SHARE EXCHANGE AGREEMENT, dated as of November 30, 2006 (the "Agreement"),
between REMOTE DYNAMICS, INC., a Delaware corporation ("RDI") and BOUNCE MOBILE
SYSTEMS, INC, a Nevada corporation ("BMSI").
WHEREAS BMSI is the owner of 500,000 shares (the "Bounce Shares") of
common stock, $.001 par value, of BounceGPS, Inc., a Nevada corporation
("Bounce"), constituting 100% of the issued and outstanding capital stock of
Bounce; and
WHEREAS RDI desires to acquire the Bounce Shares in exchange for (a) an
aggregate of 5,000 authorized, but unissued, shares of Series C Preferred Stock
having such rights, preferences and privileges as set forth in the Series C
Preferred Stock Certificate of Designations included as Exhibit A hereto (the
"RDI Shares"), (b) a series B secured convertible promissory notesof RDI in the
principal amount of $660,000 in the form of Exhibit B hereto (the "Series B
Note"), (c) an original discount series B secured convertible promissory note of
RDI in the principal amount of $264,000 in the form of Exhibit C hereto (the
"OID Note"), (d) a Series E-7 Warrant of RDI, in the form of Exhibit D hereto
(the "Series E-7 Warrant" ), to purchase a number of shares of RDI common stock,
par value $.01 per share (the "Common Stock") equal to seventy-five percent
(75%) of the number of Conversion Shares (as defined below) issuable upon
conversion of the Series B Note on the date of issuance thereof, and (e) d) a
Series X-0 Xxxxxxx xx XXX, in the form of Exhibit E hereto (the "Series F-4
Warrant" ), to purchase a number of shares of RDI Common Stock equal to
seventy-five percent (75%) of the number of Conversion Shares issuable upon
conversion of the Series B Note on the date of issuance thereof; and
WHEREAS BMSI desires to exchange the Bounce Shares for the RDI Shares, the
Series B Note, the OID Note, the Series E-7 Warrant and the Series F-4 Warrant
(collectively, the "RDI Securities"); and
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties and covenants herein contained, the parties hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
(a) The following terms, as used herein, have the following meanings:
"Closing Date" means the date that the Closing occurs in accordance with
Section 2.02.
"Conversion Shares" mean any shares of Common Stock issuable upon
conversion of the Notes.
"Environmental Laws" shall mean all applicable laws relating to the
protection of the environment including, without limitation, all requirements
pertaining to reporting, licensing, permitting, controlling, investigating or
remediating emissions, discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
materials or wastes, whether solid, liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"Note Purchase Agreement" means the Note and Warrant Purchase Agreement,
dated as of November 30, 2006, by and among RDI and the Purchasers listed on
Exhibit A thereto.
"Notes" mean the Series B Note and the OID Note.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Registration Rights Agreement" means the Registration Agreement between
RDI and BMSI , in the form of Exhibit F hereto, to be entered into at the
Closing.
"Security Agreement" means the Security Agreement between RDI and BMSI ,
in the form of Exhibit G hereto, to be entered into at the Closing.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by such Person and/or any of its other
Subsidiaries.
"Taxes" means all taxes, assessments and governmental charges imposed by
any federal, state, county, local or foreign government, taxing authority,
subdivision or agency thereof, including interest, penalties or additions
thereto.
"Transaction Documents" mean, collectively, this Agreement, the Notes, the
Warrants, the Registration Rights Agreement and the Security Agreement.
"Warrants" mean the Series E-7 Warrant and the Series F-4 Warrant.
"Warrant Shares" mean any shares of Common Stock issuable upon exercise of
the Warrants.
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(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Bounce Recitals
Bounce Balance Sheet 4.08
Bounce Balance Sheet Date 4.06
Bounce Common Stock 4.02
Bounce Permits 4.12
Bounce Shares Recitals
Charter Amendment 5.02(d)(xviii)
Closing 2.02
Code Recitals
Commission 3.06
Commission Documents 3.06
Common Stock Recitals
Damages 7.02
Exchange Act 3.06
Form 10-K 3.06
Form 10-Q 3.06
Governmental Entity 3.04
IRS 3.13
Material Adverse Effect 3.01
RDI Recitals
RDI Balance Sheet 3.08
RDI Balance Sheet Date 3.07
RDI Permits 3.13
RDI Shares Recitals
RDI Securities Recitals
Reverse Split 5.02(d)(xviii)
Securities Act 2.02
Share Increase 5.02(d)(xviii)
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ARTICLE 2
ACQUISITION AND EXCHANGE OF SHARES
Section 2.01 Exchange of Shares. Upon the terms and subject to the
conditions of this Agreement, RDI will acquire the Bounce Shares in exchange for
the RDI Securities at the Closing.
Section 2.02 Closing. The closing (the "Closing") of the acquisition of
the Bounce Shares hereunder shall take place at the offices of BMSI in San Juan
Capistrano, California as soon as possible, but in no event later than three
business days, after the satisfaction of the conditions set forth in Article
VII, or at such other time or place as RDI and BMSI may agree. At the Closing,
(a) RDI will file the Series C Certificate of Designations included
as Exhibit A hereto with the Delaware Secretary of State.
(b) RDI will deliver to BMSI (i) stock certificates representing the
RDI Shares, (ii) the Notes and (iii) the Warrants..
(c) RDI will execute and deliver to BMSI the Registration Rights
Agreement and the Security Agreement.
(c) BMSI will deliver to RDI stock certificates or other evidences
representing all of the issued and outstanding shares of Bounce Capital
Stock, duly endorsed, so as to make RDI the holder thereof, free and clear
of all Liens.
All RDI Securities to be issued hereunder shall be deemed "restricted
securities" as defined in paragraph (a) of Rule 144 under the Securities Act of
1933, as amended (the "Securities Act"). All RDI Securities to be issued under
the terms of this Agreement shall be issued pursuant to an exemption from the
registration requirements of the Securities Act, under Section 4(2) of the
Securities Act and the rules and regulations promulgated thereunder.
Certificates representing the RDI Securities to be issued hereunder shall bear a
restrictive legend in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not
be offered for sale, sold, or otherwise disposed of, except in
compliance with the registration provisions of such Act or pursuant
to an exemption from such registration provisions, the availability
of which is to be established to the satisfaction of the Company.
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The legend set forth above shall be removed and RDI shall issue a certificate
without such legend to the holder of any RDI Securities (or securities acquired
upon conversion or exercise thereof) upon which it is stamped, if, unless
otherwise required by state securities laws, (i) the sale of such securities is
registered under the Securities Act (including registration pursuant to Rule 416
thereunder); (ii) such holder provides RDI with an opinion of counsel, in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such securities
may be made without registration under the Securities Act; or (iii) such holder
provides RDI with reasonable assurances that such securities can be sold under
Rule 144. In the event the above legend is removed from any RDI Securities and
thereafter the effectiveness of a registration statement covering such RDI
Securities is suspended or RDI determines that a supplement or amendment thereto
is required by applicable securities laws, then upon reasonable advance written
notice to the holder, RDI may require that the above legend be placed on any
such RDI Securities that cannot then be sold pursuant to an effective
registration statement or under Rule 144 and the holder shall cooperate in the
replacement of such legend. Such legend shall thereafter be removed when such
RDI Securities may again be sold pursuant to an effective registration statement
or under Rule 144.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RDI
RDI hereby represents and warrants to BMSI that:
Section 3.01 Organization. RDI is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. RDI
is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not in the aggregate have a material adverse
effect on the business, operations or financial condition (a "Material Adverse
Effect") of RDI and its Subsidiaries, taken as a whole. RDI has heretofore
delivered to BMSI accurate and complete copies of the Articles of Incorporation
and Bylaws, as currently in effect, of RDI.
Section 3.02 Capitalization; Subsidiaries.
(a) The authorized capital stock and the issued and outstanding shares of
capital stock of the RDI are set forth in Section 3.02 of RDI Disclosure
Schedule. All the issued and outstanding shares of capital stock of RDI are
validly issued, fully paid and nonassessable and free of preemptive rights.
Except as set forth in Section 3.02 of the RDI Disclosure Schedule, there are
not now, and at the Closing Date there will not be: (i) any shares of capital
stock (or securities substantially equivalent to capital stock) of RDI issued or
outstanding or any subscriptions, options, warrants, calls, rights, convertible
securities or other agreements or commitments of any character obligating the
RDI to issue, transfer or sell any of its securities, (ii) any outstanding
obligations of RDI or any Subsidiary to issue or deliver or to repurchase,
redeem or otherwise acquire any securities of RDI, or (iii) except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities, any agreement or understanding that RDI is
a party to or bound by granting registration or anti-dilution rights to any
person with respect to any of its equity or debt securities or restricting the
voting or transfer of any shares of the capital stock of RDI.
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(b) Section 3.02 of the RDI Disclosure Schedule sets forth each Subsidiary
of REDI, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person's ownership of the outstanding stock or
other interests of such Subsidiary. All of the outstanding shares of capital
stock of each Subsidiary of RDI have been duly authorized and validly issued,
and are fully paid and nonassessable. There are no outstanding preemptive,
conversion or other rights, options, warrants or agreements granted or issued by
or binding upon any Subsidiary for the purchase or acquisition of any shares of
capital stock of any Subsidiary or any other securities convertible into,
exchangeable for or evidencing the rights to subscribe for any shares of such
capital stock. Neither RDI nor any Subsidiary is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of the capital stock of any Subsidiary or any convertible securities,
rights, warrants or options of the type described in the preceding sentence
except as set forth on Section 3.02 of the RDI Disclosure Schedule. Neither RDI
nor any Subsidiary is party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of any
Subsidiary.
Section 3.03 Corporate Authorization. The execution, delivery and
performance by RDI of this Agreement and the other Transaction Documents and the
consummation by RDI of the transactions contemplated hereby and thereby are
within RDI's corporate powers and have been duly authorized by all necessary
corporate action of RDI. This Agreement has been duly and validly executed and
delivered by RDI and constitutes a valid and binding agreement of RDI,
enforceable against RDI in accordance with its terms. When executed and
delivered by RDI, each of the other Transaction Documents shall constitute a
valid and binding obligation of RDI enforceable against RDI in accordance with
its terms.
