SETTLEMENT AGREEMENT AND RELEASES
THIS SETTLEMENT AGREEMENT AND RELEASES ("Agreement") is made and entered
into this 28th day of April, 2004, by and between Recom Managed Systems, Inc.,
Xxxxxxxx X. Xxxxx, ARC Finance Group LLC, and Xxxxxx Xxxxxxx-Xxxxx, on the one
hand ("Recom"), and Xxx Xxxxxx Xxxxxx ("Xxxxxx"), on the other hand. The parties
hereto acknowledge, recite and agree that Xxxxxxxx X. Xxxxx, ARC Finance Group
and Xxxxxx Xxxxxxx-Xxxxx ("releasors and releasees") are named as parties to
this Agreement solely for the purpose that Xxxxxx wishes to expressly provide
herein that the releasors and releasees are not only releasing Xxxxxx from any
liability (as set forth in the mutual general releases below) but also that
Xxxxxx is also releasing the releasors and releasees from any liability as well
(as set forth in the mutual general releases below). The parties hereto
acknowledge, recite and agree that nothing in this Agreement shall create any
obligation, right, duty or responsibility on the part of the releasors and
releasees other than to abide by the Mutual General Releases set forth in
Exhibit A attached hereto.
RECITALS
WHEREAS the parties are currently engaged in active litigation in which
Xxxxxx has sued Recom, among other parties, and in which Recom has sought to
have the suit dismissed on a number of grounds as well as having requested
monetary sanctions against Xxxxxx.
WHEREAS this Agreement was drafted jointly by the parties, by
sophisticated and experienced attorneys;
WHEREAS the Xxxxxx lawsuit related, in part, to certain shares of Recom
which were acquired by Xxxxxx out of the total shareholdings of ARC Finance
Group LLC pursuant to a settlement agreement, dated October 30, 2002, which is
attached to the Xxxxxx Lawsuit (hereinafter, the "Xxxxxx-Xxxxx Agreement");
WHEREAS the Xxxxxx Shares consisted of 450,000 shares, including 150,000
shares initially acquired by Xxxxxx pursuant to the Xxxxxx-Xxxxx Agreement
(certificate No. 2380 (CUSIP 75623Q 20 0), and an additional 300,000 shares
acquired by Xxxxxx pursuant to a stock split, and issued to him on or around
April 14, 2003 (certificate No. 2426 (CUSIP 75623Q 20 0) (hereinafter, the
"Xxxxxx Shares");
WHEREAS, as set forth above, Xxxxxx requests that Xxxxxxxx X. Xxxxx,
Xxxxxx Xxxxxxx-Xxxxx, and ARC Finance Group LLC be signatories to this Agreement
solely for purposes of assuring they and Xxxxxx are mutually bound against the
other to the mutual general releases;
NOW, THEREFORE, in consideration of the promises, mutual covenants and
obligations set forth herein, and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Dismissal; Mutual General Releases. Xxxxxx shall immediately dismiss
with prejudice all lawsuits currently on file against Recom. Recom shall
immediately inform the Court that all motions it currently has on file
appertaining or relating to Xxxxxx are withdrawn and taken off calendar. The
parties hereto further agree to be bound by the Mutual General Releases appended
hereto as Exhibit "A," and further agree that - by executing this Agreement and
entering into the Mutual General Releases, Exhibit "A" - no party hereto, and no
party related to any party hereto or released hereby as more fully set forth in
Exhibit "A," shall have any liability to the other.
Initials:_______________________________
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2. Registration of 80,000 of the Xxxxxx Shares. Recom shall include 80,000
of Xxxxxx'x Shares in its current Registration Statement that was initially
filed on January 2, 2004 with the Securities and Exchange Commission. The
parties hereto understand and agree that Recom does not control whether, when or
if, the SEC will approve any registration statement Recom may file in connection
with its shares. All parties are sophisticated and agree to bear the inherent
risk posed in connection with such registration process. Upon SEC approval of
the registration of Xxxxxx'x 80,000 shares, and subject to the cancellation of
the remaining balance of the Xxxxxx Shares referenced in paragraph 3 below,
Recom shall immediately deliver to Xxxxxx one Recom share certificate for 80,000
Recom common shares without any restrictive legend, and not subject to any
trading restrictions whatsoever except those set forth herein. Xxxxxx shall
immediately deposit the 80,000 Recom share certificate into his Schwab account
and shall be required to permit the transfer of 55,000 of the registered shares
to Xxxxxxx Xxxxxx to close a previously executed sale of 55,000 shares that has
been represented by Xxxxxx to have occurred but that Recom has no direct
knowledge of. Xxxxxx may not utilize the 55,000 shares for any other purpose but
to satisfy his obligation to provide Schwab with 55,000 Recom shares. That is,
he may not sell or transfer the shares for the profit of himself or anyone else.
With respect to the remaining balance of 25,000 registered shares, Xxxxxx shall
be entitled to sell no more than 3000 shares per week. Xxxxxx acknowledges that
the 3000 shares per week trading restriction is a reasonable limitation upon his
rights, and agrees to execute any documents Recom may require to effectuate and
enforce the trading restriction.
3. Cancellation of Xxxxxx'x Remaining Shares. Excluding the 80,000 shares
to be registered by Recom as set forth in paragraph 2 above, the remaining
balance of the Xxxxxx Shares - to wit: 449,000 minus 80,000, or a total
remaining balance of 369,000 shares - are hereby stipulated by Xxxxxx to be
cancelled, annulled, and of no further force and effect whatsoever but if and
only if Recom satisfies the following condition: Recom must either (a) deliver
the 80,000, registered shares, to Xxxxxx, in the manner set forth above or (b)
cause to be delivered to Xxxxxx free trading, legendless, unrestricted, shares
in the total amount of 80,000 shares. Upon Recom satisfying either condition a
or b, above, all conditions shall have been satisfied for the cancellation of
the remaining shares and such cancellation of the Xxxxxx Shares shall be
automatically effective without the necessity of any further action on the part
of any party. In the event Recom avails itself of condition (b), i.e.,
delivering a new set of free trading shares in the amount of 80,000 shares of
Recom, then the cancellation shall not be for 369,000 shares but - rather -
shall be for 449,000 shares in that Xxxxxx would under such circumstances be
receiving new shares unrelated to the shares currently held as the Xxxxxx
Shares. Xxxxxx agrees that upon Recom satisfying condition (a) or condition (b),
Xxxxxx shall execute all necessary documents that may be requested by Recom to
effectuate the cancellation of the Xxxxxx Shares as set forth above, and Xxxxxx
agrees that as a condition to receiving the 80,000 free-trading shares under
condition (a) or (b) above, he shall as a condition precedent assure delivery to
Recom of all certificates making up the Xxxxxx Shares to which Recom is entitled
to hereunder.
4. Warrant. Recom shall and hereby does issue to Xxxxxx a warrant to
purchase 250,000 shares of Recom's common stock, in the form attached hereto as
Exhibit B, at the market price as of closing of market on the Friday immediately
preceding the date of this Agreement.
5. Piggy Back Registration Rights. Upon the exercise of his warrant, Recom
shall xxxxx Xxxxxx "piggy back" registration rights pursuant to the "Piggy Back
Registration Rights Agreement" attached hereto as Exhibit C.
6. No Admission of Liability. The parties acknowledge and agree that no
party, by providing the consideration described above or by entering into this
Agreement, has admitted to any unlawful or improper conduct or liability to any
party. The parties further understand and agree that this Agreement shall not be
admissible as evidence in any federal, state or administrative proceeding,
except that this Agreement may be submitted to any appropriate court of
competent jurisdiction in an action to enforce or interpret the terms of this
Agreement or to impeach any party contradicting the recitals or provisions of
this Agreement.
Initials:_______________________________
2
7. Voluntary Execution. The parties hereby acknowledge that each is
executing this Agreement voluntarily and of its own free will and that each
fully understands the terms of this Agreement, has conducted its own due
diligence, and that each party has had an opportunity to and did discuss the
terms and implications thereof with legal counsel. Each of the parties hereto
acknowledge that no other party, nor any agent or attorney of any other party,
has made any promise, representation or warranty whatsoever, express or implied,
not contained herein concerning the subject matter hereof, to induce him/it to
execute this Agreement in reliance upon any such promise, representation, or
warranty not contained herein.
8. No Assignment of Claims. Each party hereto represents and warrants that
they have not heretofore assigned or transferred, or purported to assign or
transfer, to any person or entity, any claims, actions, complaints,
counter-complaints, cross-complaints, choses in action, causes of action,
obligations, costs, expenses, attorneys' fees, damages, losses, revenues,
profits, liabilities, rights, and/or interests, or any part or provision
thereof, referred to herein. Each party hereto agrees to indemnify and hold
harmless the other parties, against any claims, actions, complaints,
counter-complaints, cross-complaints, choses in action, causes of action,
obligations, costs, expenses, attorneys' fees, damages, losses, revenues,
profits, liabilities, and demands (including the payment of attorneys' fees and
costs actually incurred, whether or not litigation be commenced), based on or
arising out of or in connection with any such transfer or assignment or
purported or claimed transfer or assignment.
9. Notices. Any notice required to be provided herein shall be directed as
follows:
If to the Recom Parties:
Recom Managed Systems, Inc.
0000 Xxxxxx Xxxxxx Xxxxxxxxx
Xxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Xxxx X. Xxxx, Esq.
PAZ & XXXX LLP
1801 Avenue of the Stars, Xxxxx 000
Xxx Xxxxxxx, XX 00000
If to Xxx Xxxxxx Xxxxxx:
Xxx Xxxxxx Xxxxxx, Esq.
