Exhibit 99.1
RPM TECHNOLOGIES, INC.
SECURITIES PURCHASE AGREEMENT
July 9, 2004
TABLE OF CONTENTS
Page
1. Agreement to Sell and Purchase 1
2. Fees and Warrant 1
3. Closing, Delivery and Payment. 2
3.1 Closing 2
3.2 Delivery 2
4. Representations and Warranties of the Company 3
4.1 Organization, Good Standing and Qualification 3
4.2 Subsidiaries 3
4.3 Capitalization; Voting Rights 4
4.4 Authorization; Binding Obligations 4
4.5 Liabilities 5
4.6 Agreements; Action 5
4.7 Obligations to Related Parties 6
4.8 Changes 6
4.9 Title to Properties and Assets; Liens, Etc. 7
4.10 Intellectual Property 8
4.11 Compliance with Other Instruments 8
4.12 Litigation 9
4.13 Tax Returns and Payments 9
4.14 Employees 9
4.15 Registration Rights and Voting Rights 10
4.16 Compliance with Laws; Permits 10
4.17 Environmental and Safety Laws 10
4.18 Valid Offering 10
4.19 Full Disclosure 11
4.20 Insurance 11
4.21 SEC Reports 11
4.22 Listing 11
4.23 No Integrated Offering 11
4.24 Stop Transfer 12
4.25 Dilution 12
5. Representations and Warranties of the Purchaser 12
5.1 No Shorting 13
5.2 Requisite Power and Authority 13
5.3 Investment Representations 13
5.4 Purchaser Bears Economic Risk 13
5.5 Acquisition for Own Account 13
5.6 Purchaser Can Protect Its Interest 14
5.7 Accredited Investor 14
5.8 Legends 14
6. Covenants of the Company 15
6.1 Stop-Orders 15
6.2 Listing 15
6.3 Market Regulations 15
6.4 Reporting Requirements 15
6.5 Use of Funds 15
6.6 Access to Facilities 16
6.7 Taxes 16
6.8 Insurance 16
6.9 Intellectual Property 17
6.10 Properties 18
6.11 Confidentiality 18
6.12 Required Approvals 18
6.13 Reissuance of Securities 19
6.14 Opinion 19
6.15 Margin Stock 18
6.16 Additional Investment 18
6.17 Restricted Cash Disclosure 18
6.18 Lease 18
7. Covenants of the Purchaser 20
7.1 Confidentiality 20
7.2 Non-Public Information 20
7.3 Short Sales 19
8. Covenants of the Company and Purchaser Regarding
Indemnification 20
8.1 Company Indemnification 20
8.2 Purchaser's Indemnification 20
9. Conversion of Convertible Note 21
9.1 Mechanics of Conversion 21
10. Registration Rights 22
10.1 Registration Rights Granted 22
10.2 Offering Restrictions 22
11. Miscellaneous 22
11.1 Governing Law 22
11.2 Survival 23
11.3 Successors 23
11.4 Entire Agreement 23
11.5 Severability 23
11.6 Amendment and Waiver 23
11.7 Delays or Omissions 24
11.8 Notices 24
11.9 Attorneys' Fees 25
11.10 Titles and Subtitles 25
11.11 Facsimile Signatures; Counterparts 25
11.12 Broker's Fees 25
11.13 Construction 25
LIST OF EXHIBITS
Form of Convertible Term Note Exhibit A
Form of Warrant Exhibit B
Form of Opinion Exhibit C
Form of Funds Escrow Agreement Exhibit D
Form of Registration Rights Agreement Exhibit E
Form of Master Security Agreement Exhibit F
Form of Restricted Account Agreement Exhibit G
Form of Restricted Account Side Letter Exhibit H
Form of Subordination Agreement Exhibit I
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of July 9, 2004 by and between RPM Technologies, Inc., a Delaware corporation
(the "Company"), and Laurus Master Fund, Ltd., a Cayman Islands company (the
"Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a Convertible
Term Note in the aggregate principal amount of Two Million Five Hundred Thousand
Dollars ($2,500,000) (the "Note"), which Note is convertible into shares of the
Company's common stock, $0.01 par value per share (the "Common Stock") at an
initial fixed conversion price of $0.24 per share of Common Stock (the "Fixed
Conversion Price");
WHEREAS, the Company wishes to issue a warrant to the Purchaser to purchase up
to 1,125,000 shares of the Company's Common Stock (subject to adjustment as set
forth therein) in connection with Purchaser's purchase of the Note;
WHEREAS, Purchaser desires to purchase the Note and the Warrant (as defined in
Section 2) on the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to Purchaser
on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company, a Note in the aggregate principal amount of
$2,500,000 convertible in accordance with the terms thereof and this Agreement
into shares of the Company's Common Stock. The purchase and sale of the Note on
the Closing Date shall be referred to herein as the "Offering." A form of the
Note is annexed hereto as Exhibit A. The Note will mature on the Maturity Date
(as defined in the Note). Collectively, the Note and Warrant and Common Stock
issuable in payment of the Note, upon conversion of the Note and upon exercise
of the Warrant, are referred to as the "Securities."
2. Fees and Warrant. On the Closing Date:
(a) In connection with the Offering, the Company shall issue and deliver to the
Purchaser a Warrant to purchase up to 1,125,000 shares of Common Stock (the
"Warrant"). The Warrant shall be delivered on the Closing Date. A form of
Warrant is annexed hereto as Exhibit B. All the representations, covenants,
warranties, undertakings, and indemnification, and other rights made or granted
to or for the benefit of the Purchaser by the Company are hereby also made and
granted in respect of the Warrant and shares of the Company's Common Stock
issuable upon exercise of the Warrant (the "Warrant Shares").
(b) Subject to the terms of Section 2(d) below, the Company shall pay to Laurus
Capital Management, L.L.C., the manager of Purchaser, a closing payment in an
amount equal to three and one-half percent (3.50%) of the aggregate principal
amount of the Note. The foregoing fee is referred to herein as the "Closing
Payment."
(c) The Company shall reimburse the Purchaser for its reasonable expenses
(including documentation expenses) in preparation of this Agreement and the
Related Agreements (as hereinafter defined), and expenses incurred in connection
with the Purchaser's due diligence review of the Company and all related
matters. Amounts required to be paid under this Section 2(c), shall be paid by
the Company on the Closing Date; provided, however, that the $15,000 deposit
previously made by the Company shall be credited towards any payments to be made
under this Section 2(c). The total amount to be paid by the Company pursuant to
this clause (c) shall not exceed (i) $22,000 with respect to documentation
expenses and (ii) $17,500 with respect to expenses incurred to perform a due
diligence review.