Section 3.04 Governmental Authorization; Consents.
(a) The execution, delivery and performance by RDI of this Agreement and
the other Transaction Documents require no action by or in respect of, or filing
with, any governmental body, agency, official or authority (a "Governmental
Entity").
(b) No consent, approval, waiver or other action by an Person (other than
any Governmental Entity referred to in (a) above) under any contract, agreement,
indenture, lease, instrument, or other document to which RDI or any Subsidiary
is a party or by which any of them is bound is required or necessary for the
execution, delivery and performance of this Agreement or the other Transaction
Documents by RDI or the consummation of the transactions contemplated hereby or
thereby.
Section 3.05 Non-Contravention. The execution, delivery and performance by
RDI of this Agreement and the other Transaction Documents do not and will not
(i) contravene or conflict with the certificate of incorporation or bylaws of
RDI, (ii) contravene or conflict with or constitute a violation of any provision
of any law, regulation, judgment, injunction, order or decree binding upon or
applicable to RDI or any Subsidiary; (iii) constitute a default under or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of RDI or any Subsidiary or to a loss of any benefit to which RDI or
such Subsidiary is entitled under any provision of any agreement, contract, or
other instrument binding upon it or any license, franchise, permit or other
similar authorization held by RDI or any Subsidiary or (iv) result in the
creation or imposition of any Lien on any asset of RDI or any Subsidiary.
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Section 3.06 Commission Documents, Financial Statements. The Common Stock
of RDI is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and RDI has timely filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the Securities and Exchange Commission (the "Commission")
pursuant to the reporting requirements of the Exchange Act (all of the foregoing
including filings incorporated by reference therein being referred to herein as
the "Commission Documents"). At the times of their respective filings, the Form
10-Q for the fiscal quarters ended November 30, 2005 and February 28, 2006 and
the Form 10-QSB for the fiscal quarter ended May 31, 2006 (collectively, the
"Form 10-Q") and the Form 10-K for the fiscal year ended August 31, 2005 (the
"Form 10-K") complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and the Form 10-Q and Form 10-K did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their respective
dates, the financial statements of RDI included in the Commission Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements), and
fairly present in all material respects the financial position of RDI and its
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
Section 3.07 Absence of Certain Changes. Since August 31, 2005 (the "RDI
Balance Sheet Date"), except as disclosed in the Commission Documents or on
Section 3.07 of the RDI Disclosure Schedule, RDI and each of its Subsidiaries
have conducted their businesses in the ordinary course consistent with past
practices and there has not been:
(a) any material adverse change in the business, operations,
properties, prospects or financial condition of RDI and its Subsidiaries,
taken as a whole;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of RDI, or
any repurchase, redemption or other acquisition by RDI or any Subsidiary
of any outstanding shares of capital stock or other securities of, or
other ownership interests in, RDI or any Subsidiary;
(c) any amendment of any material terms of any outstanding security
of RDI or any Subsidiary;
(d) any incurrence, assumption or guarantee by RDI or any Subsidiary
of any indebtedness for borrowed money;
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(e) any creation or assumption by RDI or any Subsidiary of any Lien
on any material asset other than in the ordinary course of business
consistent with past practices;
(f) any making of any loan, advance or capital contributions to or
investment in any Person;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of RDI or any
Subsidiary which, individually or in the aggregate, would reasonable be
expected to have a Material Adverse Effect of RDI and its Subsidiaries,
taken as a whole;
(h) any transaction or commitment made, or any contract or agreement
entered into, by RDI or any Subsidiary relating to its assets or business
(including the acquisition or disposition of any assets) or any
relinquishment by RDI or any Subsidiary of any material contract or other
right, other than transactions and commitments in the ordinary course
consistent with past practices and those contemplated by this Agreement;
(i) any change in any method of accounting or accounting practice by
RDI or any Subsidiary, except for any such change after the date hereof
required by reason of a concurrent change in generally accepted accounting
principles; or
(j) any (i) grant of any severance or termination pay to any
officer, director or employee of RDI or any Subsidiary, (ii) entering into
of any employment, deferred compensation or other similar agreement (or
any amendment to any such existing agreement) with any director, officer
or employee of RDI or any Subsidiary, (iii) increase in benefits payable
under an existing severance or termination pay policies or employment
agreements or (iv) increase in compensation, bonus or other benefits
payable to directors, officers or employees of RDI or any Subsidiary.
Section 3.08 No Undisclosed Liabilities. Except as and to the extent set
forth in Section 3.08 of the RDI Disclosure Schedule, there are no liabilities
of RDI or any Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, other than:
(a) Liabilities disclosed or provided for in the audited balance
sheet of RDI as of August 31, 2005 (the "RDI Balance Sheet") included in
the Form 10-K;
(b) Liabilities disclosed in the Commission Documents;
(c) Liabilities incurred in the ordinary course of business
consistent with past practice since the RDI Balance Sheet Date, which in
the aggregate are not material to RDI; and
(d) Liabilities not required under generally accepted accounting
principles to be shown on the RDI Balance Sheet for reasons other than the
contingent nature thereof or the difficulty of determining the amount
thereof.
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Section 3.09 Properties. RDI and its Subsidiaries have good and marketable
title to, or in the case of leased property has valid leasehold interests in,
all property and assets (whether real or personal, tangible or intangible)
reflected on the RDI Balance Sheet or acquired after the RDI Balance Sheet Date,
except for properties and assets sold since the RDI Balance Sheet Date in the
ordinary course of business consistent with past practices or as contemplated by
this Agreement. None of such properties or assets is subject to any Liens,
except:
(a) Liens disclosed on the RDI Balance Sheet;
(b) Liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
RDI Balance Sheet); or
(c) Liens which do not materially detract from the value of such
property or assets as now used.
Section 3.10 Material Contracts.
(a) Except for agreements, contracts, plans, leases, arrangements or
commitments set forth in Section 3.10 of the RDI Disclosure Schedule, neither
RDI nor any Subsidiary is a party to or subject to:
(i) Any lease providing for annual rentals of $100,000 or more;
(ii) Any contract for the purchase of materials, supplies, goods,
services, equipment or other assets providing for annual payments by RDI
or any Subsidiary of $100,000 or more;
(iii) Any sales, distribution or other similar agreement providing
for the sale by RDI or any Subsidiary of materials, supplies, goods,
services, equipment or other assets that provides for annual payments to
RDI or any Subsidiary of $100,000 or more;
(iv) Any partnership, joint venture or other similar contract or
arrangement;
(v) Any contract relating to indebtedness for borrowed money or the
deferred purchase price of property (whether incurred, assumed, guaranteed
or secured by any asset), except contracts relating to indebtedness
incurred in the ordinary course of business in an amount not exceeding
$100,000;
(vi) Any license agreement, franchise agreement or agreement in
respect of similar rights granted to or held by RDI or any Subsidiary;
(vii) Any agency, dealer, reseller, sales representative or similar
agreement;
(viii) Any contract or other document that substantially limits the
freedom of RDI or any Subsidiary to compete in any line of business or
with any Person or in any area or which would so limit the freedom of RDI
or any Subsidiary after the Closing Date;
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(ix) Any other contract or commitment not made in the ordinary
course of business that is material to RDI and its Subsidiaries, taken as
a whole.
(b) Each agreement, contract, plan, lease, arrangement and commitment
required to be disclosed on Section 3.10 of the RDI Disclosure Schedule is a
valid and binding agreement of RDI or a Subsidiary and is in full force and
effect, and neither RDI, any Subsidiary nor any other party thereto is in
default in any material respect under the terms of any such agreement, contract,
plan, lease, arrangement or commitment.
Section 3.11 Litigation. Except as disclosed in Section 3.11 of the RDI
Disclosure Schedule, there is no action, suit, investigation, proceeding, review
pending against, or to the knowledge of RDI threatened against or affecting, RDI
or any Subsidiary or any of their properties before any court or arbitrator or
any Governmental Entity which, in the aggregate, are reasonably likely to have a
Material Adverse Effect of RDI and its Subsidiaries, taken as a whole, or
materially delay the transactions contemplated hereby.
Section 3.12 Compliance with Laws; No Defaults.
(a) RDI and its Subsidiaries holds all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities necessary for the
lawful conduct of their businesses (the "RDI Permits"), except for failures to
hold such RDI Permits which would not, in the aggregate, reasonably be expected
to have a Material Adverse Effect of RDI and its Subsidiaries, taken as a whole.
RDI and its Subsidiaries are in compliance with the terms of the RDI Permits,
except where the failure so to comply would not reasonably be expected to have a
Material Adverse Effect of RDI and its Subsidiaries, taken as a whole. The
business of RDI and its Subsidiaries is not being conducted in violation of any
applicable law, ordinance, rule, regulation, decree or order of any Governmental
Entity, except for violations which in the aggregate do not and would not
reasonably be expected to have a Material Adverse Effect of RDI and its
Subsidiaries, taken as a whole.
(b) Except as set forth in Section 3.12 of the RDI Disclosure Schedule,
neither RDI nor any Subsidiary is in default or violation (and no event has
occurred which with notice or the lapse of time or both would constitute a
default or violation) of any term, condition or provision of (i) any note, bond,
mortgage, indenture, license, contract, agreement or other instrument or
obligation to which RDI or any Subsidiary is a party or by which they or any
material amount of their properties or assets is bound or (iii) any order, writ,
injunction, decree, statute, rule or regulation applicable to RDI or any
Subsidiary, which defaults or violations would, in the aggregate, reasonable be
expected to have a Material Adverse Effect of RDI and its Subsidiaries, taken as
a whole, or which would materially delay the consummation of the transactions
contemplated hereby.
