REVISED AND RESTATED STOCK PURCHASE AGREEMENT
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These securities have not been registered with the U.S. Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), and are being offered in reliance on exemptions from
registration provided in Section 4(2) of the Securities Act and Rule
506 of Regulation D promulgated thereunder and preemption from the
registration or qualification requirements (other than notice
filing and fee provisions) of applicable state laws under the
National Securities Markets Improvement Act of 1996.
----------------------------
THIS REVISED AND RESTATED STOCK PURCHASE AGREEMENT (this "Agreement")
is entered into this 17th day of April, 2006, effective as of December 12, 2005,
by and between ARADYME CORPORATION, a Delaware corporation (the "Company"), and
EAGLE ROCK CAPITAL, LLC, a Utah limited liability company (the "Purchaser"), on
the following:
PREMISES
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D, as promulgated by the SEC under the
Securities Act.
B. The Purchaser wishes to purchase from the Company, and the Company
wishes to sell and issue to the Purchaser, upon the terms and conditions stated
in this Agreement, (i) up to an aggregate of 15,000,000 shares of the Company's
common stock, par value $0.001 per share (the "Common Stock"), and (ii) warrants
to purchase an aggregate of up to 18,750,000 shares of the Company's common
stock, par value $0.001 per share, the form of which is attached hereto as
Exhibit A (the "Warrants"); and (iii) the shares of common stock issuable upon
exercise of the warrants (the "Warrant Shares").
C. Contemporaneously with the sale of the Common Stock and Warrants,
the parties hereto will execute and deliver a Registration Rights Agreement, in
the form attached hereto as Exhibit B (the "Registration Rights Agreement"),
pursuant to which the Company will agree to provide certain registration rights
under the Securities Act, the rules and regulations promulgated thereunder, and
applicable state securities laws.
AGREEMENT
NOW, THEREFORE, upon the foregoing premises, which are incorporated
herein by reference, and for and in consideration of the mutual promises and
covenants contained in this Agreement, it is hereby agreed as follows.
ARTICLE I
DEFINITIONS
"10-KSB" means the Company's Annual Report on Form 10-KSB for the
fiscal year ended September 30, 2004, as filed with the SEC on January 13, 2005,
and as subsequently amended February 14, 2005.
Revised and Restated 4/18/2006 Effective as of 12/12/05
"Affiliate" means, respecting any Person: (a) a spouse or member of the
immediate family of such Person; (b) any member, manager, director, officer, or
partner of such Person; (c) any corporation, partnership, business, association,
limited liability company, firm, or other entity of which such Person is a
member, manager, director, officer, or partner or owns or controls, directly or
indirectly, more than 50% of the voting stock or other equity interests; and (d)
any other Person that directly or indirectly controls, is controlled by, or is
under direct or indirect common control with such first Person.
"Agreement" means this Stock Purchase Agreement.
"Business Day" means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.
"Closing" has the meaning specified in Section 2.08.
"Closing Date" has the meaning specified in Section 2.08.
"Common Stock" has the meaning specified in the premises of this
Agreement.
"Company" means Aradyme Corporation, a Delaware corporation, its
successors and assigns.
"Company's Knowledge" means a fact, circumstance, or other matter of
which the Company has actual knowledge or reasonably should have knowledge after
due inquiry of its officers, directors, and key employees and reasonable review
of its books and records.
"Confidential Information" means proprietary information, trade
secrets, confidential information, and know-how (including ideas, formulae,
compositions, processes, procedures and techniques, research and development
information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information).
"Environmental Laws" has the meaning set forth in Section 3.17.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Funding Date(s)" means any one or more of the following: Tranche Two
Funding Date, Tranche Three Funding Date, Tranche Four Funding Date, or Tranche
Five Funding Date.
"Generally accepted accounting principles" or "GAAP" means accounting
principles that are (a) consistent with the principles promulgated or adopted by
the United States Financial Accounting Standards Board and its predecessors and
other recognized principle setting bodies, in effect from time to time; (b)
applied on a basis consistent with prior periods; and (c) such that a certified
public accountant would, insofar as the use of accounting principles is
pertinent, be in a position to base an opinion as to financial statements in
which such principles have been properly applied.
"Indemnified Person" shall have the meaning set forth in Section 8.03.
"Infringe" shall have the meaning set forth in Section 3.16(d).
Revised and Restated 4/18/2006 2 Effective as of 12/12/05
"Intellectual Property" means all of the following: (a) patents, patent
applications, patent disclosures, and inventions (whether or not patentable and
whether or not reduced to practice); (b) trademarks, service marks, trade dress,
trade names, corporate names, logos, slogans, and Internet domain names,
together with all goodwill associated with each of the foregoing; (c) copyrights
and copyrightable works; (d) registrations, applications, and renewals for any
of the foregoing; and (e) proprietary computer software (including data, data
bases, and documentation).
"Investment Representations" has the meaning set forth in Section
5.02(a).
"Material Adverse Effect" means a material adverse effect on (a) the
assets, liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries taken as a whole, or
(b) the ability of the Company to perform its obligations under the Transaction
Documents.
"Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority, or any other form of entity not specifically listed herein.
"Purchaser" means Eagle Rock Capital, LLC, a Utah limited liability
company, and its successors and assigns.
"Registration Rights Agreement" means the Registration Rights Agreement
attached as Exhibit B to this Agreement.
"SEC" means the United States Securities and Exchange Commission.
"SEC Filings" has the meaning set forth in Section 3.07.
"Securities" means the Common Stock, the Warrants, and the Warrant
Shares.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" has the meaning set forth in Section 3.01.
"Tranche Two Funding Date" is the date on which the Common Stock and
Warrants described in Section 2.02(b) are purchased by Purchaser.
"Tranche Three Funding Date" the date on which the Common Stock and
Warrants described in Section 2.02(c) are purchased by Purchaser.
"Tranche Four Funding Date" the date on which the Common Stock and
Warrants described in Section 2.02(d) are purchased by Purchaser.
"Tranche Five Funding Date" the date on which the Common Stock and
Warrants described in Section 2.02(e) are purchased by Purchaser.
"Transaction Documents" means this Agreement, the Warrants, and the
Registration Rights Agreement.
"Warrants" has the meaning specified in the premises of this Agreement.
Revised and Restated 4/18/2006 3 Effective as of 12/12/05
"Warrant Shares" has the meaning specified in the premises of this
Agreement.
ARTICLE II
PURCHASE AND SALE
2.01 Authorization. The Company has duly authorized the sale and
issuance, pursuant to the terms of this Agreement, of the Common Stock and
Warrants at the times and prices and subject to the conditions set forth in this
Agreement.
2.02 Sale and Purchase. Subject to the terms and conditions of this
Agreement, the Company, upon execution and acceptance of this Agreement and
payment of the amount due at Closing, hereby agrees to sell, grant, and issue to
the Purchaser, the following:
(a) Tranche One:
(i) 5,000,000 shares of Common Stock for a purchase
price of $0.20 per share, or a total of $1,000,000, payable at
Closing; and
(ii) 5,000,000 Warrants to purchase one share of
common stock at $0.40 per share, or a total of $2,000,000 if
all such Warrants are exercised, not exercisable until at
least one year after the Closing Date, and thereafter
exercisable at any time within six years after the Closing
Date.
