NOTE AND WARRANT PURCHASE
AGREEMENT
Dated as of November 30, 2006
by and among
REMOTE DYNAMICS, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
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ARTICLE I Purchase and Sale of Notes and Warrants.......................................................1
Section 1.1 Purchase and Sale of Notes and Warrants.............................................1
Section 1.2 Purchase Price and Closings.........................................................2
Section 1.3 Conversion Shares / Warrant Shares..................................................2
Section 1.4 Exchange of Promissory Notes........................................................2
Section 1.5 Share Exchange Transaction .........................................................2
ARTICLE II Representations and Warranties................................................................3
Section 2.1 Representations and Warranties of the Company.......................................3
Section 2.2 Representations and Warranties of the Purchasers...................................14
ARTICLE III Covenants....................................................................................16
Section 3.1 Securities Compliance..............................................................16
Section 3.2 Registration and Listing...........................................................16
Section 3.3 Inspection Rights..................................................................17
Section 3.4 Compliance with Laws...............................................................17
Section 3.5 Keeping of Records and Books of Account............................................17
Section 3.6 Reporting Requirements.............................................................17
Section 3.7 Other Agreements...................................................................17
Section 3.8 Use of Proceeds....................................................................17
Section 3.9 Distributions......................................................................16
Section 3.10 Disclosure of Transaction..........................................................18
Section 3.11 Disclosure of Material Information.................................................18
Section 3.12 Pledge of Securities...............................................................18
Section 3.13 Amendments.........................................................................17
Section 3.14 Distributions......................................................................18
Section 3.15 Reservation of Shares..............................................................19
Section 3.16 Transfer Agent Instructions........................................................19
Section 3.17 Disposition of Assets..............................................................20
Section 3.18 Acquisition of Assets..............................................................20
Section 3.19 Share Increase; Reverse Split......................................................18
Section 3.20 Subsequent Financings..............................................................20
Section 3.21 D&O Insurance......................................................................22
ARTICLE IV Conditions...................................................................................22
Section 4.1 Conditions Precedent to the Obligation of the Company to Close and
to Sell the Securities.............................................................22
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Close
and to Purchase the Securities.....................................................22
ARTICLE V Certificate Legend...........................................................................25
Section 5.1 Legend.............................................................................25
ARTICLE VI Indemnification..............................................................................26
Section 6.1 General Indemnity..................................................................26
Section 6.2 Indemnification Procedure..........................................................26
ARTICLE VII Miscellaneous................................................................................27
Section 7.1 Fees and Expenses..................................................................27
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue...............................28
Section 7.3 Entire Agreement; Amendment........................................................28
Section 7.4 Notices............................................................................29
Section 7.5 Waivers............................................................................30
Section 7.6 Headings...........................................................................30
Section 7.7 Successors and Assigns.............................................................30
Section 7.8 No Third Party Beneficiaries.......................................................30
Section 7.9 Governing Law......................................................................30
Section 7.10 Survival...........................................................................30
Section 7.11 Counterparts.......................................................................30
Section 7.12 Publicity..........................................................................31
Section 7.13 Severability.......................................................................31
Section 7.14 Further Assurances.................................................................31
NOTE AND WARRANT PURCHASE AGREEMENT
This NOTE AND WARRANT PURCHASE AGREEMENT dated as of November 30, 2006
(this "Agreement") by and among Remote Dynamics, Inc., a Delaware corporation
(the "Company"), and each of the purchasers of the series B subordinated secured
convertible promissory notes of the Company whose names are set forth on Exhibit
A attached hereto (each a "Purchaser" and collectively, the "Purchasers").
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES AND WARRANTS
Section 1.1 Purchase and Sale of Notes and Warrants.
(a) Upon the following terms and conditions, the Company shall issue and
sell to the Purchasers, and the Purchasers shall purchase (in the amounts set
forth as Exhibit A hereto) from the Company, (i) series B subordinated secured
convertible promissory notes in the aggregate principal amount of up to Two
Million Dollars ($2,000,000), convertible into shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), in substantially the form
attached hereto as Exhibit B-1 (the "Series B Notes"), and (ii) original issue
discount series B subordinated secured convertible promissory notes in the
aggregate principal amount equal to forty percent (40%) of aggregate principal
amount of Notes, convertible into shares of Common Stock, in substantially the
form attached hereto as Exhibit B-2 (the "OID Notes", together with the Series B
Notes, the "Notes"). The Company and the Purchasers are executing and delivering
this Agreement in accordance with and in reliance upon the exemption from
securities registration afforded by Section 4(2) of the U.S. Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), including Regulation D ("Regulation D"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
(b) Upon the following terms and conditions, each Purchaser shall be
issued (i) Series E-7 Warrants, in substantially the form attached hereto as
Exhibit C-1 (the "Series E-7 Warrants"), to purchase a number of shares of
Common Stock equal to seventy-five percent (75%) of the number of Conversion
Shares (as defined in Section 1.3 hereof) issuable upon conversion of such
Purchaser's Series B Note on the date of issuance of such Note at an exercise
price per share equal to $0.02 on the Closing Date (as defined in Section 1.2
hereof) and a term of seven (7) years following the Closing Date and (ii) Series
F-4 Warrants, in substantially the form attached hereto as Exhibit C-2 (the
"Series F-4 Warrants" and, together with the E-7 Warrants, the "Warrants"), to
purchase a number of shares of Common Stock equal to seventy-five percent (75%)
of the number of Conversion Shares issuable upon conversion of such Purchaser's
Series B Note on the date of issuance of such Note at an exercise price per
share equal to $0.03 on the Closing Date and a term of four (4) years following
the effective date of the Registration Statement (as defined in Section 1.2
hereof). The number of shares of Common Stock issuable upon exercise of the
Warrants issuable to each Purchaser is set forth opposite such Purchaser's name
on Exhibit A attached hereto.
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Section 1.2 Purchase Price and Closings. Subject to the terms and
conditions hereof, the Company agrees to issue and sell to the Purchasers and,
in consideration of and in express reliance upon the representations,
warranties, covenants, terms and conditions of this Agreement, the Purchasers,
severally but not jointly, agree to purchase the Notes and Warrants for an
aggregate purchase price of up to Two Million Dollars ($2,000,000) (the
"Purchase Price"). The Notes and Warrants shall be sold and funded in four
separate closings (each, a "Closing" and collectively, the "Closings"). The
initial Closing under this Agreement (the "Initial Closing") shall be funded in
an amount equal to twenty-five percent (25%) of the aggregate Purchase Price
hereunder and shall take place on or about December 4, 2006 (the "Initial
Closing Date"). The second Closing under this Agreement (the "Second Closing")
shall be funded in an amount equal to twenty-five percent (25%) of the aggregate
Purchase Price hereunder and shall take place no later than five (5) business
days following the date that the Company files the Proxy Statement (as defined
in Section 3.19 hereof) with the Securities and Exchange Commission (the
"Commission") (the "Second Closing Date"). The third Closing under this
Agreement (the "Third Closing") shall be funded in an amount equal to
twenty-five percent (25%) of the aggregate Purchase Price hereunder and shall
take place no later than five (5) business days following the date that the
Company's stockholders approve the Reverse Split (as defined in Section 3.19
hereof) and the Share Increase (as defined in Section 3.19 hereof) and the
Company files the Charter Amendment (as defined in Section 3.19 hereof)
effecting the Share Increase (the "Third Closing Date"). The final Closing under
this Agreement (the "Final Closing") shall be funded in an amount equal to
twenty-five percent (25%) of the aggregate Purchase Price hereunder and shall
take place no later than five (5) business days following the date that the
Commission declares the initial registration statement (the "Registration
Statement") providing for the resale of the Conversion Shares and the Warrant
Shares pursuant to the terms of the Registration Rights Agreement (as defined in
Section 2.1(b)) effective (the "Final Closing Date"). The Initial Closing Date,
the Second Closing Date, the Third Closing Date and the Final Closing Date are
sometimes referred to in this Agreement as the "Closing Date". Each Closing
under this Agreement shall take place at the offices of Xxxxxx Xxxxx Xxxxxxxx &
Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m.
New York time; provided, that all of the conditions set forth in Article IV
hereof and applicable to such Closing shall have been fulfilled or waived in
accordance herewith. Subject to the terms and conditions of this Agreement, at
or prior to each Closing the Company shall deliver or cause to be delivered to
each Purchaser (x) its Notes for the principal amount set forth opposite the
name of such Purchaser on Exhibit A hereto, (y) its Warrants to purchase such
number of shares of Common Stock as is set forth opposite the name of such
Purchaser on Exhibit A attached hereto and (z) any other documents required to
be delivered pursuant to Article IV hereof. At each Closing, each Purchaser
shall deliver its Purchase Price by wire transfer to the escrow account pursuant
to the Escrow Deposit Agreement (as hereafter defined).