0000 Xxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
The parties hereto may change, alter or modify the foregoing notification
directives by sending a written notice of the change sent certified mail return
receipt requested to all addressees of the other party.
10. Confidentiality. The parties agree that the terms and conditions of
this Agreement are confidential and shall not be disclosed to any persons or
entities by the parties, their respective legal representatives, subsidiaries,
parent corporations, affiliates, officers, directors, shareholders,
beneficiaries, successors, heirs, licensees, assigns, agents, servants and
employees.
11. Governing Law and Dispute Resolution. This Agreement shall be governed
by and construed in accordance with the laws of the State of California, without
giving effect to the State's conflict of laws principles. Any dispute between
the parties arising out of or related to this Agreement shall be submitted to
binding arbitration administered by, and pursuant to the rules of, the American
Arbitration Association ("AAA") in the County of Los Angeles, State of
California, with the expenses of the arbitration to be shared equally by the
parties, subject to the arbitrator's authority to apportion such expenses in
favor of the prevailing party under applicable law. Judgment upon any AAA award
may be entered in any court having jurisdiction and shall be final and not
subject to appeal or collateral attack of any kind.
Initials:_______________________________
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12. Entire Agreement, Amendments and Waiver. This Agreement constitutes
the entire Agreement between the parties pertaining to the subject matter
contained herein and supersedes all prior and contemporaneous agreements,
representations and understandings -- whether oral, written or both -- of the
parties with respect to the subject matter hereof. In the case of this
particular Agreement, there have been no prior or contemporaneous agreements,
representations and understandings between or among the parties hereto, and the
only agreement that formed the topic of negotiations and discussions is
contained herein. The parties agree that this Agreement may not be modified and
that no attempted modification by the parties shall be binding upon either party
hereto unless contained in a written instrument executed by the party to be
charged. Accordingly, this Agreement may not be so modified by a writing that is
unsigned by the party to be charged and this Agreement may not be modified by
any oral amendment, oral agreement or other oral modification. In fact, any oral
amendment or written modification that remains unsigned by the party to be
charged is invalid in that the parties intend that there is no consideration for
any future promises that are not contained in writing and the parties hereto
specifically agree that this be the case.
13. Assignment. Neither this Agreement, any portion hereof nor any rights
hereunder may be assigned or transferred by any party hereto. This Agreement
shall be binding upon and shall inure to the benefit of the legal successors to
any party hereto.
///
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IN WITNESS WHEREOF, the parties hereto have themselves, or through their
duly authorized representatives, executed this Agreement, as of the date first
set forth above, such execution occurring and existing at the conclusion of all
Schedules appended hereto.
RECOM MANAGED SYSTEMS, INC.
A Delaware Corporation
By: /s/ Xxxxxx X. Xxxx
----------------------------------
XXXXXX X. XXXX
Chief Executive Officer
By: /s/ Xxxx Xxxxxxxxx
----------------------------------
XXXX XXXXXXXXX
General Counsel
By: /s/ Xxx Xxxxxx Xxxxxx
----------------------------------
XXX XXXXXX XXXXXX
Individually
By: /s/ Xxxxxxxx X. Xxxxx
----------------------------------
XXXXXXXX X. XXXXX
Individually
By: /s/ Xxxxxx Xxxxxxx-Xxxxx
----------------------------------
XXXXXX XXXXXXX-XXXXX
Individually
ARC FINANCE GROUP LLC
By: /s/ Xxxxxx Xxxxxxx-Xxxxx
----------------------------------
Xxxxxx Xxxxxxx-Xxxxx
Manager
Initials:_______________________________
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EXHIBIT "A"
Mutual General Release Provisions
I. Mutual General Releases.
a. By Xxxxxx:
Xxxxxx does hereby forever and finally release, relieve. acquit,
remise, absolve and discharge Recom and its respective past and present
employees, officers, partners, associates, members, affiliates, subsidiaries,
related companies, joint venture partners, directors, agents, representatives,
attorneys, shareholders, spouses, children, former spouses and significant
others, including, without limitation, Xxxxxxxx X. Xxxxx and Xxxxxx
Xxxxxxx-Xxxxx, as well as any and all "Parties and Participants" named in the
Complaint in the Xxxxxx Action filed on March 11, 2004 (collectively "Recom
Released Group") from any and all losses, claims, debts, liabilities, demands,
obligations, promises, acts, omissions, agreements, costs and expenses, damages,
injuries, suits, actions and causes of action, of whatever kind or nature
whether known or unknown, suspected or unsuspected, contingent or fixed, that
Xxxxxx may have against the Recom Released Group based upon, related to, or by
reason of any matter, cause, fact, act or omission occurring or arising at any
moment form the beginning of time to the last date of execution hereof,
including, without limitation, matters existing by reason of any contract
(express or implied in fact or implied in law), lien, liability, cause, fact,
thing, act or omission whatever, occurring or existing at any time to and
including the last date of execution hereof. Each person released by operation
of this Agreement is an intended third party beneficiary of this Agreement.
b. By Recom, Xxxxxxxx X. Xxxxx, ARC Finance Group LLC, and Xxxxxx
Xxxxxxx-Xxxxx:
Recom, Xxxxxxxx X. Xxxxx, ARC Finance Group LLC, and Xxxxxx
Xxxxxxx-Xxxxx, for themselves and, as applicable, for their past and present
employees, affiliates, attorneys, partners, subsidiaries, related companies,
joint venture partners, directors, agents, representatives, shareholders, and
those who at any time purport for any reason to be acting in association with
them or on their behalf, (collectively "Recom Releasing Group"), does hereby
forever and finally release relieve, acquit, remise, absolve, and discharge
Xxxxxx from any and all losses, claims, debts, liabilities, demands,
obligations, promises, acts, omissions, agreements, costs and expenses, damages,
injuries, suits, actions, and causes of action, of whatever kind or nature,
whether known or unknown, suspected or unsuspected, contingent or fixed, that
the Recom Releasing Group may have against Xxxxxx based upon, related to, or by
reason of any matter, cause, fact, act or omission occurring or arising at any
moment from the beginning of time to the last date of execution hereof,
including, without limitation, matters existing by reason of any contract
(express or implied in fact or implied in law), lien, liability, cause, fact,
thing, act or omission whatever, occurring or existing at any time to and
including the last date of execution hereof. Each person released by operation
of this Agreement is and intended third part beneficiary of this Agreement.
c. As used herein, the term "related companies" shall mean any person or
company that a person releasing by operation of this Agreement has an ownership
interest in or legal affiliation with, whether that interest or legal
affiliation is held or reflected as a partnership interest (in the case of a
partnership), a membership interest (in the case of a limited liability
company), a stock interest (in the case of a corporation), a joint venture
interest being the intention of the parties that all companies related to the
parties to this Agreement, or related to the persons released hereby, shall be
fully protected and released by reason of this Agreement.
d. The parties hereto intend that the releases set forth above shall be
read in their broadest sense, and all parties remotely or arguably subject to a
class of persons released hereby shall conclusively deemed to be released
hereby.
Initials:_______________________________
6
II. Finality and Scope of Releases. The parties hereto acknowledge and
agree that it is their intention, through this Agreement and the releases set
forth in this Schedule "A," to fully, finally and forever settle and release
each other from all those matters released herein, and all claims related
thereto, which do now exist, may exist or heretofore, have existed or may
hereafter exist. It is the intent of the parties to this Agreement to release
each other from claims or causes of action arising from facts that were
willfully, wrongfully, or tortuously concealed from the aggrieved party,
excepting any such claims or causes of action arising out of the affirmative
obligation contained in the body of the Agreement.
III. Releases of Unknown or Unsuspected Claims. THE PARTIES HAVE BEEN
INFORMED BY THEIR RESPECTIVE ATTORNEYS AND ADVISORS ABOUT CALIFORNIA CIVIL CODE
SECTION 1542, AND THE PARTIES ACKNOWLEDGE THAT THEY ARE FAMILIAR WITH AND HEREBY
EXPRESSLY WAIVE THE PROVISIONS OF THIS SECTION, AND ANY SIMILAR STATUTE, CODE,
LAW OR REGULATION OF ANY STATE IN THE UNITED STATES TO THE FULLEST EXTENT THAT
THEY MAY WAIVE SUCH RIGHTS AND BENEFITS. SECTION 1542 OF THE CALIFORNIA CIVIL
CODE PROVIDES:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
IV. Final Accord and Satisfaction. This Agreement and the releases
contained herein are intended to be final and binding between the parties hereto
and are further to be effective as a full and final accord and satisfaction
between the parties hereto, and each party to this Agreement expressly relies on
the finality of this Agreement as a substantial, material factor inducing that
party's execution of this Agreement.
V. The Effect of Discovery of Different or Additional Facts. With specific
respect only to the Mutual General Releases set forth in this Schedule "1," the
parties hereto acknowledge and agree as follows:
They are aware that they may hereafter discover claims presently unknown
or unsuspected, or facts in addition to or different from those which they now
know or believe to be true, or related or associated parities in addition to or
different from those which are listed herein and which the parties believe to
exist, pertaining to the matters released herein. Nevertheless, it is the
intention of the parties hereto, through this Agreement and the releases herein,
to fully, finally, and forever settle and release all such matters, and all
claims and parties related thereto, which do now exist, may exist in the future
or heretofore have existed. In furtherance of such intention, the releases
herein given shall be and remain in effect as a full and complete release of
such matters and parties, notwithstanding the discovery or existence of any such
additional or different claims or facts or parties related thereto by the
parties hereto. In entering into these releases, the parties hereto are not
relying upon any statement, representation, inducement or promise of any other
parties, except as expressly stated in this Agreement. It is the intent of the
parties to this Agreement to release each other from claims or causes of action
arising from facts that were willfully, wrongfully, or tortuously concealed from
the aggrieved parties.