Section 3.13 Taxes. Except as set forth in Section 3.13 of the RDI
Disclosure Schedule, RDI and each of its Subsidiaries has duly filed all
material federal, state, local and foreign tax returns required to be filed by
it, and RDI and each of its Subsidiaries has duly paid, caused to be paid or
made adequate provision for the payment of all Taxes required to be paid in
respect of the periods covered by such returns and has made adequate provision
for payment of all Taxes anticipated to be payable in respect of all calendar
periods since the periods covered by such returns. Except as set forth in
Section 3.13 of the RDI Disclosure Schedule, none of the federal income tax
returns of RDI or any Subsidiary have been examined or audited by the Internal
Revenue Service (the "IRS"). All deficiencies and assessments asserted as a
result of such examinations or other audits by federal, state, local or foreign
taxing authorities have been paid, fully settled or adequately provided for in
the financial statements of RDI, and no issue or claim has been asserted for
Taxes by any taxing authority for any prior period, the adverse determination of
which would result in a deficiency which would have a Material Adverse Effect of
RDI, other than those heretofore paid or provided for. Except as set forth in
Section 3.13 of the RDI Disclosure Schedule, there are no outstanding agreements
or waivers extending the statutory period of limitation applicable to any
federal or foreign income tax return of RDI or its subsidiaries.
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Section 3.14 Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of RDI who might be entitled to any fee or commission from BMSI, RDI or
any of their respective affiliates upon consummation of the transactions
contemplated by this Agreement and the other Transaction Documents.
Section 3.15 Employees.
(a) Neither RDI nor any Subsidiary has any collective bargaining
arrangements or agreements covering any of its employees, except as set forth on
Section 3.15 of the RDI Disclosure Schedule. Except as set forth on Section 3.15
of the RDI Disclosure Schedule, neither RDI nor any Subsidiary has any
employment contract, agreement regarding proprietary information,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to
the right of any officer, employee or consultant to be employed or engaged by
RDI or such Subsidiary required to be disclosed in the Commission Documents that
is not so disclosed. No officer, consultant or key employee of RDI or any
Subsidiary whose termination, either individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect of RDI and its Subsidiaries,
taken as a whole, has terminated or, to the knowledge of RDI, has any present
intention of terminating his or her employment or engagement with RDI or any
Subsidiary.
(b) Neither RDI nor any Subsidiary has, or contributes to, any pension,
profit-sharing, option, other incentive plan, or any other type of Employee
Benefit Plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), or has any obligation to or
customary arrangement with employees for bonuses, incentive compensation,
vacations, severance pay, sick pay, sick leave, insurance, service award,
relocation, disability, tuition refund, or other benefits, whether oral or
written, except as set forth in Section 3.15 of the RDI Disclosure Schedule. No
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any Employee Benefit Plan by RDI or any of its Subsidiaries which is
or would be materially adverse to RDI and its Subsidiaries.
Section 3.16 Operation of Business. Except as set forth in the Commission
Documents or on Section 3.16 of the RDI Disclosure Schedule, to the knowledge of
RDI, RDI and each of its Subsidiaries owns or possesses the rights to all
patents, trademarks, domain names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted without any conflict with the rights of others.
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Section 3.17 Environmental Compliance. Except as set forth in Section 3.17
of the RDI Disclosure Schedule, RDI and each of its Subsidiaries have obtained
all material approvals, authorization, certificates, consents, licenses, orders
and permits or other similar authorizations of all governmental authorities, or
from any other person, that are required under any Environmental Laws. To the
RDI's knowledge, RDI and each of its Subsidiaries have all necessary
governmental approvals required under all Environmental Laws as necessary for
RDI's business or the business of any of its Subsidiaries. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect of RDI and its Subsidiaries, taken as a whole, and to the knowledge of
RDI, there are no past or present events, conditions, circumstances, incidents,
actions or omissions relating to or in any way affecting RDI or its Subsidiaries
that violate or may violate any Environmental Law after the Closing Date or that
may give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
Section 3.18 Insurance. Section 3.18 of the RDI Disclosure Schedule sets
forth a list of all insurance policies and fidelity bonds covering the assets,
business, equipment, properties, operations, employees, officers and directors
of RDI and its Subsidiaries. There is no claim by RDI or any Subsidiary pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
payable under all such policies and bonds have been paid and RDI and its
Subsidiaries are otherwise in full compliance with the terms and conditions of
all such policies and bonds. Such policies of insurance and bonds (or other
policies and bonds providing substantially similar insurance coverage) have been
in effect since November 1, 2001 and remain in full force and effect. Such
policies of insurance and bonds are of the type and in amounts customarily
carried by Persons conducting businesses similar to those of RDI and its
Subsidiaries. RDI does not know of any threatened termination of, or premium
increase with respect to, any of such policies or bonds.
Section 3.19 Books and Records; Internal Accounting Controls. The records
and documents of RDI and its Subsidiaries accurately reflect in all material
respects the information relating to the business of RDI and the Subsidiaries,
the location of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of RDI or any Subsidiary. RDI and each of
its Subsidiaries maintain a system of internal accounting controls sufficient,
in the judgment of RDI's board of directors, to provide reasonable assurance
that (i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate actions are taken
with respect to any differences.
12
Section 3.20 Transactions with Affiliates. Except as set forth on Section
3.20 of the RDI Schedule or in the Commission Documents, there are no loans,
leases, agreements, contracts, royalty agreements, management contracts or
arrangements or other continuing transactions between (a) RDI, any Subsidiary or
any of their respective customers or suppliers on the one hand, and (b) on the
other hand, any officer, employee, consultant or director of RDI, or any of its
Subsidiaries, or any person owning at least 5% of the outstanding capital stock
of RDI or any Subsidiary or any member of the immediate family of such officer,
employee, consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder which, in each case, is required to be disclosed in the
Commission Documents or in RDI's most recently filed definitive proxy statement
on Schedule 14A, that is not so disclosed in the Commission Documents or in such
proxy statement.
Section 3.21 Questionable Payments. Neither RDI or any Subsidiary, nor any
director, officer, agent, employee, or other person associated with, or acting
on behalf of, RDI or any Subsidiary, nor any stockholder of RDI has, directly or
indirectly: used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity; made
any unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns from corporate funds;
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended;
or made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment.
Section 3.22 Xxxxxxxx-Xxxxx Act. RDI is in compliance with the applicable
provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx Act"), and the
rules and regulations promulgated thereunder, that are effective and presently
applicable to RDI and intends to comply with other applicable provisions of the
Xxxxxxxx-Xxxxx Act, and the rules and regulations promulgated thereunder, upon
the effectiveness and applicability of such provisions with respect to RDI.
Section 3.23 Validity of RDI Securities to be Issued.
(a) The shares of RDI Shares to be issued at the Closing are validly
authorized and, when the such RDI Shares have been duly delivered pursuant to
the terms of this Agreement, such RDI Shares will be validly issued, fully paid,
and nonassessable and will not have been issued, owned or held in violation of
any preemptive or similar right of stockholder.
(b) The Notes and the Warrants have been duly authorized by all necessary
corporate action and, when paid for or issued in accordance with the terms
hereof, the Notes shall be validly issued and outstanding, free and clear of all
liens, encumbrances and rights of refusal of any kind. When the Conversion
Shares and Warrant Shares are issued and paid for in accordance with the terms
of this Agreement and as set forth in the Notes and Warrants, such shares will
be duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of refusal of any kind and the holders shall be entitled
to all rights accorded to a holder of Common Stock.
13
Section 3.24 Completeness of Disclosure. No representation or warranty by
RDI in this Agreement contains or, and at the Closing Date will contain, an
untrue statement of material fact or omits or, at the Closing Date, will omit to
state a material fact required to be stated therein or necessary to make the
statements made not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BMSI
BMSI hereby represents and warrants to RDI that:
Section 4.01 Organization. Bounce is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Bounce is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not in the aggregate have a Material Adverse
Effect of Bounce. BMSI has heretofore delivered to RDI accurate and complete
copies of the Articles of Incorporation and Bylaws, as currently in effect, of
Bounce.
Section 4.02 Capitalization; Subsidiaries.
(a) The authorized capital stock of the Bounce consists of (i) 20,000,000
shares of common stock, par value $.001 per share ("Bounce Common Stock"), of
which, as of the date hereof, 500,000 were issued and outstanding and (ii)
5,000,000 shares of preferred stock, par value $.001 each, of which no shares
are issued and outstanding.. All the issued and outstanding shares of Bounce
Common Stock are validly issued, fully paid and nonassessable and free of
preemptive rights. Except as set forth above, there are not now, and at the
Closing Date there will not be any shares of capital stock (or securities
substantially equivalent to capital stock) of Bounce issued or outstanding or
any subscriptions, options, warrants, calls, rights, convertible securities or
other agreements or commitments of any character obligating the Bounce to issue,
transfer or sell any of its securities.
(b) Bounce does not own, directly or indirectly, any capital stock or
other equity securities of any corporation or have any direct or indirect equity
or ownership interest in any business.
Section 4.03 Corporate Authorization. The execution, delivery and
performance by BMSI of this Agreement and the other Transaction Documents and
the consummation by BMSI of the transactions contemplated hereby and thereby are
within BMSI's corporate powers and have been duly authorized by all necessary
corporate action of BMSI. This Agreement has been duly and validly executed and
delivered by BMSI and constitutes a valid and binding agreement of BMSI,
enforceable against BMSI in accordance with its terms. When executed and
delivered by BMSI, each of the other Transaction Documents to which it is a
party shall constitute a valid and binding obligation of BMSI enforceable
against BMSI in accordance with its terms.
14
Section 4.04 Governmental Authorization; Consents.
(a) The execution, delivery and performance by BMSI of this Agreement and
the other Transaction Documents require no action by or in respect of, or filing
with, any Governmental Entity.
(b) No consent, approval, waiver or other action by an Person (other than
any Governmental Entity referred to in (a) above) under any contract, agreement,
indenture, lease, instrument, or other document to which BMSI is a party or by
which either of them is bound is required or necessary for the execution,
delivery and performance of this Agreement or the other Transaction Documents by
BMSI or the consummation of the transactions contemplated hereby or thereby.