(d) The Closing Payment, the documentation expenses and the due diligence
expenses (net of $15,000 deposit previously paid by the Company) shall be paid
at closing out of funds held pursuant to a Funds Escrow Agreement of even date
herewith among the Company, Purchaser, and an Escrow Agent (the "Funds Escrow
Agreement") and a disbursement letter (the "Disbursement Letter").
3. Closing, Delivery and Payment.
3.1 Closing. Subject to the terms and conditions herein, the closing of the
transactions contemplated hereby (the "Closing"), shall take place on the date
hereof, at such time or place as the Company and Purchaser may mutually agree
(such date is hereinafter referred to as the "Closing Date").
3.2 Delivery. Pursuant to the Funds Escrow Agreement in the form attached
hereto as Exhibit C, at the Closing on the Closing Date, the Company will
deliver to the Purchaser, among other things, a fully executed original of this
Agreement, a Note in the form attached as Exhibit A in the principal amount of
$2,500,000 and a Warrant in the form attached as Exhibit B in the Purchaser's
name representing 1,125,000 Warrant Shares. The Purchaser will deliver to the
Company, among other things, a fully executed original of this Agreement and the
Related Agreements (as defined below), and the amounts set forth in the
Disbursement Letter by certified funds or wire transfer (it being understood
that $2,200,000 of the proceeds of the Note will be deposited in the Restricted
Account (as defined in the Restricted Account Agreement referred to below)).
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows (which representations and
warranties are supplemented by the Company's filings and disclosures (including,
without limitation, the financial statements, auditor's notes to the financial
statements and the material agreements attached as exhibits thereto) made under
the Securities Exchange Act of 1934 (collectively, the "Exchange Act Filings"),
copies of which have been provided or made available to the Purchaser):
4.1 Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company has the corporate power and authority
to own and operate its properties and assets, to execute and deliver (i) this
Agreement, (ii) the Note and the Warrant to be issued in connection with this
Agreement, (iii) the Master Security Agreement dated as of the date hereof
between the Company and the Purchaser substantially in the form of Exhibit F (as
amended, modified or supplemented from time to time, the "Master Security
Agreement"), (iv) the Registration Rights Agreement relating to the Securities
dated as of the date hereof between the Company and the Purchaser substantially
in the form of Exhibit E (as amended, modified or supplemented from time to
time, the "Registration Rights Agreement"), (v) the Escrow Agreement dated as of
the date hereof among the Company, the Purchaser and the escrow agent referred
to therein, (vi) the Restricted Account Agreement dated as of the date hereof
among the Company, the Purchaser and North Fork Bank substantially in the form
of Exhibit G (as amended, modified or supplemented from time to time, the
"Restricted Account Agreement"), (vii) the Restricted Account Side Letter
related to the Restricted Account Agreement dated the date hereof by and between
the Company and the Purchaser substantially in the form of Exhibit H (as
amended, modified or supplemented from time to time, the "Restricted Account
Side Letter"), (viii) the Subordination Agreement dated as of the date hereof,
by and among Xxxxx Xxxx, Xxxxxxx Xxxxx, the Company and the Purchaser
substantially in the form of Exhibit I (as amended, modified or supplemented
from time to time, the "Subordination Agreement") and (ix) all other agreements
related to this Agreement and the Note and referred to herein (the preceding
clauses (ii) through (ix), collectively, the "Related Agreements"), to issue and
sell the Note and the shares of Common Stock issuable upon conversion of the
Note (the "Note Shares"), to issue and sell the Warrant and the Warrant Shares,
and to carry out the provisions of this Agreement and the Related Agreements and
to carry on its business as presently conducted. The Company is duly qualified
and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions, except for those jurisdictions in which the
failure to do so has not had, or could not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the business,
assets, liabilities, condition (financial or otherwise), properties, operations
or prospects of the Company (a "Material Adverse Effect").
4.2 Subsidiaries. The Company owns no Subsidiaries. For the purpose of this
Agreement, a "Subsidiary" of any person or entity means (i) a corporation or
other entity whose shares of stock or other ownership interests having ordinary
voting power (other than stock or other ownership interests having such power
only by reason of the happening of a contingency) to elect a majority of the
directors of such corporation, or other persons or entities performing similar
functions for such person or entity, are owned, directly or indirectly, by such
person or entity or (ii) a corporation or other entity in which such person or
entity owns, directly or indirectly, more than 50% of the equity interests at
such time.
4.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, as of the date hereof, consists
of 250,000,000 of Common Stock, no par value per share. As of the date hereof,
18,186,156 shares of Common Stock are issued outstanding.
(b) Other than: (i) options exercisable into 8,500,000 shares of Common Stock
granted to Xxxxx Xxxx and Xxxxxxx Xxxxx, which options are exercisable until
September 1, 2005 at $0.50 per share of Common Stock (which shares of Common
Stock are restricted and not permitted to be publicly traded until the two year
anniversary of the respective issuance thereof), (ii) warrants to purchase an
aggregate of 7,650,000 shares of Common Stock, exercisable until March 1, 2005
at an exercise price of $4.00 per share of Common Stock, (iii) warrants held to
purchase an aggregate of 3,077,600 shares of Common Stock, exercisable until
March 1, 2005 at an exercise price of $3.00 per share of Common Stock, (iv) that
certain promissory note in the original principal amount of $50,000 issued in
favor of Xx. Xxxxx Xxxxx and convertible into Common Stock at a price of $0.25
per share (the "Existing Convertible Note"), and (v) shares which may be issued
pursuant to this Agreement and the Related Agreements, there are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal), proxy or stockholder agreements, or arrangements or
agreements of any kind for the purchase or acquisition from the Company of any
of its securities. Neither the offer, issuance or sale of any of the Note or
Warrant, or the issuance of any of the Note Shares or Warrant Shares, nor the
consummation of any transaction contemplated hereby will result in a change in
the price or number of any securities of the Company outstanding, under anti-
dilution or other similar provisions contained in or affecting any such
securities.
(c) All issued and outstanding shares of the Company's Common Stock: (i) have
been duly authorized and validly issued and are fully paid and nonassessable;
and (ii) were issued in compliance with all applicable state and federal laws
concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of the shares of the
Common Stock are as stated in the Company's Certificate of Incorporation (the
"Charter"). The Note Shares and Warrant Shares have been duly and validly
reserved for issuance. When issued in compliance with the provisions of this
Agreement and the Company's Charter, the Securities will be validly issued,
fully paid and nonassessable, and will be free of any liens or encumbrances;
provided, however, that the Securities may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed.