Section 1.3 Conversion Shares / Warrant Shares. The Company has authorized
and has reserved and covenants to continue to reserve, free of preemptive rights
and other similar contractual rights of stockholders, a number of shares of
Common Stock equal to the number of authorized shares of Common Stock that are
not currently issued or reserved for issuance as of the date hereof; provided,
however, upon the Company filing the Charter Amendment, the Company shall
authorize and reserve and continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, a number of its authorized but
unissued shares of Common Stock equal to one hundred fifty percent (150%) of the
aggregate number of shares of Common Stock to effect the conversion of the Notes
and exercise of the Warrants then outstanding. Any shares of Common Stock
issuable upon conversion of the Notes are herein referred to as the "Conversion
Shares". Any shares of Common Stock issuable upon exercise of the Warrants (and
such shares when issued) are herein referred to as the "Warrant Shares". The
Notes, the Warrants, the Conversion Shares and the Warrant Shares are sometimes
collectively referred to herein as the "Securities".
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Section 1.4 Exchange of Promissory Notes. The Company and the Purchasers
acknowledge and agree that prior to or at the Closing, the holders of the
Company's Series A senior secured convertible promissory notes (the "Series A
Notes") issued pursuant to the Note and Warrant Purchase Agreement dated as of
February 23, 2006 shall surrender to the Company their Series A Notes for
cancellation and upon the Closing, such Purchasers shall receive Notes issued
hereunder in the principal amount set forth on Schedule 1.4 attached hereto. In
addition, the Company acknowledges and agrees that a portion of the Purchase
Price to be delivered by HFS Capital Ltd. ("HFS") hereunder may be paid by
exchanging the convertible promissory notes held by HFS for the Notes issued
hereunder in the amounts set forth on Schedule 1.4 attached hereto.
Section 1.5 Share Exchange Transaction. The parties acknowledge that
simultaneously with the consummation of the transactions contemplated by this
Agreement, the Company will be entering into a Share Exchange Agreement, dated
as of the date hereof, with Bounce Mobile Systems, Inc., a Nevada corporation
("Bounce"), whereby Bounce will issue to the Company 500,000 shares of common
stock of BounceGPS, Inc., a Nevada corporation and wholly-owned subsidiary of
Bounce, and the Company shall issue to Bounce in exchange for such 500,000
shares (a) 5,000 shares of the Company's series C convertible preferred stock,
(b) series B subordinated secured convertible promissory notes in substantially
the form of the Series B Notes in the aggregate principal amount of $660,000,
(c) original issue discount series B subordinated secured convertible promissory
notes in substantially the form of the OID Notes in the aggregate principal
amount of $264,000, (d) series E-7 warrants in substantially the form of the E-7
Warrants for a number of shares of Common Stock equal to seventy-five percent
(75%) of the number of shares of Common Stock issuable upon conversion of
Bounce's series B subordinated secured convertible promissory note and (e)
series F-4 warrants in substantially the form of the F-4 Warrants for a number
of shares of Common Stock equal to seventy-five percent (75%) of the number of
shares of Common Stock issuable upon conversion of Bounce's series B
subordinated secured convertible promissory note (the "Share Exchange
Transaction").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers, as of the date hereof and each
Closing Date (except as set forth on the Schedule of Exceptions attached hereto
with each numbered Schedule corresponding to the section number herein), as
follows:
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(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted. The Company does not have any Subsidiaries (as defined in Section
2.1(g)) or own securities of any kind in any other entity except as set forth on
Schedule 2.1(g) hereto. The Company and each such Subsidiary (as defined in
Section 2.1(g)) is duly qualified as a foreign corporation to do business and is
in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary except for
any jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect. For the purposes of this
Agreement, "Material Adverse Effect" means any material adverse effect on the
business, operations, properties, prospects, or financial condition of the
Company and its Subsidiaries and/or any condition, circumstance, or situation
that would prohibit or otherwise materially interfere with the ability of the
Company to perform any of its obligations under this Agreement in any material
respect.
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, the Notes, the Warrants, the Registration Rights Agreement by and
among the Company and the Purchasers, dated as of the date hereof, substantially
in the form of Exhibit D attached hereto (the "Registration Rights Agreement"),
the Security Agreement by and among the Company and its wholly owned
subsidiaries, on the one hand, and the Purchasers, on the other hand, dated as
of the date hereof, substantially in the form of Exhibit E attached hereto (the
"Security Agreement"), the Escrow Deposit Agreement by and among the Company,
the placement agent and the escrow agent named therein, dated as of the date
hereof, substantially in the form of Exhibit F-1 attached hereto (the "Escrow
Deposit Agreement"), the Securities Escrow Agreement by and among the Company,
the placement agent and the escrow agent named therein, dated as of the date
hereof, substantially in the form of Exhibit F-2 attached hereto (the
"Securities Escrow Agreement" and together with the Escrow Deposit Agreement,
the "Escrow Agreements"), and the Irrevocable Transfer Agent Instructions (as
defined in Section 3.16 hereof) (collectively, the "Transaction Documents") and
to issue and sell the Securities in accordance with the terms hereof. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have been
duly and validly authorized by all necessary corporate action, and, except as
set forth on Schedule 2.1(b), no further consent or authorization of the
Company, its Board of Directors or stockholders is required. When executed and
delivered by the Company, each of the Transaction Documents shall constitute a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor's rights and remedies or by other equitable principles of general
application.
(c) Capitalization. The authorized capital stock and the issued and
outstanding shares of capital stock of the Company as of the date hereof is set
forth on Schedule 2.1(c) hereto. All of the outstanding shares of the Common
Stock and any other outstanding security of the Company have been duly and
validly authorized. Except as set forth in this Agreement, the Commission
Documents (as defined in Section 2.1(f)) or as set forth on Schedule 2.1(c)
hereto, no shares of Common Stock or any other security of the Company are
entitled to preemptive rights or registration rights and there are no
outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and as set forth on Schedule 2.1(c)
hereto, there are no contracts, commitments, understandings, or arrangements by
which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into
shares of capital stock of the Company. Except for customary transfer
restrictions contained in agreements entered into by the Company in order to
sell restricted securities or as provided on Schedule 2.1(c) hereto, the Company
is not a party to or bound by any agreement or understanding granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities. Except as set forth on Schedule 2.1(c), the Company
is not a party to, and it has no knowledge of, any agreement or understanding
restricting the voting or transfer of any shares of the capital stock of the
Company.
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(d) Issuance of Securities. The Notes and the Warrants to be issued at the
Closing have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Notes shall be
validly issued and outstanding, free and clear of all liens, encumbrances and
rights of refusal of any kind. When the Conversion Shares and Warrant Shares are
issued and paid for in accordance with the terms of this Agreement and as set
forth in the Notes and Warrants, such shares will be duly authorized by all
necessary corporate action and validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of refusal
of any kind and the holders shall be entitled to all rights accorded to a holder
of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the performance by the Company of its
obligations under the Notes and the consummation by the Company of the
transactions contemplated hereby and thereby, (including the issuance of the
Securities as contemplated hereby) do not and will not (i) violate or conflict
with any provision of the Company's Certificate of Incorporation (the
"Certificate") or Bylaws (the "Bylaws"), each as amended to date, or any
Subsidiary's comparable charter documents, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, mortgage, deed of trust,
indenture, note, bond, license, lease agreement, instrument or obligation to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries' respective properties or assets are bound, or (iii)
result in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries are bound
or affected, except, with respect to clauses (ii) and (iii) above for such
conflicts, defaults, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect (excluding with respect to federal and state securities laws)).
Neither the Company nor any of its Subsidiaries is required under federal,
state, foreign or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under the Transaction Documents or issue and sell the Securities in
accordance with the terms hereof (other than any filings, consents and approvals
which may be required to be made by the Company under applicable state and
federal securities laws, rules or regulations or any registration provisions
provided in the Registration Rights Agreement).
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(f) Commission Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Company has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the reporting
requirements of the Exchange Act (all of the foregoing including filings
incorporated by reference therein being referred to herein as the "Commission
Documents"). At the times of their respective filings, the Form 10-Q for the
fiscal quarters ended November 30, 2005 and February 28, 2006 and the Form
10-QSB for the fiscal quarter ended May 31, 2006 (collectively, the "Form 10-Q")
and the Form 10-K for the fiscal year ended August 31, 2005 (the "Form 10-K")
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and the Form
10-Q and Form 10-K did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the Commission Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission. Such financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company and its
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person's ownership of the outstanding stock or
other interests of such Subsidiary. For the purposes of this Agreement,
"Subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. Except as set forth on
Schedule 2.1(g) hereto, there are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon any
Subsidiary for the purchase or acquisition of any shares of capital stock of any
Subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence except as set forth
on Schedule 2.1(g) hereto. Neither the Company nor any Subsidiary is party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any Subsidiary.
