SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
among
THE TRACKER CORPORATION OF AMERICA
(the "COMPANY")
and
The Persons Listed On The Signature Pages Hereto
(the "PURCHASERS")
Dated as of August 18, 1999
This Series 1 Bridge Notes Purchase And Security Agreement provides for the
offer, sale, issuance, and delivery of up to $3,000,000 in principal amount of
Secured, Convertible, Series 1 Bridge Financing Notes with attached Repricing
Warrants and accompanying Purchaser Warrants and Callable Warrants.
TABLE OF CONTENTS
SECTION 1. Bridge Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Authorization, Issuance, and Sale of Notes.. . . . . . . . . . . . . 2
Section 1.2 Authorization and Issuance of Warrants and Callable Warrants.. . . . 2
Section 1.3 Form of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2. SECURITY AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1 Grant of Security Interest.. . . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Remedies Upon Default. . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Financing Statements.. . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 Notice.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.5 Appointment of Purchaser Representative. . . . . . . . . . . . . . . 5
Section 2.6 Assurances.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.7 Default and Acceleration Procedures. . . . . . . . . . . . . . . . . 6
Section 2.8 Standard of Care of the Representative.. . . . . . . . . . . . . . . 7
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.. . . . . . . . . . . . . 8
Section 3.1 Organization and Qualification.. . . . . . . . . . . . . . . . . . . 8
Section 3.2 Authorization, Enforcement, Compliance with Other Instruments. . . . 9
Section 3.3 Capitalization.. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.4 Issuance of Securities.. . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.5 No Conflicts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.6 SEC Documents; Financial Statements.. . . . . . . . . . . . . . . . 11
Section 3.7 Absence of Certain Changes.. . . . . . . . . . . . . . . . . . . . . 11
Section 3.8 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.9 Purchase of Securities.. . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.10 No Undisclosed Events, Liabilities, Developments, or Circumstances. 12
Section 3.11 No General Solicitation.. . . . . . . . . . . . . . . . . . . . . . 12
Section 3.12 No Integrated Offering. . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.13 Employee Relations. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.14 Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . 12
Section 3.15 Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.16 Title.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.17 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.18 Regulatory Permits. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.19 Internal Accounting Controls. . . . . . . . . . . . . . . . . . . . 13
Section 3.20 No Materially Adverse Contracts, Etc. . . . . . . . . . . . . . . . 13
Section 3.21 Tax Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.22 Certain Transactions. . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.23 Dilutive Effect.. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.24 Fees and Rights of First Refusal. . . . . . . . . . . . . . . . . . 14
Section 3.25 Foreign Corrupt Practices Act.. . . . . . . . . . . . . . . . . . . 14
Section 3.26 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4. REPRESENTATION AND WARRANTIES OF PURCHASERs. . . . . . . . . . . . . . 15
Section 4.1 Investment Purpose.. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.2 Accredited Investor Status.. . . . . . . . . . . . . . . . . . . . . 15
Section 4.3 Reliance on Exemptions.. . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.4 Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.5 No Governmental Review.. . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.6 Transfer or Resale.. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.7 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.8 Authorization Enforcement. . . . . . . . . . . . . . . . . . . . . . 16
Section 4.9 Residence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.10 No Scheme to Evade Registration.. . . . . . . . . . . . . . . . . . 17
Section 4.11 Covenant Not to Trade.. . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5. CONDITIONS OF INITIAL CLOSING. . . . . . . . . . . . . . . . . . . . . 18
Section 5.1 Transaction Agreements.. . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.2 Opinion of Counsel.. . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.3 Representations and Warranties; No Default.. . . . . . . . . . . . . 18
Section 5.4 Purchase and Loan Permitted by Applicable Laws.. . . . . . . . . . . 18
Section 5.5 No Adverse Litigation. . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.6 Approvals and Consents.. . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.7 No Material Adverse Change.. . . . . . . . . . . . . . . . . . . . . 18
Section 5.8 Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.9 Secretary Certificate. . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.10 Transfer Agent Instructions.. . . . . . . . . . . . . . . . . . . . 19
SECTION 6. CONDITIONS TO SUBSEQUENT CLOSINGS. . . . . . . . . . . . . . . . . . . 19
Section 6.1 Representations and Warranties; No Default.. . . . . . . . . . . . . 19
Section 6.2 No Suspensions.. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.3 Opinion of Counsel.. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.4 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.5 Shareholder Approval.. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.6 No Material Adverse Change.. . . . . . . . . . . . . . . . . . . . . 20
SECTION 7. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.1 Financial Information. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.2 Form D.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.3 Reporting Status.. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.4 Inspection of Property.. . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.5 Maintenance of Properties; Insurance.. . . . . . . . . . . . . . . . 21
Section 7.6 Maintenance of Security Interest.. . . . . . . . . . . . . . . . . . 21
Section 7.7 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.8 Authorized Shares of Common Stock, Reservation of Shares.. . . . . . 22
Section 7.9 Corporate Existence, Etc.. . . . . . . . . . . . . . . . . . . . . . 22
Section 7.10 Transfer Agents.. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.11 Shareholder Approval; Proxy.. . . . . . . . . . . . . . . . . . . . 22
Section 7.12 Transfer Agent Instructions.. . . . . . . . . . . . . . . . . . . . 22
Section 7.13 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.14 Compliance with Laws, Etc.. . . . . . . . . . . . . . . . . . . . . 23
Section 7.15 Use of Proceeds.. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.16 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.17 Listings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.18 Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.2 Restrictions on Debt.. . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.3 Restrictions on Dividends. . . . . . . . . . . . . . . . . . . . . . 25
Section 8.4 Restrictions on Transactions with Affiliates.. . . . . . . . . . . . 25
Section 8.5 Restrictions on Investments. . . . . . . . . . . . . . . . . . . . . 26
Section 8.6 Restrictions on Sale and Lease-Back Transactions.. . . . . . . . . . 26
Section 8.7 Restrictions on Sales of Assets. . . . . . . . . . . . . . . . . . . 26
Section 8.8 Restrictions on Subsidiaries.. . . . . . . . . . . . . . . . . . . . 26
Section 8.9 Change in Business; Operations.. . . . . . . . . . . . . . . . . . . 27
Section 8.10 Exceptions With Consent of Purchasers.. . . . . . . . . . . . . . . 27
SECTION 9. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.1 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.2 Headings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.3 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.4 Entire Agreement. Amendments.. . . . . . . . . . . . . . . . . . . . 27
Section 9.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.6 Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.7 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.8 No Third Party Beneficiaries.. . . . . . . . . . . . . . . . . . . . 28
Section 9.9 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.10 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.11 No Strict Construction. . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.12 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
TABLE OF SCHEDULES AND EXHIBITS
Schedule 1 Disclosure Schedule
Exhibit A. Form of Series 1 Bridge Notes (with form of Repricing
Warrant attached as Attachment 1)
Exhibit B. Form of Purchaser Warrant
Exhibit C. Form of Callable Warrant
Exhibit D. Form of Registration Rights Agreement
Exhibit E. Form of Escrow Agreement
Exhibit F. Form of Opinion of Company Counsel to Purchasers
Exhibit G. Form of Irrevocable Transfer Agent Instructions
Exhibit H. List of Collateral
Exhibit II Copies of Financing Statements Filed in Ontario
CROSS-REFERENCE TO DEFINED TERMS
Term Page where defined
----------------------------- ------------------
1933 Act. . . . . . . . . . . 1
1934 Act. . . . . . . . . . . 11
Additional Closing. . . . . . 3
Additional Closing Date . . . 3
Agreement . . . . . . . . . . 1
Bridge Notes. . . . . . . . . 1
Bylaws. . . . . . . . . . . . 10
Callable. . . . . . . . . . . 1
Callable Warrant Shares . . . 1
Change in Business. . . . . . 27
Charter . . . . . . . . . . . 10
Closing . . . . . . . . . . . 3
Closing Date. . . . . . . . . 3
Collateral. . . . . . . . . . 4
Common Stock. . . . . . . . . 1
Company . . . . . . . . . . . 1
Compliance Certificate. . . . 4
Consents. . . . . . . . . . . 18
Conversion Shares . . . . . . 1
Debt. . . . . . . . . . . . . 24
Disclosure Schedule . . . . . 8
Environmental Laws. . . . . . 13
Escrow Agent. . . . . . . . . 2
Escrow Agreement. . . . . . . 3
Excess Cash . . . . . . . . . 26
Financial Statements. . . . . 11
First Closing . . . . . . . . 2
First Closing Date. . . . . . 2
First Closing Pledged Shares. 3
Indemnified Liabilities . . . 24
Indemnitees . . . . . . . . . 24
Minimum Amount. . . . . . . . 2
NASD. . . . . . . . . . . . . 22
Obligations . . . . . . . . . 4
Parent Guaranty . . . . . . . 3
Pledged . . . . . . . . . . . 4
Preferred Stock . . . . . . . 9
Purchase Price. . . . . . . . 2
Purchased Bridge Notes. . . . 2
Purchaser . . . . . . . . . . 1
Registration Period . . . . . 21
Registration Rights Agreement 1
Regulation D. . . . . . . . . 1
Repricing Shares. . . . . . . 1
Repricing Warrant . . . . . . 1
Rule 144. . . . . . . . . . . 16
SEC Documents . . . . . . . . 11
Secretary Certificate . . . . 4
Securities. . . . . . . . . . 9
Transaction Agreements. . . . 9
Transfer Agent Instructions . 4
Warrant Shares. . . . . . . . 1
Warrants. . . . . . . . . . . 1
SERIES 1 BRIDGE NOTES PURCHASE AND SECURITY AGREEMENT
THIS SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT (the "AGREEMENT") is
made and entered into as of this 18th day of August, 1999, among THE TRACKER
CORPORATION OF AMERICA, a Delaware corporation (the "COMPANY") and the persons
listed on the Purchaser signature pages attached hereto (each of whom is
individually referred to as a "PURCHASER" and all of whom collectively are
referred to as the "PURCHASERS").
BACKGROUND
The Company has authorized the issuance, sale, and delivery of up to $3,000,000
in original principal amount of the Company's Series 1 Secured Convertible
Bridge Notes, in substantially the form attached hereto as EXHIBIT A (the
"BRIDGE NOTES"). The Bridge Notes are convertible into shares of the Company's
common stock, par value $.001 (the "COMMON STOCK"). The Common Stock issuable
upon conversion of the Bridge Notes is hereinafter referred to as the
"CONVERSION SHARES". The Bridge Notes have attached repricing rights evidenced
by a warrant in substantially the form of ATTACHMENT 1 to the Bridge Notes (the
"REPRICING WARRANT"), exercisable under certain circumstances for additional
shares of Common Stock (the "REPRICING SHARES") at the exercise price of $.001.