(b) Tranche Two:
(i) 2,500,000 shares of Common Stock for a purchase
price of $0.20 per share, or a total of $500,000, payable on
or before the date on which a registration statement must be
filed under Section 2(a) of the Registration Rights Agreement
(the "Tranche Two Funding Date"); and
(ii) 3,125,000 Warrants to purchase one share of
common stock at $0.40 per share, or a total of $1,250,000 if
all such Warrants are exercised, not exercisable until at
least one year after the Closing Date, and thereafter
exercisable at any time within six years after the Closing
Date.
(c) Tranche Three:
(i) 2,500,000 shares of Common Stock for a purchase
price of $0.20 per share, or a total of $500,000, payable on
or before the date on which a registration statement must be
filed under Section 2(a) of the Registration Rights Agreement
(the "Tranche Three Funding Date"); and
(ii) 3,125,000 Warrants to purchase one share of
common stock at $0.40 per share, or a total of $1,250,000 if
all such Warrants are exercised, not exercisable until at
least one year after the Closing Date, and thereafter
exercisable at any time within six years after the Closing
Date.
Revised and Restated 4/18/2006 4 Effective as of 12/12/05
(d) Tranche Four:
(i) 2,500,000 shares of Common Stock for a purchase
price of $0.20 per share, or a total of $500,000, payable on
or before the date on which a registration statement must be
filed under Section 2(a) of the Registration Rights Agreement
(the "Tranche Four Funding Date"); and
(ii) 3,750,000 Warrants to purchase one share of
common stock at $0.40 per share, or a total of $1,500,000 if
all such Warrants are exercised, not exercisable until at
least one year after the Closing Date, and thereafter
exercisable at any time within six years after the Closing
Date.
(e) Tranche Five:
(i) 2,500,000 shares of Common Stock for a purchase
price of $0.20 per share, or a total of $500,000, payable on
or before the date on which a registration statement must be
filed under Section 2(a) of the Registration Rights Agreement
(the "Tranche Five Funding Date"); and
(ii) 3,750,000 Warrants to purchase one share of
common stock at $0.40 per share, or a total of $1,500,000 if
all such Warrants are exercised, not exercisable until at
least one year after the Closing Date, and thereafter
exercisable at any time within six years after the Closing
Date.
2.03 Termination. Notwithstanding any other provision of this
Agreement, Purchaser shall have no right to fund Tranches Two, Three, Four, or
Five if such tranches are not funded as of the date the registration statement
is filed pursuant to Section 2(a) of the Registration Rights Agreement.
2.04 Preexisting Rights. This Agreement and the parties' rights and
obligations hereunder shall not abrogate the rights of Enviro Fresh, Inc. or
Xxxxxx X. Xxxxxxxxx, affiliates of Purchaser, under that Modification and
Documentation of Obligation dated as of September 29, 2003.
2.05 Payment of Purchase Price. All amounts payable by Purchaser
hereunder on any Funding Date or the exercise of Warrants shall be paid by
certified or official bank check, wire transfer, or other means acceptable to
the Company. Payment may be made, at Purchaser's sole discretion, by
cancellation of up to $100,000 in principal, plus any unpaid interest accrued
thereon, owed by the Company to Purchaser or to an affiliate of Purchaser,
provided that such debt is assigned to Purchaser prior to such payment. Payment
shall not be deemed to have been received unless and until the Purchaser's
payment, in whatever form, is collected in immediately available funds for the
account of the Company by the Company's bank.
2.06 Delivery of Certificates for Common Stock and Warrants. Within two
Business Days after receipt of the purchase price by the Company, it shall
transmit to the Purchaser such number of certificates as the Purchaser may
reasonably request evidencing the Common Stock purchased and an original
Warrant, signed by the appropriate officers of the Company, in the form of
Exhibit A appropriately completed to reflect the terms of such Warrant pursuant
to the provisions of this Agreement. Purchaser may request, by written
instructions, such certificates shall be (a) issued in even denominations of
100,000 shares, except that in the event the number of shares purchased is not
an even increment of 100,000, one certificate shall be issued for such remaining
lesser number, and (b) registered in the name of the Purchaser provided on the
signature page hereof.
Revised and Restated 4/18/2006 5 Effective as of 12/12/05
2.07 Issuance Expenses. The Company shall pay all costs and expenses of
issuing and delivering the certificates for the Common Stock and Warrants
respecting the issuance and delivery of such securities to the Purchaser.
2.08 Closing; Closing Date. The payment of $1,000,000 for the purchase
of 5,000,000 shares of Common Stock shall be delivered to the Company against
delivery to the Purchaser of one or more certificates for the shares so paid for
and purchased and original Warrants as provided above (the "Closing") at the
offices of Xxxxx Xxxxx Xxxxxxx & Xxxxx, LLC, 00 Xxxx Xxxxxxxx, Xxxxxx Xxxxx,
Xxxx Xxxx Xxxx, Xxxx, at 5:00 o'clock p.m., local time on December 12, 2005, or
such date, time, and place as may be mutually acceptable to the parties hereto
(the "Closing Date").
ARTICLE III
REPRESENTATIONS OF THE COMPANY
The Company hereby represents and warrants to the Purchaser, except as
set forth in the schedules delivered herewith (collectively, the "Disclosure
Schedules"), as follows.
3.01 Organization, Good Standing, and Qualification. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to carry on its business as now
conducted and to own its properties. Each of the Company and its Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or leasing necessary unless the
failure to so qualify has not and could not reasonably be expected to have a
Material Adverse Effect. The Company's Subsidiaries are reflected on Schedule
3.01 hereto (the "Subsidiaries").
3.02 Authorization. The Company has full power and authority and has
taken all requisite action on the part of the Company and its officers,
directors, and stockholders necessary for (a) the authorization, execution, and
delivery of the Transaction Documents; (b) authorization of the performance of
all obligations of the Company hereunder or thereunder; and (c) except as
described on Schedule 3.02 hereto, the authorization, issuance (or reservation
for issuance), and delivery of the Securities. The Transaction Documents
constitute the legal, valid, and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and similar laws of
general applicability, relating to or affecting creditors' rights generally.