Section 4.05 Non-Contravention. The execution, delivery and performance by
BMSI of this Agreement and the other Transaction Documents do not and will not
(i) contravene or conflict with the certificate of incorporation or bylaws of
BMSI, (ii) contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to BMSI or Bounce; (iii) constitute a default under or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of BMSI or Bounce or to a loss of any benefit to which BMSI or Bounce
is entitled under any provision of any agreement, contract, or other instrument
binding upon BMSI or Bounce or any license, franchise, permit or other similar
authorization held by BMSI or Bounce or (iv) result in the creation or
imposition of any Lien on any asset of BMSI or Bounce.
Section 4.06 Financial Statements. The unaudited financial statements of
Bounce for the period ended October 31, 2006 (the "Bounce Balance Sheet Date")
previously delivered to RDI fairly present, in conformity with generally
accepted accounting principles applied on a consistent basis (except as
indicated in the notes thereto), the financial position of Bounce as of the date
thereof and its results of operations and cash flow for the period then ended
(subject to normal year-end adjustments).
Section 4.07 Absence of Certain Changes. Except as set forth in Section
4.07 of the BMSI Disclosure Schedule, since the Bounce Balance Sheet Date,
Bounce has conducted its business in the ordinary course consistent with past
practices and there has not been:
(a) any material adverse change in the business, operations or
financial condition of Bounce;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of Bounce,
or any repurchase, redemption or other acquisition by Bounce of any
outstanding shares of capital stock or other securities of, or other
ownership interests in, Bounce;
(c) any amendment of any material terms of any outstanding security
of Bounce;
15
(d) any incurrence, assumption or guarantee by Bounce of any
indebtedness for borrowed money;
(e) any creation or assumption by Bounce of any Lien on any material
asset other than in the ordinary course of business consistent with past
practices;
(f) any making of any loan, advance or capital contributions to or
investment in any Person;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of Bounce which,
individually or in the aggregate, would reasonable be expected to have a
Material Adverse Effect of Bounce;
(h) any transaction or commitment made, or any contract or agreement
entered into, by Bounce relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by Bounce
of any material contract or other right, other than transactions and
commitments in the ordinary course consistent with past practices and
those contemplated by this Agreement;
(i) any change in any method of accounting or accounting practice by
Bounce, except for any such change after the date hereof required by
reason of a concurrent change in generally accepted accounting principles;
or
(j) any (i) grant of any severance or termination pay to any
officer, director or employee of Bounce, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of Bounce, (iii) increase in benefits payable under an existing
severance or termination pay policies or employment agreements or (iv)
increase in compensation, bonus or other benefits payable to directors,
officers or employees of Bounce.
Section 4.08 No Undisclosed Liabilities. Except as and to the extent set
forth in Section 4.08 of the BMSI Disclosure Schedule, there are no liabilities
of Bounce of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, other than:
(a) Liabilities disclosed or provided for in the unaudited balance
sheet of Bounce as of September 30, 2006 (the "Bounce Balance Sheet")
previously delivered to RDI;
(b) Liabilities incurred in the ordinary course of business
consistent with past practice since the Bounce Balance Sheet Date, which
in the aggregate are not material to Bounce; and
(c) Liabilities not required under generally accepted accounting
principles to be shown on the Bounce Balance Sheet for reasons other than
the contingent nature thereof or the difficulty of determining the amount
thereof.
16
Section 4.09 Properties. Bounce has good and marketable title to, or in
the case of leased property has valid leasehold interests in, all property and
assets (whether real or personal, tangible or intangible) reflected on the
Bounce Balance Sheet or acquired after the Bounce Balance Sheet Date, except for
properties and assets sold since the Bounce Balance Sheet Date in the ordinary
course of business consistent with past practices or as contemplated by this
Agreement. None of such properties or assets is subject to any Liens, except:
(a) Liens disclosed on the Bounce Balance Sheet;
(b) Liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Bounce Balance Sheet); or
(c) Liens which do not materially detract from the value of such
property or assets as now used.
Section 4.10 Material Contracts.
(a) Except for agreements, contracts, plans, leases, arrangements or
commitments set forth in Section 4.10 of the BMSI Disclosure Schedule, Bounce is
not a party to or subject to:
(i) Any lease providing for annual rentals of $5,000 or more;
(ii) Any contract for the purchase of materials, supplies, goods,
services, equipment or other assets providing for annual payments by
Bounce of $10,000 or more;
(iii) Any sales, distribution or other similar agreement providing
for the sale by Bounce of materials, supplies, goods, services, equipment
or other assets that provides for annual payments to Bounce of $10,000 or
more;
(iv) Any partnership, joint venture or other similar contract or
arrangement;
(v) Any contract relating to indebtedness for borrowed money or the
deferred purchase price of property (whether incurred, assumed, guaranteed
or secured by any asset), except contracts relating to indebtedness
incurred in the ordinary course of business in an amount not exceeding
$10,000;
(vi) Any license agreement, franchise agreement or agreement in
respect of similar rights granted to or held by Bounce;
(vii) Any agency, dealer, reseller, sales representative or similar
agreement;
(viii) Any contract or other document that substantially limits the
freedom of Bounce to compete in any line of business or with any Person or
in any area or which would so limit the freedom of Bounce after the
Closing Date;
(ix) Any other contract or commitment not made in the ordinary
course of business that is material to Bounce.
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(b) Each agreement, contract, plan, lease, arrangement and commitment
required to be disclosed on Section 4.10 of the BMSI Disclosure Schedule is a
valid and binding agreement of Bounce and is in full force and effect, and
neither Bounce nor any other party thereto is in default in any material respect
under the terms of any such agreement, contract, plan, lease, arrangement or
commitment.
Section 4.11 Litigation. Except as disclosed in Section 4.11 of the BMSI
Disclosure Schedule, there is no action, suit, investigation, proceeding, review
pending against, or to the knowledge of BMSI threatened against or affecting,
Bounce or any of its properties before any court or arbitrator or any
Governmental Entity which, in the aggregate, are reasonably likely to have a
Material Adverse Effect of Bounce or materially delay the transactions
contemplated hereby.
Section 4.12 Compliance with Laws; No Defaults.
(a) Bounce holds all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of its
businesses (the "Bounce Permits"), except for failures to hold such Bounce
Permits which would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect of Bounce. Bounce is in compliance with the terms of the
Bounce Permits, except where the failure so to comply would not reasonably be
expected to have a Material Adverse Effect of Bounce. The business of Bounce is
not being conducted in violation of any applicable law, ordinance, rule,
regulation, decree or order of any Governmental Entity, except for violations
which in the aggregate do not and would not reasonably be expected to have a
Material Adverse Effect of Bounce.
(b) Except as set forth in Section 4.12 of the BMSI Disclosure Schedule,
Bounce is not in default or violation (and no event has occurred which with
notice or the lapse of time or both would constitute a default or violation) of
any term, condition or provision of (i) any note, bond, mortgage, indenture,
license, contract, agreement or other instrument or obligation to which Bounce
is a party or by which it or any of their material amount of its properties or
assets is bound or (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to Bounce, which defaults or violations would, in the
aggregate, reasonable be expected to have a Material Adverse Effect of Bounce or
which would materially delay the consummation of the transactions contemplated
hereby.
Section 4.13 Taxes. Except as set forth in Section 4.13 of the BMSI
Disclosure Schedule, Bounce has duly filed all material federal, state, local
and foreign tax returns required to be filed by it, and Bounce has duly paid,
caused to be paid or made adequate provision for the payment of all Taxes
required to be paid in respect of the periods covered by such returns and has
made adequate provision for payment of all Taxes anticipated to be payable in
respect of all calendar periods since the periods covered by such returns.
Except as set forth in Section 4.13 of the BMSI Disclosure Schedule, none of the
federal income tax returns of Bounce have been examined or audited by the IRS.
All deficiencies and assessments asserted as a result of any such examinations
or other audits by federal, state, local or foreign taxing authorities have been
paid, fully settled or adequately provided for in the financial statements of
Bounce, and no issue or claim has been asserted for Taxes by any taxing
authority for any prior period, the adverse determination of which would result
in a deficiency which would have a Material Adverse Effect of Bounce, other than
those heretofore paid or provided for. Except as set forth in Section 4.13 of
the BMSI Disclosure Schedule, there are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any federal or
foreign income tax return of Bounce or its subsidiaries.
18
Section 4.14 Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of BMSI or Bounce who might be entitled to any fee or commission from
Bounce, RDI or any of their respective affiliates upon consummation of the
transactions contemplated by this Agreement.
Section 4.15 Employees. Bounce does not have any collective bargaining
arrangements or agreements covering any of its employees, except as set forth on
Section 4.15 of the BMSI Disclosure Schedule. Except as set forth on Section
4.15 of the BMSI Disclosure Schedule, Bounce does not have any employment
contract, agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement, or any other
similar contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by Bounce. No officer,
consultant or key employee of Bounce whose termination, either individually or
in the aggregate, would be reasonably likely to have a Material Adverse Effect
of Bounce, has terminated or, to the knowledge of BMSI, has any present
intention of terminating his or her employment or engagement with Bounce.
(b) Bounce does not have, or contribute to, any pension, profit-sharing,
option, other incentive plan, or any other type of Employee Benefit Plan (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), or have any obligation to or customary arrangement with
employees for bonuses, incentive compensation, vacations, severance pay, sick
pay, sick leave, insurance, service award, relocation, disability, tuition
refund, or other benefits, whether oral or written, except as set forth in
Section 4.15 of the BMSI Disclosure Schedule. No liability to the Pension
Benefit Guaranty Corporation has been incurred with respect to any Employee
Benefit Plan by Bounce which is or would be materially adverse to Bounce.
Section 4.16 Operation of Business. Except as set forth on Section 4.16 of
the BMSI Disclosure Schedule, to the knowledge of BMSI, Bounce owns or possesses
the rights to all patents, trademarks, domain names (whether or not registered)
and any patentable improvements or copyrightable derivative works thereof,
websites and intellectual property rights relating thereto, service marks, trade
names, copyrights, licenses and authorizations which are necessary for the
conduct of its business as now conducted without any conflict with the rights of
others.