Initials:_______________________________
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VI. Assumption of Risks. With specific respect only to the Mutual General
Releases set forth in this Exhibit "A" the parties hereto acknowledge and agree
as follows:
That no facts or representations are ever absolutely certain; accordingly,
each party hereto assume the risk of any misrepresentation, concealment or
mistake, and if any party hereto should subsequently discover that any
fact the said party relied upon in entering into this Agreement was
untrue, or that any fact was concealed from that party, or that any
understanding of the facts or the law was incorrect, said party shall not
be entitled to set aside this Agreement by reason thereof, regardless of
any claim of fraud, misrepresentation, promise made without the intention
of performing it, fraud in the inducement, concealment of fact, mistake of
fact or law, or any other circumstances whatsoever. This Agreement and the
releases contained herein are intended to be final and binding upon the
parties hereto, and each of them, and is further intended to be effective
as a full and final accord and satisfaction among the parties hereto,
regardless of any claim of fraud, misrepresentation, promise made without
the intention of performing it, fraud in the inducement, concealment of
fact, mistake of fact or law, or any other circumstances whatsoever. Each
party relies upon the finality of this Agreement and the releases herein
as a material factor inducing the party's execution of this Agreement.
VII. Generality and Specificity of Releases; Covenant Not to Xxx or Make
Claims. With specific respect only to the Mutual General Releases set forth in
this Schedule "1" the parties hereto acknowledge and agree as follows:
The parties hereto intend these Mutual General Releases to be construed in
the broadest possible terms so that the effect of this Agreement is that
the persons released hereby may not be sued by the persons releasing them
hereby, whether directly or indirectly, and no claims may be made related
to such releases whether by way of offset or otherwise or indeed in any
manner and for any reason, under any theory of fact, under any theory of
law, under any alleged set of facts, under any alleged reading of the law
and under or pursuant to any claim of any kind, including (without
limitation) claims for negligence, breach of contract, fraud, theft,
breach of fiduciary duty, lender liability and indeed for any of the
disputes set out in any of the recitals set forth above.
VIII. Incorporation by Reference. All provisions of the foregoing
Agreement are incorporated by reference as though fully set forth at length.
Initials:_______________________________
Settlement Agreement and Releases
8
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
of
RECOM MANAGED SYSTEMS, INC.
A Delaware Corporation
THIS WARRANT HAS BEEN, AND THE SHARES OF COMMON STOCK WHICH MAY BE
PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES")
WILL BE, ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF. NEITHER THIS WARRANT
OR THE WARRANT SHARES (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE STATE SECURITIES
LAWS. THIS WARRANT MUST BE SURRENDERED TO THE CORPORATION OR ITS TRANSFER
AGENT AS A CONDITION PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF
ANY INTEREST IN ANY OF THE SHARES REPRESENTED BY THIS WARRANT.
Warrant No.: To Be Identified by Company April 28, 2004
Los Angeles, California
THIS CERTIFIES THAT, for value received, Xxx Xxxxxx Xxxxxx, Esq. (the "Holder")
is entitled to subscribe for and purchase from RECOM MANAGED SYSTEMS, INC., a
Delaware corporation (the "Company"), 250,000 (two hundred fifty thousand)
shares of the Company's Common Stock (as adjusted pursuant to Section 2 hereof)
(the "Warrant Shares") at the purchase price of $7.90 (seven dollars and ninety
cents) per share (as adjusted pursuant to Section 2 hereof) (the "Exercise
Price"), upon the terms and subject to the conditions hereinafter set forth:
Exercise Rights.
Cash Exercise. The purchase rights represented by this Warrant may
be exercised by the Holder at any time after August 1, 2004, in whole or
in part, by surrender of this Warrant and delivery of a completed and duly
executed Notice of Cash Exercise, in the form attached as Exhibit A
hereto, accompanied by payment to the Company of an amount equal to the
Exercise Price then in effect multiplied by the number of Warrant Shares
to be purchased by the Holder in connection with such cash exercise of
this Warrant, which amount may be paid, at the election of the Holder, by
wire transfer, or delivery of a check payable to the order of the Company,
or any combination of the foregoing, to the principal offices of the
Company. The exercise of this Warrant shall be deemed to have been
effected on the day on which the Holder surrenders this Warrant to the
Company and satisfies all of the requirements of this Section 1. Upon such
exercise, the Holder will be deemed a shareholder of record of those
Warrant Shares for which the Warrant has been exercised with all rights of
a shareholder (including, without limitation, all voting rights with
respect to such Warrant Shares and all rights to receive any dividends
with respect to such Warrant Shares). If this Warrant is to be exercised
in respect of less than all of the Warrant Shares covered hereby, the
Holder shall be entitled to receive a new warrant covering the number of
Warrant Shares in respect of which this Warrant shall not have been
exercised and for which it remains subject to exercise. Such new warrant
shall be in all other respects identical to this Warrant.
Fair Market Value. For purposes of this Section 1, if and as
applicable, the "Fair Market Value" of the Common Stock shall have the
following meanings:
9
If the Common Stock is not listed for trading on a national
securities exchange or admitted for trading on a national market
system, then the Fair Market Value of a share of Common Stock shall
be as determined in good faith by the Board of Directors (the "Board
of Directors") of the Company as of the date of exercise.
If the Common Stock is listed for trading on a national
securities exchange or admitted for trading on a national market
system, then the Fair Market Value of Common Stock shall be deemed
to be the closing price quoted on the principal securities exchange
on which the Common Stock is listed for trading, or if not so
listed, the average of the closing bid and asked prices for Common
Stock quoted on the national market system on which Common Stock is
admitted for trading, each as published in the Western Edition of
The Wall Street Journal, in each case for the ten trading days prior
to the date of exercise pursuant to clause (b) of Fair Market Value
for Common Stock in accordance herewith.
Additional Conditions to Exercise of Warrant. Unless there is a
registration statement declared or ordered effective by the Securities and
Exchange Commission (the "Commission") under the Securities Act which
includes the Warrant Shares to be issued upon the exercise of the rights
represented by this Warrant, such rights may not be exercised unless and
until:
the Company shall have received an Investment Representation
Statement, in the form attached as Exhibit B hereto, certifying
that, among other things, the Warrant Shares to be issued upon the
exercise of the rights represented by this Warrant are being
acquired for investment and not with a view to any sale or
distribution thereof; and
each certificate evidencing the Warrant Shares to be issued
upon the exercise of the rights represented by this Warrant shall be
stamped or imprinted with a legend substantially in the following
form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS. SUCH SHARES
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED, OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT. COPIES OF THE AGREEMENTS COVERING THE PURCHASE
OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED
AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE
PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY. THIS CERTIFICATE
MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A
CONDITION PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF
ANY INTEREST IN ANY OF THE SHARES REPRESENTED BY THIS
CERTIFICATE. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE COMPANY.
Fractional Shares. Upon the exercise of the rights represented by
this Warrant, the Company shall not be obligated to issue fractional
shares of Common Stock, and in lieu thereof, the Company shall pay to the
Holder an amount in cash equal to the Fair Market Value per share of
Common Stock immediately prior to such exercise multiplied by such
fraction (rounded to the nearest cent).
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Expiration of Warrant. This Warrant shall expire and shall no longer
be exercisable on July 31, 2007.
Record Ownership of Warrant Shares. The Warrant Shares shall be
deemed to have been issued, and the person in whose name any certificate
representing Warrant Shares shall be issuable upon the exercise of the
rights represented by this Warrant (as indicated in the appropriate Notice
of Exercise) shall be deemed to have become the holder of record of (and
shall be treated for all purposes as the record holder of) the Warrant
Shares represented thereby, immediately prior to the close of business on
the date or dates upon which the rights represented by this Warrant are
exercised in accordance with the terms hereof.
Stock Certificates. In the event of any exercise of the rights
represented by this Warrant, certificates for the Warrant Shares so
purchased pursuant hereto shall be delivered to the Holder promptly and,
unless this Warrant has been fully exercised or has expired, a new Warrant
representing the Warrant Shares with respect to which this Warrant shall
not have been exercised shall also be issued to the Holder within such
time.
Issue Taxes. The issuance of certificates for shares of stock upon
the exercise of the rights represented by this Warrant shall be made
without charge to the Holder for any issuance tax in respect thereof;
provided, however, that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance
and delivery of any certificate in a name other than that of the Holder of
the Warrant.
Conditional Exercise. The Holder of this Warrant shall have the
right to submit a notice of exercise of this Warrant conditional upon the
closing of a registered secondary offering or an acquisition of the
Company. If such transaction upon which such exercise is conditioned is
not consummated, such notice of exercise shall be deemed of no further
force or effect. For the purposes hereof, the Fair Market Value for the
purposes of Section 1(b) hereto shall be the price to the public in the
case of a registered secondary offering and in the case of an acquisition
of the Company shall be the value of the consideration payable or issuable
to the holders of the Company's Common Stock.
Stock Fully Paid; Reservation of Shares. All Warrant Shares that may
be issued upon the exercise of the rights represented by this Warrant,
upon issuance, will be duly and validly issued, will be fully paid and
nonassessable, will not violate any preemptive rights or rights of first
refusal, will be free from restrictions on transfer other than those
imposed under applicable federal and state securities laws, will be issued
in compliance with all applicable federal and state securities laws, and
will have the rights, preferences and privileges described in the
Company's Certificate of Incorporation, as amended; and the Warrant Shares
will be free of any liens or encumbrances, other than any liens or
encumbrances created by or imposed upon the Holder through no action of
the Company. During the period within which the rights represented by the
Warrant may be exercised, the Company will at all times have authorized
and reserved for the purpose of issuance upon exercise of the purchase
rights evidenced by this Warrant, a sufficient number of shares of its
Common Stock to provide for the exercise of the right represented by this
Warrant.