3.03 Capitalization.
(a) The Company is authorized to issue (i) 50,000,000 shares
of common stock, of which 25,229,546 shares are issued and outstanding
as of the date of this Agreement and 8,325,500 shares are reserved for
issuance on the exercise of outstanding options and warrants; and (ii)
1,000,000 shares of preferred stock, $0.001 par value per share, none
of which is outstanding. The common stock has the voting powers,
designations, preferences, rights, qualifications, limitations, or
restrictions set forth in the certificate of incorporation and
amendments thereto. The undesignated preferred stock may be issued in
such series with the voting powers, designations, preferences, rights,
qualifications, limitations, or restrictions as may be duly approved by
the board of directors. All of the issued and outstanding shares of the
Company's capital stock have been duly authorized and validly issued,
are fully paid, nonassessable, and free of preemptive rights, and were
issued in full compliance with applicable law and any rights of third
parties. All of the issued and outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued, are fully
Revised and Restated 4/18/2006 6 Effective as of 12/12/05
paid, nonassessable, and free of preemptive rights, were issued in full
compliance with applicable law and any rights of third parties, and are
owned by the Company, beneficially and of record, subject to no lien,
encumbrance, or other adverse claim. No Person is entitled to
preemptive or similar statutory or contractual rights with respect to
any securities of the Company. Except as described above, there are no
outstanding warrants, options, convertible securities, or other rights,
agreements, or arrangements of any character under which the Company or
any of its Subsidiaries is or may be obligated to issue any equity
securities of any kind and except as contemplated by this Agreement,
neither the Company nor any of its Subsidiaries is currently in
negotiations for the issuance of any equity securities of any kind.
Except as described on Schedule 3.03(a) and except for the Registration
Rights Agreement, there are no voting agreements, buy-sell agreements,
option or right of first purchase agreements, or other agreements of
any kind among the Company and any of the security holders of the
Company relating to the securities of the Company held by them. Prior
to this Agreement, the Company has not granted any Person the right to
require the Company to register any securities of the Company under the
Securities Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for
the account of any other Person.
(b) Schedule 3.03(b) sets forth a true and complete table
setting forth the pro forma capitalization of the Company on a
fully-diluted basis giving effect to (i) the issuance of the Common
Stock and the Warrants, (ii) any adjustments in other securities
resulting from the issuance of the Common Stock or the Warrants, and
(iii) the exercise or conversion of all outstanding securities. Except
as described on Schedule 3.03(b), the issuance and sale of the
Securities hereunder will not obligate the Company to issue shares of
common stock or other securities to any other Person (other than the
Purchaser) and will not result in the adjustment of the exercise,
conversion, exchange, or reset price of any outstanding security.
(c) The Company does not have outstanding stockholder purchase
rights or any similar arrangement in effect giving any Person the right
to purchase any equity interest in the Company upon the occurrence of
certain events.
3.04 Valid Issuance. The Common Stock has been duly and validly
authorized and, when issued and paid for pursuant to this Agreement, will be
validly issued, fully paid, and nonassessable, and shall be free and clear of
all encumbrances and restrictions, except for restrictions on transfer set forth
in the Transaction Documents or imposed by applicable securities laws. The
Warrants have been duly and validly authorized. Upon the due exercise of the
Warrants, the Warrant Shares will be validly issued, fully paid, nonassessable,
and free and clear of all encumbrances and restrictions, except for restrictions
on transfer set forth in the Transaction Documents or imposed by applicable
securities laws. Except as described on Schedule 3.04, the Company has reserved
a sufficient number of shares of common stock for issuance upon the exercise of
exercisable Warrants, free and clear of all encumbrances and restrictions,
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws.
3.05 Consents. The execution, delivery, and performance by the Company
of the Transaction Documents and the offer, issuance, and sale of the Securities
require no consent of, action by or in respect of, or filing with any Person,
governmental body, agency, or official other than filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws that the Company undertakes to file
within the applicable time periods. The Company has taken all action necessary
to exempt (a) the issuance and sale of the Securities, (b) the issuance of the
Warrant Shares upon due exercise of the Warrants, and (c) the other transactions
Revised and Restated 4/18/2006 7 Effective as of 12/12/05
contemplated by the Transaction Documents from the provisions of any
antitakeover, business combination, or control share law or statute binding on
the Company or to which the Company or any of its assets and properties may be
subject or any provision of the Company's certificate of incorporation, bylaws,
or any stockholder rights agreement that is or could become applicable to the
Purchaser as a result of the transactions contemplated hereby, including the
issuance of the Securities and the ownership, disposition, or voting of the
Securities by the Purchaser or the exercise of any right granted to the
Purchaser pursuant to this Agreement or the other Transaction Documents.
3.06 Over-the-Counter Bulletin Board Compliance. The Company's common
stock is registered pursuant to Section 12(g) of the Exchange Act and is quoted
on the Over-the-Counter Bulletin Board (the "OTCBB"), and the Company has taken
no action designed to terminate, or likely to have the effect of terminating,
the registration of the common stock under the Exchange Act or the quotation of
the common stock on the OTCBB, nor has the Company received any notification
that the SEC or the NASD is contemplating terminating such registration or
listing, nor is the Company aware of any facts or circumstances that might
reasonably be expected to result in such a transaction.
3.07 Delivery of SEC Filings; Business. The Company has provided the
Purchaser with copies of the Company's 10-KSB and all other reports filed by the
Company pursuant to the Exchange Act since the filing of the 10-KSB and prior to
the date hereof (collectively, the "SEC Filings"). The SEC Filings are the only
filings required of the Company pursuant to the Exchange Act for such period.
The Company and its Subsidiaries are engaged only in the business described in
the SEC Filings and the SEC Filings contain a complete and accurate description
in all material respects of the business of the Company and its Subsidiaries
taken as a whole.
3.08 Use of Proceeds. The proceeds of the sale of the Common Stock and
the Warrants hereunder shall be used by the Company as described in Schedule
3.08.
3.09 No Material Adverse Change. Since September 30, 2004, except as
identified and described in the SEC Filings or as described on Schedule 3.09,
there has not been:
(a) any change in the consolidated assets, liabilities,
financial condition, or operating results of the Company from that
reflected in the financial statements included in the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005,
except for changes in the ordinary course of business that have not and
could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;
(b) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital
stock of the Company, or any redemption or repurchase of any securities
of the Company;
(c) any material damage, destruction, or loss, whether or not
covered by insurance to any assets or properties of the Company or its
Subsidiaries;
(d) any waiver, not in the ordinary course of business, by the
Company or any Subsidiary of a material right or of a material debt
owed to it;
(e) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company or a
Subsidiary, except in the ordinary course of business and which is not
material to the assets, properties, financial condition, operating
results, or business of the Company and its Subsidiaries taken as a
whole (as such business is presently conducted and as it is proposed to
be conducted);
Revised and Restated 4/18/2006 8 Effective as of 12/12/05
(f) any change or amendment to the Company's certificate of
incorporation or bylaws, or material change to any material contract or
arrangement by which the Company or any Subsidiary is bound or to which
any of their respective assets or properties is subject;
(g) any material labor difficulties or labor union organizing
activities with respect to employees of the Company or any Subsidiary;
(h) any transaction entered into by the Company or a
Subsidiary other than in the ordinary course of business;
(i) the loss of the services of any key employee or material
change in the composition or duties of the senior management of the
Company or any Subsidiary;
(j) the loss or threatened loss of any customer that has had
or could reasonably be expected to have a Material Adverse Effect; or
(k) any other event or condition of any character that has had
or could reasonably be expected to have a Material Adverse Effect.