4.4 Authorization; Binding Obligations. All corporate action on the part of the
Company, its officers and directors necessary for the authorization of this
Agreement and the Related Agreements, the performance of all obligations of the
Company hereunder and under the Related Agreements at the Closing and, the
authorization, sale, issuance and delivery of the Note and Warrant has been
taken or will be taken prior to the Closing. This Agreement and the Related
Agreements, when executed and delivered and to the extent it is a party thereto,
will be valid and binding obligations of the Company enforceable in accordance
with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors' rights;
and
(b) general principles of equity that restrict the availability of equitable or
legal remedies.
The sale of the Note and the subsequent conversion of the Note into Note Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. The issuance of the
Warrant and the subsequent exercise of the Warrant for Warrant Shares are not
and will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
4.5 Liabilities. The Company does not have any contingent liabilities, except
current liabilities incurred in the ordinary course of business and liabilities
disclosed in any Exchange Act Filings.
4.6 Agreements; Action. Except as as disclosed in any Exchange Act Filings:
(a) There are no agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the Company is a
party or to its knowledge by which it is bound which may involve: (i)
obligations (contingent or otherwise) of, or payments to, the Company in excess
of $50,000 (other than obligations of, or payments to, the Company arising from
purchase or sale agreements entered into in the ordinary course of business); or
(ii) the transfer or license of any patent, copyright, trade secret or other
proprietary right to or from the Company (other than licenses arising from the
purchase of "off the shelf" or other standard products); or (iii) provisions
restricting the development, manufacture or distribution of the Company's
products or services; or (iv) indemnification by the Company with respect to
infringements of proprietary rights.
(b) Since December 31, 2003, the Company has not: (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock; (ii) incurred any indebtedness for money
borrowed or any other liabilities (other than ordinary course obligations)
individually in excess of $50,000 or, in the case of indebtedness and/or
liabilities individually less than $50,000, in excess of $100,000 in the
aggregate; (iii) made any loans or advances to any person not in excess,
individually or in the aggregate, of $100,000, other than ordinary advances for
travel expenses; or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.
(c) For the purposes of subsections (a) and (b) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
subsections.
4.7 Obligations to Related Parties. There are no obligations of the Company to
officers, directors, stockholders or employees of the Company other than:
(a) for payment of salary for services rendered and for bonus payments;
(b) reimbursement for reasonable expenses incurred on behalf of the Company;
(c) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of the Company); and
(d) obligations listed in the Company's financial statements or disclosed in any
of its Exchange Act Filings, including, without limitation, obligations (i) the
Existing Convertible Note, (ii) to pay deferred compensation owing to certain
Company officers in an aggregate amount of no more than $820,000and (iii)
options to issue up to 8,500,000 shares of Common Stock granted to Xxxxx Xxxx
and Xxxxxxx Xxxxx, which options are exercisable until September 1, 2005 at
$0.50 per share of Common Stock (which shares of Common Stock are restricted and
not permitted to be publicly traded until the two year anniversary of the
respective issuance thereof).
None of the officers, directors or, to the best of the Company's knowledge, key
employees or stockholders of the Company or any members of their immediate
families, are indebted to the Company, individually or in the aggregate, in
excess of $50,000 or have any direct or indirect ownership interest in any firm
or corporation with which the Company is affiliated or with which the Company
has a business relationship, or any firm or corporation which competes with the
Company, other than passive investments in publicly traded companies
(representing less than one percent (1%) of such company) which may compete with
the Company. Except as described above, no officer, director or stockholder, or
any member of their immediate families, is, directly or indirectly, interested
in any material contract with the Company and no agreements, understandings or
proposed transactions are contemplated between the Company and any such person.
The Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
4.8 Changes. Except as disclosed in any Exchange Act Filing, since December 31,
2003, there has not been:
(a) any change in the business, assets, liabilities, condition (financial or
otherwise), properties, operations or prospects of the Company, which,
individually or in the aggregate, has had or could reasonably be expected to
have, a Material Adverse Effect;
(b) any resignation or termination of any officer, key employee or group of
employees of the Company;
(c) any material change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(d) any damage, destruction or loss, whether or not covered by insurance, which
has had, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(e) except in the ordinary course of business, any waiver by the Company of a
valuable right or of a material debt owed to it;
(f) any direct or indirect material loans made by the Company to any
stockholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) any material change in any compensation arrangement or agreement with any
employee, officer, director or stockholder;
(h) any declaration or payment of any dividend or other distribution of the
assets of the Company;
(i) any labor organization activity related to the Company;
(j) any debt, obligation or liability incurred, assumed or guaranteed by the
Company, except those for immaterial amounts and for current liabilities
incurred in the ordinary course of business;
(k) any sale, assignment or transfer of any patents, trademarks, copyrights,
trade secrets or other intangible assets;
(l) any change in any material agreement to which the Company is a party or by
which it is bound which, either individually or in the aggregate, has had, or
could reasonably be expected to have, a Material Adverse Effect;
(m) any other event or condition of any character that, either individually or
in the aggregate, has had, or could reasonably be expected to have, a Material
Adverse Effect; or
(n) any arrangement or commitment by the Company to do any of the acts described
in subsection (a) through (m) above.
4.9 Title to Properties and Assets; Liens, Etc. The Company has good and
marketable title to its properties and assets, and good title to its leasehold
estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than:
(a) those resulting from taxes which have not yet become delinquent;
(b) minor liens and encumbrances which do not materially detract from the value
of the property subject thereto or materially impair the operations of the
Company; and
(c) those that have otherwise arisen in the ordinary course of business.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company are in good operating condition and repair
and are reasonably fit and usable for the purposes for which they are being
used. The Company is in compliance with all material terms of each lease to
which it is a party or is otherwise bound.
4.10 Intellectual Property.
(a) The Company owns or possesses sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes necessary for its
business as now conducted and to the Company's knowledge as presently proposed
to be conducted (the "Intellectual Property"), without any known infringement of
the rights of others. There are no outstanding options, licenses or agreements
of any kind relating to the foregoing proprietary rights, nor is the Company
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
of any other person or entity other than such licenses or agreements arising
from the purchase of "off the shelf" or standard products.
(b) The Company has not received any communications alleging that the Company
has violated any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity, nor is the Company aware of any basis therefor.
(c) The Company does not believe it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its employees
made prior to their employment by the Company or any of its Subsidiaries, except
for inventions, trade secrets or proprietary information that have been
rightfully assigned to the Company or any of its Subsidiaries.