Adjustment Rights.
Right to Adjustment. The number of Warrant Shares purchasable upon
the exercise of the rights represented by this Warrant, and the Exercise
Price therefor, shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
11
Merger. If at any time there shall be a merger or
consolidation of the Company with or into another corporation when
the Company is not the surviving corporation, then, as a part of
such merger or consolidation, lawful provision shall be made so that
the holder of this Warrant shall thereafter be entitled to receive
upon exercise of this Warrant, during the period specified herein
and upon payment of the aggregate Exercise Price then in effect, the
number of shares of stock or other securities or property of the
successor corporation resulting from such merger or consolidation,
to which a holder of the stock deliverable upon exercise of this
Warrant would have been entitled in such merger or consolidation if
this Warrant had been exercised immediately before such merger or
consolidation. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Warrant with
respect to the rights and interests of the Holder after the merger
or consolidation.
Stock Splits, Dividends, Combinations and Consolidations. In
the event of a stock split, stock dividend or subdivision of or in
respect of the outstanding shares of Common Stock, the number of
Warrant Shares issuable upon the exercise of the rights represented
by this Warrant immediately prior to such stock split, stock
dividend or subdivision shall be proportionately increased and the
Exercise Price then in effect shall be proportionately decreased,
effective at the close of business on the date of such stock split,
stock dividend or subdivision, as the case may be. In the event of a
reverse stock split, consolidation, combination or other similar
event of or in respect of the outstanding shares of Common Stock,
the number of Warrant Shares issuable upon the exercise of the
rights represented by this Warrant immediately prior to such reverse
stock split, consolidation, combination or other similar event shall
be proportionately decreased and the Exercise Price shall be
proportionately increased, effective at the close of business on the
date of such reverse stock split, consolidation, combination or
other similar event, as the case may be.
Adjustment Notices. Upon any adjustment of the Exercise Price, and
any increase or decrease in the number of Warrant Shares subject to this
Warrant, in accordance with this Section 2, the Company, within 30 days
thereafter, shall give written notice thereof to the Holder at the address
of such Holder as shown on the books of the Company, which notice shall
state the Exercise Price as adjusted and, if applicable, the increased or
decreased number of Warrant Shares subject to this Warrant, setting forth
in reasonable detail the method of calculation of each such adjustment.
Transfer of Warrant.
Conditions. This Warrant and the rights represented hereby are not
transferable, except in accordance with the conditions set forth in this
Section 3; provided, however, that the Company shall waive the provisions
of Section 3(b)(ii), below, and shall consent to the transfer of this
Warrant, if the Holder of the Warrant would otherwise be permitted to
transfer the Warrant Shares in accordance with State and Federal
Securities Laws. In order to effect any transfer of all or a portion of
this Warrant, the Holder hereof shall deliver to the Company a completed
and duly executed Notice of Transfer, in the form attached as Exhibit C
hereto.
Additional Conditions to Transfer of Warrant. Unless there is a
registration statement declared or ordered effective by the Commission
under the Securities Act which includes this Warrant, this Warrant may not
be transferred unless and until:
the Company receives an Investment Representation Statement,
in the form attached as Exhibit D hereto, certifying that, among
other things, this Warrant is being acquired for investment and not
with a view to any sale or distribution thereof; and
12
the Company receives a written notice from the Holder
which describes the manner and circumstances of the proposed
transfer accompanied by a written opinion of Holder's legal
counsel, in form and substance reasonably satisfactory to the
Company, stating that such transfer is exempt from the
registration and prospectus delivery requirements of the
Securities Act and all applicable state securities laws or
with a Commission "no-action" letter stating that future
transfers of such securities by the transferor or the
contemplated transferee would be exempt from registration
under the Securities Act or such securities may be transferred
in accordance with Rule 144(k). Upon receipt of the foregoing,
the Company shall, or shall instruct its transfer agent to,
promptly, and without expense to the Holder issue new
securities in the name of the Holder not bearing the legends
required under Section 1(c)(ii). In addition, new securities
shall be issued without such legend if such legends may be
properly removed under the terms of Rule 144(k).
No Shareholder Rights. The Holder of this Warrant (and any transferee
hereof) shall not be entitled to vote on matters submitted for the approval or
consent of the shareholders of the Company or to receive dividends declared on
or in respect to the shares of Common Stock or any other capital stock or other
securities of the Company which may at any time be issuable upon the exercise of
the rights represented hereby for any purpose, nor shall anything contained
herein be construed to confer upon the Holder (or any transferee hereof) any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted for the approval or consent of the
shareholders, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, merger
or consolidation, conveyance, or otherwise) or to receive notice of meetings, or
to receive dividends or subscription rights or otherwise until this Warrant
shall have been exercised as provided herein. No provision of this Warrant, in
the absence of the actual exercise of such Warrant or any part thereof into
Common Stock issuable upon such exercise, shall give rise to any liability on
the part of such Holder as a shareholder of the Company, whether such liability
shall be asserted by the Company or by creditors of the Company.
Miscellaneous.
Governing Law. This Warrant will be construed in accordance with,
and governed in all respects by, the laws of the State of California, as
applied to agreements entered into, and to be performed entirely in such
state, between residents of such state.
Dispute Resolution.
Negotiation. In the event of any dispute, controversy or claim
arising out of or relating to this Warrant, representatives of the parties
will meet in a location chosen by the party initiating the negotiation not
later than ten business days after written notice from one party to the
other of such dispute and will enter into good faith negotiations aimed at
resolving the dispute. If they are unable to resolve the dispute in a
mutually satisfactory manner within 30 business days from the date of such
notice, the matter may be submitted by either party to arbitration as
provided for in Section 5(b)(ii), below.
Arbitration.
Any dispute, controversy or claim between or among any of the
parties hereto arising out of or relating to this Warrant or the breach,
termination or invalidity thereof, including any dispute as to whether any
dispute is subject to arbitration, which has not been resolved after good
faith negotiations pursuant to subsection 5(b)(i) hereof will be settled
by binding arbitration administered by the American Arbitration
Association in accordance with its then current Commercial Arbitration
Rules except as provided herein.
Any arbitration will be conducted in a location in the metropolitan
area of the party responding to the action by a three person arbitration
panel. The three person arbitration panel will consist of one party
arbitrator selected by the Company, one party arbitrator selected by the
Holder, each of whom will be named within ten business days of the demand
for arbitration, and one neutral arbitrator selected by the first two
arbitrators. If the two party appointed arbitrators cannot agree on the
neutral arbitrator within ten business days of the selection of the last
party appointed arbitrator, the American Arbitration Association will
appoint the neutral arbitrator, who will act as chairperson. In the event
of a vacancy with respect to an arbitrator, the vacancy will be filled
within ten business days of notice of the vacancy in the same manner and
subject to the same requirements as are provided for in the original
appointment to that position. If the vacancy is not filled within ten
business days, the American Arbitration Association will make the
appointment.
13
It is the intent of the parties to avoid the appearance of
impropriety due to bias or partiality on the part of the neutral
arbitrator. Accordingly, prior to his or her appointment, such neutral
arbitrator will disclose to the parties and the other members of the
tribunal, any financial, fiduciary, kinship or other relationship between
the neutral arbitrator and any party or its counsel. Any party will have
the right to challenge in writing the appointment of the neutral
arbitrator on the basis of and within five days of such disclosure. In the
event of a challenge, the American Arbitration Association will uphold or
dismiss the challenge and its decision will be conclusive.
The law applicable to the validity of the arbitration clause, the
conduct of the arbitration, including the resort to a court for interim
relief, enforcement of the award or any other question of arbitration law
or procedure will be the United States' Federal Arbitration Act, 9 U.S.C.
ss. 1 et seq. The parties shall be entitled to engage in reasonable
discovery including requests for the production of all relevant documents
and a reasonable number of depositions. The arbitration panel shall have
the sole discretion to determine the reasonableness of any requested
document production or deposition. It is the intent of the parties that a
substantive hearing be held as soon as practicable after the appointment
of the neutral arbitrator or the rejection of a challenge thereto,
whichever occurs later. The presentation of evidence will be governed by
the federal Rules of Evidence. A stenographic record of all witness
testimony will be made.
Any award, including any interim award, made will be made by a
majority of the arbitrators applying the substantive law of California and
will (i) be in writing and state the arbitration panel's findings of fact
and conclusions of law, (ii) be made promptly, and in any event within 60
days after the conclusion of the arbitration hearing; and (iii) be binding
against the parties involved and may be entered for enforcement in any
court of competent jurisdiction.
Fifty percent of the costs of any arbitration proceeding (e.g.,
arbitrators, court reporter and room rental fees) will be borne by the
Company with the remaining 50% to paid by the other party to the dispute.
However, each party will pay its own expense, including attorneys' and
other professionals' fees and disbursements.
The arbitration provision set forth in this Section 5(b)(ii) will be
a complete defense to any suit, action or proceeding instituted in any
court with respect to any matter arbitrable under this Warrant, except
that judicial intervention may be sought in accordance with Section
5(b)(iii) hereof.