In connection with the issuance of the Bridge Notes, the Company has authorized
the issuance of Purchase Warrants, in substantially the form attached hereto as
EXHIBIT B (the "WARRANTS") and Callable Warrants in substantially the form
attached hereto as EXHIBIT C (the "CALLABLE WARRANTS"), each giving a Purchaser
the right to purchase Common Stock. Each Purchaser will be issued a Warrant at
that Closing exercisable for 20,000 shares of Common Stock for each $100,000 in
principal amount of Bridge Notes purchased, and a Callable Warrant exercisable
for $1,000 worth of Common Stock for each $1,000 in principal amount of Bridge
Notes purchased by such Purchaser. The shares of Common Stock issuable upon
exercise of the Warrants are hereinafter referred to as the "WARRANT SHARES,"
and the shares of Common Stock issuable upon exercise of the Callable Warrants
are hereinafter referred to as the "CALLABLE WARRANT SHARES." The proceeds of
the Bridge Notes will be used to provide the Company with operating capital,
repayment of certain limited existing indebtedness of the Company, and capital
expenditures. The Bridge Notes are generally secured by a pledge of the assets
of the Company and of its parent, The Global Tracker Corporation as part of its
guaranty of the Company's Obligations hereunder. The Bridge Notes are also
secured by certain shares of the Company's Common Stock and certain shares and
option rights exercisable for shares of the Company's Common Stock owned or held
by certain Company officers pledged as part of their limited guaranty of the
Company's Obligations hereunder, having a value of approximately 200% of the
principal amount of the Bridge Notes at any time outstanding. Purchasers wish
to purchase, upon the terms and conditions stated in this Agreement, up to
$3,000,000 in principal amount of the Bridge Notes, with each Purchaser
purchasing Bridge Notes in the principal amount set forth on such Purchaser's
signature page affixed to this Agreement. Contemporaneously with the execution
and delivery of this Agreement, the parties hereto are executing and delivering
a Registration Rights Agreement in substantially the form attached hereto as
EXHIBIT D (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company
has agreed to provide certain registration rights in respect of the Conversion
Shares, the Warrant Shares, the Callable Warrant Shares, and the Repricing
Shares under the Securities Act of 1933 ("1933 ACT") and the rules and
regulations promulgated thereunder, and applicable state securities laws. The
Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemption from securities registration pursuant to Section
4(2) and Regulation D ("REGULATION D").
AGREEMENT
For and in consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and each Purchaser hereby agree as
follows:
SECTION 1. BRIDGE NOTES.
SECTION 1.1 AUTHORIZATION, ISSUANCE, AND SALE OF NOTES.
The Company has authorized the sale and issuance, in accordance with the terms
of this Agreement, of up to $3,000,000 in principal amount of its Bridge Notes
at one or more closings. The Company agrees to issue and sell to each Purchaser
and each Purchaser agrees to purchase from the Company, at a Closing, a Bridge
Note in the principal amount (the "PURCHASED BRIDGE NOTES") set forth adjacent
to the caption "PURCHASED BRIDGE NOTES" on the signature page to this Agreement
of each Purchaser hereto at a purchase price (the "PURCHASE PRICE") of 100% of
the principal amount of Bridge Notes purchased.
SECTION 1.2 AUTHORIZATION AND ISSUANCE OF WARRANTS AND CALLABLE WARRANTS.
The Company has authorized the issuance and delivery of Warrants exercisable for
up to 600,000 shares of Common Stock in connection with the issuance, sale, and
delivery of the Bridge Notes. The Company agrees to issue and deliver to each
Purchaser a Warrant exercisable for 20,000 shares of Common Stock for each
$100,000 in principal amount of the Bridge Notes purchased by such Purchaser,
PROVIDED HOWEVER, that in the event that any Bridge Note issued hereunder is
redeemed by the Company for cash and not converted into Common Stock, then in
such event such Purchaser's Warrant shall be exercisable for 25,000 shares of
Common Stock for each $100,000 in principal amount of the Bridge Notes purchased
by such Purchaser. The Company has authorized the issuance and delivery of
Callable Warrants exercisable for up to $3,000,000 worth of shares of Common
Stock in connection with the issuance, sale, and delivery of the Bridge Notes.
The Company agrees to issue and deliver to each Purchaser a Callable Warrant
exercisable for up to $100,000 worth of shares of Common Stock for each $100,000
in principal amount of the Bridge Notes purchased by such Purchaser.
SECTION 1.3 FORM OF PAYMENT.
On or before the Closing Date, each Purchaser shall pay the Purchase Price for
the Purchased Bridge Notes to be issued and sold to such Purchaser at the
Closing, by wire transfer of immediately available funds to:
Bank: SunTrust Bank, Atlanta
Center: 008
Account No.: 9088000008
ABA Routing No.: 000000000
Attn: Xxxxxxx Xxxxxxx
Re: The Tracker Corporation of America-Escrow Account
SECTION 1.4 CLOSING.
All closings of the purchase and sale of the Purchased Bridge Notes shall take
place at the offices of Xxxxxxx Law Group LLC, 0000 Xxxxx Xxxx, XX, Xxxxx 000,
Xxxxxxx, Xxxxxxx 00000, within five (5) business days following the date that
$1,000,000 (the "MINIMUM AMOUNT") is held by SunTrust Bank, Atlanta (the "ESCROW
AGENT"), subject to notification of satisfaction (or waiver) of the conditions
to the Closing set forth in Section 5 below (such closing being called the
"FIRST CLOSING" and such date and time being called the "FIRST CLOSING DATE").
Following the First Closing, the Company anticipates it will continue to offer
the Bridge Notes until the offering of the Bridge Notes is terminated or all
$3,000,000 in principal amount is purchased. From time to time, one or more
additional closings may occur at such time and date as is mutually agreeable
between the Purchasers purchasing Bridge Notes at such closing and the Company
(each such closing being called an "ADDITIONAL CLOSING" and such date and time
being called an "ADDITIONAL CLOSING DATE," and all of such closings are
hereinafter referred to individually as a "CLOSING" and collectively as the
"CLOSINGS," and each date on which a Closing shall occur is hereinafter referred
to as a "CLOSING DATE" and collectively as the "CLOSING DATES"). Each Closing
is expected to take place by exchange of faxed signature pages with originals to
follow by overnight delivery.
SECTION 1.5 DELIVERIES AT CLOSING.
At each Closing the Company shall deliver to the Purchasers:
(a) the original of this Agreement;
(b) Bridge Notes in definitive form with attached Repricing Warrants,
registered in the name of each Purchaser, or the designee of such Purchaser,
representing the Purchased Bridge Notes purchased by such Purchaser;
(c) Warrants in definitive form, registered in the name of each Purchaser,
or the designee of such Purchaser;
(d) Callable Warrants in definitive form, registered in the name of each
Purchaser, or the designee of such Purchaser;
(e) a copy of the Registration Rights Agreement;
(f) a copy of the Escrow Agreement in substantially the form of EXHIBIT E
hereto (the "ESCROW AGREEMENT");
(g) a Guaranty Agreement executed by each of the Company and its parent, The
Global Tracker Corporation, a Canadian corporation, as guarantor thereunder (the
"PARENT GUARANTY");
(h) a Security Agreement executed by The Global Tracker Corporation, which
is giving a security interest in all its assets as additional security for the
Bridge Notes issued hereunder;
(i) a Guaranty Agreement executed by the Company and Xxx X. Xxxxxxxx as
guarantor thereunder and an accompanying Stock Pledge Agreement executed by Xxx
X. Xxxxxxxx as pledgor of certain shares or rights to acquire shares of Common
Stock of the Company for a particular Closing;
(j) a Guaranty Agreement executed by the Company and Xxxxx X. Xxxxx as
guarantor thereunder and an accompanying Stock Pledge Agreement executed by
Xxxxx X. Xxxxx as pledgor of certain shares or rights to acquire shares of
Common Stock of the Company (the shares and option rights pledged by each of
Xxxxxxxx and Xxxxx are hereinafter referred to as the "FIRST CLOSING PLEDGED
SHARES") for a particular Closing, along with share certificates representing
the Pledged Shares;
(k) a copy of the opinion of counsel to the Company, in substantially the
form of EXHIBIT F hereto;
(l) a copy of the Irrevocable Transfer Agent Instructions, in substantially
the form of EXHIBIT G hereto, (the "TRANSFER AGENT INSTRUCTIONS");
(m) the Compliance Certificate of the Company (the "COMPLIANCE
CERTIFICATE"); and
(n) the Secretary Certificate of the Company (the "SECRETARY CERTIFICATE").
SECTION 2. SECURITY AGREEMENT.
The provisions of this Section 2 shall remain in effect so long as any of the
Bridge Notes shall remain outstanding.
SECTION 2.1 GRANT OF SECURITY INTEREST.
In order to secure the obligations of the Company due to the Purchasers (such
obligations are sometimes hereinafter referred to as the "OBLIGATIONS") under
the Bridge Notes issued on the First Closing Date, in addition to the general
credit of the Company and the First Closing Pledged Shares being pledged and
delivered at the First Closing, the Company hereby grants to Purchasers,
effective at the First Closing a continuing first priority security interest in
and a general lien upon:
(a) all the assets of the Company, as listed and described on EXHIBIT H
hereto (the "PLEDGED ASSETS"); and
(b) all proceeds, as such term is defined in Section 9-306(1) of the UCC
and, in any event, shall include, without limitation, (i) any and all proceeds
of any insurance, indemnity, warranty, or guaranty payable to the Company from
time to time with respect to any of the Pledged Assets, (ii) any and all
payments (in any form whatsoever) made or due and payable to the Company from
time to time in connection with any requisitions, confiscation, condemnation,
seizure, or forfeiture of all or any part of the Pledged Assets by any
governmental authority (or any person acting under color of governmental
authority), and (iii) any and all other amounts from time to time paid or
payable under or in connection with any of the Pledged Assets (collectively, the
"COLLATERAL").
SECTION 2.2 REMEDIES UPON DEFAULT.
Upon the occurrence or existence of an Event of Default as defined in Section 10
of the Bridge Notes issued on the First Closing Date, each such Purchaser of
such Bridge Notes subject to the provisions of the Article 2 shall have the
right to pursue all available remedies at law or in equity, including without
limitation:
(a) all of the rights and remedies available to a secured party under the
Canadian version of the Uniform Commercial Code as adopted in the Province of
Ontario, Canada, and any other applicable law, all of which shall be cumulative
and none of which shall be exclusive to the fullest extent permitted by law, and
all other legal and equitable rights under this Agreement and the Transaction
Agreements which may be available to Purchasers, all of which shall be
cumulative;
(b) the right to take possession of the Collateral upon reasonable notice
and to enter the offices of the Company during normal business hours to take
possession of the Collateral; the right of the Purchaser to (a) enter upon the
premises of Company or any of its subsidiaries, or any other place or places
where the Collateral is located and kept, through self-help and without judicial
process, without first obtaining a final judgment or giving Company or any of
its subsidiaries notice and opportunity for a hearing on the validity of the
Purchaser's claim and without any obligation to pay rent to Company or any of
its subsidiaries, and remove the Collateral therefrom to the premises of
Purchaser or any agent of Purchaser, for such time as Purchaser may desire, in
order to effectively collect or liquidate the Collateral; and/or (b) require
Company to assemble the Collateral and make it available to Purchaser at a place
to be designated by the Purchaser, in their sole discretion.