4.11 Compliance with Other Instruments. The Company is not in violation or
default of (x) any term of its Charter or Bylaws, or (y) of any provision of any
indebtedness, mortgage, indenture, contract, agreement or instrument to which it
is party or by which it is bound or of any judgment, decree, order or writ,
which violation or default, in the case of this clause (y), has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. The execution, delivery and performance of and
compliance with this Agreement and the Related Agreements to which it is a
party, and the issuance and sale of the Note by the Company and the other
Securities by the Company each pursuant hereto and thereto, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
4.12 Litigation. There is no action, suit, proceeding or investigation pending
or, to the Company's knowledge, currently threatened against the Company that
prevents the Company from entering into this Agreement or the Related
Agreements, or from consummating the transactions contemplated hereby or
thereby, or which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect or could result in
any material change in the current equity ownership of the Company, nor is the
Company aware that there is any basis to assert any of the foregoing. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
4.13 Tax Returns and Payments. The Company has timely filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be
due and payable on such returns, any assessments imposed, and all other taxes
due and payable by the Company on or before the Closing, have been paid or will
be paid prior to the time they become delinquent. The Company has not been
advised:
(a) that any of its returns, federal, state or other, have been or are being
audited as of the date hereof; or
(b) of any deficiency in assessment or proposed judgment to its federal, state
or other taxes.
The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14 Employees. The Company has no collective bargaining agreements with any
of its employees. There is no labor union organizing activity pending or, to
the Company's knowledge, threatened with respect to the Company. Except as
disclosed in the Exchange Act Filings, the Company is not a party to or bound by
any currently effective employment contract, deferred compensation arrangement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. To the Company's knowledge, no
employee of the Company, nor any consultant with whom the Company has
contracted, is in violation of any term of any employment contract, proprietary
information agreement or any other agreement relating to the right of any such
individual to be employed by, or to contract with, the Company because of the
nature of the business to be conducted by the Company; and to the Company's
knowledge the continued employment by the Company of its present employees, and
the performance of the Company's contracts with its independent contractors,
will not result in any such violation. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
their duties to the Company. The Company has not received any notice alleging
that any such violation has occurred. Except for employees who have a current
effective employment agreement with the Company, no employee of the Company has
been granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. The Company
is not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company, nor does the Company
have a present intention to terminate the employment of any officer, key
employee or group of employees.
4.15 Registration Rights and Voting Rights. Except as disclosed in Exchange
Act Filings, the Company is presently not under any obligation, and has not
granted any rights, to register any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued. To the
Company's knowledge, no stockholder of the Company has entered into any
agreement with respect to the voting of equity securities of the Company.
4.16 Compliance with Laws; Permits. The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which has had, or
could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement or any Related Agreement and the issuance of any of
the Securities, except such as has been duly and validly obtained or filed, or
with respect to any filings that must be made after the Closing, as will be
filed in a timely manner. The Company has all material franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
4.17 Environmental and Safety Laws. The Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation. No Hazardous Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or, to the Company's knowledge, by
any other person or entity on any property owned, leased or used by the Company.
For the purposes of the preceding sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as "hazardous" or "toxic"
under any applicable local, state, federal and/or foreign laws and regulations
that govern the existence and/or remedy of contamination on property, the
protection of the environment from contamination, the control of hazardous
wastes, or other activities involving hazardous substances, including building
materials; or
(b) any petroleum products or nuclear materials.
4.18 Valid Offering. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
4.19 Full Disclosure. The Company has provided the Purchaser with all
information requested by the Purchaser in connection with its decision to
purchase the Note and Warrant, including all information the Company believes is
reasonably necessary to make such investment decision. Neither this Agreement,
the Related Agreements nor the exhibits and schedules hereto and thereto nor the
Exchange Act Filings delivered or made available by the Company to Purchaser or
its attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, contain any untrue statement of a
material fact nor omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading. Any financial projections and other estimates
provided to the Purchaser by the Company were based on the Company's experience
in the industry and on assumptions of fact and opinion as to future events which
the Company, at the date of the issuance of such projections or estimates,
believed to be reasonable.
4.20 Insurance. The Company has general commercial, product liability, fire
and casualty insurance policies with coverages which the Company believes are
customary for companies similarly situated to the Company in the same or similar
business.
4.21 SEC Reports. The Company has filed all proxy statements, reports and
other documents required to be filed by it under the Securities Xxxxxxxx Xxx
0000, as amended (the "Exchange Act"). The Company has furnished the Purchaser
with, or has otherwise made available to Purchaser, copies of: (i) its Annual
Report on Form 10-KSB for its fiscal year ended December 31, 2003, (ii) its
Quarterly Reports on Form 10-QSB for its fiscal quarter ended March 31, 2004 and
(iii) the Form 8-K filings which it has made during the fiscal year 2004 to date
(collectively, the "SEC Reports"). Each SEC Report was, at the time of its
filing, in substantial compliance with the requirements of its respective form
and, except to the extent any SEC Report indicates that the Company had
authorized and issued preferred stock (which, in fact, it had not properly
authorized and issued, and which obligations with respect to any such preferred
stock have been retired prior to the date hereof), none of the SEC Reports, nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective filing dates, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.22 Listing. The Company's Common Stock is listed for trading on the OTC
Bulletin Board ("OTCBB") and satisfies all requirements for the continuation of
such trading. The Company has not received any notice that its Common Stock
will not be eligible to be traded on the OTCBB or that its Common Stock does not
meet all requirements for such trading.
4.23 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 security or solicited any offers to buy any security
under circumstances that would cause the offering of the Securities pursuant to
this Agreement or any Related Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Rule 506 under the Securities Act, or
any applicable exchange-related stockholder approval provisions, 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.
4.24 Stop Transfer. The Securities are restricted securities as of the date of
this Agreement. The Company will not issue any stop transfer order or other
order impeding the sale and delivery of any of the Securities at such time as
the Securities are registered for public sale or an exemption from registration
is available, except as required by state and federal securities laws.
4.25 Dilution. The Company specifically acknowledges that its obligation to
issue the shares of Common Stock upon conversion of the Note and exercise of the
Warrant is binding upon the Company and enforceable regardless of the dilution
such issuance may have on the ownership interests of other shareholders of the
Company.