6
(h) No Material Adverse Change. Since August 31, 2005, the Company has not
experienced or suffered any Material Adverse Effect, except as disclosed on
Schedule 2.1(h) hereto and as disclosed in its Commission Documents.
(i) No Undisclosed Liabilities. Except as disclosed on Schedule 2.1(i)
hereto or in the Commission Documents, neither the Company nor any of its
Subsidiaries has incurred any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) other than those incurred in the ordinary course of the
Company's or its Subsidiaries respective businesses or which, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. Since August 31, 2005, except
as disclosed on Schedule 2.1(j) hereto, to the knowledge of the Company, no
event or circumstance has occurred or exists with respect to the Company or its
Subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed.
(k) Indebtedness. Schedule 2.1(k) hereto sets forth as of the date hereof
all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or Indebtedness for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness" shall mean (a)
any liabilities for borrowed money or amounts owed in excess of $100,000 (other
than trade accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is
in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the Subsidiaries has good and
valid title to all of its real and personal property reflected in the Commission
Documents, free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated on Schedule 2.1(l)
hereto or such that, individually or in the aggregate, do not cause a Material
Adverse Effect. Any leases of the Company and each of its Subsidiaries are valid
and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in the Commission Documents or on Schedule 2.1(m) hereto, there is no
action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or other proceeding pending or, to the knowledge of the Company,
threatened against or involving the Company, any Subsidiary or any of their
respective properties or assets, which individually or in the aggregate, would
reasonably be expected, if adversely determined, to have a Material Adverse
Effect. There are no outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against the
Company or any Subsidiary or any officers or directors of the Company or
Subsidiary in their capacities as such, which individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
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(n) Compliance with Law. The business of the Company and the Subsidiaries
has been and is presently being conducted in accordance with all applicable
federal, state and local governmental laws, rules, regulations and ordinances,
except as set forth in the Commission Documents or on Schedule 2.1(n) hereto or
such that, individually or in the aggregate, the noncompliance therewith could
not reasonably be expected to have a Material Adverse Effect. The Company and
each of its Subsidiaries have all franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. The Company and each of the Subsidiaries has accurately
prepared and filed all federal, state and other tax returns required by law to
be filed by it, has paid or made provisions for the payment of all taxes shown
to be due and all additional assessments, and adequate provisions have been and
are reflected in the financial statements of the Company and the Subsidiaries
for all current taxes and other charges to which the Company or any Subsidiary
is subject and which are not currently due and payable. Except as disclosed on
Schedule 2.1(o) hereto or in the Commission Documents, none of the federal
income tax returns of the Company or any Subsidiary have been audited by the
Internal Revenue Service. The Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against the Company or
any Subsidiary for any period, nor of any basis for any such assessment,
adjustment or contingency.
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
(q) Disclosure. Except for the transactions contemplated by this
Agreement, the Company confirms that neither it nor any other person acting on
its behalf has provided any of the Purchasers or their agents or counsel with
any information that constitutes or might constitute material, nonpublic
information. To the Company's knowledge, neither the representations and
warranties contained in Section 2.1 of this Agreement or the Schedules hereto
nor any other documents, certificates or instruments furnished to the Purchasers
by or on behalf of the Company or any Subsidiary in connection with the
transactions contemplated by this Agreement contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
8
(r) Operation of Business. Except as set forth on Schedule 2.1(r) hereto,
to the knowledge of the Company, the Company and each of the Subsidiaries owns
or possesses the rights to all patents, trademarks, domain names (whether or not
registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service
marks, trade names, copyrights, licenses and authorizations which are necessary
for the conduct of its business as now conducted without any conflict with the
rights of others.
(s) Environmental Compliance. Except as set forth on Schedule 2.1(s)
hereto or in the Commission Documents, the Company and each of its Subsidiaries
have obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws. "Environmental Laws" shall mean all applicable laws relating to the
protection of the environment including, without limitation, all requirements
pertaining to reporting, licensing, permitting, controlling, investigating or
remediating emissions, discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
materials or wastes, whether solid, liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature. To
the Company's knowledge, the Company has all necessary governmental approvals
required under all Environmental Laws as necessary for the Company's business or
the business of any of its subsidiaries. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect and to the
knowledge of the Company, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way
affecting the Company or its Subsidiaries that violate or may violate any
Environmental Law after the Closing Date or that may give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
(t) Books and Records; Internal Accounting Controls. The records and
documents of the Company and its Subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and the
Subsidiaries, the location of their assets, and the nature of all transactions
giving rise to the obligations or accounts receivable of the Company or any
Subsidiary. The Company and each of its Subsidiaries maintain a system of
internal accounting controls sufficient, in the judgment of the Company's board
of directors, to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate actions are taken with respect to any
differences.
9
(u) Material Agreements. Except for the Transaction Documents (with
respect to clause (i) only), as disclosed in the Commission Documents or as set
forth on Schedule 2.1(u) hereto, or as would not be reasonably likely to have a
Material Adverse Effect, (i) the Company and each of its Subsidiaries have
performed all obligations required to be performed by them to date under any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, filed or required to be filed with the Commission (the "Material
Agreements"), (ii) neither the Company nor any of its Subsidiaries has received
any notice of default under any Material Agreement and, (iii) to the Company's
knowledge, neither the Company nor any of its Subsidiaries is in default under
any Material Agreement now in effect.
(v) Transactions with Affiliates. Except as set forth on Schedule 2.1(v)
hereto and in the Commission Documents, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company, any Subsidiary or any of their
respective customers or suppliers on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or any of its
Subsidiaries, or any person owning at least 5% of the outstanding capital stock
of the Company or any Subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder which, in each case, is required to be
disclosed in the Commission Documents or in the Company's most recently filed
definitive proxy statement on Schedule 14A, that is not so disclosed in the
Commission Documents or in such proxy statement.
(w) Securities Act of 1933. Based in material part upon the
representations herein of the Purchasers, the Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Securities hereunder. Neither the Company
nor anyone acting on its behalf, directly or indirectly, has or will sell, offer
to sell or solicit offers to buy any of the Securities or similar securities to,
or solicit offers with respect thereto from, or enter into any negotiations
relating thereto with, any person, or has taken or will take any action so as to
bring the issuance and sale of any of the Securities under the registration
provisions of the Securities Act and applicable state securities laws. Neither
the Company nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection with
the offer or sale of any of the Securities.
(x) Employees. Neither the Company nor any Subsidiary has any collective
bargaining arrangements or agreements covering any of its employees, except as
set forth on Schedule 2.1(x) hereto. Except as set forth on Schedule 2.1(x)
hereto, neither the Company nor any Subsidiary has any employment contract,
agreement regarding proprietary information, non-competition agreement,
non-solicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company or such Subsidiary
required to be disclosed in the Commission Documents that is not so disclosed.
No officer, consultant or key employee of the Company or any Subsidiary whose
termination, either individually or in the aggregate, would be reasonably likely
to have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any Subsidiary.
10
(y) Absence of Certain Developments. Except as set forth in the Commission
Documents or provided on Schedule 2.1(y) hereto, since August 31, 2005, neither
the Company nor any Subsidiary has:
(i) issued any stock, bonds or other corporate securities or any
right, options or warrants with respect thereto;
(ii) borrowed any amount in excess of $100,000 or incurred or become
subject to any other liabilities in excess of $100,000 (absolute or contingent)
except current liabilities incurred in the ordinary course of business which are
comparable in nature and amount to the current liabilities incurred in the
ordinary course of business during the comparable portion of its prior fiscal
year, as adjusted to reflect the current nature and volume of the business of
the Company and its Subsidiaries;
(iii) discharged or satisfied any lien or encumbrance in excess of
$100,000 or paid any obligation or liability (absolute or contingent) in excess
of $100,000, other than current liabilities paid in the ordinary course of
business;
(iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock,
in each case in excess of $50,000 individually or $100,000 in the aggregate;
(v) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, in each case in excess of $100,000, except in the
ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights in excess of $100,000, or disclosed any proprietary
confidential information to any person except to customers in the ordinary
course of business or to the Purchasers or their representatives;
(vii) suffered any material losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
11
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(x) entered into any material transaction, whether or not in the
ordinary course of business which has not been disclosed in the Commission
Documents;
(xi) made charitable contributions or pledges in excess of $10,000;
(xii) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(xiii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
(xiv) entered into an agreement, written or otherwise, to take any
of the foregoing actions.
(z) Public Utility Holding Company Act and Investment Company Act Status.
The Company is not a "holding company" or a "public utility company" as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
The Company is not, and as a result of and immediately upon the Closing will not
be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(aa) ERISA. No liability to the Pension Benefit Guaranty Corporation has
been incurred with respect to any Plan (as defined below) by the Company or any
of its Subsidiaries which is or would be materially adverse to the Company and
its Subsidiaries. The execution and delivery of this Agreement and the issuance
and sale of the Securities will not involve any transaction which is subject to
the prohibitions of Section 406 of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") or in connection with which a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended,
provided that, if any of the Purchasers, or any person or entity that owns a
beneficial interest in any of the Purchasers, is an "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA) with respect to which the
Company is a "party in interest" (within the meaning of Section 3(14) of ERISA),
the requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are
met. As used in this Section 2.1(aa), the term "Plan" shall mean an "employee
pension benefit plan" (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.