(c) the right to sell or otherwise dispose of all or any part of the
Collateral in its then condition, at public or private sale or sales, with such
notice as may be required by law, in lots or in bulk, for cash or on credit, all
as such Purchaser may deem advisable, and purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations, and to apply the proceeds realized from such sale,
after allowing two (2) business days for collection, first to the reasonable
costs, expenses, and attorneys' fees and expenses incurred by such Purchaser for
collection and for acquisition, storage, sale, and delivery of the Collateral,
secondly to interest due upon the Obligations, and thirdly to the principal of
the Obligations; and
(d) the right to proceed by an action or actions at law or in equity to
obtain possession of the Collateral, to recover the Obligations and amounts
secured hereunder or to foreclose under this Agreement and sell the Collateral
or any portion thereof, pursuant to a judgment or decree of a court or courts of
competent jurisdiction, all without the necessity of posting any bond.
SECTION 2.3 FINANCING STATEMENTS.
The Company and each of Global Tracker, Xxxxxxxx, and Xxxxx agree to file or
cause to be filed on or before the First Closing financing statements in the
Province of Ontario evidencing the security interests granted herein, in the
Security Agreement given by Global Tracker, and in the Stock Pledge Agreements
executed by each of Xxxxxxxx and Xxxxx, copies of which are attached hereto as
EXHIBIT I.
SECTION 2.4 NOTICE.
Any notice required to be given by Purchaser of a sale, lease, or other
disposition of the Collateral or any other intended action by Purchaser, given
to Company in the manner set forth in Section 9.5 below, at least ten (10) days
prior to such proposed action, shall constitute commercially reasonable and fair
notice thereof to Company.
SECTION 2.5 APPOINTMENT OF PURCHASER REPRESENTATIVE.
Each Purchaser hereto hereby irrevocably appoints SovCap Equity Partners, Ltd.,
a corporation organized under the laws of the Bahamas and a First Closing
Purchaser hereunder, to act as the sole and exclusive agent and representative
(the "REPRESENTATIVE") of each such Purchaser to act on behalf of such Purchaser
and in such Purchaser's name, place, and stead, to (i) exercise all rights of
such Purchaser, and (ii) take all action on behalf of Purchaser that may be
taken by Purchaser with respect to the collateral under this Agreement, the
Bridge Notes, and the other Transaction Agreements. Without limiting the
generality of the foregoing:
(a) The Representative shall, on behalf of all Purchasers, send all notices
which shall or may be given by Purchasers, under the Transaction Agreements,
declare Events of Default under this Agreement, the Bridge Notes, and the other
Transaction Agreements, accelerate the Bridge Notes, rescind acceleration of the
Bridge Notes, and enforce the Bridge Notes, this Agreement, and the other
Transaction Agreements. The Representative reserves the right, in its sole
discretion, in each instance without prior notice to the Purchasers, (i) to
agree to the modification, waiver, or release of any of the terms of any of the
Transaction Agreements, including, without limitation, the waiver or release of
any of the conditions precedent for the purchase and sale of the Bridge Notes;
(ii) to consent to any action or failure to act by the Company; and (iii) to
exercise or refrain from exercising any powers, rights, or remedies that the
Purchasers have or may have with respect to collateral under the Transaction
Agreements; PROVIDED HOWEVER, that the Representative shall not, without
obtaining the prior written consent of each Purchaser (which consent shall not
be unreasonably withheld or delayed), exercise any of such rights so as to
knowingly release or waive any claim against the Company or any other person who
may be liable with respect to the Bridge Notes if such action would have a
materially adverse effect on the collection of the indebtedness evidenced by the
Bridge Notes or the enforcement of the Transaction Agreements.
If any Purchaser shall refuse to consent to any amendment, modification, waiver,
release, or subordination requiring the written consent of the Purchasers, the
Purchasers who consent to such amendment, modification, waiver, release, or
subordination may, at their option, at any time thereafter (but shall not be
obligated to) purchase the Bridge Note or Bridge Notes held by the
non-consenting Purchaser or Purchasers by paying to such non-consenting
Purchaser or Purchasers an amount equal to the unpaid principal and accrued but
unpaid interest on the Bridge Note held by such non-consenting Purchaser or
Purchasers.
(b) The Representative shall collect, enforce, and bring any action on the
Transaction Agreements and any collateral granted therein in the name of the
Representative for the benefit of all Purchasers.
SECTION 2.6 ASSURANCES.
(a) Each Purchaser hereby authorizes third parties with whom Representative
deals in carrying out the responsibilities of Representative hereunder, to rely
conclusively on the instructions and decisions of the Representative as to any
action taken pursuant to and in accordance with the terms of this Agreement and
the other Transaction Agreements without any further or additional approval or
authorization from such Purchaser, including without limitation, the execution
and delivery of any documents or instruments, or any other actions required to
be taken by the Representative under this Agreement and the other Transaction
Agreements, and no Purchaser shall have any cause of action against third
parties with whom Representative deals in carrying out the responsibilities of
Representative hereunder or under the other Transaction Agreements for any
action taken by such third parties in reliance upon the instructions or
decisions of the Representative;
(b) All actions, decisions, and instructions of the Representative shall be
conclusive and binding upon all of the Purchasers, and no Purchaser shall have
any cause of action against the Representative for any actions taken, decision
made or instruction given by the Representative under this Agreement, except for
fraud or willful misconduct by Representative acting in such capacity hereunder.
SECTION 2.7 DEFAULT AND ACCELERATION PROCEDURES.
(a) Each Purchaser acknowledges and agrees that its respective rights in,
to, and under any collateral granted in the Transaction Agreements are limited
to the specific collateral securing the Bridge Notes purchased by each such
Purchaser as granted by the Company pursuant to the Closing at which such Bridge
Notes are purchased.
(b) The Representative shall give all Purchasers written notice of any Event
of Default under the Bridge Notes, this Agreement, or the other Transaction
Agreements which, in the judgment of the Representative, adversely affects the
respective interests of the Purchasers under any of the Transaction Agreements.
In the event of any Event of Default thereunder, the Representative shall pursue
any remedies available to Purchasers under the Transaction Agreements which the
Representative in its sole discretion shall deem advisable, and Representative
may also elect to postpone the pursuit of remedies if in its sole discretion and
judgment it is appropriate under the circumstances to do so.
(c) In the event proceedings are instituted for a sale under power of sale
or a judicial foreclosure of the collateral provided under the Transaction
Agreements, the provisions of the Georgia UCC, absent written agreement to the
contrary, shall govern such proceedings and the actions taken pursuant thereto,
as among the Representative and the Purchasers.
(d) In the event the Representative acquires title to any of the collateral
provided under the Transaction Agreements pursuant to a foreclosure or
conveyance in lieu of foreclosure, title shall be taken in a form acceptable to
the Representative and shall be held by or on behalf of the Representative for
the benefit of only the Purchasers holding Bridge Notes which were secured by
such collateral, in their Proportionate Share. The Representative shall manage
such collateral in its ordinary course of business and in accordance with its
customary practices and procedures for as long as such title is held in whole or
in part in the name of or on behalf of the Representative. The Representative
shall contemporaneously endeavor to sell such collateral on terms and conditions
reasonably acceptable to the Representative.
(e) If the Representative receives a payment after acceleration of the
Bridge Notes, whether pursuant to a demand for payment or as a result of legal
proceedings against the Company, or from any source whatsoever, such payment in
respect of the specific Bridge Notes so paid shall be applied in the following
order (unless mandated otherwise by the Transaction Agreements or validly by the
express terms of such payment):
(1) To the expenses incurred in effecting such recovery or in enforcing any
right or remedy under the Transaction Agreements, and any other expenses
theretofore incurred by the Representative and not previously reimbursed by the
Company;
(2) To accrued interest, payable by the Company, according to Purchaser's
Proportionate Share of such accrued interest in respect of such Bridge Notes;
and
(3) To the unpaid principal of such Bridge Notes with each Purchaser
receiving such Purchaser's Proportionate Share of such principal.
(f) The term "PROPORTIONATE SHARE" shall mean the amount of each Purchaser's
Bridge Note purchased at a specific Closing DIVIDED BY the total amount of
Bridge Notes purchased at such Closing.
SECTION 2.8 STANDARD OF CARE OF THE REPRESENTATIVE.
(a) The Representative shall endeavor in good faith to perform all services
and duties and exercise all powers hereunder specifically assigned and delegated
to the Representative, and the Representative shall perform and exercise, and
shall have the right and power to perform and exercise, such other services and
powers as are reasonably incidental thereto. The Representative shall not be
liable to the Purchasers, however, for any action or failure to act or any error
of judgment, negligence, mistake, or oversight by it or any of its agents,
officers, employees, or attorneys, with respect to the Transaction Agreements,
PROVIDED the Representative has acted in good faith and has not been guilty of
willful misconduct or gross negligence. Without limiting the generality of the
foregoing, the Representative may consult with counsel or other advisors
selected by it, and the Representative shall not be liable for any action taken
or omitted to be taken in good faith by it in accordance with the advice of such
counsel or other advisors. In performing its obligations hereunder and under
the Transaction Agreements, the Representative may rely in good faith on written
and telephonic communications received by the Representative without
investigating the genuineness thereof or the power and authority of the author
of such communications. Each Purchaser acknowledges and agrees that the
Representative's duties and obligations under this Agreement are administrative
and ministerial in nature, and that the Representative has no fiduciary
obligation to the Purchasers.
(b) The Representative does not assume, and shall not have, any
responsibility or liability, express or implied, for the adequacy, sufficiency,
validity, collectability, genuineness, or enforceability of any of the
Transaction Agreements, for the financial condition of the Company, for
compliance by the Company with the terms and conditions of the Transaction
Agreements, or for the accuracy of any financial or other information furnished
to the Purchaser by the Representative or by any other party. The
Representative shall not be required to ascertain or inquire as to the
performance or observance by the Company of any of the terms, conditions,
provisions, covenants, or agreements contained in any of the Transaction
Agreements or as to the use of the proceeds of the offering of the Bridge Notes
or of the existence or possible existence of any Event of Default thereunder.
(c) The Representative may accept deposits from, lend money to, and
generally engage in any kind of banking, trust, financial advisory, or other
business with the Company or any affiliate thereof as if it were not performing
the duties specified herein, and may accept fees and other consideration from
the Company or affiliate for services in connection with such services, without
having to account for the same to the Purchasers."
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
To induce the Purchasers to purchase the Bridge Notes, the Company represents
and warrants to each Purchaser, except as referenced on SCHEDULE 1 hereto (the
"DISCLOSURE SCHEDULE"), which reference shall set forth the specific section to
which the qualification relates and the statement which constitutes the
qualification, that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION.
The Company and its subsidiaries are corporations duly organized, validly
existing, and in good standing under the laws of the jurisdiction in which they
are incorporated, and have the requisite corporate power to own their properties
and to carry on their business as now being conducted. Each of the Company and
each subsidiary is duly qualified as a foreign corporation to do business and is
in good standing in each jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
SECTION 3.2 AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER INSTRUMENTS.