No Waivers; Interim Relief. The parties mutually acknowledge that an
award of damages may be inadequate to remedy any breach hereof and that
injunctive relief may be required. Therefore, (i) a party may request a
court of competent jurisdiction to provide interim injunctive relief in
aid of arbitration or to prevent a violation of this Warrant pending
arbitration, and any such request will not be deemed a waiver or breach of
the obligations to arbitrate set forth herein and (ii) the arbitrators may
order equitable relief where they deem it appropriate and the parties
agree that any interim relief ordered by the arbitrators may be
immediately and specifically enforced by a court otherwise having
jurisdiction over the parties.
Successors and Assigns. Subject to the restrictions on transfer
described in Section 3, the rights and obligations of the Company and
Holder of this Warrant shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
Waiver and Amendment. Any provision of this Warrant may be amended,
waived or modified upon the written consent of the Company and the Holder.
14
Notices. All notices and other communications required or permitted
hereunder will be in writing and will be sent by telecopier or mailed by
first-class mail, postage prepaid, or delivered either by hand or by
messenger, addressed (a) if to the Holder, at the address indicated on the
Company's books, or at such other address and telecopier number as Holder
will have furnished to the Company in writing, or (b) if to the Company,
at 0000 Xxxxxx Xxxxxx Xxxx., Xxxxx 000 Xxxxxxxxxx 00000, Attn: General
Counsel, or at such other address and telecopier number as the Company
will have furnished to the Holder and each such other holder in writing.
Each such notice or other communication will for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally or by messenger, or, if sent by mail, at the earlier
of its receipt or 72 hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail
addressed and mailed as aforesaid.
Severability. In case any provision of this Warrant will be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
Lost Warrant. Upon receipt from the Holder of written notice or
other evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of the Warrant and, in the case of any such
loss, theft or destruction, upon receipt of an unsecured indemnity
agreement and an affidavit of lost warrant, or in the case of any such
mutilation upon surrender and cancellation of the Warrant, the Company, at
the Company's expense, will make and deliver a new Warrant in lieu of the
lost, stolen, destroyed or mutilated Warrant carrying the same rights and
obligations as the original Warrant. The Company will also pay the cost of
all deliveries of the Warrant upon any exchange thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officer as of the date first written above.
RECOM MANAGED SYSTEMS, INC.
a Delaware corporation
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
Xxxxxx X. Xxxx
President and Chief Executive Officer
15
EXHIBIT A
NOTICE OF CASH EXERCISE
TO: [_________]
1. The undersigned hereby elects to purchase ____________ shares of Common Stock
of Recom Managed Systems, Inc., a Delaware corporation (the "Company"), pursuant
to the terms of Warrant No. W-{___}, issued {_____}, 2004 to and in the name of
Xxx Xxxxxx Xxxxxx, Esq., a copy of which is attached hereto (the "Warrant"), and
tenders herewith full payment of the aggregate Exercise Price for such shares in
accordance with the terms of the Warrant.
2. Please issue a certificate or certificates representing said shares of
____________ Stock in such name or names as specified below:
______________________________ _________________________________
(Name) (Name)
______________________________ _________________________________
______________________________ _________________________________
(Address) (Address)
3. The undersigned hereby represents and warrants that the aforesaid shares of
stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof,
and that the undersigned has no present intention of distributing or reselling
such shares. The undersigned has executed an Investment Representation Statement
with certain representations and warranties, in the form attached as Exhibit B
to the Warrant, concurrently herewith.
Date: _________ Xxx Xxxxxx Xxxxxx, Esq.
By: _________________________________________________
(Signature must conform in all respects to
name of the Holder as set forth on the face of
the Warrant)
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : Xxx Xxxxxx Xxxxxx, Esq.
SELLER : Recom Managed Systems, Inc.
COMPANY : Recom Managed Systems, Inc.
SECURITY : COMMON STOCK ISSUED UPON THE EXERCISE OF WARRANT NO.
W-{____}, ISSUED ON {____}, 2004
AMOUNT : 200,000 SHARES
DATE : ________________________
The undersigned hereby represents and warrants to Recom Managed Systems, Inc., a
Delaware corporation (the "Company"), as follows:
1. I am aware of the business affairs, financial condition and results of
operations of the Company and have acquired sufficient information about the
Company to reach an informed and knowledgeable investment decision to acquire
the Securities. I am purchasing the Securities for my own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act").
2. I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. I understand that, in the view of the Securities and
Exchange Commission (the "Commission"), the statutory basis for such exemption
may be unavailable if my representation was predicated solely upon a present
intention to hold the Securities for the minimum capital gains period specified
under tax statutes, for a deferred sale, for or until an increase or decrease in
the market price of the Securities, or for a period of one year or any other
fixed period in the future.
3. I further understand that the Securities must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption from
registration is otherwise available. Moreover, I understand that the Company is
under no obligation to register the Securities. In addition, I understand that
the certificate evidencing the Securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
4. I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions.
5. I agree that, if so requested by the Company or any representative of the
underwriters (the "Managing Underwriter") in connection with any registration of
the offering of any securities of the Company under the Securities Act, I shall
not sell or otherwise transfer any of the above listed Securities or other
securities of the Company during the 180-day period (or such other period as may
be requested in writing by the Managing Underwriter and agreed to in writing by
the Company) (the "Market Standoff Period") following the effective date of a
registration statement of the Company filed under the Securities Act. Such
restriction shall apply only to the first registration statement of the Company
to become effective under the Securities Act that includes securities to be sold
on behalf of the Company to the public in an underwritten public offering under
the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such Market Standoff Period.
6. I further understand that in the event all of the applicable requirements of
Rule 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the
Commission has expressed its opinion that persons proposing to sell private
placement securities other than in a registered offering and otherwise than
pursuant to Rule 144 will have a substantial burden of proof in establishing
that an exemption from registration is available for such offers or sales, and
that such persons and their respective brokers who participate in such
transactions do so at their own risk.
Date: _________ Xxx Xxxxxx Xxxxxx, Esq.
By: _______________________________________________
(Signature must conform in all respects to
name of the Holder as set forth on the face of
the Warrant)
2
EXHIBIT C
NOTICE OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
______________________________ the right represented by Warrant No. W-{_____},
issued on {____}, 2004 to and in the name of Xxx Xxxxxx Xxxxxx, Esq., to
purchase 200,000 shares of Common Stock of Recom Managed Systems, Inc., a
Delaware corporation (the "Company"), a copy of which is attached hereto (the
"Warrant"), and appoints ______________________________ as attorney-in-fact to
transfer such right on the books of the Company with full power of substitution
in the premises.
Date: _________ Xxx Xxxxxx Xxxxxx, Esq.
By: ________________________________________________
(Signature must conform in all respects to
name of the Holder as set forth on the face of
the Warrant)
____________________________________________________
____________________________________________________
(Address)
Signed in the presence of:
_________________________________________
EXHIBIT D
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : __________________________
TRANSFEROR : Xxx Xxxxxx Xxxxxx
COMPANY : Recom Managed Systems, Inc.
SECURITY : Warrant no. W-{___} issued on {____}, 2004
AMOUNT : __________ SHARES
DATE : ________________________
The undersigned hereby represents and warrants to Recom Managed Systems, Inc., a
Delaware corporation (the "Company"), as follows:
1. I am aware of the business affairs, financial condition and results of
operations of the Company, and have acquired sufficient information about the
Company to reach an informed and knowledgeable investment decision to acquire
the Securities. I am purchasing the Securities for my own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act").
2. I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. I understand that, in the view of the Securities and
Exchange Commission (the "Commission"), the statutory basis for such exemption
may be unavailable if my representation was predicated solely upon a present
intention to hold the Securities for the minimum capital gains period specified
under tax statutes, for a deferred sale, for or until an increase or decrease in
the market price of the Securities, or for a period of one year or any other
fixed period in the future.
3. I further understand that the Securities must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption from
registration is otherwise available. Moreover, I understand that the Company is
under no obligation to register the Securities. In addition, I understand that
the certificate evidencing the Securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
4. I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions.
5. I agree that, if so requested by the Company or any representative of the
underwriters (the "Managing Underwriter") in connection with any registration of
the offering of any securities of the Company under the Securities Act, I shall
not sell or otherwise transfer any of the above listed Securities or other
securities of the Company during the 180-day period (or such other period as may
be requested in writing by the Managing Underwriter and agreed to in writing by
the Company) (the "Market Standoff Period") following the effective date of a
registration statement of the Company filed under the Securities Act. Such
restriction shall apply only to the first registration statement of the Company
to become effective under the Securities Act that includes securities to be sold
on behalf of the Company to the public in an underwritten public offering under
the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such Market Standoff Period.
6. I further understand that in the event all of the applicable requirements of
Rule 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the
Commission has expressed its opinion that persons proposing to sell private
placement securities other than in a registered offering and otherwise than
pursuant to Rule 144 will have a substantial burden of proof in establishing
that an exemption from registration is available for such offers or sales, and
that such persons and their respective brokers who participate in such
transactions do so at their own risk.
Date: _________ By:________________________________________
Name: _____________________________________
- THIS AGREEMENT DRAFTED JOINTLY BY XXX XXXXXX AND RECOM MANAGED SYSTEMS, INC. -
PIGGYBACK REGISTRATION RIGHTS
AGREEMENT
THIS PIGGYBACK REGISTRATION RIGHTS AGREEMENT (hereinafter referred to as
the "Agreement"), is entered into effective as of the 28th day of April, 2004,
by and between Recom Managed Systems, Inc., a corporation authorized and
existing pursuant to the laws of the state of Delaware (the "Corporation"), and
Xxx Xxxxxx Xxxxxx, Esq. ("Xxxxxx").