12
(bb) Independent Nature of Purchasers. The Company acknowledges that the
obligations of each Purchaser under the Transaction Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under the Transaction Documents. The Company acknowledges that the
decision of each Purchaser to purchase Securities pursuant to this Agreement has
been made by such Purchaser independently of any other Purchaser and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of
its Subsidiaries which may have made or given by any other Purchaser or by any
agent or employee of any other Purchaser, and no Purchaser or any of its agents
or employees shall have any liability to any Purchaser (or any other person)
relating to or arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. The Company acknowledges that for reasons of
administrative convenience only, the Transaction Documents have been prepared by
counsel for the placement agent and such counsel does not represent the
Purchasers. The Company acknowledges that it has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers and the Purchasers have retained their own counsel with respect to
the transactions contemplated hereby. The Company acknowledges that such
procedure with respect to the Transaction Documents in no way creates a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to the Transaction Documents or the transactions contemplated
hereby or thereby.
(cc) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act in a manner that would prevent
the Company from selling the Securities pursuant to Regulation D and Rule 506
thereof under the Securities Act, nor will the Company or any of its affiliates
or subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings. The Company does not have any
registration statement pending before the Commission or currently under the
Commission's review. Except as set forth on Schedule 2.1(cc) hereto, since April
1, 2006, the Company has not offered or sold any of its equity securities or
debt securities convertible into shares of Common Stock.
(dd) Xxxxxxxx-Xxxxx Act. The Company is in compliance with the applicable
provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx Act"), and the
rules and regulations promulgated thereunder, that are effective and presently
applicable to the Company and intends to comply with other applicable provisions
of the Xxxxxxxx-Xxxxx Act, and the rules and regulations promulgated thereunder,
upon the effectiveness and applicability of such provisions with respect to the
Company.
(ee) Dilutive Effect. The Company understands and acknowledges that its
obligation to issue Conversion Shares upon conversion of the Notes in accordance
with this Agreement and the Notes and its obligations to issue the Warrant
Shares upon the exercise of the Warrants in accordance with this Agreement and
the Warrants, is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interest of other
stockholders of the Company.
13
(ff) DTC Status. The Company's current transfer agent is a participant in
and the Common Stock is eligible for transfer pursuant to the Depository Trust
Company Automated Securities Transfer Program. The name, address, telephone
number, fax number, contact person and email address of the Company's transfer
agent is set forth on Schedule 2.1(ff) hereto.
Section 2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers hereby represents and warrants to the Company with respect solely to
itself and not with respect to any other Purchaser as follows as of the date
hereof and as of each Closing Date:
(a) Organization and Standing of the Purchasers. If the Purchaser is an
entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Each Purchaser has the requisite power and
authority to enter into and perform its obligations under the Transaction
Documents and to purchase the Securities being sold to it hereunder. The
execution, delivery and performance of the Transaction Documents by each
Purchaser and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate or partnership action, and
no further consent or authorization of such Purchaser or its Board of Directors,
stockholders, or partners, as the case may be, is required. When executed and
delivered by the Purchasers, the other Transaction Documents shall constitute
valid and binding obligations of each Purchaser enforceable against such
Purchaser in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) No Conflict. The execution, delivery and performance of the
Transaction Documents by the Purchaser and the consummation by the Purchaser of
the transactions contemplated thereby and hereby do not and will not (i) violate
any provision of the Purchaser's charter or organizational documents, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Purchaser is a party or by which the
Purchaser's respective properties or assets are bound, or (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Purchaser or by which any property or asset of
the Purchaser are bound or affected, except, in all cases, other than violations
pursuant to clauses (i) or (iii) (with respect to federal and state securities
laws) above, except, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, materially and adversely affect the Purchaser's ability to perform
its obligations under the Transaction Documents.
14
(d) Acquisition for Investment. Each Purchaser is purchasing the
Securities solely for its own account and not with a view to, or for sale in
connection with, public sale or distribution thereof. Each Purchaser does not
have a present intention to sell any of the Securities, nor a present
arrangement (whether or not legally binding) or intention to effect any
distribution of any of the Securities to or through any person or entity;
provided, however, that by making the representations herein, such Purchaser
does not agree to hold the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance with
Federal and state securities laws applicable to such disposition. Each Purchaser
acknowledges that it (i) has such knowledge and experience in financial and
business matters such that Purchaser is capable of evaluating the merits and
risks of Purchaser's investment in the Company, (ii) is able to bear the
financial risks associated with an investment in the Securities and (iii) has
been given full access to such records of the Company and the Subsidiaries and
to the officers of the Company and the Subsidiaries as it has deemed necessary
or appropriate to conduct its due diligence investigation.
(e) Rule 144. Each Purchaser understands that the Securities must be held
indefinitely unless such Securities are registered under the Securities Act or
an exemption from registration is available. Each Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Each Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(f) General. Each Purchaser understands that the Securities are being
offered and sold in reliance on a transactional exemption from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Securities. Each Purchaser understands that no United
States federal or state agency or any government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities. Each
Purchaser is a resident of the jurisdiction set forth immediately below such
Purchaser's name on the signature pages hereto.
(g) No General Solicitation. Each Purchaser acknowledges that the
Securities were not offered to such Purchaser by means of any form of general or
public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, Internet
website or similar media, or broadcast over television or radio, or (ii) any
seminar or meeting to which such Purchaser was invited by any of the foregoing
means of communications. Each Purchaser, in making the decision to purchase the
Securities, has relied upon independent investigation made by it and has not
relied on any information or representations made by third parties.
15
(h) Accredited Investor. Each Purchaser is an "accredited investor" (as
defined in Rule 501 of Regulation D), and such Purchaser has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Securities. Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act and such
Purchaser is not a broker-dealer. Each Purchaser acknowledges that an investment
in the Securities is speculative and involves a high degree of risk.
(i) Certain Fees. The Purchasers have not employed any broker or finder or
incurred any liability for any brokerage or investment banking fees,
commissions, finders' structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.
(j) Independent Investment. Except as may be disclosed in any filings made
by a Purchaser with the Commission, no Purchaser has agreed to act with any
other Purchaser for the purpose of acquiring, holding, voting or disposing of
the Securities purchased hereunder for purposes of Section 13(d) under the
Exchange Act, and each Purchaser is acting independently with respect to its
investment in the Securities.
ARTICLE III
COVENANTS
The Company covenants with each Purchaser as follows, which covenants are
for the benefit of each Purchaser and their respective permitted assignees.
Section 3.1 Securities Compliance. The Company shall notify the Commission
in accordance with its rules and regulations, of the transactions contemplated
by any of the Transaction Documents and shall take all other necessary action
and proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the
Purchasers, or their respective subsequent holders.
Section 3.2 Registration and Listing. The Company shall cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, to comply in all respects with its reporting and filing obligations under
the Exchange Act, to comply with all requirements related to any registration
statement filed pursuant to this Agreement, and to not take any action or file
any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company will take all action
necessary to continue the listing or trading of its Common Stock on the OTC
Bulletin Board or other exchange or market on which the Common Stock is trading.
Subject to the terms of the Transaction Documents, the Company further covenants
that it will take such further action as the Purchasers may reasonably request,
all to the extent required from time to time to enable the Purchasers to sell
the Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act. Upon the request of the Purchasers, the Company shall deliver to
the Purchasers a written certification of a duly authorized officer as to
whether it has complied with the issuer requirements of Rule 144.
16
Section 3.3 Inspection Rights. Provided the same would not be in violation
of Regulation FD, the Company shall permit, during normal business hours and
upon reasonable request and reasonable notice, each Purchaser or any employees,
agents or representatives thereof, so long as such Purchaser shall be obligated
hereunder to purchase the Notes or shall beneficially own any Conversion Shares
or Warrant Shares, for purposes reasonably related to such Purchaser's interests
as a stockholder, to examine the publicly available, non-confidential records
and books of account of, and visit and inspect the properties, assets,
operations and business of the Company and any Subsidiary, and to discuss the
publicly available, non-confidential affairs, finances and accounts of the
Company and any Subsidiary with any of its officers, consultants, directors and
key employees.
Section 3.4 Compliance with Laws. The Company shall comply, and cause each
Subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which would be reasonably likely to have a Material Adverse
Effect.