(a) The Company has the requisite corporate power and authority to enter
into and perform each of this Agreement, any and all amendments thereto, the
Bridge Notes, the Repricing Warrants, the Warrants, the Callable Warrants, the
Registration Rights Agreement, the Escrow Agreement, the Global Tracker guaranty
and security agreement, the individual guaranties and stock pledge agreements of
each of Xxxxxxxx and Xxxxx, the Transfer Agent Instructions, the Financing
Statement, and any related agreements (collectively, the "TRANSACTION
AGREEMENTS" and individually a "TRANSACTION AGREEMENT"), and to issue the Bridge
Notes, the Repricing Warrants, the Warrants, the Callable Warrants, the
Conversion Shares, the Repricing Shares, the Warrant Shares, and the Callable
Warrant Shares in accordance with the terms hereof and thereof;
(b) the execution and delivery by the Company of each of the Transaction
Agreements and the consummation by it of the transactions contemplated thereby,
including without limitation the issuance of the Bridge Notes, the Warrants, the
Callable Warrants, and the Repricing Warrants, the reservation for issuance and
the issuance of the Conversion Shares issuable upon conversion of the Bridge
Notes and the reservation for issuance and the issuance of the Repricing Shares,
the Warrant Shares, and the Callable Warrant Shares upon exercise of the
Repricing Warrants, the Warrants, and the Callable Warrants (the Bridge Notes,
the Repricing Warrants, the Warrants, the Callable Warrants, the Conversion
Shares, the Repricing Shares, the Warrant Shares, and the Callable Warrant
Shares are hereinafter collectively, the "SECURITIES") have been duly authorized
by the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors, or its stockholders;
(c) each of the Transaction Agreements have been duly and validly executed
and delivered by the Company; and
(d) each of the Transaction Agreements constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
SECTION 3.3 CAPITALIZATION.
Immediately prior to Closing, the authorized capital stock of the Company
consisted of 56,600,000 shares of capital stock, of which 50,100,000 shares are
Common Stock, par value $.001, of which 50,388,579 shares are issued and
outstanding, and 6,500,000 shares of preferred stock ("PREFERRED STOCK"), par
value $.001, none of which are issued and outstanding. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. Except as
described in Section 3.3 of the Disclosure Schedule, no shares of Common Stock
or preferred stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company. Except as
disclosed in Section 3.3 of the Disclosure Schedule, as of the effective date of
this Agreement, (a) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings,
or arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries, or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, (b) there are no outstanding debt securities, and (c) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement). There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities in the manner contemplated by this
Agreement. The Company has furnished to the Purchaser true and correct copies
of the Company's Certificate of Incorporation, as amended (the "CHARTER") and
the Company's Bylaws, as in effect on the date hereof (the "BYLAWS"), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
SECTION 3.4 ISSUANCE OF SECURITIES.
The Bridge Notes have been duly authorized and are free from all taxes, liens,
and charges with respect to the issue thereof. The Conversion Shares issuable
upon conversion of the Bridge Notes have been duly authorized and reserved for
issuance. The Repricing Warrants have been duly authorized and are free from
all taxes, liens, and charges with respect to the issuance thereof. The
Repricing Shares issuable upon exercise of the Repricing Warrants have been duly
authorized and reserved for issuance. The Warrants have been duly authorized
and are free from all taxes, liens, and charges with respect to the issuance
thereof. The Warrant Shares issuable upon exercise of the Warrants have been
duly authorized and reserved for issuance. The Callable Warrants have been duly
authorized and are free from all taxes, liens, and charges with respect to the
issuance thereof. The Callable Warrant Shares issuable upon exercise of the
Callable Warrants have been duly authorized and reserved for issuance. Upon
conversion of the Bridge Notes, the Conversion Shares will, and upon exercise of
the Repricing Warrants, the Warrants, and the Callable Warrants, the Repricing
Shares, the Warrant Shares, and the Callable Warrant Shares will, be duly and
validly issued, fully paid, and nonassessable, and free from all taxes, liens,
and charges, with respect to the issuance thereof, with the holders being
entitled to all rights accorded to a holder of Common Stock.
SECTION 3.5 NO CONFLICTS.
Except as disclosed in Section 3.5 of the Disclosure Schedule, the execution,
delivery, and performance of the Transaction Agreements by the Company, and the
consummation by the Company of the transactions contemplated thereby, will not
(a) result in a violation of the Charter or the Bylaws of the Company or (b)
conflict with, constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration, or cancellation of, any agreement,
indenture, or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment,
or decree (including federal and state securities laws and regulations and the
rules and regulations of the principal market or exchange on which the Common
Stock is traded or listed) applicable to the Company or any of its subsidiaries
or by which any property or asset of the Company or any of its subsidiaries is
bound or affected. Except as described in Section 3.5 of the Disclosure
Schedule, neither the Company nor any subsidiary is in violation of any term of,
or in default under, its Charter or the Bylaws or their organizational charter
or Bylaws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree, or order or any statute,
rule, or regulation applicable to the Company or its subsidiaries. The business
of the Company and its subsidiaries is not being conducted in violation of any
law, ordinance, or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
and any applicable state securities laws, the Company is not required to obtain
any consent, authorization, or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver, and
perform any of its obligations under or contemplated by the Transaction
Agreements in accordance with the terms thereof. Except as disclosed in Section
3.5 of the Disclosure Schedule, all consents, authorizations, orders, filings,
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
SECTION 3.6 SEC DOCUMENTS; FINANCIAL STATEMENTS.
Since July 16, 1999, the Company has filed all reports, schedules, forms,
statements, and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "1934 ACT") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred to as
the "SEC DOCUMENTS"). The Company has made available to each Purchaser or its
representative true and complete copies of the SEC Documents. The Company (i)
is a "reporting issuer" as defined in Rule 902(1) of Regulation S and (ii) has a
class of securities registered under Section 12(b) or 12(g) of the 1934 Act or
is required to file reports pursuant to Section 15(d) of the 1934 Act, and has
filed all the materials required to be filed as reports pursuant to the Exchange
Act for the period the Company was required by law to file such material. As of
their respective dates, the financial statements of the Company included in the
SEC Documents (the "FINANCIAL STATEMENTS") complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (a) as may be
otherwise indicated in such financial statements or the notes thereto, or (b) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and present fairly, in all
material respects, the financial position of the Company as of the dates
thereof, and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Purchaser which is not included in the SEC Documents, including, without
limitation, information referred to in Section 3.5 of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
SECTION 3.7 ABSENCE OF CERTAIN CHANGES.
Except as described in Section 3.7 of the Disclosure Schedule, since the date of
the most recent audited balance sheet included in the SEC Documents, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of operations, or
prospects of the Company or its subsidiaries. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or its subsidiaries have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings.
SECTION 3.8 ABSENCE OF LITIGATION.
There is no action, suit, proceeding, inquiry, or investigation before or by any
court, public board, government agency, self-regulatory organization, or body
pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company, the Common Stock, or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(a) have a material adverse effect on the transactions contemplated hereby, (b)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under the Transaction Agreements, or
(c) except as expressly set forth in Schedule 3.8 of the Disclosure Schedule,
have a material adverse effect on the business, operations, properties,
financial condition, or results of operation of the Company and its subsidiaries
taken as a whole.
SECTION 3.9 PURCHASE OF SECURITIES.
The Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Purchasers or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Purchaser's
purchase of the Securities. The Company further represents to the Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation by the Company and its representatives.
SECTION 3.10 NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS, OR
CIRCUMSTANCES.
No event, liability, development, or circumstance has occurred or exists, or to
the knowledge of the Company is contemplated to occur, with respect to the
Company or its subsidiaries or their respective business, properties, prospects,
operations, or financial condition, which could be material but which has not
been publicly announced or disclosed in writing to the Purchaser.
SECTION 3.11 NO GENERAL SOLICITATION.
Neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the 0000 Xxx) in
connection with the offer or sale of the Bridge Notes or the Conversion Shares.
The Company represents that it has not offered the Bridge Notes or Conversion
Shares to the Purchaser in the U.S. or, to the best knowledge of the Company, to
any person in the United States or any U.S. person.
SECTION 3.12 NO INTEGRATED OFFERING.
Neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of any of the Securities under the 1933 Act or cause
this offering to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions.
SECTION 3.13 EMPLOYEE RELATIONS.
Neither the Company nor any of its subsidiaries is involved in any labor dispute
nor, to the knowledge of the Company or any of its subsidiaries, is any such
dispute threatened. None of the Company's or its subsidiaries' employees is a
member of a union and the Company and its subsidiaries believe that their
relations with their employees are good.
SECTION 3.14 INTELLECTUAL PROPERTY RIGHTS.
The Company and its subsidiaries own or possess adequate rights or licenses to
use all trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets, and rights necessary to
conduct their respective businesses as now conducted. Except as set forth on
Section 3.14 of the Disclosure Schedule, none of the Company's trademarks, trade
names, service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets, or other intellectual property rights have expired or terminated,
or are expected to expire or terminate in the near future. The Company and its
subsidiaries do not have any knowledge of any infringement by the Company or its
subsidiaries of the trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service xxxx
registrations, trade secret, or other similar rights of others. Except as set
forth on Section 3.14 of the Disclosure Schedule, there is no claim, action, or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service xxxx registrations, trade secret, or other infringement,
and the Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company and its subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality,
and value of all of their intellectual properties.
SECTION 3.15 ENVIRONMENTAL LAWS.
The Company and its subsidiaries are (a) in compliance with any and all
applicable foreign, federal, state, and local laws and regulations relating to
the protection of human health and safety, the environment, or hazardous, toxic
substances, wastes, pollutants, or contaminants ("ENVIRONMENTAL LAWS"), (b) have
received all permits, licenses, or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses, and (c)
are in compliance with all terms and conditions of any such permit, license, or
approval.
SECTION 3.16 TITLE.
The Company and its subsidiaries have good and marketable title in fee simple to
all real property and good and marketable title to all personal property owned
by them which is material to the business of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances, and defects except as
described in Section 3.16 of the Disclosure Schedule or as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its subsidiaries. Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting, and enforceable leases
with such exceptions as are not material, and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries. The Pledged Assets are owned by the Company free and clear of any
and all encumbrances, liens, and adverse claims whatsoever, has been at all
times prior to the date hereof, and shall remain from and after the date of this
Agreement in the possession of the Company and located at its principal
executive offices located in Xxxxxxx, Xxxxxxx. The fair market value of the
Pledged Assets is not less than $6,000,000.
SECTION 3.17 INSURANCE.
The Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks, and in such amounts, as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company nor
any such subsidiary has been refused any insurance coverage sought or applied
for, and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial, or otherwise, or the earnings,
business, or operations of the Company and its subsidiaries, taken as a whole.
SECTION 3.18 REGULATORY PERMITS.
The Company and its subsidiaries possess all certificates, authorizations, and
permits issued by the appropriate federal, state, or foreign regulatory
authorities necessary to conduct their respective businesses, except to the
extent that the failure to possess any such certificate, authorization, and
permit would not have a material adverse effect on the Company and its
subsidiaries taken as a whole, and neither the Company nor any such subsidiary
has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization, or permit.