W I T N E S S E T H:
WHEREAS, Xxxxxx entered into that certain settlement agreement dated April
28, 2004 by and between the Corporation and Xxxxxx; and
WHEREAS, in partial consideration for the Settlement, the Corporation
issued to Xxxxxx a Warrant (the "Xxxxxx Warrant") to purchase Two Hundred Fifty
Thousand (250,000) shares of duly authorized, validly issued, fully paid and
nonassessable Common Stock of the Company, par value $0.01 per share, (the
"Warrant Shares") at the purchase price of seven dollars ninety cents ($7.90)
per share, as more fully set forth in the Xxxxxx Warrant; and
WHEREAS, the Corporation and Xxxxxx desire to make conditional provisions
for the registration of the securities to be issued upon exercise of the Xxxxxx
Warrant as set forth herein, if the same be necessary.
NOW, THEREFORE, for and in consideration of the premises and of the mutual
covenants, representations, warranties and Agreements herein contained, the
parties hereto agree as follows:
Section I
Definitions
1.1 As used in this Agreement, the following capitalized terms shall have
the following meanings:
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles, as in effect
from time to time in the United States, consistently applied
"Holder" means Xxxxxx, or any assignee of Xxxxxx.
"Common Shares" means the common equity shares of the Corporation.
"Person" means a natural person, partnership, corporation, business
trust, association, joint venture or other entity or a government or agency or
political subdivision thereof.
"Prospectus" means the prospectus included in any Registration
Statement, as supplemented by any and all prospectus supplements and as amended
by any and all post-effective amendments and including all material incorporated
by reference in such prospectus.
"Registration" means the registration described in Section 2 hereof.
"Registrable Securities" means the Warrant Shares, owned by the
Holder, and any securities issued or issuable with respect to such Common Shares
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or reorganization.
2
- THIS AGREEMENT DRAFTED JOINTLY BY XXX XXXXXX AND RECOM MANAGED SYSTEMS, INC. -
"Registration Statement" means the registration statement which
covers Registrable Securities pursuant to the provisions of this Agreement,
including the Prospectus included in such registration statement, amendments
(including post-effective amendments) and supplements to such registration
statement, and all exhibits to and all material incorporated by reference in
such registration statement.
"Restricted Stock" means any shares of Common Stock of the
Corporation issued to Holder for which a Registration Statement has not become
effective.
"Securities Act" means the Securities Act of 1933, as from time to
time amended.
"Selling Holder" means any holder of Restricted Stock who exercises
any Registration Rights granted hereunder.
"Share" means the common stock in the Corporation and includes any
options, warrants or other rights to purchase Shares and securities of any type
whatsoever that are, or may become, convertible into Shares with the number of
any Shares which is an option, warrant, right or convertible security being the
number of such Shares which would result upon the immediate exercise of such
option, warrant or right of conversion of such convertible security, without
regard as to when such option, warrant or right may in fact be exercised or such
convertible security may in fact be converted.
"Warrant" means the Xxxxxx Warrant or any warrant to purchase shares
of Common Stock of the Corporation issued to Holder in exchange therefor.
"Warrant Shares" mean any and all shares of Common Stock issued or
issuable upon exercise of the Warrant.
Section II
Piggyback Registration Rights
2.1 After August 1, 2004, if the Investor exercises any portion of the
Warrant, and thereafter the Corporation proposes to file a brand new
registration statement under the Securities Act with respect to an offering for
its own account of any class of its equity securities (other than a registration
statement on Form S-8 (or any successor form) or any other registration
statement relating solely to employee benefit plans or filed in connection with
an exchange offer, a transaction to which Rule 145 (or any successor provision)
under the Securities Act applies or an offering of securities solely to the
Corporation's existing shareholders), then the Corporation shall in each case
give written notice of such proposed filing to the Holder as soon as practicable
(but no later than 20 business days) before the anticipated filing date, and
such notice shall offer each Holder the opportunity to register such number of
shares of Restricted Stock as such Holder may request. Each Holder desiring to
have Restricted Stock included in such registration statement shall so advise
the Corporation in writing within 10 business days after the date on which the
Corporation's notice is so given, setting forth the number of shares of
Restricted Stock for which registration is requested. If the Corporation's
offering is to be an underwritten offering, the Corporation shall, subject to
the further provisions of this Agreement, use its reasonable best efforts to
cause the managing underwriter or underwriters to permit the Holders of the
Restricted Stock requested to be included in the registration for such offering
to include such Restricted Stock in such offering on the same terms and
conditions as any similar securities of the Corporation included therein. The
right of each Holder to registration pursuant to this Section 4 in connection
with an underwritten offering by the Corporation shall, unless the Corporation
otherwise assents, be conditioned upon such Holder's participation as a seller
in such underwritten offering and its execution of an underwriting agreement
with the managing underwriter or underwriters selected by the Corporation.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
such offering deliver a written opinion to the Corporation that either because
of (a) the kind of securities that the Corporation, the Holders and any other
persons or entities intend to include in such offering or (b) the size of the
offering that the Corporation, the Holders and any other persons or entities
intend to make, the success of the offering would be materially and adversely
affected by inclusion of the Restricted Stock requested to be included, then (i)
in the event that the size of the offering is the basis of such managing
underwriter's opinion, the number of shares of Restricted Stock to be registered
and offered for the accounts of Holders shall be reduced pro rata on the basis
of the number of securities requested by such Holders to be registered and
offered to the extent necessary to reduce the total amount of securities to be
included in such offering to the amount recommended by such managing underwriter
or underwriters (provided that if securities are being registered and offered
for the account of other persons or entities in addition to the Corporation,
such reduction shall not be proportionally greater than any similar reductions
imposed on such other persons or entities) and (ii) in the event that the
combination of securities to be offered is the basis of such managing
underwriters opinion, (x) the Restricted Stock to be included in such
registration and offering shall be reduced as described in clause (i) above or
(y) if such actions would, in the reasonable judgment of the managing
underwriter, be insufficient to substantially eliminate the adverse effect that
inclusion of the Restricted Stock requested to be included would have on such
offering, such Restricted Stock will be excluded entirely from such registration
and offering. Any Restricted Stock excluded from an underwriting shall, if
applicable, be withdrawn from registration and shall not, without the consent of
the Corporation, be transferred in a public distribution prior to the earlier of
ninety (90) days (or such other shorter period of time as the managing
underwriter may require) after the effective date of the registration statement
or ninety (90) days after the date the Holders of such Restricted Stock are
notified of such exclusion.
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Section III
Registration Procedures
3.1 Whenever Holders of Restricted Stock have requested pursuant to
Section 2.1 that any Restricted Stock be registered, the Corporation shall,
subject to the provisions of Section 4.3 hereof, use its reasonable best efforts
to effect the registration and the sale or distribution of such Restricted Stock
in accordance with the intended method of disposition thereof as promptly as
practicable, and in connection with any such request, the Corporation shall:
(a) prepare and file with the Securities and Exchange Commission, a
registration statement on any form for which the Corporation then qualifies and
which counsel for the Corporation shall deem appropriate and which form shall be
available for the sale or distribution of such Restricted Stock in accordance
with the intended method of distribution thereof, and use its reasonable best
efforts to cause such registration statement to become effective; provided that,
(i) before filing a registration statement or prospectus or any amendments or
supplements thereto, the Corporation will furnish to one counsel selected by the
Holders of a majority of the shares of Restricted Stock covered by such
registration statement copies of all such documents proposed to be filed, which
documents will be subject to the review and comment of such counsel and (ii)
after the filing of the registration statement, the Corporation shall promptly
notify each Selling Holder of Restricted Stock of any stop order issued or, to
the knowledge of the Corporation, threatened by the Securities and Exchange
Commission and take all reasonable actions to prevent the entry of such stop
order or to remove it if entered;
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than ninety (90) days
or such shorter period as shall terminate when the distribution of all
Restricted Stock covered by such registration statement shall have terminated
(but not before the expiration of the ninety day (90) period referred to in
Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable) and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the Selling Holders
thereof set forth in such registration statement;
(c) as soon as reasonably practicable, furnish to each Selling
Holder, prior to filing a registration statement, copies of such registration
statement as proposed to be filed and thereafter furnish to such Selling Holder
such number of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration Statement
(including each preliminary prospectus) and such other documents as such Selling
Holder may reasonably request in order to facilitate the disposition of the
Restricted Stock owned by such Selling Holder;
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(d) use its best efforts to register or qualify such Restricted
Stock under such other securities or blue sky laws of such jurisdictions within
the United States and Canada as any Selling Holder reasonably (in light of such
Selling Holder's intended plan of distribution) requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such Selling Holder to consummate the disposition in such jurisdictions of the
Restricted Stock owned by such Selling Holder; provided that the Corporation
shall not be required to (i) qualify generally to do business or file a general
consent to service of process in any jurisdiction or (ii) take any action that
would subject itself to taxation in any such jurisdiction;
(e) promptly notify each Selling Holder of such Restricted Stock, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the occurrence of any event known to the Corporation
requiring the preparation of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers or recipients of such Restricted
Stock, such prospectus will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and promptly make available to each
Selling Holder any such supplement or amendment;
(f) enter into an underwriting agreement in customary form, the form
and substance of such underwriting agreement being subject to the reasonable
satisfaction of the Corporation and a majority in interest of the Selling
Holders;
(g) make available for inspection by any Selling Holder, any
underwriter participating in any sale or distribution pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such Selling Holder or underwriter (collectively, the "Inspectors") all
financial and other records, pertinent corporate documents and properties of the
Corporation (collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Corporation's officers and employees to supply all information reasonably
requested for such purpose by any such Inspector in connection with such
registration statement; provided that the Corporation shall have no obligation
to permit such access to the Records or its officers or employees in a manner
that would unreasonably disrupt the normal conduct of its business operations.