Section 3.5 Keeping of Records and Books of Account. The Company shall
keep and cause each Subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 3.6 Reporting Requirements. If the Company ceases to file its
periodic reports with the Commission, or if the Commission ceases making these
periodic reports available via the Internet without charge, then the Company
shall furnish the following to each Purchaser so long as such Purchaser shall be
obligated hereunder to purchase the Securities or shall beneficially own
Securities:
(a) Quarterly Reports filed with the Commission on Form 10-Q as soon as
practical after the document is filed with the Commission, and in any event
within five (5) days after the document is filed with the Commission;
(b) Annual Reports filed with the Commission on Form 10-K as soon as
practical after the document is filed with the Commission, and in any event
within five (5) days after the document is filed with the Commission; and
(c) Copies of all notices, information and proxy statements in connection
with any meetings, that are, in each case, provided to holders of shares of
Common Stock, contemporaneously with the delivery of such notices or information
to such holders of Common Stock.
Section 3.7 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any Subsidiary under any
Transaction Document.
Section 3.8 Use of Proceeds. The net proceeds from the sale of the
Securities hereunder shall be used by the Company for working capital and
general corporate purposes and not to redeem any Common Stock or securities
convertible, exercisable or exchangeable into Common Stock (except with respect
to HFS in accordance with Section 1.2 hereof) or to settle any outstanding
litigation.
17
Section 3.9 Distributions. So long as any Notes or Warrants remain
outstanding, the Company agrees that it shall not (i) declare or pay any
dividends or make any distributions to any holder(s) of Common Stock or (ii)
purchase or otherwise acquire for value, directly or indirectly, any Common
Stock or other equity security of the Company.
Section 3.10 Disclosure of Transaction. The Company shall issue a press
release describing the material terms of the transactions contemplated hereby
(the "Press Release") on the day of each Closing; provided, however, that if
such Closing occurs after 4:00 P.M. Eastern Time on any Trading Day, the Company
shall issue the Press Release no later than 9:00 A.M. Eastern Time on the first
Trading Day following such Closing Date. The Company shall also file with the
Commission a Current Report on Form 8-K (the "Form 8-K") describing the material
terms of the transactions contemplated hereby (and attaching as exhibits thereto
this Agreement, each form of Note, the Registration Rights Agreement, the
Security Agreement, each form of Warrant and the Press Release) as soon as
practicable following each Closing Date but in no event more than two (2)
Trading Days following each Closing Date, which Press Release and Form 8-K shall
be subject to prior review and reasonable comment by the Purchasers. "Trading
Day" means any day during which the principal exchange on which the Common Stock
is traded shall be open for trading.
Section 3.11 Disclosure of Material Information. The Company covenants and
agrees that neither it nor any other person acting on its behalf has provided or
will provide any Purchaser or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company.
Section 3.12 Pledge of Securities. The Company acknowledges that the
Securities may be pledged by a Purchaser in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Purchaser effecting a pledge
of the Securities shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document; provided that a Purchaser and its pledgee
shall be required to comply with the provisions of Article V hereof in order to
effect a sale, transfer or assignment of Securities to such pledgee. At the
Purchasers' expense, the Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Purchaser.
Section 3.13 Amendments. The Company shall not amend or waive any
provision of the Articles or Bylaws of the Company in any way that would
adversely affect exercise rights, voting rights, conversion rights, prepayment
rights or redemption rights of the holder of the Notes.
18
Section 3.14 Distributions. So long as any Notes or Warrants remain
outstanding, the Company agrees that it shall not (i) declare or pay any
dividends or make any distributions to any holder(s) of Common Stock or (ii)
purchase or otherwise acquire for value, directly or indirectly, any Common
Stock or other equity security of the Company.
Section 3.15 Reservation of Shares. So long as any of the Notes or
Warrants remain outstanding, the Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, no less
than a number of shares of Common Stock equal to the number of authorized shares
of Common Stock that are not currently issued or reserved for issuance as of the
date hereof; provided, however, upon the Company filing the Charter Amendment,
the Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, free of preemptive rights and other
similar contractual rights of stockholders, a number of shares of Common Stock
equal to one hundred fifty percent (150%) of the number of shares of Common
Stock as shall from time to time be sufficient to provide for the issuance of
the Conversion Shares and the Warrant Shares.
Section 3.16 Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of each Purchaser or its
respective nominee(s), for the Conversion Shares and the Warrant Shares in such
amounts as specified from time to time by each Purchaser to the Company upon
conversion of the Notes or exercise of the Warrants in the form of Exhibit G
attached hereto (the "Irrevocable Transfer Agent Instructions"). Prior to
registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 5.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.16 will be given by the Company to its transfer agent and that
the Conversion Shares and Warrant Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section 3.16
shall affect in any way each Purchaser's obligations and agreements set forth in
Section 5.1 to comply with all applicable prospectus delivery requirements, if
any, upon resale of the Conversion Shares and the Warrant Shares. If a Purchaser
provides the Company with an opinion of counsel, in a reasonably acceptable
form, to the effect that a public sale, assignment or transfer of the Conversion
Shares or Warrant Shares may be made without registration under the Securities
Act or the Purchaser provides the Company with reasonable assurances that the
Conversion Shares or Warrant Shares can be sold pursuant to Rule 144 without the
restriction as to the number of securities acquired as of a particular date that
can be immediately sold, the Company shall permit the transfer, and, in the case
of the Conversion Shares and the Warrant Shares, promptly instruct its transfer
agent to issue one or more certificates in such name and in such denominations
as specified by such Purchaser and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations under this Section 3.16 will
cause irreparable harm to the Purchasers by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 3.16 will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 3.16, that the Purchasers shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
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Section 3.17 Disposition of Assets. So long as the Notes remain
outstanding, neither the Company nor any subsidiary shall sell, transfer or
otherwise dispose of any of its properties, assets and rights including, without
limitation, its software and intellectual property, to any person except for
sales of obsolete assets and sales to customers in the ordinary course of
business or with the prior written consent of the holders of a majority of the
principal amount of the Notes then outstanding.
Section 3.18 Acquisition of Assets. In the event the Company or any
Subsidiary acquires any assets or other properties, such assets or properties
shall constitute a part of the Collateral (as defined in the Security Agreement)
and the Company shall take all action necessary to perfect the Purchasers'
security interest in such assets or properties pursuant to the Security
Agreement.
Section 3.19 Share Increase; Reverse Split. As promptly as practicable
following the Initial Closing Date, the Company shall file a preliminary proxy
statement on Schedule 14A (the "Proxy Statement") with the Commission. The
Company shall recommend for approval of the Company's stockholders in the Proxy
Statement of (A) an amendment to the Certificate (the "Charter Amendment") to be
filed with the Delaware Secretary of State to effect an increase in the number
of its authorized shares of Common Stock to at least 575,000,000 (the "Share
Increase") and (B) a one-for-fifty (1-for-50) reverse stock split of the Common
Stock (the "Reverse Split"). The Company shall use its commercially reasonable
efforts to obtain stockholder approval to effect the Share Increase and the
Reverse Split as promptly as practicable following the Initial Closing Date and
shall effect the Share Increase and the Reverse Split as promptly as practicable
following the approval of its stockholders.
Section 3.20 Subsequent Financings.
(a) For a period of one (1) year following the Initial Closing Date (which
one-year period shall extend for each day that the Registration Statement is not
effective as required under the Registration Rights Agreement), the Company
covenants and agrees to promptly notify in writing (a "Rights Notice") the
Purchasers of the terms and conditions of any proposed offer or sale to, or
exchange with (or other type of distribution to) any third party (a "Subsequent
Financing"), of Common Stock or any securities convertible, exercisable or
exchangeable into Common Stock, including convertible debt securities
(collectively, the "Financing Securities"); provided, however, prior to
delivering to each Purchaser a Rights Notice, the Company shall first deliver to
each Purchaser a written notice of its intention to effect a Subsequent
Financing ("Pre-Notice") within three (3) Trading Days of receiving an
applicable offer, which Pre-Notice shall ask such Purchaser if it wants to
review the details of such financing. Upon the request of a Purchaser, and only
upon a request by such Purchaser within three (3) Trading Days of receipt of a
Pre-Notice, the Company shall promptly, but no later than two (2) Trading Days
after such request, deliver a Rights Notice to such Purchaser. The Rights Notice
shall describe, in reasonable detail, the proposed Subsequent Financing, the
names and investment amounts of all investors participating in the Subsequent
Financing, the proposed closing date of the Subsequent Financing, which shall be
within twenty (20) calendar days from the date of the Rights Notice, and all of
the terms and conditions thereof and proposed definitive documentation to be
entered into in connection therewith. The Rights Notice shall provide each
Purchaser an option (the "Rights Option") during the ten (10) Trading Days
following delivery of the Rights Notice (the "Option Period") to inform the
Company whether such Purchaser will purchase up to its pro rata portion of all
or a portion of the securities being offered in such Subsequent Financing on the
same, absolute terms and conditions as contemplated by such Subsequent
Financing. If any Purchaser elects not to participate in such Subsequent
Financing, the other Purchasers may participate on a pro-rata basis so long as
such participation in the aggregate does not exceed the total Purchase Price
hereunder. For purposes of this Section, all references to "pro rata" means, for
any Purchaser electing to participate in such Subsequent Financing, the
percentage obtained by dividing (x) the principal amount of the Notes purchased
by such Purchaser at the Closings by (y) the sum of (1) the total principal
amount of all of the Notes purchased by all of the participating Purchasers at
the Closings and (2) the total principal amount of all of the promissory notes
purchased by Bounce pursuant to the Share Exchange Transaction. Delivery of any
Rights Notice constitutes a representation and warranty by the Company that
there are no other material terms and conditions, arrangements, agreements or
otherwise except for those disclosed in the Rights Notice, to provide additional
compensation to any party participating in any proposed Subsequent Financing,
including, but not limited to, additional compensation based on changes in the
Purchase Price or any type of reset or adjustment of a purchase or conversion
price or to issue additional securities at any time after the closing date of a
Subsequent Financing. If the Company does not receive notice of exercise of the
Rights Option from the Purchasers within the Option Period, the Company shall
have the right to close the Subsequent Financing on the scheduled closing date
with a third party; provided that all of the material terms and conditions of
the closing are the same as those provided to the Purchasers in the Rights
Notice. If the closing of the proposed Subsequent Financing does not occur on
that date, any closing of the contemplated Subsequent Financing or any other
Subsequent Financing shall be subject to all of the provisions of this Section
3.20(a), including, without limitation, the delivery of a new Rights Notice. The
provisions of this Section 3.20(a) shall not apply to issuances of securities in
a Permitted Financing.