SECTION 3.19 INTERNAL ACCOUNTING CONTROLS.
The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (a)
transactions are executed in accordance with management's general or specific
authorizations, (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (c) access to assets is
permitted only in accordance with management's general or specific
authorization, and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
SECTION 3.20 NO MATERIALLY ADVERSE CONTRACTS, ETC.
Neither the Company nor any of its subsidiaries is subject to any charter,
corporate, or other legal restriction, or any judgment, decree, order, rule, or
regulation which in the judgment of the Company's officers has, or to the
knowledge of the Company is expected in the future to have, a material adverse
effect on the business, properties, operations, financial condition, results of
operations, or prospects of the Company or its subsidiaries. Neither the
Company nor any of its subsidiaries is a party to any contract or agreement
which in the judgment of the Company's officers has, or to the knowledge of the
Company is expected to have, a material adverse effect on the business,
properties, operations, financial condition, results of operations, or prospects
of the Company or its subsidiaries.
SECTION 3.21 TAX STATUS.
Except as set forth on Section 3.21 of the Disclosure Schedule, the Company and
each of its subsidiaries has made or filed all federal and state income and all
other tax returns, reports, and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes), and has paid all taxes and
other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports, and declarations, except those
being contested in good faith, and has set aside on its books amounts deemed
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports, or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim, and except as set forth on Schedule 3.21, there are no open years,
examinations in progress or claims against it for federal, state or other taxes
(including penalties and interest) for any period or periods prior to the date
hereof.
SECTION 3.22 CERTAIN TRANSACTIONS.
Except as set forth on Section 3.22 of the Disclosure Schedule and in the SEC
Documents, and except for arm's length transactions pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than the
grant of stock options disclosed on Section 3.3 of the Disclosure Schedule, none
of the officers, directors, or employees of the Company is presently a party to
any transaction with the Company (other than for services as employees,
officers, and directors), including any contract, agreement, or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director, or such employee or, to the knowledge of the
Company, any corporation, partnership, trust, or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee, or partner.
SECTION 3.23 DILUTIVE EFFECT.
The Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Bridge Notes will increase in certain
circumstances. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Bridge Notes in accordance with this
Agreement and the Bridge Notes is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
SECTION 3.24 FEES AND RIGHTS OF FIRST REFUSAL.
The Company is not obligated to offer the securities offered hereunder on a
right of first refusal basis or otherwise to any third parties including, but
not limited to, current or former shareholders of the Company, underwriters,
brokers, agents, or other third parties.
SECTION 3.25 FOREIGN CORRUPT PRACTICES ACT.
The Company has not made, offered, or agreed to offer anything of value to any
government official, political party, or candidate for government office nor has
it taken any action which would cause the Company to be in violation of the
Foreign Corrupt Practices Act of 1977.
SECTION 3.26 DISCLOSURE.
Neither this Agreement nor any Schedule or Exhibit hereto, contains an untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein not misleading. None of the statements,
documents, certificates or other items prepared or supplied by the Company with
respect to the transactions contemplated hereby contains an untrue statement of
a material fact or omits a material fact necessary to make the statements
contained therein not misleading.
SECTION 4. REPRESENTATION AND WARRANTIES OF PURCHASERS
Each Purchaser represents and warrants to the Company, with respect to such
Purchaser only that:
SECTION 4.1 INVESTMENT PURPOSE.
Purchaser is acquiring the Securities for its own account for investment only
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof, except pursuant to sales registered or exempted under
the 1933 Act; PROVIDED HOWEVER, that by making the representations herein,
Purchaser does not agree to hold any Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.
SECTION 4.2 ACCREDITED INVESTOR STATUS.
Purchaser is an "accredited investor" as that term is defined in Rule 501(a)(3)
of Regulation D.
SECTION 4.3 RELIANCE ON EXEMPTIONS.
Purchaser understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and Purchaser's compliance with, the
representations, warranties, agreements, acknowledgments, and understandings of
Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of Purchaser to acquire such securities.
SECTION 4.4D. INFORMATION.
Purchaser and its advisors, if any, have been furnished with all materials
relating to the business, finances, and operations of the Company and materials
relating to the offer and sale of the Securities, which have been requested by
such Purchaser. Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by Purchaser or its advisors, if
any, or its representatives shall modify, amend, or affect such Purchaser's
right to rely on the Company's representations and warranties contained in
Section 3 hereof. Purchaser understands that its investment in the Securities
involves a high degree of risk. Purchaser has sought such accounting, legal,
and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
SECTION 4.5 NO GOVERNMENTAL REVIEW.
Purchaser understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities, or the fairness or suitability of the investment
in the Securities, nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
SECTION 4.6 TRANSFER OR RESALE.
Purchaser understands that except as provided in the Registration Rights
Agreement:
(a) the Securities have not been and are not being registered under the 1933
Act or any state securities laws, and may not be offered for sale, sold,
assigned, or transferred unless;
(i) subsequently registered thereunder;
(ii) Purchaser shall have delivered to the Company an opinion of counsel, in
a generally acceptable form, to the effect that such securities to be sold,
assigned, or transferred may be sold, assigned, or transferred pursuant to an
exemption from such registration; or
(iii) Purchaser provides the Company with reasonable assurance that such
securities can be sold, assigned, or transferred pursuant to Rule 144 or
promulgated under the 1933 Act (or a successor rule thereto);
(b) any sale of such securities made in reliance on Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) ("RULE 144") may be made only
in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and
(c) neither the Company nor any other person is under any obligation to
register such securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
SECTION 4.7 LEGENDS.
Purchaser understands that the certificates or other instruments representing
the Bridge Notes and, until such time as the sale of the Conversion Shares have
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares shall bear
a restrictive legend in substantially the following form (and a stop transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN EFFECTive REGIStratiON
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Bridge Notes and the
Conversion Shares, upon which it is stamped, if, unless otherwise required by
state securities laws, (a) the sale of the Conversion Shares is registered under
the 1933 Act, (b) in connection with a sale transaction, such holder provides
the Company with an opinion of counsel, in a generally acceptable form, to the
effect that a public sale, assignment, or transfer of the Bridge Notes and the
Conversion Shares may be made without registration under the 1933 Act, or (c)
such holder provides the Company with reasonable assurances that the Bridge
Notes and the Conversion Shares can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold.
SECTION 4.8 AUTHORIZATION ENFORCEMENT.
This Agreement has been duly and validly authorized, executed, and delivered on
behalf of Purchaser and is a valid and binding agreement of Purchaser
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
SECTION 4.9 RESIDENCE.
Purchaser is a resident of that country specified in its address on the Schedule
of Purchaser.
SECTION 4.10 NO SCHEME TO EVADE REGISTRATION.
Purchaser represents and warrants to the Company, as to itself only, that the
acquisition of the Securities is not a transaction (or any element of a series
of transactions) that is part of a plan or scheme by the Purchaser to evade the
registration provisions of the 1933 Act and that
(a) such Purchaser is an "accredited investor" within the meaning of Rule
501 under the Securities Act;
(b) such Purchaser has sufficient knowledge and experience to evaluate the
risks and merits of its investment in the Company and it is able financially to
bear the risks thereof;
(c) such Purchaser has had an opportunity to ask questions of and receive
answers from and to discuss the Company's business, management, and financial
affairs with the Company's management;
(d) the Securities are being acquired for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof;
(e) such Purchaser was not offered nor made aware of the Company's interest
in issuing the Bridge Notes by any means of public advertisement or
solicitation;
(f) in connection with such Purchaser's purchase of the Securities, it has
been solely responsible for its own (i) due diligence investigation of the
Company and (ii) investment decision, and has not engaged or relied upon any
agent or "purchaser representative" to review or analyze the Company's business
and affairs or advise Purchaser with respect to the merits of the investment;
(g) such Purchaser has full power and authority to execute, deliver, and
perform this Agreement; and this Agreement constitutes the legal, valid, and
binding obligation of such Purchaser, enforceable against it in accordance with
their respective terms; and
(h) if such Purchaser proposes to sell the Securities pursuant to Rule 144A
under the Securities Act, it will (A) take reasonable steps to obtain the
information required by such Rule to establish a reasonable belief that the
prospective purchaser is a "qualified institutional buyer" as such term is
defined in Rule 144A and (B) advise the prospective purchaser that the Purchaser
is relying on the exemption from the registration provisions of the Securities
Act available pursuant to Rule 144A.
SECTION 4.11 COVENANT NOT TO TRADE.
Each Purchaser for itself and on behalf of each affiliate and associate of such
Purchaser covenants and agrees, not to purchase, sell, make any short sale of,
pledge, grant any option for the purchase or sale of or otherwise trade any
Common Stock prior to the conversion of the Bridge Notes (other than a purchase
of Common Stock from the Company pursuant to the exercise of the Repricing
Warrant or the Warrant or the Callable Warrant), without the prior written
consent of the Company.
SECTION 5. CONDITIONS OF INITIAL CLOSING
The Purchaser's obligation to purchase and pay for the Securities is subject to
the satisfaction prior to or at the Closing of the following conditions:
SECTION 5.1 TRANSACTION AGREEMENTS.
The Company shall have delivered to Purchaser the Transaction Agreements as
provided in Section 1.5, above, executed by all the parties thereto.
SECTION 5.2 OPINION OF COUNSEL.
Purchaser shall have received from counsel for the Company, an opinion in
substantially the form of EXHIBIT F, addressed to Purchaser, dated the Closing
Date. To the extent that the opinion referred to in the preceding sentence is
rendered in reliance upon the opinion of any other counsel, Purchaser shall have
received a copy of such opinion of such other counsel, dated the Closing Date
and addressed to Purchaser, or a letter from such other counsel, dated the
Closing Date and addressed to Purchaser, authorizing Purchaser to rely on such
other counsel's opinion.
SECTION 5.3 REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The representations and warranties of the Company contained in this Agreement
and those otherwise made in writing by or on behalf of the Company in connection
with the transactions contemplated by this Agreement shall be true in all
material respects, except to the extent of changes caused by the transactions
contemplated herein; PROVIDED HOWEVER, that there shall exist at the time of the
Closing and after giving effect to such transactions no Event of Default (as
defined in Section 10 of the Bridge Notes).
SECTION 5.4 PURCHASE AND LOAN PERMITTED BY APPLICABLE LAWS.
The purchase of, and payment for, all the Securities evidenced by or attendant
to the Bridge Notes shall not violate any applicable domestic law or
governmental regulation (including, without limitation, Section 5 of the
Securities Act) and shall not subject Purchaser to any tax, penalty, liability,
or other onerous condition under, or pursuant to, any applicable law or
governmental regulation or order.
SECTION 5.5 NO ADVERSE LITIGATION.