3.10 SEC Filings. At the time of filing thereof, the SEC Filings
complied as to form in all material respects with the requirements of the
Exchange Act and did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
3.11 No Conflict, Breach, Violation, or Default. To the Company's
knowledge, the execution, delivery, and performance of the Transaction Documents
by the Company and the issuance and sale of the Securities will not conflict
with or result in a breach or violation of any of the terms and provisions of,
or constitute a default under (a) the Company's certificate of incorporation or
bylaws, both as in effect on the date hereof (copies of which have been provided
to the Purchaser before the date hereof); or (b)(i) any statute, rule,
regulation, or order of any governmental agency or body or any court, domestic
or foreign, having jurisdiction over the Company, any Subsidiary, or any of
their respective assets or properties, or (ii) any agreement or instrument to
which the Company or any Subsidiary is a party or by which the Company or a
Subsidiary is bound or to which any of their respective assets or properties is
subject.
3.12 Tax Matters. To the Company's knowledge, the Company and each
Subsidiary has timely prepared and filed all tax returns required to have been
filed by the Company or such Subsidiary with all appropriate governmental
agencies and timely paid all taxes shown thereon or otherwise owed by it except
those described on Schedule 3.12. The charges, accruals, and reserves on the
books of the Company in respect of taxes for all fiscal periods are adequate in
all material respects, and there are no material unpaid assessments against the
Company or any Subsidiary nor, to the Company's Knowledge, any basis for the
assessment of any additional taxes, penalties, or interest for any fiscal period
or audits by any federal, state, or local taxing authority, except for any
assessment that is not material to the Company and its Subsidiaries taken as a
whole. To the Company's knowledge and except as described on Schedule 3.12, all
taxes and other assessments and levies that the Company or any Subsidiary is
required to withhold or to collect for payment have been duly withheld and
collected and paid to the proper governmental entity or third party when due.
There are no tax liens or claims pending or, to the Company's Knowledge,
threatened against the Company or any Subsidiary or any of their respective
assets or property. Except as described on Schedule 3.12, there are no
outstanding tax-sharing agreements or other such arrangements between the
Company and any Subsidiary or other corporation or entity.
Revised and Restated 4/18/2006 9 Effective as of 12/12/05
3.13 Title to Properties. To the Company's knowledge and except as
disclosed in the SEC Filings, the Company and each Subsidiary has good and
marketable title to all real properties and all other properties and assets
owned by it, in each case free from liens, encumbrances, and defects that would
materially affect the value thereof or materially interfere with the use made or
currently planned to be made thereof by them; and except as disclosed in the SEC
Filings, the Company and each Subsidiary holds any leased real or personal
property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or currently planned to be made thereof
by them.
3.14 Certificates, Authorities, and Permits. To the Company's
knowledge, the Company and each Subsidiary possess adequate certificates,
authorities, or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it, and neither the Company
nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authority, or permit that,
if determined adversely to the Company or such Subsidiary, could reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate.
3.15 No Labor Disputes. No material labor dispute with the employees of
the Company or any Subsidiary exists or, to the Company's Knowledge, is
imminent.
3.16 Intellectual Property.
(a) To the Company's knowledge, all Intellectual Property of
the Company and its Subsidiaries is currently in compliance with all
legal requirements (including timely filings, proofs, and payments of
fees) and is valid and enforceable. No Intellectual Property of the
Company or its Subsidiaries that is necessary for the conduct of
Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted has been
or is now involved in any cancellation, dispute, or litigation and, to
the Company's Knowledge, no such action is threatened. No patent of the
Company or its Subsidiaries has been or is now involved in any
interference, reissue, reexamination, or opposition proceeding.
(b) All of the licenses and sublicenses and consent, royalty,
or other agreements concerning Intellectual Property that are necessary
for the conduct of the Company's and each of its Subsidiaries'
respective businesses as currently conducted or as currently proposed
to be conducted to which the Company or any Subsidiary is a party or by
which any of their assets are bound (other than generally commercially
available, non-custom, off-the-shelf software application programs
having a retail acquisition price of less than $10,000 per license) are
valid and binding obligations of the Company or its Subsidiaries that
are parties thereto and, to the Company's Knowledge, the other parties
thereto, enforceable in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, or other
similar laws affecting the enforcement of creditors' rights generally,
and there exists no event or condition that will result in a material
violation or breach of or constitute (with or without due notice or
lapse of time or both) a default by the Company or any of its
Subsidiaries under any such license agreement.
(c) To the Company's knowledge, the Company and its
Subsidiaries own or have the valid right to use all of the Intellectual
Property that is necessary for the conduct of the Company's and each of
its Subsidiaries' respective businesses as currently conducted or as
currently proposed to be conducted and for the ownership, maintenance,
and operation of the Company's and its Subsidiaries' properties and
assets, free and clear of all liens, encumbrances, adverse claims, or
obligations to license all such owned Intellectual Property and
Confidential Information, other than licenses entered into in the
ordinary course of the Company's and its Subsidiaries' businesses. The
Revised and Restated 4/18/2006 10 Effective as of 12/12/05
Company and its Subsidiaries have a valid and enforceable right to use
all third-party Intellectual Property and Confidential Information used
or held for use in the respective businesses of the Company and its
Subsidiaries.
(d) To the Company's knowledge, the conduct of the Company's
and its Subsidiaries' businesses as currently conducted does not
infringe or otherwise impair or conflict with (collectively,
"Infringe") any Intellectual Property rights of any third party or any
confidentiality obligation owed to a third party and the Intellectual
Property and Confidential Information of the Company and its
Subsidiaries that are necessary for the conduct of Company's and each
of its Subsidiaries' respective businesses as currently conducted or as
currently proposed to be conducted are not being Infringed by any third
party. There is no litigation or order pending or outstanding or, to
the Company's Knowledge, threatened or imminent that seeks to limit or
challenge or that concerns the ownership, use, validity, or
enforceability of any Intellectual Property or Confidential Information
of the Company and its Subsidiaries and the Company's and its
Subsidiaries' use of any Intellectual Property or Confidential
Information owned by a third party and, to the Company's Knowledge,
there is no valid basis for the same.
(e) To the Company's knowledge, the consummation of the
transactions contemplated hereby will not result in the alteration,
loss, impairment of, or restriction on the Company's or any of its
Subsidiaries' ownership or right to use any of the Intellectual
Property or Confidential Information that is necessary for the conduct
of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted.
(f) All software owned by the Company or any of its
Subsidiaries and, to the Company's Knowledge, all software licensed
from third parties by the Company or any of its Subsidiaries: (i) is
free from any material defect, bug, virus, or programming, design, or
documentation error; (ii) operates and runs in a reasonable and
efficient business manner; and (iii) conforms in all material respects
to the specifications and purposes thereof.