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(b) For purposes of this Agreement, a Permitted Financing (as defined
hereinafter) shall not be considered a Subsequent Financing. A "Permitted
Financing" shall mean (i) securities issued (other than for cash) in connection
with a merger, acquisition, or consolidation, (ii) securities issued pursuant to
the conversion or exercise of convertible or exercisable securities issued or
outstanding on or prior to the date hereof or issued pursuant to the Share
Exchange Transaction, this Agreement and the Notes, including the Conversion
Shares, (iii) the Warrant Shares, (iv) securities issued in connection with bona
fide strategic license agreements or other partnering arrangements so long as
such issuances are not for the purpose of raising capital, (v) Common Stock
issued or the issuance or grants of options to purchase Common Stock pursuant to
the Company's stock option plans and employee stock purchase plans as they now
exist on the date hereof, (vi) any warrants issued to the placement agent and
its designees for the transactions contemplated by this Agreement, (vii) Common
Stock issued in connection with consulting or advisory services not in excess of
5,000,000 shares; and (viii) the payment of any principal in shares of Common
Stock pursuant to the Notes or any promissory notes issued by the Company
pursuant to the Share Exchange Transaction.
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(c) So long as the Notes remain outstanding, if the Company enters into
any Subsequent Financing on terms more favorable than the terms governing the
Notes, then the Purchasers in their sole discretion may exchange the Notes,
valued at their stated value, for the securities issued or to be issued in the
Subsequent Financing. The Company covenants and agrees to promptly notify in
writing the Purchasers of the terms and conditions of any such proposed
Subsequent Financing.
Section 3.21 D&O Insurance. So long as the Notes remain outstanding, the
Company shall maintain its directors and officer's liability insurance policy
coverage at an amount equal to or in excess of $3,000,000.
ARTICLE IV
CONDITIONS
Section 4.1 Conditions Precedent to the Obligation of the Company to Close
and to Sell the Securities. The obligation hereunder of the Company to close and
issue and sell the Securities to the Purchasers at each Closing is subject to
the satisfaction or waiver, at or before such Closing of the conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of each Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to each Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(d) Delivery of Purchase Price. The Purchase Price for the Securities
shall have been delivered to the Company on the Closing Date.
(e) Delivery of Transaction Documents. The Transaction Documents shall
have been duly executed and delivered by the Purchasers and, with respect to the
Escrow Agreements, the applicable escrow agent, to the Company.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Close and to Purchase the Securities. The obligation hereunder of the Purchasers
to purchase the Securities and consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before each Closing,
of each of the conditions set forth below. These conditions are for the
Purchasers' sole benefit and may be waived by the Purchasers at any time in
their sole discretion.
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(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement and the other
Transaction Documents shall be true and correct in all material respects as of
each Closing Date, except for representations and warranties that speak as of a
particular date, which shall be true and correct in all material respects as of
such date.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to each Closing Date.
(c) No Suspension, Etc. Trading in the Common Stock shall not have been
suspended by the Commission or the OTC Bulletin Board (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets
("Bloomberg") shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by Bloomberg,
or on the New York Stock Exchange, nor shall a banking moratorium have been
declared either by the United States or New York State authorities, nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity or crisis of such magnitude in its effect on,
or any material adverse change in any financial market which, in each case, in
the judgment of such Purchaser, makes it impracticable or inadvisable to
purchase the Securities.
(d) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any Subsidiary, or any of the officers, directors or affiliates
of the Company or any Subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(f) Opinion of Counsel. The Purchasers shall have received an opinion of
counsel to the Company, dated the date of each Closing, substantially in the
form of Exhibit H hereto, with such exceptions and limitations as shall be
reasonably acceptable to counsel to the Purchasers.
(g) Notes and Warrants. At or prior to each Closing, the Company shall
have delivered to the Purchasers the Notes (in such denominations as each
Purchaser may request) and the Warrants (in such denominations as each Purchaser
may request).
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(h) Secretary's Certificate. The Company shall have delivered to the
Purchasers a secretary's certificate, dated as of each Closing Date, as to (i)
the resolutions adopted by the Board of Directors approving the transactions
contemplated hereby, (ii) the Certificate of Incorporation, (iii) the Bylaws,
each as in effect at such Closing, and (iv) the authority and incumbency of the
officers of the Company executing the Transaction Documents and any other
documents required to be executed or delivered in connection therewith.
(i) Officer's Certificate. On each Closing Date, the Company shall have
delivered to the Purchasers a certificate signed by an executive officer on
behalf of the Company, dated as of such Closing Date, confirming the accuracy of
the Company's representations, warranties and covenants as of such Closing Date
and confirming the compliance by the Company with the conditions precedent set
forth in paragraphs (b)-(e) and (l) of this Section 4.2 as of such Closing Date
(provided that, with respect to the matters in paragraphs (d) and (e) of this
Section 4.2, such confirmation shall be based on the knowledge of the executive
officer after due inquiry).
(j) Registration Rights Agreement. As of the Initial Closing Date, the
Company shall have executed and delivered the Registration Rights Agreement to
each Purchaser.
(k) Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before each Closing Date.
(l) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit G attached hereto, shall have been
delivered to the Company's transfer agent.
(m) Escrow Agreements. As of the Initial Closing Date, the Company and the
applicable escrow agent shall have executed and delivered the Escrow Agreements
to each Purchaser.
(n) Security Agreement. As of the Initial Closing Date, the Company shall
have executed and delivered the Security Agreement to each Purchaser.
(o) UCC Financing Statements. The Company shall have filed all UCC
financing statements in form and substance satisfactory to the Purchasers at the
appropriate offices.
(p) OTC Bulletin Board. As of the Initial Closing Date, the Company's
shares of Common Stock shall be quoted on the OTC Bulletin Board.
(q) Share Exchange Transaction. As of the Initial Closing Date, the Share
Exchange Transaction between the Company and Bounce shall have been consummated.
(r) Written Consent of Stockholders. As of the Initial Closing Date, the
Company shall have received the written consent of each of the purchasers
(pursuant to the Note and Warrant Purchase Agreement dated as of February 23,
2006) to the consummation of the transactions contemplated by this Agreement and
the Transaction Documents.
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(s) Filing of Proxy Statement. Prior to the Second Closing Date, the Proxy
Statement shall have been filed by the Company with the Commission.
(t) Share Increase; Reverse Split. Prior to the Third Closing Date, the
Company's stockholders shall have approved the Reverse Split and the Share
Increase and the Company shall have filed the Charter Amendment effecting the
Share Increase.
(u) Effective Registration Statement. Prior to the Final Closing Date, the
Registration Statement shall have been declared effective by the Commission.