There shall be no action, suit, investigation, or proceeding, pending or, to the
best of Purchaser's or the Company's knowledge, threatened, against or affecting
Purchaser, the Company, any of Purchaser's or the Company's properties or
rights, or any of Purchaser's or the Company's Affiliates, officers, or
directors, by or before any court, arbitrator, or administrative or governmental
body which (i) seeks to restrain, enjoin, prevent the consummation of, or
otherwise affect the transactions contemplated by this Agreement or (ii)
questions the validity or legality of any such transactions, or (iii) seeks to
recover damages or obtain other relief in connection with any such transactions,
and, to the best of Purchaser's and the Company's knowledge, there shall be no
valid basis for any such action, proceeding, or investigation, and Purchaser
shall have received a certificate executed by the chief executive officer of the
Company, dated the Closing Date, to such effect.
SECTION 5.6 APPROVALS AND CONSENTS.
The Company shall have duly received all authorizations, waivers, consents,
approvals, licenses, franchises, permits, and certificates (collectively,
"CONSENTS") by or of all federal, state, and local governmental authorities and
all material consents by or of all other persons necessary or advisable for the
issuance of the Bridge Notes, all such consents shall be in full force and
effect at the time of Closing, and Purchaser shall have received a certificate
executed by the chief executive officer of the Company, dated the Closing Date,
to such effect.
SECTION 5.7 NO MATERIAL ADVERSE CHANGE.
Since {INSERT DATE OF LAST 10-Q - XXX/XXX}, there shall not have been any
material adverse change in the business, condition (financial or other), assets,
properties, operations, or prospects of the Company, and Purchaser shall have
received a certificate executed by the chief executive officer of the Company,
dated the Closing Date, to such effect.
SECTION 5.8 PROCEEDINGS.
All proceedings taken or to be taken in connection with the transactions
contemplated hereby, and all documents incident thereto shall be reasonably
satisfactory in form and substance to Purchaser and Purchasers counsel, and
Purchaser and Purchasers counsel shall have received all such counterpart
originals or certified or other copies of such documents as the Purchaser or
Purchasers' counsel may reasonably request.
SECTION 5.9 SECRETARY CERTIFICATE.
Purchaser shall have received a Secretary's Certificate from the Secretary or an
Assistant Secretary of the Company dated the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of the Charter as then in
effect, certified or bearing evidence of filing by the Secretary of State of
Delaware, and (B) a certificate of said Secretary of State, dated as of a recent
date as to the due incorporation and good standing of the Company, the payment
of all franchise taxes by the Company, and listing all documents of the Company
on file with said Secretary of State; (C) that attached thereto is a true and
complete copy of the Bylaws of the Company as in effect on the date of such
certification; (D) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors or the shareholders of the Company
authorizing the execution, delivery, and performance of Transaction Agreements
and the issuance, sale, and delivery of the Securities, and that all such
resolutions are in full force and effect and are all the resolutions adopted in
connection with the foregoing agreements and the transactions contemplated
thereby; (E) that the Charter has not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to clause (A) above;
and (F) to the incumbency and specimen signature of each officer of the Company
executing all Transaction Agreements and any certificate or instrument furnished
pursuant hereto, and a certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate.
SECTION 5.10 TRANSFER AGENT INSTRUCTIONS.
The Transfer Agent Instructions, in form and substance satisfactory to the
Purchaser, shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
SECTION 6. CONDITIONS TO SUBSEQUENT CLOSINGS
SECTION 6.1 REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The representations and the warranties of the Company contained in this
Agreement and those otherwise made in writing by or on behalf of the Company in
connection with the transactions contemplated by this Agreement shall be true in
all material respects, except to the extent of changes caused by the
transactions contemplated herein; PROVIDED HOWEVER, that there shall exist no
Event of Default under this Agreement or any of the Bridge Notes at the time of
the Subsequent Closing.
SECTION 6.2 NO SUSPENSIONS.
There shall be no suspensions of trading in or in delisting (or pending
delisting) of the Common Stock.
SECTION 6.3 OPINION OF COUNSEL.
Purchaser shall have received from counsel for the Company, an opinion in
substantially the form of EXHIBIT F, addressed to Purchaser, dated as of each
Additional Closing Date. To the extent that the opinion referred to in the
preceding sentence is rendered in reliance upon the opinion of any other
counsel, Purchaser shall have received a copy of such opinion of such other
counsel, dated the Additional Closing Date and addressed to Purchaser, or a
letter from such other counsel, dated the Additional Closing Date and addressed
to Purchaser, authorizing Purchaser to rely on such other counsel's opinion.
SECTION 6.4 DUE DILIGENCE.
Purchaser shall be satisfied with the results of periodic due diligence
investigations and shall have received a "comfort" letter from the Company's
auditors with respect to the financial statements filed by the Company in its
quarterly and annual securities filings.
SECTION 6.5 SHAREHOLDER APPROVAL.
Company, if required, must obtain shareholder approval on placement so as to
address the 20% rule.
SECTION 6.6 NO MATERIAL ADVERSE CHANGE.
Since date hereof, there shall not have been any material adverse change in the
business, condition (financial or other), assets, properties, operations, or
prospects of the Company, and Purchaser.
SECTION 7. AFFIRMATIVE COVENANTS
The Company covenants that from and after the date of this Agreement through the
Closing and thereafter so long as any of the Bridge Notes remain outstanding:
SECTION 7.1 FINANCIAL INFORMATION.
The Company shall furnish to Purchaser:
(a) within five (5) days after the filing thereof with the SEC, a copy of
its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current
Reports on Form 8-K, and any registration statements or amendments filed
pursuant to the 1933 Act;
(b) within one (1) day after release thereof, copies of all press releases
issued by the Company or any of its subsidiaries;
(c) copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders;
(d) promptly upon any officer of the Company obtaining knowledge (i) of any
condition or event which constitutes an Event of Default, (ii) that the holder
of any Bridge Notes has given any notice or taken any other action with respect
to a claimed Event of Default under this Agreement, (iii) of any condition or
event which, in the opinion of management of the Company would have a material
adverse effect on the business, condition (financial or other), assets,
properties, operations, or prospects of the Company, other than conditions or
events applicable to the economy as a whole, (iv) that any person has given any
notice to the Company or taken any other action with respect to a claimed Event
of Default, or (v) of the institution of any litigation involving claims against
the Company, unless such litigation is defended by the insurance carrier without
any reservation of rights and is reasonably expected to be fully covered by a
creditworthy insurer, in an amount equal to or greater than $250,000 with
respect to any single cause of action or of any adverse determination in any
litigation involving a potential liability to the Company equal to or greater
than $100,000 with respect to any single cause of action, a certificate executed
by the chief executive officer of the Company specifying the nature and period
of existence of any such condition or event, or specifying the notice given or
action taken by such holder or person and the nature of such claimed Event of
Default, event or condition, and what action the Company has taken, is taking,
or proposes to take with respect thereto; and
(e) with reasonable promptness, such other information and data with respect
to the Company as Purchaser may reasonably request.
SECTION 7.2 FORM D.
The Company agrees to file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof to each Purchaser promptly
after such filing. The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary to qualify the
Securities for, or obtain exemption for the Securities for, sale to the
Purchaser at the Closing pursuant to this Agreement under applicable securities
or "Blue Sky" laws of the states of the United States, and shall provide
evidence of any such action so taken to the Purchaser on or prior to the Closing
Date.
SECTION 7.3 REPORTING STATUS.
Until the earlier of (a) the date as of which the Investors (as that term is
defined in the Registration Rights Agreement) may sell all of the Conversion
Shares without restriction pursuant to Rule l44(k) promulgated under the 1933
Act (or successor thereto), or (b) the date on which (i) the Investors shall
have sold all the Conversion Shares and (ii) none of the Bridge Notes is
outstanding (the "REGISTRATION PERIOD"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
SECTION 7.4 INSPECTION OF PROPERTY.
The Company will permit any Person designated by any Purchaser in writing, at
Purchaser's expense, to visit and inspect any of the properties of the Company,
to examine the books and financial records of the Company and make copies
thereof or extracts therefrom and to discuss its affairs, finances, and accounts
with its officers and its independent public accountants, all at reasonable
times and upon reasonable prior notice to the Company.
SECTION 7.5 MAINTENANCE OF PROPERTIES; INSURANCE.
The Company will maintain or cause to be maintained in good repair, working
order, and condition all properties used or useful in the business of the
Company and from time to time will make or cause to be made all appropriate
repairs, renewals, and replacements thereof. The Company will maintain or cause
to be maintained, with financially sound and reputable insurers (or, as to
workers' compensation or similar insurance, in an insurance fund or by
self-insurance authorized by the laws of the jurisdiction in question),
insurance with respect to their respective properties and businesses against
loss or damage of the kinds customarily insured against by corporations of
established reputation engaged in the same or similar businesses and similarly
situated, of such type and in such amounts as are customarily carried under
similar circumstances by such other corporations and as are in good faith
believed by the Company to be sufficient to prevent the Company from becoming a
co-insurer within the terms of the policies in question.
SECTION 7.6 MAINTENANCE OF SECURITY INTEREST.
The Company will maintain or cause to be maintained a perfected first priority
security interest in certain collateral pledged as security therefor in favor of
each group of Purchasers purchasing Bridge Notes at a Closing. Each such first
priority security interest granted in collateral at each Closing shall have a
value of not less than 200% of the aggregate principal amount of the Bridge
Notes purchased at each such Closing and then outstanding.
SECTION 7.7 EXPENSES.
The Company and Purchasers shall pay all costs and expenses incurred by such
party in connection with the negotiation, investigation, preparation, execution,
and delivery of this Agreement, the Bridge Notes, the Escrow Agreement, the
Registration Rights Agreement, and other documents executed in connection with
the issuance of the Bridge Notes. The costs and expenses of Sovereign Capital,
LLC including the fees and expenses of Xxxxxxx Law Group, LLC (not to exceed
$17,500 in fees PLUS all expenses for the First Closing) shall be paid for by
the Company at the First Closing and the fees and expenses for all subsequent
Closings (not to exceed $4,500 in fees PLUS expenses for the Second Closing and
$2,500 in fees PLUS all expenses for each subsequent Closing) shall be paid at
each subsequent Closing. The fee limits of counsel to Sovereign Capital
Advisors, LLC cited in this Section 7.7 are subject in all instances to such
counsel providing all transaction documents, agreements, certificates, and the
like necessary for the transactions contemplated hereunder, and receiving a
reasonable level of comments thereto. However, should such counsel prepare such
documents, agreements, and certificates for any Additional Closing and
subsequently receive substantial additional comments to such documents,
agreements, and certificates (for example, as a result of changes requested by
or comments of the Company to any part or structure of the transactions
contemplated hereunder), then such hourly limits for any given Additional
Closing shall not apply and such counsel shall xxxx and the Company agrees to
pay for all such additional work at such counsel's normal hourly rates then in
effect.
SECTION 7.8 AUTHORIZED SHARES OF COMMON STOCK, RESERVATION OF SHARES.
The Company shall at all times, so long as any of the Bridge Notes are
outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Bridge
Notes, such number of shares of Common Stock equal to or greater than 150% of
the number of Conversion Shares issuable upon conversion of the Bridge Notes
which are then outstanding or which could be issued at any time under this
Agreement.