Each such Selling Holder and Inspector that actually reviews Records supplied by
the Corporation that include information that the Corporation identifies, in
good faith, as being confidential or proprietary ("Confidential Information")
shall be required at the Corporation's option, prior to any such review, to
execute an agreement with the Corporation providing that such Inspector shall
not publicly disclose any Confidential Information unless such disclosure is
required by applicable law or legal process and shall not use such information
for any purpose other than the limited purpose contemplated by this subsection
(g). Each such Selling Holder and Inspector shall be required further to agree
that it shall, upon learning that disclosure of Confidential Information is
sought in a court of competent jurisdiction, give notice to the Corporation and
allow the Corporation, at its expense, to undertake appropriate action to
prevent disclosure of the Confidential Information;
(h) in the event such sale is pursuant to an underwritten offering,
use its reasonable best efforts to obtain a comfort letter or letters from the
Corporation's independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters as the managing
underwriter reasonably requests; and
(i) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission and
make available to its security holders, as soon as reasonably practicable, an
earnings statement complying with the provisions of Section 11(a) of the
Securities Act (including, at the option of the Corporation, pursuant to Rule
158 (or any successor provision) under the Securities Act).
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Upon receipt of any notice from the Corporation of the occurrence of any event
of the kind described in subsection (e) hereof, such Selling Holder shall
forthwith discontinue all offerings, sales and other dispositions of Restricted
Stock pursuant to the registration statement covering such Restricted Stock
until such Selling Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by subsection (e) hereof. In the event the Corporation
shall give any such notice, the Corporation shall extend the period during which
such registration statement shall be maintained effective pursuant to this
Agreement (including the period referred to in subsection (b) hereof) by the
number of days during the period from and including the date of the giving of
such notice pursuant to subsection (b) hereof to and including the first date on
which each Selling Holder of Restricted Stock covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by subsection (e) hereof. Each Selling Holder shall
notify the Corporation if any event relating to such Selling Holder occurs which
would require the preparation of a supplement or amendment to the prospectus so
that such prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
Section IV
Conditions and Limitations.
4.1 The Corporation's obligations under this Section 3 shall be subject to
the Corporation having received the information and documents specified in
Section 5 hereof and each Selling Holder shall have observed or performed its
other covenants contained in Sections 5 and 7 hereof.
4.2 The Corporation's obligation under Section 4 hereof shall be subject
to the limitations and conditions specified in such section, and to the
condition that the Corporation may at any time terminate its proposal to
register equity securities for its own account and discontinue its efforts to
cause a registration statement to become or remain effective as to any and all
shares of Restricted Stock that would otherwise have been eligible for inclusion
in such registration.
Section V
Certain Covenants of Holders of Restricted Stock
5.1 Notices and requests delivered to the Corporation by Holders for whom
Restricted Stock is to be registered pursuant to this Agreement shall contain
such information regarding the Restricted Stock to be so registered, the Holder
and the intended method of disposition of such Restricted Stock as shall
reasonably be required in connection with the actions contemplated to be taken
pursuant to this Agreement. Any Holder whose Restricted Stock is included in a
registration statement pursuant to this Agreement shall execute all consents,
powers of attorney, registration statements and other documents reasonably
required to be executed by it in order to cause such registration statement to
became effective. Each Selling Holder covenants that, in disposing of such
Holder's shares, such Holder will comply with Rules 10b-2, 10b-5, 10b-6 and
10b-7 (or any successor provisions) under the Exchange Act and all other
requirements of applicable law.
Section VI
Registration Expenses
6.1 All Registration Expenses (as defined herein) will be borne by the
Corporation. Underwriting discounts and commissions applicable to the sale of
Restricted Stock shall be borne by the Holder of the Restricted Stock to which
such discount or commission relates, and each Selling Holder shall be
responsible for the fees and expenses of any legal counsel, accountants or other
agents retained by such Selling Holder and all other out-of-pocket expenses
incurred by such Selling Holder in connection with any registration under this
Agreement.
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6.2 As used herein, the term Registration Expenses means all expenses
incident to the Corporation's performance of or compliance with this Agreement
(whether or not the registration in connection with which such expenses are
incurred ultimately becomes effective), including without limitation all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Restricted Stock), rating agency
fees, printing expenses, the fees and expenses incurred in connection with the
listing or admission for quotation of the securities to be registered and any
securities exchange or quotation system and fees and disbursements of counsel
for the Corporation and its independent certified public accountants (including
the expenses of any special audit or comfort letters required by or incident to
such performance), securities act liability insurance (if the Corporation elects
to obtain such insurance), the reasonable fees and expenses of any special
expert retained by the Corporation in connection with such registration and the
fees and expenses of other persons retained by the Corporation.
Section VII
Indemnification; Contribution
7.1 Indemnification by the Corporation. In connection with any offering of
Restricted Stock pursuant to this Agreement, the Corporation shall indemnify and
hold harmless each Selling Holder, its officers, directors and agents and each
person, if any, who controls such Selling Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable fees and disbursements of counsel) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to Restricted Stock or in any
amendment or supplement thereto or in any preliminary prospectus relating to
Restricted Stock or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made, except insofar as such losses, claims,
damages, liabilities or expenses arise out of, or are based upon, any such
untrue statement or alleged untrue statement or omission or alleged omission
based upon information furnished in writing to the Corporation by such Selling
Holder or on such Selling Holder's behalf expressly for use therein. In
connection with any underwritten offering of Restricted Stock registered
pursuant to this Agreement, the Corporation shall cause to be included in any
underwriting agreement with the underwriters of such offering provisions
indemnifying and providing for contribution to such underwriters and their
officers and directors and each person who controls such underwriters on
substantially the same basis as the provisions of this Section 7.1 indemnifying
and providing for contribution to the Selling Holders.
7.2 Indemnification by Holders of Restricted Stock. In connection with any
offering of Restricted Stock pursuant to this Agreement, each Selling Holder,
severally and not jointly, shall indemnify and hold harmless the Corporation,
its officers, directors and agents and each person, if any, who controls the
Corporation within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, and, in accordance with industry practice, in
the case of an offering of Restricted Stock pursuant to this Agreement, each
underwriter of such Restricted Stock if requested by such underwriter, from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable fees and disbursements of counsel) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to Restricted Stock or in any
amendment or supplement thereto or in any preliminary prospectus relating to
Restricted Stock, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made, provided that (i) such losses, claims,
damages, liabilities or expenses arise out of, or are based upon, any such
untrue statement or alleged untrue statement or omission or alleged omission
based upon information furnished in writing to the Corporation by such Selling
Holder or on such Selling Holder's behalf expressly for use therein and (ii) no
Selling Holder shall be liable for any indemnification under this Section 7.2 in
an aggregate amount which exceeds the total net proceeds received by such
Selling Holder from such offering. In connection with any underwritten offering
of Restricted Stock registered pursuant to this Agreement, each Selling Holder
shall cause to be included in any underwriting agreement with the underwriters
of such offering provisions indemnifying and providing for contribution to such
underwriters, their officers and directors and each person who controls such
underwriters on substantially the same basis as the provisions of this Section
7.2 indemnifying and providing for contribution to the Corporation.
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7.3 Conduct of Indemnification Proceedings. If any action or proceeding
(including any governmental investigation) shall be brought or asserted against
any indemnified party hereunder in respect of which indemnity may be sought from
an indemnifying party hereunder, such indemnifying party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such indemnified party, and shall assume the payment of all expenses. Such
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expenses of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses, (ii) the
indemnifying party shall have failed to assume the defense of such action or
proceeding and employ counsel reasonably satisfactory to such indemnified party,
or (iii) the named parties to any such action or proceeding (including any
impleaded parties) include both such indemnified party and such indemnifying
party, and such indemnified party shall have been advised by counsel that there
may be one or more legal defenses available to such indemnified party which are
different from or additional to those available to the indemnifying party (in
which case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such action or proceeding on behalf of such indemnified party; it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for such indemnified party, which firm shall be designated
in writing by such indemnified party and reasonably satisfactory to the
indemnifying party). The indemnifying party shall not be liable for any
settlement of any such action or proceeding erected without its written consent,
but if settled with its written consent, or if there is a final judgment for the
plaintiff in any such action or proceeding, the indemnifying party shall
indemnify and hold harmless the indemnified party from and against any loss or
liability (to the extent stated above) by reason of such settlement or judgment.
7.4 Contribution. If the indemnification provided for in this Section 7 is
unavailable to the Corporation or the Selling Holders in respect of any losses,
claims, damages, liabilities or judgments referred to herein, then each such
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments in such proportion as
is appropriate to reflect the relative fault of each such party in connection
with such statements or omissions or alleged statements or omissions, as well as
any other relevant equitable considerations. The relative fault of each such
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Corporation
and the Selling Holders agree that it would not be just and equitable if
contribution pursuant to this Section 7.4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding sentences. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding sentences shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claims.
Notwithstanding the provisions of this Section 7.4, no Selling Holder shall be
required to contribute an amount in excess of the amount by which the total
price at which the Restricted Stock of such Selling Holder was offered to the
public exceeds the amount of any fee which such Selling Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
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Section VIII
Representations and Warranties
The Corporation represents and warrants that:
8.1 Existence and Rights. The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware.
The Corporation has all requisite corporate power and authority, to carry on its
business and to own and use the properties owned and used by it. True and
correct copies of the Corporation's Articles of Incorporation and Bylaws, as
amended to date, are available to Holder via the Securities and Exchange Website
xxx.xxx.xxx. The Corporation is qualified to conduct business and is in good
standing under the laws of each jurisdiction wherein the nature of its business
or its ownership of property requires it to be so qualified, except where the
failure to be so qualified, would not individually or in the aggregate, have a
material adverse effect on the assets or business of the Corporation. The
Corporation has no Subsidiaries.