(g) The Company and its Subsidiaries have taken reasonable
steps to protect the rights of the Company and its Subsidiaries in
their Intellectual Property and Confidential Information. Each
employee, consultant, and contractor that has had access to
Confidential Information that is necessary for the conduct of Company's
and each of its Subsidiaries' respective businesses as currently
conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Confidential
Information and has executed appropriate agreements that are
substantially consistent with the Company's standard forms thereof.
Except under confidentiality obligations, there has been no material
disclosure of any of the Confidential Information of the Company or its
Subsidiaries to any third party.
3.17 Environmental Matters. To the Company's knowledge, neither the
Company nor any Subsidiary (a) is in violation of any statute, rule, regulation,
decision, or order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal, or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, "Environmental
Laws"), (b) owns or operates any real property contaminated with any substance
that is subject to any Environmental Laws, (c) is liable for any off-site
disposal or contamination pursuant to any Environmental Laws, and (d) is subject
to any claim relating to any Environmental Laws, which violation, contamination,
liability, or claim has had or could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate; and there is no pending or
threatened investigation that might lead to such a claim.
Revised and Restated 4/18/2006 11 Effective as of 12/12/05
3.18 Litigation. Except as described on Schedule 3.18, there are no
pending actions, suits, or proceedings against or affecting the Company, its
Subsidiaries, or any of its or their properties; and to the Company's Knowledge,
no such actions, suits, or proceedings are threatened or contemplated.
3.19 Financial Statements. The financial statements included in each
SEC Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis (except as may be disclosed
therein or in the notes thereto and, in the case of quarterly financial
statements, as permitted by Form 10-QSB under the Exchange Act). Except as set
forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof or as described on Schedule 3.19, neither the
Company nor any of its Subsidiaries has incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of business and
consistent (as to amount and nature) with past practices since the date of such
financial statements, individually or in the aggregate, that have or could
reasonably be expected to have a Material Adverse Effect.
3.20 Insurance Coverage. To the Company's knowledge, the Company and
each Subsidiary maintains in full force and effect insurance coverage that is
customary for comparably situated companies for the business being conducted and
properties owned or leased by the Company and each Subsidiary, and the Company
reasonably believes such insurance coverage to be adequate against all
liabilities, claims, and risks against which it is customary for comparably
situated companies to insure.
3.21 Brokers and Finders. No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest, or claim
against or upon the Company, any Subsidiary, or the Purchaser for any
commission, fee, or other compensation pursuant to any agreement, arrangement,
or understanding entered into by or on behalf of the Company, other than as
described in Schedule 3.21.
3.22 No General Solicitation. Neither the Company nor any Person acting
on its behalf has conducted any general solicitation or general advertising (as
those terms are used in Regulation D) in connection with the offer or sale of
any of the Securities.
3.23 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 Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the
Securities under the Securities Act.
3.24 Private Placement. The offer and sale of the Securities to the
Purchaser as contemplated hereby is exempt from the registration requirements of
the Securities Act.
3.25 Questionable Payments. Neither the Company, its Subsidiaries nor,
to the Company's Knowledge, any of their respective current or former
stockholders, directors, officers, employees, agents, or other Persons acting on
behalf of the Company or any Subsidiary, on behalf of the Company or any
Subsidiary or in connection with their respective businesses, has: (a) used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company or any Subsidiary; or (e) made any unlawful
bribe, rebate, payoff, influence payment, kickback, or other unlawful payment of
any nature.
Revised and Restated 4/18/2006 12 Effective as of 12/12/05
3.26 Transactions with Affiliates. Except as disclosed in SEC Filings
made on or prior to the date hereof or as disclosed on Schedule 3.26, none of
the officers or directors of the Company and, to the Company's Knowledge, none
of the employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than as holders of stock options and/or
warrants, and for services as employees, officers, and directors), including any
contract, agreement, or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director, or such
employee or, to the Company's Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee, or partner.
3.27 Internal Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (a) transactions are executed in accordance with management's
general or specific authorizations, (b) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (c) access
to assets is permitted only in accordance with management's general or specific
authorization, and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.28 Disclosures. The Transaction Documents delivered to the Purchaser
in connection with the transactions contemplated herein, including all exhibits
and schedules thereto, do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS OF PURCHASER
The Purchaser represents and warrants to the Company as follows as of
the date of the Purchaser's execution of this Agreement and at and as of the
Closing Date.
4.01 Investment. The Purchaser (a) is acquiring the Securities solely
for its own account for investment purposes and not with a view to or for sale
in connection with any distribution thereof, nor with any present intention of
distributing the same, (b) has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness, or commitment providing for
the disposition thereof, and (c) is fully aware that in agreeing to sell the
Securities and entering into this Agreement, the Company is relying upon the
truth and accuracy of the representations and warranties contained herein.
4.02 Authority for Agreement. The Purchaser has full power and
authority to execute, deliver, and perform its obligations under this Agreement
in accordance with its terms. The Purchaser has not been organized, reorganized,
or recapitalized specifically for the purpose of investing in the Company, or,
if it has, all equity owners of the Purchaser are "accredited investors" as that
term is defined in Section 5.01(a) of Regulation D promulgated under the
Securities Act. This Agreement has been duly executed and delivered by the
Purchaser and constitutes a valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms.
4.03 Information. The Purchaser, or its purchaser representative or
other duly constituted representative, (a) has reviewed the information and
representations of the Company contained in, or incorporated by reference into,
this Agreement and the Company Reports, and (b) has had the opportunity to make
inquiry concerning the Company and its business and personnel. The officers of
the Company have made available to each such Person any and all written
information that it has requested and have answered to each such Person's
Revised and Restated 4/18/2006 13 Effective as of 12/12/05
satisfaction all inquiries made. The Purchaser understands that an investment in
the Company involves a degree of risk, as set forth in the information provided
by the Company.
4.04 Accredited Investor. The Purchaser is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act. The Purchaser, either alone or with its purchaser representative
or other duly constituted representative, has sufficient knowledge and
experience in investing in companies similar to the Company so as to be able to
evaluate the risks and merits of its investment in the Company and is able
financially to bear the risks thereof, including a complete loss of its entire
investment.
4.05 Restrictions on Transfer. The Purchaser understands that the
Securities have not been registered, but are being acquired by reason of a
specific exemption under the Securities Act as well as under certain state
statutes for transactions by an issuer not involving any public offering and
that any disposition of the Securities may, under certain circumstances, be
inconsistent with this exemption and may make the Purchaser an "underwriter"
within the meaning of the Securities Act. The Purchaser acknowledges that the
Securities must be held and may not be sold, transferred, or otherwise disposed
of for value unless subsequently registered under the Securities Act or an
exemption from such registration is available.
4.06 Brokerage. Except as set forth on the signature page of this
Agreement, no broker, finder, agent, or similar intermediary has acted on behalf
of the Purchaser in connection with the Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finder's fees, or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement, or understanding with the Purchaser.