SECTION 7.9 CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and effect its
corporate existence, and rights, licenses, and franchises material to its
business, and will qualify to do business as a foreign corporation in each
jurisdiction where the failure to so qualify would have a material adverse
effect on the business, condition (financial or other), assets, properties, or
operations of the Company, taken as a whole.
SECTION 7.10 TRANSFER AGENTS.
The Company covenants and agrees that, in the event that the Company's agency
relationship with the transfer agent should be terminated for any reason prior
to a date which is two (2) years after the Closing Date, the Company shall
immediately appoint a new transfer agent and shall require that the transfer
agent execute and agree to be bound by the terms of the Irrevocable Instructions
to Transfer Agent.
SECTION 7.11 SHAREHOLDER APPROVAL; PROXY.
The Company covenants to submit to its shareholders a proposal for ratification
of the issuance of the Bridge Notes and the Conversion Shares, if and as
required by the rules of the National Association of Securities Dealers, Inc.
(the "NASD") applicable to the transaction. All officers and directors will,
upon request of Purchaser, execute a proxy authorizing Purchaser or any designee
of Purchaser to vote all shares of Common Stock, the voting of which is
controlled by such officer or director, at any meeting (or any adjournment
thereof) at which Shareholder action is proposed to ratify the issuance of the
Bridge Notes and the Conversion Shares.
SECTION 7.12 TRANSFER AGENT INSTRUCTIONS.
The Company shall issue Transfer Agent Instructions to its transfer agent to
issue certificates, registered in the name of the Purchaser or its respective
nominee(s), for the Conversion Shares, the Repricing Shares, the Warrant Shares,
and the Callable Warrant Shares in such amounts as specified from time to time
by the Purchaser to the Company upon conversion of the Bridge Notes, except as
provided in Section 7.8 herein. Prior to registration of the Conversion Shares
under the 1933 Act, all such certificates shall bear the restrictive legend
specified in Section 4.7 of this Agreement. The Company warrants that no
instruction other than the Transfer Agent Instructions referred to in this
Section 7.12, and stop transfer instructions to give effect to Section 4.7
hereof (in the case of the Conversion Shares, prior to registration of such
shares under the 0000 Xxx) will be given by the Company to its transfer agent
and that the Bridge Notes and the Conversion Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section 7.12 shall affect in any way the Purchaser's obligations and
agreement to comply with all applicable securities laws upon resale of the
Bridge Notes or Conversion Shares. If the Purchaser provides the Company with
an opinion of counsel, reasonably satisfactory in form, and substance to the
Company, that registration of a resale by the Purchaser of any of the Bridge
Notes or Conversion Shares is not required under the 1933 Act, the Company shall
permit the transfer, and, in the case of the Conversion Shares, promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denominations as specified by the Purchaser. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Purchaser by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 7.12 will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 7.12, that the Purchaser shall be entitled, in
addition to all other available remedies, to an 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.
SECTION 7.13 PAYMENT OF TAXES.
The Company will pay all taxes, assessments, and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income, or properties before any penalty or significant
interest accrues thereon, and all claims (including, without limitation, claims
for labor, services, materials, and supplies) for sums which have become due and
payable and which by law have or may become a lien upon any of its properties or
assets, PROVIDED that no such charge or claim need be paid if such claim is (i)
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, and (ii) the amount of such claim is accrued on the
financial statements of the Company or other appropriate provision is made as
shall be required by generally accepted accounting principles.
SECTION 7.14 COMPLIANCE WITH LAWS, ETC.
The Company will comply with the requirements of all applicable laws, rules,
regulations, and orders of any court or other governmental authority (including,
without limitation, those related to environmental or ERISA compliance),
noncompliance with which could materially adversely affect the business,
condition (financial or other), assets, property, operations, or prospects of
the Company.
SECTION 7.15 USE OF PROCEEDS.
The Company will use the proceeds from the sale and issuance of the Bridge Notes
as follows: provide the Company with operating capital, repayment of certain
limited existing indebtedness of the Company, and capital expenditures.
SECTION 7.16 REGISTRATION STATEMENT.
The Company shall (a) file a Registration Statement, covering the resale of
shares of Common Stock received upon conversion of the Bridge Notes, the
Repricing Warrants, the Warrants, and the Callable Warrants to permit the
holder(s) thereof to resell from and after the Registration Deadline (as such
term is defined therein) in accordance with the Registration Rights Agreement,
(b) use its best efforts to have the Registration Statement declared effective
in accordance with the Registration Rights Agreement, and (c) keep such
Registration Statement current and effective for a period 12 months from the
effective date of such Registration Statement in accordance with the
Registration Rights Agreement.
SECTION 7.17 LISTINGS.
The Company shall promptly secure the listing of the Conversion Shares, the
Repricing Shares, the Warrant Shares, and the Callable Warrant Shares upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listings of all Conversion Shares, the Repricing Shares, the
Warrant Shares, and the Callable Warrant Shares from time to time issuable under
the terms of the Bridge Notes, the Repricing Warrants, the Warrants, the
Callable Warrants, and the Registration Rights Agreement. The Company shall
maintain the Common Stock's authorization for quotation in the over-the-counter
market. The Company shall promptly provide to Purchaser copies of any notices it
receives regarding the continued eligibility of the Common Stock for trading in
the over-the-counter market.
SECTION 7.18 INDEMNIFICATION.
In consideration of the Purchaser's execution and delivery of this Agreement and
acquiring the Securities hereunder and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect, indemnify,
and hold harmless each Purchaser and each other holder of the Securities and
each officer, director, employee, and agent of each Purchaser (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "INDEMNITEES") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities, and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by the Indemnitees
or any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in any Transaction Agreement or any other certificate, instrument, or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement, or obligation of the Company contained in the Transaction Agreements,
or any other certificate, instrument or document contemplated hereby or thereby,
or (c) any cause of action, suit, or claim brought or made against such
Indemnitee and arising out of or resulting from the execution, delivery,
performance, or enforcement of this Agreement or any other instrument, document,
or agreement executed pursuant hereto by any of the Indemnitees, any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Bridge Notes, or the status of the Purchaser or
holder of the Bridge Notes or the Conversion Shares, as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
SECTION 8. NEGATIVE COVENANTS
The provisions of this Section 8 shall remain in effect so long as any of the
Bridge Notes shall remain outstanding.
SECTION 8.1 DEFINITION OF DEBT. For purposes of this Agreement, the
capitalized term "DEBT" of any Person shall mean:
(a) all indebtedness of such Person for borrowed money, including without
limitation obligations evidenced by bonds, debentures, Bridge Notes, or other
similar instruments;
(b) all indebtedness guaranteed in any manner by such Person, or in effect
guaranteed by such Person through an agreement to purchase, contingent or
otherwise;
(c) all accounts payable which, to the knowledge of such Person, have
remained unpaid for a period of 90 days after the same become due and payable in
accordance with their respective terms taking into account any grace period
relating to the due date expressly set forth in the applicable invoice with
respect to the payment of such accounts payable;
(d) all indebtedness secured by any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in property owned by such Person, even
though such Person has not assumed or become liable for the payment of such
indebtedness;
(e) all indebtedness created or arising under any conditional sale agreement
or lease in the nature thereof (including obligations as lessee under leases
which shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capitalized leases) (but excluding operating
leases) or other title retention agreement with respect to property acquired by
such Person, even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession of such
property;
(f) all bankers' acceptances and letters of credit; and
(g) liabilities in respect of unfunded vested benefits under Plans covered
by Title IV of ERISA.
SECTION 8.2 RESTRICTIONS ON DEBT.
The Company will not create, assume, or incur or become or at any time be liable
in respect of, any Debt, except:
(a) the Bridge Notes issued pursuant to this Agreement;
(b) Debt outstanding on the date hereof to the extent reflected on the most
recent balance sheet of the Company or incurred in the ordinary course of
business thereafter; and
(c) Debt incurred in permitted real estate investments; and
(d) purchase money security interests not to exceed $250,000 per year.
Notwithstanding the foregoing provisions of Section 8.2, the Company will not
create, assume, or incur, or become or at any time be liable in respect of, any
Debt for money borrowed, advances made, or goods purchased, if the Purchaser,
the Person making such advances, or the vendor of such goods (or any Person who
guarantees or becomes surety for all or any part of such Debt or acquires any
right or incurs any obligation to become, either immediately or upon the
occurrence of some future contingency, the owner of all or any part thereof)
shall have any right, by reason of any statute or otherwise, to have any claim
in respect of such Debt first satisfied out of the general assets of the Company
in priority to the claims of its general creditors.
SECTION 8.3 RESTRICTIONS ON DIVIDENDS.
The Company will not (a) pay any dividends, in cash or otherwise, on, (b) make
any distributions to holders of, or (c) purchase, redeem, or otherwise acquire
any of its outstanding Common Stock or Preferred Stock or set apart assets for a
sinking or other analogous fund for the purchase, redemption, retirement, or
other acquisition of, any shares of its Common Stock or Preferred Stock;
PROVIDED HOWEVER, that the Company may, so long as at the time of and after
giving effect thereof no Event of Default has occurred and is continuing: (i)
pay dividends on its outstanding Preferred Stock in accordance with the Charter;
(ii) with prior written approval of each Purchaser, repurchase shares of its
Common Stock issued or to be issued by the Company upon exercise of stock
options granted to employees and directors of the Company pursuant to the terms
of plans adopted by the Board of Directors of the Company; and (iii) pay cash in
lieu of fractional shares of its Common Stock on the exercise of outstanding
warrants to purchase its Common Stock, pursuant to the terms of such warrants.
SECTION 8.4 RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES.
The Company will not make any loans or advances to any of its officers,
directors, shareholders, or Affiliates, other than expense advances made by the
Company to its officers and employees in the ordinary course of business. The
Company will not increase the salary of any executive officer, or the
remuneration of any director.
SECTION 8.5 RESTRICTIONS ON INVESTMENTS.
Other than as permitted by this Agreement, the Company will not purchase or
acquire or invest in, or agree to purchase or acquire or invest in the business,
property, or assets of, or any securities of, any other company or business,
PROVIDED HOWEVER, that the Company may invest its Excess Cash as defined below
in:
(a) securities issued or directly and fully guaranteed or insured by the
United States government or any agency thereof having maturities of not more
than one year from the date of acquisition;
(b) certificates of deposit or eurodollar certificates of deposit, having
maturities of not more than one hundred eighty days from the date of
acquisition, or one year from the date of acquisition in the case of
certificates of deposit or eurodollar certificates of deposit being used to
secure the Company's reimbursement obligations under letters of credit (provided
that nothing contained herein shall be construed to permit letters of credit not
otherwise permitted under this Agreement);
(c) commercial paper of any Person that is not a subsidiary or an Affiliate
of the Company, maturing within one hundred eighty days after the date of
acquisition;
(d) bank loan participations; and
(e) money market instruments having maturities of not more than one hundred
eighty days from the date of acquisition, or one year from the date of
acquisition in the case of money market instruments being used to secure the
Company's reimbursement obligations under letters of credit (provided that
nothing contained herein shall be construed to permit letters of credit not
otherwise permitted under this Agreement);
in all cases of such credit quality as a prudent business person would invest
in. As used in this Section, "EXCESS CASH" shall mean that portion of the
proceeds of the Bridge Notes which has not been invested as described in Section
7.15 hereof.