4.26 Patriot Act. The Company certifies that, to the best of Company's
knowledge, the Company has not been designated, and is not owned or controlled,
by a "suspected terrorist" as defined in Executive Order 13224. The Company
hereby acknowledges that the Purchaser seeks to comply with all applicable laws
concerning money laundering and related activities. In furtherance of those
efforts, the Company hereby represents, warrants and agrees that: (i) none of
the cash or property that the Company will pay or will contribute to the
Purchaser has been or shall be derived from, or related to, any activity that is
deemed criminal under United States law; and (ii) no contribution or payment by
the Company to the Purchaser, to the extent that they are within the Company's
control shall cause the Purchaser to be in violation of the United States Bank
Secrecy Act, the United States International Money Laundering Control Act of
1986 or the United States International Money Laundering Abatement and Anti-
Terrorist Financing Act of 2001. The Company shall promptly notify the
Purchaser if any of these representations ceases to be true and accurate
regarding the Company. The Company agrees to provide the Purchaser any
additional information regarding the Company that the Purchaser deems necessary
or convenient to ensure compliance with all applicable laws concerning money
laundering and similar activities. The Company understands and agrees that if
at any time it is discovered that any of the foregoing representations are
incorrect, or if otherwise required by applicable law or regulation related to
money laundering similar activities, the Purchaser may undertake appropriate
actions to ensure compliance with applicable law or regulation, including but
not limited to segregation and/or redemption of the Purchaser's investment in
the Company. The Company further understands that the Purchaser may release
confidential information about the Company and, if applicable, any underlying
beneficial owners, to proper authorities if the Purchaser, in its sole
discretion, determines that it is in the best interests of the Purchaser in
light of relevant rules and regulations under the laws set forth in subsection
(ii) above.
5. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement)
5.1 No Shorting. Neither the Purchaser nor any of its affiliates and investment
partners, directly or indirectly, has engaged or has caused any person or entity
to engage, in "short sales" of the Company's Common Stock.
5.2 Requisite Power and Authority. The Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
corporate action on Purchaser's part required for the lawful execution and
delivery of this Agreement and the Related Agreements have been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors' rights;
and
(b) as limited by general principles of equity that restrict the availability of
equitable and legal remedies.
5.3 Investment Representations. Purchaser understands that the Securities are
being offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon Purchaser's representations contained in
the Agreement, including, without limitation, that the Purchaser is an
"accredited investor" within the meaning of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). The Purchaser confirms that it
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to
the Note and the Warrant to be purchased by it under this Agreement and the Note
Shares and the Warrant Shares acquired by it upon the conversion of the Note and
the exercise of the Warrant, respectively. The Purchaser further confirms that
it has had an opportunity to ask questions and receive answers from the Company
regarding the Company's business, management and financial affairs and the terms
and conditions of the Offering, the Note, the Warrant and the Securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Purchaser or to which the
Purchaser had access.
5.4 Purchaser Bears Economic Risk. The Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. The Purchaser must bear the economic risk of this investment
until the Securities are sold pursuant to: (i) an effective registration
statement under the Securities Act; or (ii) an exemption from registration is
available with respect to such sale.
5.5 Acquisition for Own Account. The Purchaser is acquiring the Note and
Warrant and the Note Shares and the Warrant Shares for the Purchaser's own
account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.
5.6 Purchaser Can Protect Its Interest. The Purchaser represents that by reason
of its, or of its management's, business and financial experience, the Purchaser
has the capacity to evaluate the merits and risks of its investment in the Note,
the Warrant and the Securities and to protect its own interests in connection
with the transactions contemplated in this Agreement, and the Related
Agreements. Further, the Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement
or the Related Agreements.
5.7 Accredited Investor. Purchaser represents that it is an accredited investor
within the meaning of Regulation D under the Securities Act.
5.8 Legends.
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE,
STATE SECURITIES LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION
OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO RPM TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(b) The Note Shares and the Warrant Shares, if not issued by DWAC system (as
hereinafter defined), shall bear a legend which shall be in substantially the
following form until such shares are covered by an effective registration
statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.
THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO RPM
TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO RPM
TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
6. Covenants of the Company. The Company covenants and agrees with the
Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser, promptly after it
receives notice of issuance by the Securities and Exchange Commission (the
"SEC"), any state securities commission or any other regulatory authority of any
stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
6.2 Listing. The Company shall promptly secure the listing of the shares of
Common Stock issuable upon conversion of the Note and upon the exercise of the
Warrant on the OTCBB (the "Principal Market") upon which shares of Common Stock
are listed (subject to official notice of issuance) and shall maintain such
listing so long as any other shares of Common Stock shall be so listed. The
Company will maintain the listing of its Common Stock on the Principal Market,
and will comply in all material respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD and applicable
state authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, 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 Purchaser
and promptly provide copies thereof to the Purchaser.
6.4 Reporting Requirements. For so long as the Note and Warrant are outstanding
and/or Purchaser holds shares of Company Common Stock, the Company will timely
file with the SEC all reports required to be filed pursuant to the Exchange Act
and refrain from terminating its status as an issuer required by the Exchange
Act to file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit such termination.
6.5 Use of Funds. The Company agrees that it will use (A) up to $1,000,000 of
the proceeds of the sale of the Note to purchase equipment described on (or
substantially similar to) the equipment set forth on Schedule 6.5 hereto
(collectively, the "Equipment Purchases") at a commercially reasonable price,
(B) the remainder of the proceeds of the Note to pay for the fees and expenses
incurred in connection with this Agreement and for general working capital
purposes (it being understood that $2,200,000 of the proceeds of the Note will
be deposited in the Restricted Account on the Closing Date and shall be subject
to the terms and conditions of the Restricted Account Agreement and the
Restricted Account Side Letter) and (C) the proceeds of the sale of the Warrant
for general working capital purposes only.
6.6 Access to Facilities. The Company will permit any representatives designated
by the Purchaser (or any successor of the Purchaser), upon reasonable notice and
during normal business hours, at such person's expense and accompanied by a
representative of the Company, to:
(a) visit and inspect any of the properties of the Company;
(b) examine the corporate and financial records of the Company (unless such
examination is not permitted by federal, state or local law or by contract) and
make copies thereof or extracts therefrom; and
(c) discuss the affairs, finances and accounts of the Company with the
directors, officers and independent accountants of the Company.
Notwithstanding the foregoing, the Company will not provide any material, non-
public information to the Purchaser unless the Purchaser signs a confidentiality
agreement and otherwise complies with Regulation FD, under the federal
securities laws.
6.7 Taxes. The Company will promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and governmental
charges or levies imposed upon the income, profits, property or business of the
Company; provided, however, that any such tax, assessment, charge or levy need
not be paid if the validity thereof shall currently be contested in good faith
by appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefor.