4.07 Legal Advice. The Purchaser has engaged its own legal advisors
respecting its compliance with federal and state securities laws and federal,
state, and local taxation laws respecting the transactions contemplated or
permitted by this Agreement. The Purchaser has relied solely on its own such
advisors and not on any statements or representations of the Company or its
agents, attorneys, or accountants, written or oral. The Purchaser shall be
solely responsible for its own compliance with applicable state and federal
securities laws and applicable federal, state, and local tax laws related to
this Agreement and the transactions contemplated hereby.
ARTICLE V
CONDITIONS TO CLOSING
5.01 Conditions to the Purchaser's Obligations. The obligation of the
Purchaser to purchase the Securities at the Closing is subject to the
fulfillment to the Purchaser's satisfaction, on or prior to the Closing Date, of
the following conditions, any of which may be waived by the Purchaser.
(a) The representations and warranties made by the Company in
Section 3 hereof qualified as to materiality shall be true and correct
at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date,
in which case such representation or warranty shall be true and correct
as of such earlier date, and, the representations and warranties made
by the Company in Section 3 hereof not qualified as to materiality
shall be true and correct in all material respects at all times prior
to and on the Closing Date, except to the extent any such
representation or warranty expressly speaks as of an earlier date, in
which case such representation or warranty shall be true and correct in
all material respects as of such earlier date. The Company shall have
Revised and Restated 4/18/2006 14 Effective as of 12/12/05
performed in all material respects all obligations and conditions
herein required to be performed or observed by it on or prior to the
Closing Date.
(b) The Company shall have obtained in a timely fashion any
and all consents, permits, approvals, registrations, and waivers
necessary or appropriate for consummation of the purchase and sale of
the Securities, all of which shall be in full force and effect.
(c) The Company shall have executed and delivered the
Registration Rights Agreement.
(d) The Company shall have entered into the agreements
superseding the Executive Employment Agreements of February 11, 2005,
with Xxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxx, and Xxxxxx X. Xxxxxxxxx
attached hereto at Exhibit C.
(e) The Company shall have entered into the agreements with
certain Affiliates of Purchaser restructuring debt owed by the Company
to those Affiliates attached hereto at Exhibit D.
(f) The Company shall have entered into cost-containment
measures reasonably satisfactory to Purchaser.
(g) No judgment, writ, order, injunction, award, or decree of
or by any court or judge, justice, or magistrate, including any
bankruptcy court or judge, or any order of or by any governmental
authority, shall have been issued, and no action or proceeding shall
have been instituted by any governmental authority, enjoining or
preventing the consummation of the transactions contemplated hereby or
in the other Transaction Documents.
(h) The Company shall have delivered a certificate, executed
on behalf of the Company by its chief executive officer or its chief
financial officer, dated as of the Closing Date, certifying the
fulfillment of the conditions specified in subsections (a), (b), (d),
(e), (f), (g), and (j) of this Section 5.01.
(i) The Company shall have delivered a certificate, executed
on behalf of the Company by its authorized officer, dated as of the
Closing Date, certifying the resolutions adopted by the Company's board
of directors approving the transactions contemplated by this Agreement
and the other Transaction Documents and the issuance of the Securities,
certifying the current versions of the Company's certificate of
incorporation and bylaws and certifying as to the signatures and
authority of Persons signing the Transaction Documents and related
documents on behalf of the Company.
(j) No stop order or suspension of trading shall have been
imposed by the National Association of Securities Dealers, Inc., the
SEC, or any other governmental regulatory body with respect to public
trading in the common stock.
(k) The Company shall have caused to be delivered to the
Company irrevocable proxies from stockholders, that combined with stock
owned by affiliates of the Purchaser, own of record not less than 50%
of the issued and outstanding stock of the Company, appointing
Purchaser as the proxy and attorney-in-fact of such stockholders to
approve the proposed increase in the authorized capitalization of the
Company in accordance with this Agreement.
Revised and Restated 4/18/2006 15 Effective as of 12/12/05
5.02 Conditions to Obligations of the Company. The Company's obligation
to sell and issue the Securities at the Closing is subject to the fulfillment to
the satisfaction of the Company on or prior to the Closing Date of the following
conditions, any of which may be waived by the Company.
(a) The representations and warranties made by the Purchaser
in Article IV hereof, other than the representations and warranties
contained in Sections 4.01, 4.02, 4.03, 4.04, 4.05, and 4.06 (the
"Investment Representations"), shall be true and correct in all
material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as
if they had been made on and as of said date. The Investment
Representations shall be true and correct in all respects when made,
and shall be true and correct in all respects on the Closing Date with
the same force and effect as if they had been made on and as of said
date. The Purchaser shall have performed in all material respects all
obligations and conditions herein required to be performed or observed
by it on or prior to the Closing Date.
(b) The Purchaser shall have executed and delivered the
Registration Rights Agreement.
(c) The Purchaser shall have delivered the purchase price to
the Company.
5.03 Termination of Obligations to Effect Closing; Effects.
(a) The obligations of the Company, on the one hand, and the
Purchaser, on the other hand, to effect the Closing shall terminate as
follows:
(i) upon the mutual written consent of the Company
and the Purchaser;
(ii) by the Company if any of the conditions set
forth in Section 5.02 shall have become incapable of
fulfillment, and shall not have been waived by the Company;
(iii) by the Purchaser if any of the conditions set
forth in Section 5.01 shall have become incapable of
fulfillment, and shall not have been waived by the Purchaser;
or
(iv) by either the Company or the Purchaser if the
Closing has not occurred on or prior to December 31, 2005;
provided, however, that, except in the case of clause (i) above, the
party seeking to terminate its obligation to effect the Closing shall
not then be in breach of any of its representations, warranties,
covenants, or agreements contained in this Agreement or the other
Transaction Documents if such breach has resulted in the circumstances
giving rise to such party's seeking to terminate its obligation to
effect the Closing.
(b) In the event of termination by the Company or the
Purchaser of their obligations to effect the Closing pursuant to this
Section 5.03, written notice thereof shall forthwith be given to the
other parties hereto and the obligation of all parties to effect the
Closing shall be terminated, without further action by any party.
Nothing in this Section 5.03 shall be deemed to release any party from
any liability for any breach by such party of the terms and provisions
of this Agreement or the other Transaction Documents or to impair the
right of any party to compel specific performance by any other party of
its obligations under this Agreement or the other Transaction
Documents.
Revised and Restated 4/18/2006 16 Effective as of 12/12/05
ARTICLE VI
CONDITIONS TO CLOSING OF SUBSEQUENT FUNDING DATES
The obligation of the Purchaser to purchase the Securities at the
Closing of Funding Dates subsequent to the Closing Date shall be subject to the
fulfillment to the Purchaser's satisfaction, on or prior to such Funding Date,
of the following conditions, any of which may be waived by the Purchaser.
(a) The Company shall have delivered a certificate, executed
on behalf of the Company by its chief executive officer and chief
financial officer, dated as of such Funding Date, certifying the
continued fulfillment of the conditions specified in subsections (a),
(b), (c), (d), (e), (f), (g), (h), and (k) of Section 5.01 of this
Agreement and the Company's compliance with all covenants under Article
VII of this Agreement required to have been performed, satisfied, or
met on or before such Funding Date.