Section 4.17 Environmental Compliance. Except as set forth in Section 4.17
of the BMSI Disclosure Schedule, Bounce has obtained all material approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws. To the BMSI's knowledge,
Bounce has all necessary governmental approvals required under all Environmental
Laws as necessary for Bounce's business. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect of Bounce, and
to the knowledge of BMSI, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way
affecting Bounce that violate or may violate any Environmental Law after the
Closing Date or that may give rise to any environmental liability, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based on or related to
the manufacture, processing, distribution, use, treatment, storage (including
without limitation underground storage tanks), disposal, transport or handling,
or the emission, discharge, release or threatened release of any hazardous
substance.
19
Section 4.18 Insurance. Section 4.18 of the BMSI Disclosure Schedule sets
forth a list of all insurance policies and fidelity bonds covering the assets,
business, equipment, properties, operations, employees, officers and directors
of Bounce. There is no claim by Bounce pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums payable under all such
policies and bonds have been paid and Bounce is otherwise in full compliance
with the terms and conditions of all such policies and bonds. Such policies of
insurance and bonds (or other policies and bonds providing substantially similar
insurance coverage) have been in effect since August 1, 2006 and remain in full
force and effect. Such policies of insurance and bonds are of the type and in
amounts customarily carried by Persons conducting businesses similar to those of
Bounce. BMSI does not know of any threatened termination of, or premium increase
with respect to, any of such policies or bonds.
Section 4.19 Books and Records; Internal Accounting Controls. The records
and documents of Bounce accurately reflect in all material respects the
information relating to the business of Bounce, the location of its assets, and
the nature of all transactions giving rise to the obligations or accounts
receivable of Bounce. Bounce maintains a system of internal accounting controls
sufficient, in the judgment of Bounce's board of directors, to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions are taken with respect to any differences.
Section 4.20 Transactions with Affiliates. Except as set forth on Section
4.20 of the BMSI Schedule, there are no loans, leases, agreements, contracts,
royalty agreements, management contracts or arrangements or other continuing
transactions between (a) Bounce or any of its respective customers or suppliers
on the one hand, and (b) on the other hand, any officer, employee, consultant or
director of Bounce, or any person owning at least 5% of the outstanding capital
stock of Bounce or any member of the immediate family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder.
Section 4.21 Questionable Payments. Neither Bounce, nor any director,
officer, agent, employee, or other person associated with, or acting on behalf
of, Bounce, nor any stockholder of Bounce has, directly or indirectly: used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment.
20
Section 4,22 Ownership of Shares. BMSI owns beneficially all of the Bounce
Shares. BMSI has full power and authority to transfer the Bounce Shares to RDI
under, pursuant to, and in accordance with, this Agreement, and such shares are
free and clear of any Liens and such shares are not subject to any claims as to
the ownership thereof, or any rights, powers or interest therein, by any third
party and are not subject to any preemptive or similar rights of stockholders.
Section 4.23 Investment Representations and Covenants.
(i) BMSI represents that it is acquiring the RDI Securities for its
own account and for investment only and not with a view to distribution or
resale thereof within the meaning of such phrase as defined under the Securities
Act. BMSI shall not dispose of any part or all of such RDI Securities in
violation of the provisions of the Securities Act and the rules and regulations
promulgated under the Securities Act by the Securities and Exchange Commission
and all applicable provisions of state securities laws and regulations.
(ii) The certificate or certificates representing the shares of RDI
Securities shall bear a legend in substantially the form set forth in Section
2.02 hereof.
(iii) BMSI acknowledges being informed that the RDI Securites shall
be unregistered, shall be "restricted securities" as defined in paragraph (a) of
Rule 144 under the Securities Act, and must be held indefinitely unless (a) they
are subsequently registered under the Securities Act, or (b) an exemption from
such registration is available.
(iv) BMSI acknowledges that it has been afforded access to all
material information which they have requested relevant to their decision to
acquire the RDI Securities and to ask questions of RDI's management and that,
except as set forth herein, neither RDI nor anyone acting on behalf of RDI has
made any representations or warranties to the BMSI which have induced,
persuaded, or stimulated the BMSI to acquire such RDI Securities.
(v) Either alone, or together with its investment advisor(s), BMSI
has the knowledge and experience in financial and business matters to be capable
of evaluating the merits and risks of the prospective investment in the RDI
Securities, and BMSI is and will be able to bear the economic risk of the
investment in such RDI Securities.
Section 4.24 Completeness of Disclosure. No representation or warranty by
BMSI in this Agreement contains or, and at the Closing Date will contain, an
untrue statement of material fact or omits or, at the Closing Date, will omit to
state a material fact required to be stated therein or necessary to make the
statements made not misleading.
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ARTICLE V
COVENANTS
Section 5.01 Covenants of RDI. RDI agrees that:
(a) Conduct of RDI. During the period from the date of this Agreement and
continuing until the Closing Date, RDI shall conduct its business in the
ordinary course consistent with past practices and to use its best efforts to
preserve intact its business organizations and relationships with third parties
and to keep available the services of its present officers and employees.
Without limiting the generality of the foregoing, from the date hereof until the
Closing Date, RDI will not:
(i) Adopt or propose any change in its certificate of incorporation
or bylaws;
(ii) Merge or consolidate with any other Person or acquire a
material amount of assets of any other Person;
(iii) Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the RDI Balance Sheet (or the notes thereto) or incurred
in the ordinary course of business consistent with past practice;
(iv) Except as expressly permitted by this Agreement, sell, lease,
license or otherwise dispose of any material assets or properties except
(A) pursuant to existing contracts or commitments and (B) in the ordinary
course of business consistent with past practice; or
(v) Agree or commit to do any of the foregoing.
RDI will not (i) take or agree or commit to take any action that would make any
representation and warranty of RDI inaccurate in any respect at, or as of any
time prior to, the Closing Date, (ii) omit or agree or commit to omit to take
any action necessary to prevent any such representation or warranty from being
inaccurate in any respect at any such time, or (iii) make any agreement or reach
any understanding not approved in writing by RDI as a condition for obtaining
any consent, authorization, approval, order, license, certificate, or permit
required for the consummation of the transactions contemplated by this
Agreement.
(b) Access to Information. Upon reasonable notice and subject to
restrictions contained in confidentiality agreements to which such party is
subject (from which such party shall use reasonable efforts to be released), RDI
shall afford to the officers, employees, accountants, counsel and other
representatives of BMSI, access, during normal business hours during the period
prior to the Closing, to all of RDI's properties, books, contracts, commitments
and records and, during such period, RDI shall furnish promptly to the other all
information concerning RDI's business, properties and personnel as BMSI may
reasonably request.
22
(c) Confidentiality. Prior to the Closing Date and after any termination
of this Agreement, RDI and its affiliates will hold, an will use best efforts to
cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning BMSI and Bounce furnished
to RDI or its affiliates in connection with the transaction contemplated by this
Agreement, except to the extent that such information can be shown to have been
(i) previously known on a nonconfidential basis by RDI, (ii) in the public
domain through no fault of RDI or (iii) later lawfully acquired by RDI from
sources other than BMSI or Bounce; provided that RDI may disclose such
information to its officers, directors, employees, accountants, counsel,
consultants, advisors and agents in connection with the transactions
contemplated by this Agreement and to its lenders in connection with obtaining
the financing for the transactions contemplated by this Agreement so long as
such Persons are informed by RDI of the confidential nature of such information
and are directed by RDI to treat such information confidentially. The obligation
of RDI and its affiliates to hold such information in confidence shall be
satisfied if they exercise the same care with respect to such information as
they would take to preserve the confidentiality of their own similar
information. If this Agreement is terminated, RDI and its affiliates will, and
will use best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or deliver to
BMSI, upon request, all documents and other materials, and all copies thereof,
obtained by RDI and its affiliates or on their behalf from BMSI or Bounce in
connection with this Agreement that are subject to such confidence.
(d) Additional Covenants of RDI.
(i) Board Composition. Effective at the Closing, the Board of Directors of
RDI shall take all required corporate action to cause the Board of Directors of
RDI to consist of Xxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxxx Xxxxxx and Xxxxxx Xxxxxxxx
(the "New RDI Board"). Within 30 days following the Closing, the Board of
Directors of RDI shall take all required corporate action to increase the size
of the Board of Directors to five members and to appoint an individual
designated by BMSI to fill the resulting vacancy.
(ii) Securities Compliance. RDI shall notify the Commission in accordance
with its rules and regulations, of the transactions contemplated by any of the
Transaction Documents and shall take all other necessary action and proceedings
as may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the RDI Securities to BMSI.
(iii) Registration and Listing. RDI shall cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, to
comply in all respects with its reporting and filing obligations under the
Exchange Act, to comply with all requirements related to any registration
statement filed pursuant to this Agreement, and to not take any action or file
any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. RDI will take all action
necessary to continue the listing or trading of its Common Stock on the OTC
Bulletin Board or other exchange or market on which the Common Stock is trading.
Subject to the terms of the Transaction Documents, RDI further covenants that it
will take such further action as BMSI may reasonably request, all to the extent
required from time to time to enable BMSI to sell the RDI Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act. Upon the request of
BMSI, RDI shall deliver to BMSI a written certification of a duly authorized
officer as to whether it has complied with the issuer requirements of Rule 144.
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(iv) Inspection Rights. Provided the same would not be in violation of
Regulation FD, RDI shall permit, during normal business hours and upon
reasonable request and reasonable notice, BMSI or any employees, agents or
representatives thereof, so long as BMSI shall beneficially own any Conversion
Shares or Warrant Shares, for purposes reasonably related to BMSI's interests as
a stockholder, to examine the publicly available, non-confidential records and
books of account of, and visit and inspect the properties, assets, operations
and business of RDI and any Subsidiary, and to discuss the publicly available,
non-confidential affairs, finances and accounts of RDI and any Subsidiary with
any of its officers, consultants, directors and key employees.
(vi) Compliance with Laws. RDI shall comply, and cause each of its
Subsidiaries to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which would be reasonably likely to have a Material Adverse
Effect of RDI and its Subsidiaries, taken as a whole.