ARTICLE V
CERTIFICATE LEGEND
Section 5.1 Legend. Each certificate representing the Securities shall be
stamped or otherwise imprinted with a legend substantially in the following form
(in addition to any legend required by applicable state securities or "blue sky"
laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR REMOTE
DYNAMICS, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION
OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The Company agrees to issue or reissue certificates representing any of
the Conversion Shares and the Warrant Shares, without the legend set forth above
if at such time, prior to making any transfer of any such Conversion Shares or
Warrant Shares, such holder thereof shall give written notice to the Company
describing the manner and terms of such transfer and removal as the Company may
reasonably request. Such proposed transfer and removal will not be effected
until: (a) either (i) the Company has received an opinion of counsel reasonably
satisfactory to the Company, to the effect that the registration of the
Conversion Shares or Warrant Shares under the Securities Act is not required in
connection with such proposed transfer, (ii) a registration statement under the
Securities Act covering such proposed disposition has been filed by the Company
with the Commission and has become effective under the Securities Act, (iii) the
Company has received other evidence reasonably satisfactory to the Company that
such registration and qualification under the Securities Act and state
securities laws are not required (which may include an opinion of counsel
provided by the Company), or (iv) the holder provides the Company with
reasonable assurances that such security can be sold pursuant to Rule 144 under
the Securities Act (which may include an opinion of counsel provided by the
Company); and (b) either (i) the Company has received an opinion of counsel
reasonably satisfactory to the Company, to the effect that registration or
qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, (ii) compliance with
applicable state securities or "blue sky" laws has been effected, or (iii) the
holder provides the Company with reasonable assurances that a valid exemption
exists with respect thereto (which may include an opinion of counsel provided by
the Company). The Company will respond to any such notice from a holder within
three (3) business days. In the case of any proposed transfer under this Section
5.1, the Company will use commercially reasonable efforts to comply with any
such applicable state securities or "blue sky" laws, but shall in no event be
required, (x) to qualify to do business in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject, or (z) to comply
with state securities or "blue sky" laws of any state for which registration by
coordination is unavailable to the Company. The restrictions on transfer
contained in this Section 5.1 shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section
of this Agreement. Whenever a certificate representing the Conversion Shares or
Warrant Shares is required to be issued to a Purchaser without a legend, in lieu
of delivering physical certificates representing the Conversion Shares or
Warrant Shares, provided the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, the
Company shall use its reasonable best efforts to cause its transfer agent to
electronically transmit the Conversion Shares or Warrant Shares to a Purchaser
by crediting the account of such Purchaser's Prime Broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system (to the extent not
inconsistent with any provisions of this Agreement).
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ARTICLE VI
INDEMNIFICATION
Section 6.1 General Indemnity. The Company agrees to indemnify and hold
harmless the Purchasers (and their respective directors, officers, affiliates,
agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements) incurred by
the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. Each
Purchaser severally but not jointly agrees to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys' fees, charges
and disbursements) incurred by the Company as result of any inaccuracy in or
breach of the representations, warranties or covenants made by such Purchaser
herein. The maximum aggregate liability of each Purchaser pursuant to its
indemnification obligations under this Article VI shall not exceed the portion
of the Purchase Price paid by such Purchaser hereunder.
Section 6.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VI (an "indemnified party") will give written
notice to the indemnifying party of any matter giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnifying party a conflict of interest between it
and the indemnified party exists with respect to such action, proceeding or
claim (in which case the indemnifying party shall be responsible for the
reasonable fees and expenses of one separate counsel for the indemnified
parties), to assume the defense thereof with counsel reasonably satisfactory to
the indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article VI to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the indemnified party of a
release from all liability in respect of such claim. The indemnification
obligations to defend the indemnified party required by this Article VI shall be
made by periodic payments of the amount thereof during the course of
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred, so long as the indemnified party shall refund
such moneys if it is ultimately determined by a court of competent jurisdiction
that such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law. No indemnifying party will be liable to the indemnified party under this
Agreement to the extent, but only to the extent that a loss, claim, damage or
liability is attributable to the indemnified party's breach of any of the
representations, warranties or covenants made by such party in this Agreement or
in the other Transaction Documents.
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ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees and Expenses. Each party shall pay the fees and expenses
of its advisors, counsel, accountants and other experts, if any, and all other
expenses, incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement; provided, however, that
the Company shall pay all actual attorneys' fees and expenses (including
disbursements and out-of-pocket expenses) incurred by the Purchasers in
connection with (i) the preparation, negotiation, execution and delivery of the
Transaction Documents and the transactions contemplated thereunder and review of
the documents relating to the Share Exchange Transaction, which payment shall be
made at the Initial Closing and shall not exceed $35,000 (plus disbursements and
out-of-pocket expenses), of which $10,000 was paid prior to the Initial Closing
Date, (ii) the review of the Registration Statement in accordance with Section
4(iv) of the Registration Rights Agreement, which payment of $5,000 shall be
made at the Initial Closing and held in escrow until such fees, if any, are
incurred, and (iii) any amendments, modifications or waivers of this Agreement
or any of the other Transaction Documents. In addition, the Company shall pay
(A) $3,000 to the Collateral Agent (as defined in the Security Agreement) on the
Initial Closing Date, (B) $2,500 to the escrow agent pursuant to the Escrow
Deposit Agreement on the Initial Closing Date, and (C) all reasonable fees and
expenses incurred by the Purchasers in connection with the enforcement of this
Agreement or any of the other Transaction Documents, including, without
limitation, all reasonable attorneys' fees and expenses.
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Section 7.2 Specific Performance; Consent to Jurisdiction; Venue.
(a) The Company and the Purchasers acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement or
the other Transaction Documents were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement or the other Transaction Documents
and to enforce specifically the terms and provisions hereof or thereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) The parties agree that venue for any dispute arising under this
Agreement will lie exclusively in the state or federal courts located in New
York County, New York, and the parties irrevocably waive any right to raise
forum non conveniens or any other argument that New York is not the proper
venue. The parties irrevocably consent to personal jurisdiction in the state and
federal courts of the state of New York. The Company and each Purchaser consent
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 7.2 shall affect
or limit any right to serve process in any other manner permitted by law. The
Company and the Purchasers hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to the Securities, this
Agreement or the other Transaction Documents, shall be entitled to reimbursement
for reasonable legal fees from the non-prevailing party. The parties hereby
waive all rights to a trial by jury.
Section 7.3 Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding and agreement of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the other Transaction Documents, neither the Company nor
any Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the Purchasers holding at least a majority
of the principal amount of the Notes then held by the Purchasers. Any amendment
or waiver effected in accordance with this Section 7.3 shall be binding upon
each Purchaser (and their permitted assigns) and the Company.
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Section 7.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the third business
day following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company: Remote Dynamics, Inc.
0000 Xxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Attention: Chief Executive Officer
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
with copies (which copies
shall not constitute notice
to the Company) to: Xxxxxxxxxx & Xxxxx LLP
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
If to any Purchaser: At the address of such Purchaser set forth
on Exhibit A to this Agreement, with copies
to Purchaser's counsel as set forth on
Exhibit A or as specified in writing by such
Purchaser with copies to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
29
Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other party hereto pursuant
to the provisions of this Section 7.4.
Section 7.5 Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter. No consideration shall be offered or paid to any
Purchaser to amend or consent to a waiver or modification of any provision of
any of the Transaction Documents unless the same consideration is also offered
to all of the parties to the Transaction Documents. This provision constitutes a
separate right granted to each Purchaser by the Company and shall not in any way
be construed as the Purchasers acting in concert or as a group with respect to
the purchase, disposition or voting of Securities or otherwise.
Section 7.6 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 7.7 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. After
the Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement. Subject to
Section 5.1 hereof, the Purchasers may assign the Securities and its rights
under this Agreement and the other Transaction Documents and any other rights
hereto and thereto without the consent of the Company.
Section 7.8 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Agreement
shall not be interpreted or construed with any presumption against the party
causing this Agreement to be drafted.
Section 7.10 Survival. The representations and warranties of the Company
and the Purchasers shall survive the execution and delivery hereof and each
Closing until the second anniversary of the Final Closing Date, except the
agreements and covenants set forth in Articles I, III, V, VI and VII of this
Agreement shall survive the execution and delivery hereof and the Closing
hereunder.
Section 7.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart.
30
Section 7.12 Publicity. The Company agrees that it will not disclose, and
will not include in any public announcement, the names of the Purchasers without
the consent of the Purchasers, which consent shall not be unreasonably withheld
or delayed, or unless and until such disclosure is required by law, rule or
applicable regulation, including without limitation any disclosure pursuant to
the Registration Statement, and then only to the extent of such requirement.
Section 7.13 Severability. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
Section 7.14 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, the Company and
each Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the other
Transaction Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
31
IN WITNESS WHEREOF, the parties hereto have caused this Note and Warrant
Purchase Agreement to be duly executed by their respective authorized officers
as of the date first above written.
REMOTE DYNAMICS, INC.