8.2 Corporate Authorization. The Corporation has all necessary power and
authority to enter into this Agreement and has taken all action, specifically
including, without limitation, all corporate action, necessary to execute,
deliver and perform this Agreement. This Agreement has been duly authorized,
executed and delivered by the Corporation and is a legally valid and binding
obligation of the Corporation enforceable against the Corporation in accordance
with its terms.
8.3 No Conflict. The execution, delivery and performance of this Agreement
and of the related documents by the Corporation will not violate any provision
of the Corporation's Articles of Incorporation or the Bylaws; or violate any law
or rule or regulation of any administrative agency or governmental body; or any
order, writ, injunction or decree of any court, arbiter, administrative agency
or governmental authority having jurisdiction over the Corporation; or violate
any indenture, mortgage, contract, will, agreement or other undertaking to which
the Corporation is a party or is subject, or result in the creation or
imposition of any lien or encumbrance on any of the properties of the
Corporation under any of the foregoing.
Section IX
Miscellaneous
9.1 Notices. Any notice or other communication required or permitted
hereunder shall be deemed given if in writing and delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally or sent by overnight air courier or facsimile
transmission or, if mailed, two days after the date of deposit in the United
States mails, as follows:
If to Xxxxxx:
Xxx Xxxxxx Xxxxxx, Esq.
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Recom Managed Systems:
Recom Managed Systems, Inc.
Attn: Xxxxxx Xxxx
0000 Xxxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxx Xxxx, XX 00000
Facsimile: 000-000-0000
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With a copy to:
Xxxx X. Xxxx, Esq.
PAZ & XXXX, LLP.
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Any party may require any other party to serve notices in accordance with this
Section at a different address or directed to another person for receipt of
notices, if such party so designates such other person or address in writing
delivered to every other party in accordance with this Section 9, paragraph 9.1.
9.2 Partial Invalidity. Each part of this Agreement is intended to be
separate. If any term, covenant, condition or provision hereof is illegal or
invalid or unenforceable for any reason whatsoever, such illegality, invalidity
or unenforceability shall not affect the legality, validity or enforceability of
the remaining parts of this Agreement and all such remaining parts hereto shall
not be impaired or invalidated in any way, but shall be legal, valid and
enforceable and have full force and effect as if the illegal, invalid,
unenforceable part has not been included.
9.3 Governing Law and Dispute Resolution. This Agreement shall be governed
by and construed in accordance with the laws of the State of California, without
giving effect to the State's conflict of law principles. Any dispute between
parties arising out of or related to this Agreement shall be submitted to
binding arbitration administered by, and pursuant to the rules of, the American
Arbitration Association ("AAA") in the County of Los Angeles, State of
California, with the expenses of the arbitration to be shared equally by the
parties, subject to the arbitrator's authority to apportion such expenses in
favor of the prevailing party under applicable law. Judgment upon any AAA award
may be entered in any court having jurisdiction and shall be final and not
subject to appeal or collateral attack of any kind.
9.4 Entire Agreement. This Agreement constitutes the entire understanding
and Agreement of the parties hereto, and supersedes any and all prior
understandings or other Agreements, either oral or in writing, if any, among
such parties with respect to the subject matter hereof and contains all of the
covenants and Agreements between the parties with respect thereto. Each party to
this Agreement acknowledges that no representations, inducements, or Agreements,
oral or otherwise, have been made by such party, or anyone acting on behalf of
such party, which are not embodied herein, and no other Agreement, statement or
promise not contained in this Agreement shall be valid or binding. The parties
hereto have had an opportunity to consult with their respective attorneys
concerning the meaning and the import of this Agreement and each has read this
Agreement, as signified by their signatures below, and is executing the same for
the purposes and consideration herein expressed.
9.5 Waivers. No delay on the part of any party in exercising any right,
power, or privilege hereunder shall operate as a waiver thereof. Nor shall any
waiver on the part of any party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such right, power or
privilege. The rights and remedies of any party based upon, arising out of or
otherwise in respect of any inaccuracy in or breach by any other party of any
representation, warranty, covenant or Agreement contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence or
other state of facts upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other representation, warranty,
covenant or Agreement contained in this Agreement (or in any other Agreement
between the parties) as to which there is no inaccuracy or breach.
9.6 Tax Consultation. Each Party acknowledges that it has had the
opportunity to and has consulted with their own separate independent accounting
and tax advisors in connection with the accounting and tax treatment for the
transactions contemplated hereby and the tax ramifications thereof. Each Party
shall bear all risk in connection with the accounting and tax treatment of the
transactions contemplated by this Agreement and no Party is relying on the other
Party in connection with the same.
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9.7 Variations in Pronouns. Wherever the context shall so require, all
words herein in the male gender shall be deemed to include the female or neuter
gender and vice versa, all singular words shall include the plural, and all
plural words shall include the singular. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
9.8 Headings. The headings used in this Agreement are for administrative
purposes only and do not constitute substantive matter to be considered in
construing the terms and shall not affect the interpretation of this Agreement.
All references herein to Sections, subsections, and clauses, shall be deemed
references to such parts of this Agreement, unless the context shall otherwise
require. A reference to an article or section will mean an article or section in
this Agreement, unless otherwise explicitly set forth. The titles and headings
in this Agreement are for reference purposes only and will not in any manner
limit the construction of this Agreement. For the purposes of such construction,
this Agreement will be considered as a whole. The terms "including" and
"include" as used in this Agreement will be deemed to include the phrase
"without limitation."
9.9 Attorney's Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs, and necessary
disbursements, but only from the offending party, in addition to any other
relief to which it may be entitled.
9.10 Representation by Counsel. Each party acknowledges that it has had
the opportunity to be represented by separate independent counsel in the
negotiation of this Agreement, that any such respective attorneys were of its
own choosing, that each authorized representative has read this Agreement and
that he understands its meaning and legal consequences to each party. Each Party
warrants and represents that he has consulted with his attorney of choice, or
voluntarily chose not to do so, concerning the execution, the meaning and the
import of this Agreement, and has read this Agreement and fully understands the
terms hereof as signified by his signature below, and is executing the same of
his own free will for the purposes and consideration herein expressed. Each
Party warrants and represents that he has had sufficient time to consider
whether to enter into this Agreement and that he is relying solely on his own
judgment and the advice of his own counsel, if any, in deciding to execute this
Agreement. Each Party warrants and represents that he has read this Agreement in
its entirety and has consulted with his attorney, if any concerning the
execution of this Agreement. If any or all Parties have chosen not to seek
counsel, said party or parties hereby acknowledge that he or they refrained from
seeking counsel entirely of his or their own volition and with full knowledge of
the consequences of such a decision.
9.11 Presumption Against Scrivener. Each party waives the presumption that
this Agreement is presumed to be in favor of the party which did not prepare it,
in case of a dispute as to interpretation.
9.12 Capacity. Each party represents and warrants that he has the
authority to enter into this Agreement either on his own behalf or in an
official capacity on behalf of a corporate party.
9.13 Further Assurances. At any time and from time to time after the date
hereof, at the request of any Party, and without further consideration, every
other party will execute and deliver such other and further instruments and
documents, and take such other action as the other Party may reasonably deem
necessary, convenient or desirable in order to more effectively assist any Party
in exercising all rights with respect thereto, and carrying out the business,
duties, and obligations created by this Agreement.
9.14 Amendments. This Agreement may not be modified, amended, superceded,
cancelled, renewed or extended, except in writing, signed by the party or
parties to be bound thereby or signed by their respective attorneys.
9.15 Binding Effect and Assignment. This Agreement and the terms,
covenants, conditions, provisions, obligations, undertakings, rights and
benefits hereof, shall be binding upon, and shall inure to the benefit of, the
undersigned parties and their respective heirs, executors, administrators,
representatives, officers, directors, Corporation, successors, agents, servants,
employees, attorneys, and assigns. This Agreement and any rights hereunder are
freely assignable by Investor to the extent that Investor has assigned or sold
any Warrant or portion thereof. This Agreement shall inure to the benefit of and
bind the Parties hereto and their respective legal representatives, successors,
and permitted assigns.
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- THIS AGREEMENT DRAFTED JOINTLY BY XXX XXXXXX AND RECOM MANAGED SYSTEMS, INC. -
9.16 Counterparts. This Agreement may be executed in several counterparts
by one or more of the undersigned and all such counterparts so executed shall
together be deemed and constitute one final Agreement, as if one document had
been signed by all parties hereto; and each such counterpart shall be deemed an
original, binding the parties subscribed hereto and multiple signature pages
affixed to a single copy of this Agreement shall be deemed to be a fully
executed original Agreement. Several counterparts consisting of multiple copies
hereof each signed by less than all parties, but together signed by all parties
shall constitute and be deemed a fully executed original Agreement.
9.17 Corporate Authority. The Corporation represents and warrants to the
Investor other that it has previously taken the necessary corporate action
authorizing the execution of this Agreement and the undertakings to be
accomplished hereunder by its officer recited below.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
evidenced by their respective signatures below, effective as of the date
provided herein.
RECOM MANAGED SYSTEMS, INC.
A Delaware Corporation
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
XXXXXX X. XXXX
Chief Executive Officer
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------
XXXX XXXXXXXXX
General Counsel
By: /s/ Xxx Xxxxxxx Xxxxxx
-------------------------------------
XXX XXXXXX XXXXXX
Individually
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