(vii) Keeping of Records and Books of Account. RDI shall keep and cause
each of its Subsidiaries to keep adequate records and books of account, in which
complete entries will be made in accordance with generally accepted accounting
principles consistently applied, reflecting all financial transactions of RDI
and its Subsidiaries, and in which, for each fiscal year, all proper reserves
for depreciation, depletion, obsolescence, amortization, taxes, bad debts and
other purposes in connection with its business shall be made.
(viii) Reporting Requirements. If RDI ceases to file its periodic reports
with the Commission, or if the Commission ceases making these periodic reports
available via the Internet without charge, then RDI shall furnish the following
(or if RDI has ceased to file periodic reports, substantially equivalent
information) to BMSI so long as BMSI shall beneficially own RDI Securities:
(A) Quarterly Reports filed with the Commission on Form 10-Q as soon
as practical after the document is filed with the Commission, and in any
event within five (5) days after the document is filed with the
Commission;
(B) Annual Reports filed with the Commission on Form 10-K as soon as
practical after the document is filed with the Commission, and in any
event within five (5) days after the document is filed with the
Commission; and
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(C) Copies of all notices, information and proxy statements in
connection with any meetings, that are, in each case, provided to holders
of shares of Common Stock, contemporaneously with the delivery of such
notices or information to such holders of Common Stock.
(ix) Other Agreements. RDI shall not enter into any agreement in which the
terms of such agreement would restrict or impair the right or ability to perform
of RDI or any Subsidiary under any Transaction Document.
(x) Distributions. So long as any RDI Securities remain outstanding, RDI
agrees that it shall not (A) declare or pay any dividends or make any
distributions to any holder(s) of Common Stock or (B) purchase or otherwise
acquire for value, directly or indirectly, any Common Stock or other equity
security of RDI.
(xi) Pledge of Securities. RDI acknowledges that the RDI Securities may be
pledged by BMSI in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the RDI Securities. The pledge of RDI
Securities shall not be deemed to be a transfer, sale or assignment of the RDI
Securities hereunder, and BMSI shall not be required to provide RDI with any
notice thereof or otherwise make any delivery to RDI pursuant to this Agreement
or any other Transaction Document; provided that BMSI and its pledgee shall be
required to comply with the provisions of Section 2.02 hereof in order to effect
a sale, transfer or assignment of RDI Securities to such pledgee. At BMSI's
expense, RDI hereby agrees to execute and deliver such documentation as a
pledgee of the RDI Securities may reasonably request in connection with a pledge
of the RDI Securities to such pledgee by BMSI.
(xii) Amendments. RDI shall not amend or waive any provision of its
Articles of Incorporation or Bylaws in any way that would adversely affect
exercise rights, voting rights, conversion rights, prepayment rights or
redemption rights of any holder of the Notes.
(xiii) Distributions. So long as any RDI Securities remain outstanding,
RDI agrees that it shall not (A) declare or pay any dividends or make any
distributions to any holder(s) of Common Stock or (B) purchase or otherwise
acquire for value, directly or indirectly, any Common Stock or other equity
security of RDI.
(xiv) Reservation of Shares. So long as any of RDI Securities remain
outstanding, RDI shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than a number of
shares of Common Stock equal to the number of authorized shares of Common Stock
that are not currently issued or reserved for issuance as of the date hereof;
provided, however, upon RDI filing the Charter Amendment, RDI shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, free of preemptive rights and other similar contractual rights of
stockholders, a number of shares of Common Stock equal to one hundred fifty
percent (150%) of the number of shares of Common Stock as shall from time to
time be sufficient to provide for the issuance of the Conversion Shares and the
Warrant Shares.
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(xv) Transfer Agent Instructions. RDI shall issue irrevocable instructions
to its transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of BMSI or its respective nominee(s), for the Conversion
Shares and the Warrant Shares in such amounts as specified from time to time by
BMSI to RDI upon conversion of the Notes or exercise of the Warrants in the form
of Exhibit H attached hereto (the "Irrevocable Transfer Agent Instructions").
Prior to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 2.02 of this Agreement. RDI warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5.01(d)(xv) will be given by RDI to its transfer agent and that the
Conversion Shares and Warrant Shares shall otherwise be freely transferable on
the books and records of RDI as and to the extent provided in this Agreement and
the Registration Rights Agreement. Nothing in this Section 5.01(d)(xv) shall
affect in any way BMSI's obligation to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Conversion Shares and the
Warrant Shares. If BMSI provides RDI with an opinion of counsel, in a reasonably
acceptable form, to the effect that a public sale, assignment or transfer of the
Conversion Shares or Warrant Shares may be made without registration under the
Securities Act or BMSI provides RDI with reasonable assurances that the
Conversion Shares or Warrant Shares can be sold pursuant to Rule 144 without the
restriction as to the number of securities acquired as of a particular date that
can be immediately sold, RDI shall permit the transfer, and, in the case of the
Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by BMSI and without any restrictive legend. BMSI acknowledges that a
breach by it of its obligations under this Section 5.01(d)(xv) will cause
irreparable harm to BMSI by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, RDI acknowledges that the remedy at law for a
breach of its obligations under this Section 5.01(d)(xv) will be inadequate and
agrees, in the event of a breach or threatened breach by RDI of the provisions
of this Section 5.01(d)(xv), that RDI shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
(xvi) Disposition of Assets. So long as any RDI Securities remain
outstanding, neither RDI nor any Subsidiary shall sell, transfer or otherwise
dispose of any of its properties, assets and rights including, without
limitation, its software and intellectual property, to any person except for
sales of obsolete assets and sales to customers in the ordinary course of
business or with the prior written consent of the holders of a majority of the
principal amount of the Notes then outstanding.
(xvii) Acquisition of Assets. In the event RDI or any Subsidiary acquires
any assets or other properties, such assets or properties shall constitute a
part of the Collateral (as defined in the Security Agreement) and RDI shall take
all action necessary to perfect BMSI's security interest in such assets or
properties pursuant to the Security Agreement.
(xviii) Share Increase; Reverse Split. As promptly as practicable
following the Closing Date, RDI shall file a preliminary proxy statement on
Schedule 14A (the "Proxy Statement") with the Commission. RDI shall recommend
for approval of RDI's stockholders in the Proxy Statement of (A) an amendment to
the Certificate (the "Charter Amendment") to be filed with the Delaware
Secretary of State to effect an increase in the number of its authorized shares
of Common Stock to at least 575,000,000 (the "Share Increase") and (B) a
one-for-fifty (1-for-50) reverse stock split of the Common Stock (the "Reverse
Split"). RDI shall use its commercially reasonable efforts to obtain stockholder
approval to effect the Share Increase and the Reverse Split as promptly as
practicable following the Closing Date and shall effect the Share Increase and
the Reverse Split as promptly as practicable following the approval of its
stockholders.
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(xix) Subsequent Financings.
(A) For a period of one (1) year following the Closing Date (which
one-year period shall extend for each day that the Registration Statement
is not effective as required under the Registration Rights Agreement), RDI
covenants and agrees to promptly notify in writing (a "Rights Notice")
BMSI of the terms and conditions of any proposed offer or sale to, or
exchange with (or other type of distribution to) any third party (a
"Subsequent Financing"), of Common Stock or any securities convertible,
exercisable or exchangeable into Common Stock, including convertible debt
securities (collectively, the "Financing Securities"); provided, however,
prior to delivering to BMSI a Rights Notice, RDI shall first deliver to
BMSI a written notice of its intention to effect a Subsequent Financing
("Pre-Notice") within three (3) Trading Days of receiving an applicable
offer, which Pre-Notice shall ask BMSI if it wants to review the details
of such financing. Upon the request of BMSI, and only upon a request by
BMSI within three (3) Trading Days of receipt of a Pre-Notice, RDI shall
promptly, but no later than two (2) Trading Days after such request,
deliver a Rights Notice to BMSI. The Rights Notice shall describe, in
reasonable detail, the proposed Subsequent Financing, the names and
investment amounts of all investors participating in the Subsequent
Financing, the proposed closing date of the Subsequent Financing, which
shall be within twenty (20) calendar days from the date of the Rights
Notice, and all of the terms and conditions thereof and proposed
definitive documentation to be entered into in connection therewith. The
Rights Notice shall provide BMSI an option (the "Rights Option") during
the ten (10) Trading Days following delivery of the Rights Notice (the
"Option Period") to inform RDI whether BMSI will purchase up to its pro
rata portion of all or a portion of the securities being offered in such
Subsequent Financing on the same, absolute terms and conditions as
contemplated by such Subsequent Financing. For purposes of this Section,
all references to "pro rata" means, for any Purchaser electing to
participate in such Subsequent Financing, the percentage obtained by
dividing (x) the principal amount of the Note by (y) the sum of (1) the
principal amount of the Notes and (2) the total principal amount of all of
the series B notes purchased pursuant to the Note Purchase Agreement.
Delivery of any Rights Notice constitutes a representation and warranty by
RDI that there are no other material terms and conditions, arrangements,
agreements or otherwise except for those disclosed in the Rights Notice,
to provide additional compensation to any party participating in any
proposed Subsequent Financing, including, but not limited to, additional
compensation based on changes in the Purchase Price or any type of reset
or adjustment of a purchase or conversion price or to issue additional
securities at any time after the closing date of a Subsequent Financing.
If RDI does not receive notice of exercise of the Rights Option from BMSI
within the Option Period, RDI shall have the right to close the Subsequent
Financing on the scheduled closing date with a third party; provided that
all of the material terms and conditions of the closing are the same as
those provided to BMSI in the Rights Notice. If the closing of the
proposed Subsequent Financing does not occur on that date, any closing of
the contemplated Subsequent Financing or any other Subsequent Financing
shall be subject to all of the provisions of this Section 5.02(r),
including, without limitation, the delivery of a new Rights Notice. The
provisions of this Section 5.02(r) shall not apply to issuances of
securities in a Permitted Financing.