6.8 Insurance. The Company will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against loss or
damage by fire, explosion and other risks customarily insured against by
companies in similar business similarly situated as the Company; and the Company
will maintain, with financially sound and reputable insurers, insurance against
other hazards and risks and liability to persons and property to the extent and
in the manner which the Company reasonably believes is customary for companies
in similar business similarly situated as the Company and to the extent
available on commercially reasonable terms. The Company and each of its
Subsidiaries will jointly and severally bear the full risk of loss from any loss
of any nature whatsoever with respect to the assets pledged to the Purchaser as
security for its obligations hereunder and under the Related Agreements. At the
Company's own cost and expense in amounts customarily insured against by
companies in similar business similarly situated as the Company and with
carriers reasonably acceptable to Purchaser, the Company and each of the
Subsidiaries shall (i) keep all its insurable properties and properties in which
it has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to the Company's or the respective Subsidiary's including
business interruption insurance; (ii) maintain a bond in such amounts as is
customary in the case of companies engaged in businesses similar to the
Company's or the Subsidiary's insuring against larceny, embezzlement or other
criminal misappropriation of insured's officers and employees who may either
singly or jointly with others at any time have access to the assets or funds of
the Company either directly or through governmental authority to draw upon such
funds or to direct generally the disposition of such assets; (iii) maintain
public and product liability insurance against claims for personal injury, death
or property damage suffered by others; (iv) maintain all such worker's
compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which the Company or the Subsidiary is engaged in business;
(v) no later than 30 days following the Closing Date, obtain general liability
insurance with a coverage limit of no less than $1,200,000; (vi) in connection
with its purchase of any equipment, obtain customary insurance insuring the
Company against any loss with respect thereto and (vii) furnish Purchaser with
(x) copies of all policies and evidence of the maintenance of such policies at
least thirty (30) days before any expiration date, (y) excepting the Company's
workers' compensation policy, endorsements to such policies naming Purchaser as
"co-insured" or "additional insured" and appropriate loss payable endorsements
in form and substance satisfactory to Purchaser, naming Purchaser as loss payee,
and (z) evidence that as to Purchaser the insurance coverage shall not be
impaired or invalidated by any act or neglect of the Company or any Subsidiary
and the insurer will provide Purchaser with at least thirty (30) days notice
prior to cancellation. The Company and each Subsidiary shall instruct the
insurance carriers that in the event of any loss thereunder, the carriers shall
make payment for such loss to the Company and/or the Subsidiary and Purchaser
jointly. In the event that as of the date of receipt of each loss recovery upon
any such insurance, the Purchaser has not declared an event of default with
respect to this Agreement or any of the Related Agreements, then the Company
shall be permitted to direct the application of such loss recovery proceeds
toward investment in property, plant and equipment that would comprise
"Collateral" secured by Purchaser's security interest pursuant to its security
agreement, with any surplus funds to be applied toward payment of the
obligations of the Company to Purchaser. In the event that Purchaser has
properly declared an event of default with respect to this Agreement or any of
the Related Agreements, then all loss recoveries received by Purchaser upon any
such insurance thereafter may be applied to the obligations of the Company
hereunder and under the Related Agreements, in such order as the Purchaser may
determine. Any surplus (following satisfaction of all Company obligations to
Purchaser) shall be paid by Purchaser to the Company or applied as may be
otherwise required by law. Any deficiency thereon shall be paid by the Company
or the Subsidiary, as applicable, to Purchaser, on demand.
6.9 Intellectual Property. The Company shall maintain in full force and effect
its corporate existence, rights and franchises and all licenses and other rights
to use Intellectual Property owned or possessed by it and reasonably deemed to
be necessary to the conduct of its business.
6.10 Properties. The Company will keep its properties in good repair, working
order and condition, reasonable wear and tear excepted, and from time to time
make all needful and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could reasonably be expected to have a
Material Adverse Effect.
6.11 Confidentiality. The Company agrees that it will not disclose, and will
not include in any public announcement, the name of the Purchaser, unless
expressly agreed to by the Purchaser or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement. The Company may disclose Purchaser's identity and the terms of
this Agreement to its current and prospective debt and equity financing sources.
6.12 Required Approvals. For so long as twenty-five percent (25%) of the
principal amount of the Note is outstanding, the Company, without the prior
written consent of the Purchaser, shall not:
(a) (i) directly or indirectly declare or pay any dividends, other than
dividends paid to the Company or any of its wholly-owned Subsidiaries, (ii)
issue any preferred stock that is manditorily redeemable prior to the six month
anniversary of the Maturity Date (as defined in the Note) or (iii) redeem any of
its preferred stock or other equity interests;
(b) liquidate, dissolve or effect a material reorganization (it being understood
that in no event shall the Company dissolve, liquidate or merge with any other
person or entity (unless the Company is the surviving entity);
(c) become subject to (including, without limitation, by way of amendment to or
modification of) any agreement or instrument which by its terms would (under any
circumstances) restrict the Company's right to perform the provisions of this
Agreement or any of the agreements contemplated thereby;
(d) materially alter or change the scope of the business of the Company;
(e) (i) create, incur, assume or suffer to exist any indebtedness (exclusive of
trade debt and debt incurred to finance the purchase of equipment (not in excess
of five percent (5%) per annum of the fair market value of the Company's
assets); provided that, notwithstanding the foregoing, the Company shall not be
permitted to incur indebtedness in connection with any Equipment Purchase (other
than indebtedness incurred pursuant to this Agreement and the Related
Agreements), whether secured or unsecured, other than (x) the Company's
indebtedness to Purchaser, (y) the Existing Convertible Note, and (z) any
indebtedness incurred in connection with the purchase of assets in the ordinary
course of business, and any refinancings or replacements thereof on terms no
less favorable to the Purchaser than the indebtedness being refinanced or
replaced; (ii) cancel any indebtedness owing to it in excess of $50,000 in the
aggregate during any 12 month period; or (iii) assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligations of any other Person, except the endorsement of negotiable
instruments by the Company for deposit or collection or similar transactions in
the ordinary course of business; and
(f) make investments in, make any loans or advances to, transfer assets to, or
maintain any assets in, any of its Subsidiaries, other than any immaterial
investments, loans, advances, assets and/or asset transfers made or maintained
in the ordinary course of business.
6.13 Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Section 5.7 above
at such time as:
(a) the holder thereof is permitted to dispose of such Securities pursuant to
Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement after such
Securities are registered under the Securities Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the selling Purchaser and broker, if
any.