(b) At each Funding Date, the Company shall have sufficient
authorized but unissued shares to issue the shares of Common Stock and
shall have reserved a sufficient number of authorized but unissued
shares of common stock issuable upon the exercise of the exercisable
Warrants associated with such Funding Date.
(c) At each Funding Date, the Company shall have maintained
the continued registration of the Company's common stock pursuant to
Section 12(g) of the Exchange Act and the continued quotation of the
Company's common stock on the OTCBB (or such other national exchange or
listing reasonably acceptable to Purchaser), must not have received any
notification that the SEC or the NASD is contemplating terminating such
registration or listing, and must not be aware of any facts or
circumstances that might reasonably be expected to result in such a
termination.
ARTICLE VII
ADDITIONAL COVENANTS OF THE COMPANY
7.01 Reservation of Common Stock. The Company shall cause its
authorized common stock to be increased to 100,000,000 shares and shall, at all
times, reserve and keep available out of its authorized but unissued shares of
common stock such number of shares of common stock as shall from time to time
equal the number of shares sufficient to permit the shares of Common Stock to be
issued in Tranches Two through Five and to permit the exercise of the Warrants
issued pursuant to this Agreement in accordance with their respective terms.
7.02 Reports. The Company will furnish to Purchaser and/or its
assignees such information relating to the Company and its Subsidiaries as from
time to time may reasonably be requested by Purchaser and/or its assignees;
provided, however, that the Company shall not disclose material, nonpublic
information to the Purchaser, or to advisors to or representatives of the
Purchaser, unless prior to disclosure of such information, the Company
identifies such information as being material, nonpublic information and
provides the Purchaser and such advisors and representatives with the
opportunity to accept or refuse to accept such material, nonpublic information
for review and Purchaser enters into an appropriate confidentiality agreement
with the Company with respect thereto.
7.03 No Conflicting Agreements. The Company will not take any action,
enter into any agreement, or make any commitment that would conflict or
interfere in any material respect with the obligations to the Purchaser under
the Transaction Documents.
Revised and Restated 4/18/2006 17 Effective as of 12/12/05
7.04 Insurance. The Company shall not materially reduce the insurance
coverages described in Section 3.20.
7.05 Compliance with Laws. The Company will comply in all material
respects with all applicable laws, rules, regulations, orders, and decrees of
all governmental authorities.
7.06 Quotation of Common Stock. The Company will use commercially
reasonable efforts to continue the quotation and trading of its common stock on
the OTCBB and, in accordance therewith, will use commercially reasonable efforts
to comply in all respects with the Company's reporting, filing, and other
obligations under the bylaws or rules of the OTCBB.
7.07 Board of Directors. The Company shall cause one independent member
to be appointed to the Company's board of directors, subject to the approval of
the Purchaser, within 45 days of the Closing Date, and a second independent
member, subject to the approval of the Purchaser, within 30 days after the
effectiveness of the registration statement pursuant to the Registration Rights
Agreement. If the Company has not caused to be appointed either independent
member to the board of directors by the required dates, the Company shall cause
an independent member selected by the Purchaser to be appointed to the Company's
board of directors.
7.08 Investor Relations. The Company shall obtain within 60 days of the
Closing Date qualified internal or external investor relations capabilities,
acceptable to Purchaser, and maintain such relationships to assure effective
communications with the investment community in compliance with applicable laws.
7.09 Operating Plan. Within 60 days following the Closing Date, the
Company shall provide Purchaser a detailed operating plan, approved by its board
of directors, which shall include discussions of the Company's technology,
product development, marketing strategies, competitive differentiation and
competition, intellectual property, and financial strategy, as well as an
executive summary.
7.10 Financial Projections and Operating Budgets. Within 30 days
following the Closing Date, the Company shall provide Purchaser with financial
projections for the following three years, which shall be detailed in monthly
projections for the first 12 months and then in quarterly projections
thereafter. These financial projections shall include:
(a) revenue by product, service, vertical market, and
customer;
(b) cost and expense projections;
(c) capital expenditures;
(d) statement of operations;
(e) balance sheet; and
(f) cash flow statement.
These financial projections shall be the basis for the Company's departmental
and function-based operating budgets, which shall be updated and provided to the
Purchaser on a quarterly basis.
Revised and Restated 4/18/2006 18 Effective as of 12/12/05
7.11 Existing Loans. The Company shall pay all existing loans to
Purchaser and its Affiliates when due, unless such payments are waived by
Purchaser or its Affiliate, as applicable, in its sole discretion.
7.12 Right of First Refusal. For 18 months following the Closing Date,
the Purchaser shall have a 30-day right of first refusal to provide any required
equity financing. The Company shall provide the Purchaser with notice of its
intent to seek additional equity financing setting forth the description of the
Securities to be offered, the sales price, the terms of purchase, and other
material business terms of the proposed financing, and the Purchaser shall have
30 days to provide some or all of the proposed financing on the terms proposed.
Only after the expiration of the 30-day notice period (or receipt of the
Purchaser's written notice that it will not provide some or all of the proposed
equity financing) may the Company consummate any proposed equity financing with
any investor other than the Purchaser during the succeeding 180 days at a price
and on other terms no less favorable to the Company than as set forth in such
notice. If the Company does not complete the foregoing financing within 180 days
after the expiration of the 30-day notice period (or receipt of the Purchaser's
written notice that it will not provide some or all of the proposed equity
financing), the Company shall be required to provide a new notice of intent to
seek equity financing as provided above before obtaining equity financing. This
right of first refusal shall not apply to any equity issuances in connection
with the Company's stock inventive plan, any options or warrants granted prior
to the Closing Date, business acquisitions, joint ventures, strategic alliances,
technology development agreements, or partnering or licensing agreements that
are approved by the board of directors, or to a firm commitment underwritten
offering of the Company's securities.
7.13 Termination of Covenants. The provisions of Sections 7.02 through
7.12 shall terminate and be of no further force and effect upon the earlier of
(a) the mutual consent of the Company and the Purchaser or (b) the date on which
the Company's obligations under the Registration Rights Agreement to register or
maintain the effectiveness of any registration covering the Registrable
Securities (as such term is defined in the Registration Rights Agreement) shall
terminate.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.01 Survival. All representations, warranties, covenants, and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants, and agreements as of the date hereof and shall survive
the execution and delivery of this Agreement for a period of three years from
the date of this Agreement; provided, however, that the provisions contained in
Article 7 hereof shall survive in accordance therewith.
8.02 Indemnification. The Company agrees to indemnify and hold
harmless, on an after-insurance recovery basis, the Purchaser and its Affiliates
and their respective directors, officers, employees, and agents from and against
any and all losses, claims, damages, liabilities, and expenses (including
reasonable attorney fees, disbursements, and other expenses incurred in
connection with investigating, preparing, or defending any action, claim, or
proceeding, pending or threatened, and the costs of enforcement hereof) to which
such Person may become subject as a result of any breach of representation,
warranty, covenant, or agreement made by or to be performed on the part of the
Company under the Transaction Documents, and will reimburse any such Person for
all such amounts as they are incurred by such Person.