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(B) For purposes of this Agreement, a Permitted Financing (as
defined hereinafter) shall not be considered a Subsequent Financing. A
"Permitted Financing" shall mean (1) securities issued (other than for
cash) in connection with a merger, acquisition, or consolidation, (2)
securities issued pursuant to the conversion or exercise of convertible or
exercisable securities issued or outstanding on or prior to the date
hereof or issued pursuant to this Agreement and the Note, including the
Conversion Shares, (3) the Warrant Shares, (4) securities issued in
connection with bona fide strategic license agreements or other partnering
arrangements so long as such issuances are not for the purpose of raising
capital, (5) Common Stock issued or the issuance or grants of options to
purchase Common Stock pursuant to RDI's stock option plans and employee
stock purchase plans as they now exist on the date hereof, (6) Common
Stock issued in connection with consulting or advisory services not in
excess of 5,000,000 shares; and (7) the payment of any principal in shares
of Common Stock pursuant to the Notes.
(C) So long as any Note remains outstanding, if RDI enters into any
Subsequent Financing on terms more favorable than the terms governing the
Notes, then BMSI in its sole discretion may exchange the Notes, valued at
their stated value, for the securities issued or to be issued in the
Subsequent Financing. RDI covenants and agrees to promptly notify in
writing BMSI of the terms and conditions of any such proposed Subsequent
Financing.
(xx) D&O Insurance. So long as any RDI Securities remain outstanding, RDI
shall maintain its directors and officer's liability insurance policy coverage
at an amount equal to or in excess of $3,000,000.
(xxi) Performance of Other Obligations. RDI shall perform all obligations
required to be performed by it under the Note Purchase Agreement and the
Transaction Documents referred to therein.
(xxii) Cooperation to Satisfy BMSI Filing Requirements. So long as so long
as BMSI shall beneficially own any Conversion Shares or Warrant Shares, RDI will
use best efforts to provide BMSI with all financial and other information with
respect to RDI and its Subsidiaries that BMSI may reasonably request to permit
BMSI to satisfy, in a timely manner, any and all requirements applicable to it
under the Securities Act, the Exchange Act or other applicable law.
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Section 5.02 Covenants of BMSI. BMSI agrees that:
(a) Conduct of Bounce. During the period from the date of this Agreement
and continuing until the Closing Date, BMSI shall cause Bounce to conduct its
business in the ordinary course consistent with past practices and to use its
best efforts to preserve intact its business organizations and relationships
with third parties and to keep available the services of its present officers
and employees. Without limiting the generality of the foregoing, from the date
hereof until the Closing Date, BMSI will not permit Bounce to:
(i) Adopt or propose any change in its certificate of incorporation
or bylaws;
(ii) Merge or consolidate with any other Person or acquire a
material amount of assets of any other Person;
(iii) Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the Bounce Balance Sheet (or the notes thereto) or
incurred in the ordinary course of business consistent with past practice;
(iv) Except as expressly permitted by this Agreement, sell, lease,
license or otherwise dispose of any material assets or properties except
(A) pursuant to existing contracts or commitments and (B) in the ordinary
course of business consistent with past practice; or
(v) Agree or commit to do any of the foregoing.
BMSI will not, an BMSI will not permit Bounce to, (i) take or agree or commit to
take any action that would make any representation and warranty of BMSI
inaccurate in any respect at, or as of any time prior to, the Closing Date, (ii)
omit or agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such time
or (iii) make any agreement or reach any understanding not approved in writing
by RDI as a condition for obtaining any consent, authorization, approval, order,
license, certificate, or permit required for the consummation of the
transactions contemplated by this Agreement.
(b) Access to Information. Upon reasonable notice and subject to
restrictions contained in confidentiality agreements to which such party is
subject (from which such party shall use reasonable efforts to be released),
BMSI shall afford to the officers, employees, accountants, counsel and other
representatives of RDI, access, during normal business hours during the period
prior to the Closing, to all of Bounce's properties, books, contracts,
commitments and records and, during such period, BMSI shall furnish promptly to
the other all information concerning Bounce's business, properties and personnel
as RDI may reasonably request, in each case, to the extent necessary to permit
RDI to determine any matter relating to its rights and obligations hereunder or
to any period ending on or before the Closing Date.
(c) Confidentiality. Prior to the Closing Date and after any termination
of this Agreement, BMSI and its affiliates will hold, an will use best efforts
to cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning RDI furnished to BMSI or
its affiliates in connection with the transaction contemplated by this
Agreement, except to the extent that such information can be shown to have been
(i) previously known on a nonconfidential basis by BMSI, (ii) in the public
domain through no fault of BMSI or (iii) later lawfully acquired by BMSI from
sources other than RDI; provided that BMSI may disclose such information to its
officers, directors, employees, accountants, counsel, consultants, advisors and
agents in connection with the transactions contemplated by this Agreement and to
its lenders in connection with obtaining the financing for the transactions
contemplated by this Agreement so long as such Persons are informed by BMSI of
the confidential nature of such information and are directed by BMSI to treat
such information confidentially. The obligation of BMSI and its affiliates to
hold such information in confidence shall be satisfied if they exercise the same
care with respect to such information as they would take to preserve the
confidentiality of their own similar information. If this Agreement is
terminated, BMSI and its affiliates will, and will use best efforts to cause
their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to RDI, upon request,
all documents and other materials, and all copies thereof, obtained by BMSI and
its affiliates or on their behalf from RDI in connection with this Agreement
that are subject to such confidence.
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Section 6.03 Covenants of Both Parties. Each party hereto agrees that:
(a) Best Efforts. Subject to the terms and conditions of this Agreement,
each of the parties hereto agrees (i) to use its best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, and (ii) to execute
and deliver such other documents, certificates, agreements and other writings
and to take such other actions as may be necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement.
(b) Certain Filings. Each of the parties will cooperate with one another
(i) in determining whether any action by or in respect of, or filing with, any
Governmental Entity is require or any actions, consents, approvals or waivers
are required to be obtained from parties to any material contracts, in
connection with the transactions contemplated by this Agreement and (ii) in
taking such actions or making any such filings, furnishing information required
in connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
(c) Public Announcements. Before any party releases any information
concerning this Agreement or any of the other transactions contemplated hereby
or in connection herewith which is intended for or may result in public
dissemination thereof, it shall cooperate with the other parties, shall furnish
drafts of all documents or proposed oral statements to the other parties for
comment, and shall not release any such information without the written consent
of BMSI (in the case of release by RDI) or RDI (in the case of release by BMSI).
Nothing contained herein shall prevent a party from releasing any information if
required to do so by law.
30
(d) Notices. Each of the parties shall give prompt notice to the other
parties of: (a) any notice of, or other communication relating to, a default or
event which, with notice or the lapse of time or both, would become a default,
received by it or any of its subsidiaries subsequent to the date of this
Agreement and prior to the Closing, under any agreement, indenture or instrument
material to the financial condition, properties, businesses or results of
operations of it and its subsidiaries, taken as a whole, to which it or any of
its subsidiaries is a party or is subject; (b) any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement,
which consent, if required, would breach the representations contained in
Articles III or IV; and (c) any other material fact or occurrence or any pending
or threatened material occurrence of which it obtains knowledge and which (if
existing and known at the date of the execution of this Agreement) would have
been required to be set forth or disclosed in or pursuant to this Agreement,
which (if existing and known at any time prior to or at the Closing) would make
the performance by any party of a covenant contained in this Agreement
impossible or make such performance materially more difficult than in the
absence of such fact or occurrence, or which (if existing and known at the time
of the Closing) would cause a condition to any party's obligations under this
Agreement not to be fully satisfied.
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to Each Party's Obligation. The obligation of each
party to consummate the Closing is subject to the satisfaction of the following
conditions:
(a) All authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations or terminations of waiting
periods imposed by, any Governmental Entity, and all required third party
consents, shall have been filed, occurred or been obtained.
(b) No statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by
any court or governmental authority which prohibits the consummation of
the Closing and shall be in effect.
Section 6.02 Conditions to Obligation of RDI. The obligation of RDI to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a) The representations and warranties of BMSI set forth in this
Agreement shall be true and correct as of the date of this Agreement, and
shall also be true in all material respects (except for such changes as
are contemplated by the terms of this Agreement and such changes as would
be required to be made in the exhibits to this Agreement if such schedules
were to speak as of the Closing Date) on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date.
(b) BMSI and Bounce shall have performed in all material respects
all obligations required to be performed by them under this Agreement at
or prior to the Closing Date.
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(c) RDI shall have a received a certificate signed by the Chief
Executive Officer of BMSI confirming Section 6.02(a) and (b).
(d) RDI shall have received (i) resolutions duly adopted by the
Board of Directors of the BMSI approving the execution and delivery of
this Agreement and all other necessary or proper corporate action to
enable BMSI to comply with the terms of this Agreement, and (ii) all other
documents it may reasonably request relating to the existence of BMSI and
the authority of BMSI for this Agreement, all in form and substance
reasonable satisfactory to RDI.
Section 6.03 Conditions to Obligation of BMSI. The obligation of BMSI to
consummate the Closing is subject to the following further conditions:
(a) The representations and warranties of RDI set forth in this
Agreement shall be true and correct as of the date of this Agreement, and
shall also be true in all material respects (except for such changes as
are contemplated by the terms of this Agreement and such changes as would
be required to be made in the exhibits to this Agreement if such schedules
were to speak as of the Closing Date) on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date.
(b) RDI shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or
prior to the Closing Date.
(c) BMSI shall have a received a certificate signed by the Chief
Executive Officer of RDI confirming Section 6.03(a) and (b).
(d) BMSI shall have received (i) resolutions duly adopted by the
Board of Directors of RDI approving the execution and delivery of this
Agreement and all other necessary or proper corporate action to enable RDI
to comply with the terms of this Agreement, and (ii) all other documents
it may reasonably request relating to the existence of RDI and the
authority of RDI for this Agreement, all in form and substance reasonable
satisfactory to BMSI.
(e) RDI shall have made all filings, and taken all actions,
necessary to comply with all reporting requirements under federal and
state securities laws (including without limitation, applicable "blue-sky"
laws with regard to the issuance of RDI Securities as contemplated by this
Agreement) other than the filing of Form D up to 15 days following the
Closing. Without limiting the generality of the foregoing, any prescribed
periods within which a "blue sky" or securities law administrator may
disallow RDI's notice of reliance on an exemption from such state's
requirements, shall have elapsed at or prior to the Closing Date.