6.14 Opinion. On the Closing Date, the Company will deliver to the Purchaser
an opinion substantially in the form of Exhibit C. The Company will provide, at
the Company's expense, such other legal opinions in the future as are reasonably
necessary for the conversion of the Note and exercise of the Warrant.
6.15 Margin Stock. The Company will not permit any of the proceeds of the Note
or the Warrant to be used directly or indirectly to "purchase" or "carry"
"margin stock" or to repay indebtedness incurred to "purchase" or "carry"
"margin stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect.
6.16 Additional Investment. The Company agrees that the Purchaser shall have
the right (at its sole option), on or prior to the date which is 270 days
following the Closing Date, to purchase an additional term note to be issued by
the Company in an aggregate principal amount of up to $960,000, on substantially
the same terms and conditions (including, without limitation, the same interest
rate, the same Fixed Conversion Price (as defined in the Note) then in effect,
proportionate warrant coverage (at the same exercise prices), a proportionate
amortization schedule, etc.) set forth in, and pursuant to substantially similar
documentation as, this Agreement and the Related Agreements.
6.17 Restricted Cash Disclosure. The Company agrees that, in connection with
its filing of its 8-K Report with the SEC concerning the transactions
contemplated by this Agreement and the Related Agreements (such report, the
"Laurus Transaction 8-K") in a timely manner after the date hereof, it will
disclose in such Laurus Transaction 8-K that $2,200,000 of the proceeds of the
Note issued by the Company to the Purchaser has been placed in a restricted cash
account under the sole dominion and control of the Purchaser, and the release of
the proceeds set forth in such restricted cash account is subject to the terms
of the Restricted Account Agreement and the Restricted Account Side Letter.
Furthermore, the Company agrees to disclose in all public filings required by
the Commission (where appropriate) following the filing of the Laurus
Transaction 8-K, the existence of the restricted cash referred to in the
immediately preceding sentence, together with the amount thereof.
6.18 Equipment and Lease. (a) The Company agrees to consummate the Equipment
Purchases no later than 120 days following the Closing Date, in each case, at a
commercially reasonable purchase price.
(b) The Company agrees to enter into a lease on commercially reasonable terms
for a corporate headquarters and operational and manufacturing facility (the
"Lease") prior to its initial receipt of equipment pursuant to an Equipment
Purchase.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with the
Company as follows:
7.1 Confidentiality. The Purchaser agrees that it will not disclose, and will
not include in any public announcement, the name of the Company, unless
expressly agreed to by the Company or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.
7.2 Non-Public Information. The Purchaser agrees not to effect any sales in the
shares of the Company's Common Stock while in possession of material, non-public
information regarding the Company if such sales would violate applicable
securities law.
7.3 Short Sales. Neither the Purchaser nor any of its affiliates, directly or
indirectly, will engage, or cause any person or entity to engage, in "short
sales" of the Company's Common Stock.
8. Covenants of the Company and Purchaser Regarding Indemnification.
8.1 Company Indemnification. The Company agrees to indemnify, hold harmless,
reimburse and defend Purchaser, each of Purchaser's officers, directors, agents,
affiliates, control persons, and principal shareholders, against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon the Purchaser which results,
arises out of or is based upon: (i) any misrepresentation by Company or breach
of any warranty by Company in this Agreement, any Related Agreement or in any
exhibits or schedules attached hereto or thereto; or (ii) any breach or default
in performance by Company of any covenant or undertaking to be performed by
Company hereunder, or any other agreement entered into by the Company and
Purchaser relating hereto.
8.2 Purchaser's Indemnification. Purchaser agrees to indemnify, hold harmless,
reimburse and defend the Company and each of the Company's officers, directors,
agents, affiliates, control persons and principal shareholders, at all times
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Company which results, arises out of or is based upon: (i) any
misrepresentation by Purchaser or breach of any warranty by Purchaser in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement; or (ii) any breach or default in performance by Purchaser of any
covenant or undertaking to be performed by Purchaser hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto.
9. Conversion of Convertible Note.
9.1 Mechanics of Conversion.
(a) Provided the Purchaser has notified the Company of the Purchaser's intention
to sell the Note Shares and the Note Shares are included in an effective
registration statement or are otherwise exempt from registration when sold: (i)
upon the conversion of the Note or part thereof, the Company shall, at its own
cost and expense, take all necessary action (including the issuance of an
opinion of counsel reasonably acceptable to the Purchaser following a request by
the Purchaser) to assure that the Company's transfer agent shall issue shares of
the Company's Common Stock in the name of the Purchaser (or its nominee). and in
such denominations to be specified representing the number of Note Shares
issuable upon such conversion; and (ii) the Company warrants that no
instructions other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that after the Effectiveness
Date (as defined in the Registration Rights Agreement) the Note Shares issued
will be freely transferable subject to the prospectus delivery requirements of
the Securities Act and the provisions of this Agreement, and will not contain a
legend restricting the resale or transferability of the Note Shares.
(b) Purchaser will give notice of its decision to exercise its right to convert
the Note or part thereof by telecopying or otherwise delivering an executed and
completed notice of the number of shares to be converted to the Company (the
"Notice of Conversion"). The Purchaser will not be required to surrender the
Note until the Purchaser receives a credit to the account of the Purchaser's
prime broker through the DWAC system (as defined below), representing the Note
Shares or until the Note has been fully satisfied. Each date on which a Notice
of Conversion is telecopied or delivered to the Company in accordance with the
provisions hereof shall be deemed a "Conversion Date." Pursuant to the terms of
the Notice of Conversion, the Company will issue instructions to the transfer
agent accompanied by an opinion of counsel within one (1) business day of the
date of the delivery to Company of the Notice of Conversion and shall cause the
transfer agent to transmit the certificates representing the Note Shares to the
Holder by crediting the account of the Purchaser's prime broker with the
Depository Trust Company ("DTC") through its Deposit Withdrawal Agent Commission
("DWAC") system within three (3) business days after receipt by the Company of
the Notice of Conversion (the "Delivery Date").