By:_________________________________
Name:
Title:
PURCHASER:
By:_________________________________
Name:
Title:
EXHIBIT A
LIST OF PURCHASERS
Names and Addresses Investment Amount and Number of
of Purchasers Warrants Purchased
------------- ------------------
i
EXHIBIT B-1
FORM OF SERIES B NOTE
ii
EXHIBIT B-2
FORM OF OID NOTE
iii
EXHIBIT C-1
FORM OF SERIES E-7 WARRANT
iv
EXHIBIT C-2
FORM OF SERIES F-4 WARRANT
v
EXHIBIT D
FORM OF REGISTRATION RIGHTS AGREEMENT
vi
EXHIBIT E
FORM OF SECURITY AGREEMENT
vii
EXHIBIT F-1
FORM OF ESCROW DEPOSIT AGREEMENT
viii
EXHIBIT F-2
FORM OF SECURITIES ESCROW AGREEMENT
ix
EXHIBIT G
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
REMOTE DYNAMICS, INC.
as of November 30, 2006
[Name and address of Transfer Agent]
Attn: _____________
Ladies and Gentlemen:
Reference is made to that certain Note and Warrant Purchase Agreement (the
"Purchase Agreement"), dated as of November 30, 2006, by and among Remote
Dynamics, Inc., a Delaware corporation (the "Company"), and the purchasers named
therein (collectively, the "Purchasers") pursuant to which the Company is
issuing to the Purchasers series B subordinated secured convertible promissory
notes and the OID Notes (as defined in the Purchase Agreement) (collectively,
the "Notes") and warrants (the "Warrants") to purchase shares of the Company's
common stock, par value $.01 per share (the "Common Stock"). This letter shall
serve as our irrevocable authorization and direction to you (provided that you
are the transfer agent of the Company at such time) to issue shares of Common
Stock upon conversion of the Notes (the "Conversion Shares") and exercise of the
Warrants (the "Warrant Shares") to or upon the order of a Purchaser from time to
time upon (i) surrender to you of a properly completed and duly executed
Conversion Notice or Exercise Notice, as the case may be, in the form attached
hereto as Exhibit I and Exhibit II, respectively, (ii) in the case of the
conversion of Notes, a copy of the Note (with the original delivered to the
Company) representing the Notes being converted or, in the case of Warrants
being exercised, a copy of the Warrants (with the original Warrants delivered to
the Company) being exercised (or, in each case, an indemnification undertaking
with respect to such Notes or the Warrants in the case of their loss, theft or
destruction), and (iii) delivery of a treasury order or other appropriate order
duly executed by a duly authorized officer of the Company. So long as you have
previously received (x) written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares or Warrant
Shares, as applicable, has been declared effective by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act"), and no subsequent notice by the Company or its counsel of the
suspension or termination of its effectiveness and (y) a copy of such
registration statement, and if the Purchaser represents in writing that the
prospectus delivery requirements have been or will be met, the Conversion Shares
or the Warrant Shares, as the case may be, were sold pursuant to the
Registration Statement, then certificates representing the Conversion Shares and
the Warrant Shares, as the case may be, shall not bear any legend restricting
transfer of the Conversion Shares and the Warrant Shares, as the case may be,
thereby and should not be subject to any stop-transfer restriction. Provided,
however, that if you have not previously received (i) written confirmation from
counsel to the Company that a registration statement covering resales of the
Conversion Shares or Warrant Shares, as applicable, has been declared effective
by the SEC under the 1933 Act, and (ii) a copy of such registration statement,
then the certificates for the Conversion Shares and the Warrant Shares shall
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS, OR REMOTE DYNAMICS, INC. SHALL HAVE RECEIVED AN OPINION
OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED."
x
and, provided further, that the Company may from time to time notify you to
place stop-transfer restrictions on the certificates for the Conversion Shares
and the Warrant Shares in the event a registration statement covering the
Conversion Shares and the Warrant Shares is subject to amendment for events then
current.
A form of written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares and the Warrant
Shares has been declared effective by the SEC under the 1933 Act is attached
hereto as Exhibit III.
Please be advised that the Purchasers are relying upon this letter as an
inducement to enter into the Purchase Agreement and, accordingly, each Purchaser
is a third party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at ___________.
Very truly yours,
REMOTE DYNAMICS, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By:______________________
Name:____________________
Title:___________________
Date:____________________
xi
EXHIBIT I
REMOTE DYNAMICS, INC.
CONVERSION NOTICE
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. ___ into shares of Common Stock of REMOTE
DYNAMICS, INC. (the "Maker") according to the conditions hereof, as of the date
written below.
Date of Conversion _____________________________________________________________
Applicable Conversion Price ____________________________________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion: _______________________________________
Signature_______________________________________________________________________
[Name]
Address:________________________________________________________________________
________________________________________________________________________
xii
EXHIBIT II
FORM OF EXERCISE NOTICE
EXERCISE FORM
REMOTE DYNAMICS, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Remote
Dynamics, Inc. covered by the within Warrant.
Dated: _________________ Signature___________________________________
Address ___________________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature___________________________________
Address ___________________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature___________________________________
Address ___________________________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
xiii
EXHIBIT III
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Name and address of Transfer Agent]
Attn: _____________
Re: Remote Dynamics, Inc.
Ladies and Gentlemen:
We are special counsel to Remote Dynamics, Inc., a Delaware corporation
(the "Company"), and have represented the Company in connection with that
certain Note and Warrant Purchase Agreement (the "Purchase Agreement"), dated as
of November 30, 2006, by and among the Company and the purchasers named therein
(collectively, the "Purchasers") pursuant to which the Company issued to the
Purchasers series B subordinated secured convertible promissory notes and the
OID Notes (as defined in the Purchase Agreement) (collectively, the "Notes") and
warrants (the "Warrants") to purchase shares of the Company's common stock, par
value $.01 per share (the "Common Stock"). Pursuant to the Purchase Agreement,
the Company has also entered into a Registration Rights Agreement with the
Purchasers (the "Registration Rights Agreement"), dated as of November 30, 2006,
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon conversion of the Notes and
exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 Act"). In connection with the Company's obligations under the Registration
Rights Agreement, on ________________, 2006, the Company filed a Registration
Statement on Form S-1 (File No. 333-________) (the "Registration Statement")
with the Securities and Exchange Commission (the "SEC") relating to the resale
of the Registrable Securities which names each of the present Purchasers as a
selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and accordingly, the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
Very truly yours,
[COMPANY COUNSEL]
By:_______________
cc: [LIST NAMES OF PURCHASERS]
xiv
EXHIBIT H
FORM OF OPINION
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents and to issue
the Notes, the Warrants and the Common Stock issuable upon conversion of the
Notes and exercise of the Warrants. The execution, delivery and performance of
each of the Transaction Documents by the Company and the consummation by it of
the transactions contemplated thereby have been duly and validly authorized by
all necessary corporate action and no further consent or authorization of the
Company, its Board of Directors or its stockholders is required. Each of the
Transaction Documents have been duly executed and delivered, and the Notes and
the Warrants have been duly executed, issued and delivered by the Company and
each of the Transaction Documents constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
respective terms. The Common Stock issuable upon conversion of the Notes and
exercise of the Warrants are not subject to any preemptive rights under the
Certificate of Incorporation or the Bylaws.
3. The Notes and the Warrants have been duly authorized and, when
delivered against payment in full as provided in the Purchase Agreement, will be
validly issued, fully paid and nonassessable. The shares of Common Stock
issuable upon conversion of the Notes and exercise of the Warrants have been
duly authorized and reserved for issuance, and when delivered upon conversion or
against payment in full as provided in the Notes and the Warrants, as
applicable, will be validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Transaction Documents and the issuance of the Notes, the Warrants
and the Common Stock issuable upon conversion of the Notes and exercise of the
Warrants do not (a) violate any provision of the Certificate of Incorporation or
Bylaws, (b) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party and
which is set forth on Schedule I, (c) create or impose a lien, charge or
encumbrance on any property of the Company under any agreement or any commitment
which is set forth on Schedule I to which the Company is a party or by which the
Company is bound or by which any of its respective properties or assets are
bound, or (d) result in a violation of any Federal, state, local or foreign
statute, rule, regulation, order, judgment, injunction or decree (including
Federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected, except, in
all cases other than violations pursuant to clauses (a) and (d) above, for such
conflicts, default, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect.
xv
5. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the Transaction Documents, or the
offer, sale or issuance of the Notes, the Warrants and the Common Stock issuable
upon conversion of the Notes and exercise of the Warrants other than filings as
may be required by applicable Federal and state securities laws and regulations
and any applicable stock exchange rules and regulations.
6. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of the Purchase Agreement or the transactions contemplated thereby or
any action taken or to be taken pursuant thereto. There is no action, suit,
claim, investigation or proceeding pending, or to our knowledge, threatened,
against or involving the Company or any of its properties or assets and which,
if adversely determined, is reasonably likely to result in a Material Adverse
Effect. To our knowledge, there are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any officers or directors of the Company
in their capacities as such.
7. Assuming that all of the Purchasers' representations and warranties in
the Purchase Agreement are complete and accurate, the offer, issuance and sale
of the Notes and the Warrants and the offer, issuance and sale of the Common
Stock issuable upon conversion of the Notes and exercise of the Warrants are
exempt from the registration requirements of the Securities Act of 1933, as
amended.
8. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
9. The Security Agreement will create a valid security interest in favor
of the Purchasers in such assets of the Company that is subject to such Security
Agreement.
xvi