(f) (i) The Certificate of Designation, Preferences and Rights of
RDI's Series B Convertible Preferred Stock shall have been amended and
restated in the form of Exhibit I-1 hereto and (ii) RDI and the holders of
its Series B Convertible Preferred Stock shall have entered into Amendment
No.1 to Securities Purchase Agreement in the form of Exhibit I-2 hereto.
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ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.01 Survival. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing until the second anniversary of the Closing Date;
provided that the covenants of RDI set forth in Section 5.02(d) shall survive
for such longer period of time as may be stated therein. Notwithstanding the
preceding sentence, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under Section 7.02 shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the inaccuracy or breach thereof giving rise to such right to
indemnity shall have been given to the party against whom such indemnity may be
sought prior to such time.
Section 7.02 Indemnification.
(a) RDI hereby indemnifies BMSI against and agrees to hold them harmless
from any and all damage, loss, liability and expense (including without
limitation reasonable expenses of investigation and reasonable attorneys' fees
and expenses in connection with any action, suit or proceeding) ("Damages")
incurred or suffered by BMSI arising out of any misrepresentation or breach of
warranty, covenant or agreement made or to be performed by RDI pursuant to this
Agreement.
(b) BMSI hereby indemnifies RDI against and agrees to hold it harmless
from any and all Damages incurred or suffered by RDI arising out of any
misrepresentation or breach of warranty, covenant or agreement made or to be
performed by BMSI pursuant to this Agreement.
Section 7.03 Procedures; Exclusivity
(a) The party seeking indemnification under Section 7.02 (the "Indemnified
Party") agrees to give prompt notice to the party against whom indemnity is
sought (the "Indemnifying Party") of the assertion of any claim, or the
commencement of any suit, action or proceeding in respect of which indemnity may
be sought under such Section. The Indemnifying Party may at the request of the
Indemnified Party participate in and control the defense of any such suit,
action, or proceeding at its own expense. The Indemnifying Party shall not be
liable under Section 7.02 for any settlement effected without its consent of any
claim, litigation or proceeding in respect of which indemnity may be sought
hereunder.
(b) After the Closing, Section 7.02 will provide the exclusive remedy for
any misrepresentation, breach or warranty, covenant or other agreement (other
than those contained in the Series C Preferred Stock Certificate of
Designations, the other Transaction Documents or the Note Purchase Agreement (or
the Transaction Documents referred to therein)) or other claim arising out of
this Agreement or the transactions contemplated hereby.
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ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.01 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual consent of BMSI and RDI;
(b) by either BMSI or RDI if the Closing shall not have been
consummated before November 30, 2006 (unless the failure to consummate the
Closing by such date shall be due to the action or failure to act of the
party seeking to terminate this Agreement); or
(c) by either BMSI or RDI if (i) the conditions to such party's
obligations shall have become impossible to satisfy or (ii) any permanent
injunction or other order of a court or other competent authority
preventing the consummation of the Closing shall have become final and
non-appealable.
Section 8.02 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.01 hereof, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party hereto or its affiliates, directors, officers or stockholders,
other than the provisions of Sections 5.01(c) and 5.02(c). Nothing contained in
this Section 8.02 shall relieve any party from liability for any breach of this
Agreement.
Section 8.03 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 8.04 Extension; Waiver. At any time prior to the Closing Date, the
parties hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Entire Agreement; Assignment. This Agreement and the other
Transaction Documents (a) constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof (other than any confidentiality
agreement between the parties; any provisions of such agreements which are
inconsistent with the transactions contemplated by this Agreement being waived
hereby) and (b) shall not be assigned by operation of law or otherwise (except
as provided in the Other Transaction Documents).
34
Section 9.02 Expenses. Whether or not the transactions contemplated in
this Agreement are consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, will be paid by
the party incurring such expense or as otherwise agreed to herein; provided that
RDI will pay to BMSI at Closing the amount of $20,000 in respect of
documentation and due diligence expenses incurred by BMSI.
Section 9.03 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested or by the most nearly comparable method
if mailed from or to a location outside of the United States or by Federal
Express, Express Mail, or similar overnight delivery or courier service or
delivered (in person or by telecopy, telex, or similar telecommunications
equipment) against receipt to the party to which it is to be given at the
address of such party set forth in the signature pages to this Agreement (or to
such other address as the party shall have furnished in writing in accordance
with the provisions of this Section 9.03. Any notice or other communication
given by certified mail (or by such comparable method) shall be deemed given at
the time of certification thereof (or comparable act), except for a notice
changing a party's address which will be deemed given at the time of receipt
thereof. Any notice given by other means permitted by this Section 9.03 shall be
deemed given at the time of receipt thereof.
Section 9.04 Parties in Interest. This Agreement will inure to the benefit
of and be binding upon the parties hereto and the respective successors and
assigns. Nothing in this Agreement is intended to confer, expressly or by
implication, upon any other person any rights or remedies under or by reason of
this Agreement.
Section 9.05 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all together will
constitute one document. The delivery by facsimile of an executed counterpart of
this Agreement will be deemed to be an original and will have the full force and
effect of an original executed copy.
Section 9.06 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 9.07 Headings. The Article and Section headings are provided
herein for convenience of reference only and do not constitute a part of this
Agreement and will not be deemed to limit or otherwise affect any of the
provisions hereof.
35
Section 9.08 Governing Law; Jurisdiction. This Agreement will be deemed to
be made in and in all respects will be interpreted, construed and governed by
and in accordance with the law of the State of Delaware without regard to any
applicable principles of conflicts of law. This Agreement shall not be
interpreted or construed with any presumption against the party causing this
Agreement to be drafted. RDI and BMSI agree that venue for any dispute arising
under this Agreement will lie exclusively in the state or federal courts located
in New York County, New York, and the parties irrevocably waive any right to
raise forum non conveniens or any other argument that New York is not the proper
venue. RDI and BMSI irrevocably consent to personal jurisdiction in the state
and federal courts of the state of New York. RDI and BMSI consent to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this Section 9.08 shall affect or limit any right
to serve process in any other manner permitted by law. RDI and BMSI hereby agree
that the prevailing party in any suit, action or proceeding arising out of or
relating to this Agreement or the other Transaction Documents, shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing party. The
parties hereby waive all rights to a trial by jury.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in a manner legally binding upon them as of the date first above
written.
REMOTE DYNAMICS, INC.
By_________________________
Name:
Title:
Address:
Attest:
________________
Name:
Title: Secretary
BOUNCE MOBILE SYSTEMS, INC.
By____________________________
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
Address: 00000 Xxxxxx Xxxxx Xxxx
Xxx Xxxx Xxxxxxxxxx, XX 00000
Attest:
________________
Name:
Title: Secretary
37
EXHIBIT H
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
REMOTE DYNAMICS, INC.
as of November __, 2006
[Name and address of Transfer Agent]
Attn: _____________
Ladies and Gentlemen:
Reference is made to that certain Share Exchange Agreement (the "Share
Exchange Agreement"), dated as of November 30, 2006, by and among Remote
Dynamics, Inc., a Delaware corporation (the "Company"), and Bounce Mobile
Systems, Inc. ("BMSI") pursuant to which the Company is issuing to BMSI the
Notes and Warrants (each, as defined in the Share Exchange Agreement). This
letter shall serve as our irrevocable authorization and direction to you
(provided that you are the transfer agent of the Company at such time) to issue
shares of the Company's common stock, par value $.01 per share, upon conversion
of the Notes (the "Conversion Shares") and exercise of the Warrants (the
"Warrant Shares") to or upon the order of BMSI from time to time upon (i)
surrender to you of a properly completed and duly executed Conversion Notice or
Exercise Notice, as the case may be, in the form attached hereto as Exhibit I
and Exhibit II, respectively, (ii) in the case of the conversion of Notes, a
copy of the Note (with the original delivered to the Company) representing the
Notes being converted or, in the case of Warrants being exercised, a copy of the
Warrants (with the original Warrants delivered to the Company) being exercised
(or, in each case, an indemnification undertaking with respect to such Notes or
the Warrants in the case of their loss, theft or destruction), and (iii)
delivery of a treasury order or other appropriate order duly executed by a duly
authorized officer of the Company. So long as you have previously received (x)
written confirmation from counsel to the Company that a registration statement
covering resales of the Conversion Shares or Warrant Shares, as applicable, has
been declared effective by the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act"), and no subsequent
notice by the Company or its counsel of the suspension or termination of its
effectiveness and (y) a copy of such registration statement, and if BMSI
represents in writing that the prospectus delivery requirements have been or
will be met, the Conversion Shares or the Warrant Shares, as the case may be,
were sold pursuant to the Registration Statement, then certificates representing
the Conversion Shares and the Warrant Shares, as the case may be, shall not bear
any legend restricting transfer of the Conversion Shares and the Warrant Shares,
as the case may be, thereby and should not be subject to any stop-transfer
restriction. Provided, however, that if you have not previously received (i)
written confirmation from counsel to the Company that a registration statement
covering resales of the Conversion Shares or Warrant Shares, as applicable, has
been declared effective by the SEC under the 1933 Act, and (ii) a copy of such
registration statement, then the certificates for the Conversion Shares and the
Warrant Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS, OR REMOTE DYNAMICS, INC. SHALL HAVE RECEIVED AN OPINION
OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED."
38
and, provided further, that the Company may from time to time notify you to
place stop-transfer restrictions on the certificates for the Conversion Shares
and the Warrant Shares in the event a registration statement covering the
Conversion Shares and the Warrant Shares is subject to amendment for events then
current.
A form of written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares and the Warrant
Shares has been declared effective by the SEC under the 1933 Act is attached
hereto as Exhibit III.
Please be advised that BMSI is relying upon this letter as an inducement
to enter into the Share Exchange Agreement and, accordingly, BMSI is a third
party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at ___________.
Very truly yours,
REMOTE DYNAMICS, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By:_____________________
Name:___________________
Title:__________________
Date:___________________
39