(c) The Company understands that a delay in the delivery of the Note Shares in
the form required pursuant to Section 9 hereof beyond the Delivery Date could
result in economic loss to the Purchaser. In the event that the Company fails
to direct its transfer agent to deliver the Note Shares to the Purchaser via the
DWAC system within the time frame set forth in Section 9.1(b) above and the Note
Shares are not delivered to the Purchaser by the Delivery Date, as compensation
to the Purchaser for such loss, the Company agrees to pay late payments to the
Purchaser for late issuance of the Note Shares in the form required pursuant to
Section 9 hereof upon conversion of the Note in the amount equal to the greater
of: (i) $500 per business day after the Delivery Date; or (ii) the Purchaser's
actual damages from such delayed delivery. Notwithstanding the foregoing, the
Company will not owe the Purchaser any late payments if the delay in the
delivery of the Note Shares beyond the Delivery Date is solely out of the
control of the Company and the Company is actively trying to cure the cause of
the delay. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand and, in the case of actual damages,
accompanied by reasonable documentation of the amount of such damages. Such
documentation shall show the number of shares of Common Stock the Purchaser is
forced to purchase (in an open market transaction) which the Purchaser
anticipated receiving upon such conversion, and shall be calculated as the
amount by which (A) the Purchaser's total purchase price (including customary
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (B) the aggregate principal and/or interest amount of the Note, for
which such Conversion Notice was not timely honored.
Nothing contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required to
be paid or other charges hereunder exceed the maximum amount permitted by such
law, any payments in excess of such maximum shall be credited against amounts
owed by the Company to a Purchaser and thus refunded to the Company.
10. Registration Rights.
10.1 Registration Rights Granted. The Company hereby grants registration
rights to the Purchaser pursuant to a Registration Rights Agreement dated as of
even date herewith between the Company and the Purchaser.
10.2 Offering Restrictions. Except as previously disclosed in the SEC Reports
or in the Exchange Act Filings, or stock or stock options granted to employees
or directors of the Company (these exceptions hereinafter referred to as the
"Excepted Issuances"), the Company will not issue any securities with a
continuously variable/floating conversion feature which are or could be (by
conversion or registration) free-trading securities (i.e. common stock subject
to a registration statement) prior to the full repayment or conversion of the
Note (together with all accrued and unpaid interest and fees related thereto
(the "Exclusion Period").
11. Miscellaneous.
11.1 Governing Law. THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER
PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AND EACH RELATED AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE COURTS
OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK. BOTH
PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND THE RELATED AGREEMENTS
ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS AND
WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY PROVISION OF THIS AGREEMENT OR ANY
RELATED AGREEMENT DELIVERED IN CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE
UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION SHALL BE DEEMED
INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT THEREWITH AND SHALL BE DEEMED
MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF LAW. ANY SUCH PROVISION WHICH
MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT THE VALIDITY
OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT OR ANY RELATED
AGREEMENT.
11.2 Survival. The representations, warranties, covenants and agreements made
herein shall survive any investigation made by the Purchaser and the closing of
the transactions contemplated hereby to the extent provided therein. All
statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.
11.3 Successors. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
heirs, executors and administrators of the parties hereto and shall inure to the
benefit of and be enforceable by each person who shall be a holder of the
Securities from time to time, other than the holders of Common Stock which has
been sold by the Purchaser pursuant to Rule 144 or an effective registration
statement. Purchaser may not assign its rights hereunder to a competitor of the
Company.
11.4 Entire Agreement. This Agreement, the Related Agreements, the exhibits
and schedules hereto and thereto and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.
11.5 Severability. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
11.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the written consent of
the Company and the Purchaser.
(b) The obligations of the Company and the rights of the Purchaser under this
Agreement may be waived only with the written consent of the Purchaser.
(c) The obligations of the Purchaser and the rights of the Company under this
Agreement may be waived only with the written consent of the Company.
11.7 Delays or Omissions. It is agreed that no delay or omission to exercise
any right, power or remedy accruing to any party, upon any breach, default or
noncompliance by another party under this Agreement or the Related Agreements,
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of or in any similar breach, default or noncompliance thereafter
occurring. All remedies, either under this Agreement, or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.
11.8 Notices. All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal business hours of the
recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by registered or certified
mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt.
All communications shall be sent as follows:
If to the Company, to:
RPM Technologies, Inc.
00000 Xxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxx
Facsimile: 000-000-0000
with a copy to:
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxx., Xxxxx 0000
Xxxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx, Esq.
Facsimile: 000-000-0000
If to the Purchaser, to: Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services ltd.
X.X. Xxx 0000 G.T.
Queensgate House, South Church Street
Grand Cayman, Cayman Islands
Facsimile: 000-000-0000
with a copy to:
Xxxx X. Xxxxxx , Esq.
000 Xxxxx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
11.9 Attorneys' Fees. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including, without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
11.10 Titles and Subtitles. The titles of the sections and subsections of the
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
11.11 Facsimile Signatures; Counterparts. This Agreement may be executed by
facsimile signatures and in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument.
11.12. Broker's Fees. Each party hereto represents and warrants that no agent,
broker, investment banker, person or firm acting on behalf of or under the
authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 11.12 being
untrue.
11.13 Construction. Each party acknowledges that its legal counsel participated
in the preparation of this Agreement and the Related Agreements and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Agreement to favor any party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
RPM TECHNOLOGIES, INC. LAURUS MASTER FUND, LTD.
By: By:
Name: Name:
Title: Title:
SCHEDULE 6.5
Equipment Type
Board Line
1- HCM Mod. 0-000-000 Extruder
1- Vacuum Tank
1- Cooling Tank
1- Puller
1- Auto Cut-off
1- Stacker
1- Chiller
1- Water Ring Pump
1- Lot Plumbing
1- Set up Training
4- Discs
Compression Line
1- HCM Mod 0-000-000 Extruder
1- Hyd Press Mod 40100-250
2- Hyd Press Mod 4862-250
1- Xxxxxx Feeder Mod 4860
4- Dump Hoppers Mod DH 4860
Aux Equip
Cooling Plates
Chiller
Forklift
Grinding Line
1- Cumberland Gd 50
1- HCM 50 Grinder
3- Conveyors 12"x16'-0
1-HCM Screen Mod 4072-4
Repo Line
1- HCM Mod 0-000-000 Extruder
1- Pelletizer
1- Dryer
Mixing & Blending
Xxxxxx Blender 3000#
EXHIBIT A
FORM OF CONVERTIBLE NOTE
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
FORM OF OPINION
[see attached]
EXHIBIT D
FORM OF ESCROW AGREEMENT
EXHIBIT E
FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT F
FORM OF MASTER SECURITY AGREEMENT
EXHIBIT G
FORM OF RESTRICTED ACCOUNT AGREEMENT
EXHIBIT H
FORM OF RESTRICTED ACCOUNT SIDE LETTER
EXHIBIT I
FORM OF SUBORDINATION AGREEMENT