8.03 Conduct of Indemnification Proceedings. Promptly after receipt by
any Person (the "Indemnified Person") of notice of any demand, claim, or
circumstances that would or might give rise to a claim or the commencement of
any action, proceeding, or investigation in respect of which indemnity may be
Revised and Restated 4/18/2006 19 Effective as of 12/12/05
sought pursuant to Section 8.02, such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (a) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (b) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. Without the prior written
consent of the Indemnified Person, which consent shall not be unreasonably
withheld, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.
ARTICLE IX
MISCELLANEOUS
9.01 Opportunity to Review; Advisors; Investigation. Prior to the
execution of this Agreement, each party has had the opportunity to review the
schedules and exhibits to this Agreement, and has been afforded the opportunity
to engage its own attorneys, accountants, and other advisors to assist in the
review of such schedules and other information and has made its own decision
respecting the extent to which it has engaged such attorneys, accountants, and
other advisors. The representations, warranties, and agreements of each party
hereto shall remain operative and in full force and effect regardless of any
affiliation of the Purchaser with the Company or investigation made by or on
behalf of either party, any person controlling either party, or any of their
officers, directors, managers, partners, representatives, attorneys,
accountants, or agents, whether prior to or after the execution of this
Agreement.
9.02 No Assignment. This Agreement and the rights and obligations of
the Purchaser may not be assigned in whole or in part by the Purchaser to any
Person without the prior written consent of the Company, which such consent may
be granted or withheld by the Company in its sole discretion.
9.03 Costs. The Company shall pay all of the costs and expenses
incurred or to be incurred in negotiating and preparing this Agreement and in
closing and carrying out the transactions contemplated by this Agreement, except
as expressly otherwise provided herein, and shall reimburse the Purchaser up to
$10,000 for costs and expenses incurred by Purchaser in connection with this
Agreement.
9.04 Confidentiality. The Purchaser shall keep confidential and will
not disclose or divulge any Confidential Information that Purchaser may obtain
from the Company pursuant to financial statements, reports, and other materials
submitted by the Company to Purchaser pursuant to this Agreement, or pursuant to
visitation or inspection courtesies extended to Purchaser, unless such
information is known, or until such information becomes known, to the public;
provided, however, that the Purchaser may disclose such information (a) to its
attorneys, accountants, consultants, and other professionals to the extent
Revised and Restated 4/18/2006 20 Effective as of 12/12/05
necessary to obtain their services in connection with its investment in the
Company, (b) to any permitted prospective purchaser of any of the Securities
from Purchaser as long as such prospective purchaser agrees in writing to be
bound by the provisions of this section, or (c) to any Affiliate of Purchaser;
subject to the agreement of such party to keep such information confidential as
set forth herein.
9.05 Notice. Any notice, demand, request or other communication
permitted or required under this Agreement shall be in writing and shall be
deemed to have been given as of the date so delivered, if personally served; as
of the date so sent, if transmitted by facsimile and receipt is confirmed by the
facsimile operator of the recipient; as of the date so sent, if sent by
electronic mail and receipt is acknowledged by the recipient; one Business Day
after the date so sent, if delivered by overnight courier service; or three
Business Days after the date so mailed, if mailed by certified mail, return
receipt requested, addressed as follows:
if to the Company, to: Aradyme Corporation
0000 Xxxxx Xxxxxxxx Xxx, Xxxx. X0000
Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to Purchaser, to: Eagle Rock Capital, LLC
0000 X 0000 X
Xxxx Xxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Each party, by notice duly given in accordance herewith, may specify a different
address for the giving of any notice hereunder.
9.06 Attorneys' Fees. In the event that any party institutes any action
or suit to enforce this Agreement or to secure relief from any default hereunder
or breach hereof, the nonprevailing party shall reimburse the prevailing party
for all costs, including reasonable attorneys' fees, incurred in connection
therewith and in enforcing or collecting any judgment rendered therein,
including such costs that are incurred in any bankruptcy or appellate
proceeding.
9.07 Survival. The representations, warranties, and covenants of the
respective parties shall survive the Closing.
9.08 Form of Execution; Counterparts. A valid and binding signature
hereto or any notice or demand hereunder may be in the form of a manual
execution or a true copy made by photographic, xerographic, or other electronic
process that provides similar copy accuracy of a document that has been
executed. This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which taken together shall be but a
single instrument.
9.09 Construction. This Agreement is the result of negotiation between
the parties hereto, each of which has been, or has had the opportunity to be,
represented by independent legal counsel of such party's own selection.
Accordingly, no provision of this Agreement or any agreement, certificate, or
other writing delivered in accordance with this Agreement shall be constructed
against any party merely because of such party's involvement in its preparation.
Revised and Restated 4/18/2006 21 Effective as of 12/12/05
9.10 Amendment or Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein at law
or in equity, and may be enforced concurrently herewith, and no waiver by any
party of the performance of any obligation by the other shall be construed as a
waiver of the same or any other default then, theretofore, or thereafter
occurring or existing. At any time prior to the Closing Date, this Agreement may
be amended by a writing signed by all parties hereto, with respect to any of the
terms contained herein, and any term or condition of this Agreement may be
waived or the time for performance thereof may be extended by a writing signed
by the party or parties for whose benefit the provision is intended.
9.11 Validity of Provisions and Severability. If any provision of this
Agreement is, becomes, or is deemed invalid, illegal, or unenforceable in any
jurisdiction, such provision shall be deemed amended to conform to the
applicable jurisdiction, or if it cannot be so amended without materially
altering the intention of the parties, it will be stricken. However, the
validity, legality, and enforceability of any such provisions shall not in any
way be affected or impaired thereby in any other jurisdiction and the remainder
of this Agreement shall remain in full force and effect.
9.12 Entire Agreement; Modification. This Agreement constitutes the
entire agreement and understanding between the parties pertaining to the subject
matter of this Agreement. This Agreement supersedes all prior agreements, if
any, any understandings, negotiations, courses of dealing, and discussions,
whether oral or written, between the parties hereto, including any subsidiary of
the Company. No supplement, modification, waiver, or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby.
9.13 Governing Law. This Agreement shall be governed by, enforced, and
construed under and in accordance with the laws of the United States of America
and, with respect to matters of state law, with the laws of the state of Utah.
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.
ARADYME CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxx, Chief Executive Officer
Date: 04/17/06
--------------------------------------
EAGLE ROCK CAPITAL, LLC
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxxxxx, Manager
Date: 04/17/06
--------------------------------------
Tax Identification Number:
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Revised and Restated 4/18/2006 22 Effective as of 12/12/05
Exhibit A
Form of Warrant
Exhibit B
Form of Registration Rights Agreement
Exhibit C
Employment Agreements
Exhibit D
Restructure of Debt with Affiliate of Purchaser
Revised and Restated 4/18/2006 Effective as of 12/12/05