SECTION 8.6 RESTRICTIONS ON SALE AND LEASE-BACK TRANSACTIONS.
The Company will not sell or transfer any of its properties to anyone with the
intention of taking back a lease of the same property or leasing other property
for substantially the same use as the property being sold or transferred;
PROVIDED HOWEVER, that (a) the Company may continue and extend its existing
leasing arrangements and may lease, under operating leases, any fixtures,
equipment, and real estate that do not constitute Pledged Assets in the ordinary
course of business of the Company, and (b) the Company may otherwise make real
estate investments but only with the consent of the Purchasers as provided for
herein.
SECTION 8.7 RESTRICTIONS ON SALES OF ASSETS.
The Company will not sell, transfer, or dispose of any property except for sales
of obsolete equipment having a book value at the time of sale of not more than
$100,000 in the aggregate in any fiscal year.
SECTION 8.8 RESTRICTIONS ON SUBSIDIARIES.
The Company will not, without the written consent of Purchaser to organize, or
transfer any assets to, any Subsidiaries, PROVIDED that, if consent of the
Purchaser is obtained and any Subsidiaries are organized, or assets transferred,
in compliance with this Section 8.8, the Company will not permit such
Subsidiaries to enter into any transaction or agreement which would violate any
of the provisions of this Section 8 if such provisions were applicable to such
Subsidiary.
SECTION 8.9 CHANGE IN BUSINESS; OPERATIONS.
The Company will not cause or effect any change in or addition to the primary
business of the Company that has not been approved by Purchaser, such that more
than 10% of the consolidated net earnings of the Company are derived from a
business other than the business in which the Company was engaged on the date
hereof as reflected in the applicable last SEC Document filed prior to the First
Closing ("CHANGE IN BUSINESS"), except any such changes approved in advance in
writing by the Representative. The business of the Company and its subsidiaries
shall not be conducted in violation of any law, ordinance, or regulation of any
governmental entity.
SECTION 8.10 EXCEPTIONS WITH CONSENT OF PURCHASERS.
The Company may seek an exception to any prohibited action under this Section by
FIRST, giving written notice to all Purchasers of Bridge Notes under this
Agreement, along with copies of all documentation requested by any Purchaser
relating to such requested exception, and SECOND, in the sole discretion of
Purchasers, satisfactorily responding to any Purchaser inquiries about the
requested action. The Company may undertake any such requested action otherwise
prohibited by this Section 8 only after receiving the advance written consent of
Purchasers representing not less than two-thirds (2/3) of all amounts due under
Bridge Notes issued hereunder and then outstanding.
SECTION 9. MISCELLANEOUS.
SECTION 9.1 COUNTERPARTS.
This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party. In the event any signature page is delivered by facsimile transmission,
the party using such means of delivery shall cause four (4) additional original
executed signature pages to be physically delivered to the other party within
five (5) days of the execution and delivery hereof.
SECTION 9.2 HEADINGS.
The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.
SECTION 9.3 SEVERABILITY.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
SECTION 9.4 ENTIRE AGREEMENT. AMENDMENTS.
This Agreement supersedes all other prior oral or written agreements between the
Purchaser, the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Purchaser makes any
representation, warranty, covenant, or undertaking with respect to such matters.
No provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the party to be charged with enforcement.
SECTION 9.5 NOTICES.
Any notices, consents, waivers, or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered (a) upon receipt, when delivered personally, (b) upon
receipt, when sent by facsimile, PROVIDED a copy is mailed by U.S. certified
mail, return receipt requested, (c) three (3) days after being sent by U.S.
certified mail, return receipt requested, or (d) one (1) day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
The Tracker Corporation of America
000 Xxxxxx Xxxxxx Xxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention:
Telephone: (000) 000-0000
Facsimile:
With a copy to:
[name of Firm]
Attention: Xxxxxx X. Xxxxx
Telephone:
Facsimile:
If to any Purchaser, to its address and facsimile number on the signature page
of such Purchaser hereto, with copies to such Purchaser's counsel as set forth
on the signature page of such Purchaser hereto. Each party shall provide five-
(5) days prior written notice to the other party of any change in address or
facsimile number.
SECTION 9.6 INTEREST.
In no event shall the amount of interest due or payable hereunder or under the
Bridge Notes exceed the maximum rate of interest allowed by applicable law, and
if any such payment is inadvertently made by the Company or is inadvertently
received by any holder of Bridge Notes, then such excess sum shall be credited
as a payment of principal, unless the applicable holder of a Bridge Notes shall
notify the Company in writing that it elects to have such excess sum returned
forthwith. It is the express intent hereof that the Company not pay and the
holder of the Bridge Notes not receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may legally be paid by the Company
under applicable law.
SECTION 9.7 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Purchasers. Any Purchaser may assign its rights hereunder
without the consent of the Company, PROVIDED HOWEVER, that any such assignment
shall not release such Purchaser from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption.
SECTION 9.8 NO THIRD PARTY BENEFICIARIES.
This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.
SECTION 9.9 PUBLICITY.
The Company and Purchasers shall have the right to approve, before issuance, any
press releases or any other public statements with respect to the transactions
contemplated hereby; PROVIDED HOWEVER, that the Company shall be entitled,
without the prior approval of Purchasers, to make any press release or other
public disclosure with respect to such transactions as is required by applicable
law and regulations (although the Purchaser shall be consulted by the Company in
connection with any such press release or other public disclosure prior to its
release and shall be provided with a copy thereof).
SECTION 9.10 FURTHER ASSURANCES.
Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments, and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
SECTION 9.11 NO STRICT CONSTRUCTION.
The language used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rules of strict construction
will be applied against any party.
SECTION 9.12 GOVERNING LAW.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Georgia without regard to the principles of conflict of laws.
The parties agree that any appropriate State court located in New Castle County,
Delaware or the Federal courts located in the District of Delaware, shall have
jurisdiction of any case or controversy arising under or in connection with this
Agreement and shall be the proper forum in which to adjudicate such case or
controversy, and the parties further agree to submit to the personal
jurisdiction of such court.
IN WITNESS WHEREOF, Purchasers and the Company have caused this Series 1 Bridge
Note Purchase and Security Agreement to be duly executed as of the date first
written above.
[Signatures on the following page]
COMPANY SIGNATURE PAGE
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
COMPANY
THE TRACKER CORPORATION OF AMERICA
By: /s/ Xxx X. Xxxxxxxx
-----------------------------
Xxx X. Xxxxxxxx, President
PURCHASER SIGNATURE PAGE
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
PURCHASER
Purchaser Name:
-----------------------------
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
PURCHASER NAME
ADDRESS AND
FACSIMILE NUMBER
PRINCIPAL AMOUNT
OF BRIDGE NOTES
PURCHASED
PURCHASER'S LEGAL
COUNSEL ADDRESS
AND FACSIMILE NUMBER
SCHEDULE 1
DISCLOSURE SCHEDULE
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
EXHIBIT A
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF SERIES 1 BRIDGE NOTE
(WITH FORM OF REPRICING WARRANT ATTACHED AS ATTACHMENT 1)
Form Attached hereto.
THIS BRIDGE NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS
REGISTERED UNDER SUCH ACT OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE TRACKER CORPORATION OF AMERICA
SERIES 1 BRIDGE FINANCING NOTE
No. S1BFN-__ $___,000.00 August ___, 0000
XXX XXXXXXX XXXXXXXXXXX XX XXXXXXX, a Delaware corporation (such
corporation, or any successor permitted hereunder, the "COMPANY"), for value
received, hereby promises to pay to [HOLDER NAME], a [resident of the State of]
______ [corporation] [limited liability company] or any subsequent holder hereof
(such holders, assignees, or any registered assignees, the "HOLDERS"), the
principal sum of ___ THOUSAND DOLLARS (US $____,000.00), and to pay interest on
such principal sum, at the rate of eight percent (8%) per annum (the "NOTE
RATE") from the Original Issue Date (as defined below) until the one hundred
twentieth (120th) day after the Original Issue Date (the "MATURITY DATE") and at
the rate of eleven percent (11%) per annum (the "DEFAULT RATE") after the
Maturity Date until payment of all principal, premium, and accrued and unpaid
interest has been paid in full. Interest shall be payable on the Maturity Date.
All such interest shall be computed on the basis of the actual number of days
elapsed during any interest period in a year of 360 days. The date on which
this Series 1 Bridge Note shall have first been issued is referred to herein as
the "ORIGINAL ISSUE DATE."
SECTION 1. DESCRIPTION.
This Bridge Note is one of a series of Series 1 Bridge Financing Notes that
have been authorized by the Company (the "SERIES 1 BRIDGE NOTES") and are alike
except for principal amount and issue date, and are in registered form. This
Series 1 Bridge Note is convertible, into shares of the Company's Common Stock,
$.001 par value (the "COMMON STOCK"), as provided herein, and, effective upon
any such conversion, the Common Stock so issued shall be subject to all terms
and conditions and shall enjoy all rights, privileges, and preferences
applicable to such Common Stock under the Company's Certificate of Incorporation
(the "CERTIFICATE OF INCORPORATION"). The Common Stock issuable upon conversion
of this Series 1 Bridge Note (the "CONVERSION SHARES") are entitled to
registration rights pursuant to a Registration Rights Agreement between Holder,
the Company, and certain other signatories thereto dated August 18, 1999 (the
"REGISTRATION RIGHTS AGREEMENT"). This Series 1 Bridge Note is secured by
certain specified shares of Common Stock of the Company being pledged therefor
and having a value of approximately 200% of the principal amount of this Series
1 Bridge Note pursuant to the terms of a Series 1 Bridge Note Purchase and
Security Agreement dated August 18, 1999 (the "PURCHASE AGREEMENT") and a Stock
Pledge Agreement dated August 18, 1999, and is otherwise entitled to all of the
rights and benefits thereunder.
SECTION 2. OFFICE FOR REGISTRATION AND CONVERSION.
The Company shall maintain an office where this Series 1 Bridge Note shall
be surrendered or presented for registration of transfers or exchanges and
conversions. This office will initially be located at the offices of the
Company at 000 Xxxxxx Xxxxxx Xxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0.
The Company shall keep a register of the Series 1 Bridge Notes and of their
transfer and exchange, including the names and addresses of Holders of the
Series 1 Bridge Notes. Holder shall give the Company notice of any change in
Holder's address to the office indicated in this Section 2. Upon two- (2)
business days written request, the Company shall permit Holder or its duly
authorized representatives to inspect such register. Upon written notice to
Holder, the Company may change the address of the office to be maintained by the
Company pursuant to this Section 2 or appoint one or more co-registrars, stock
registrars, paying agents, or conversion agents to assist the Company in
performing its functions under the Series 1 Bridge Notes.
1
SECTION 3. REDEMPTION.
(a) MANDATORY REDEMPTION. If this Series 1 Bridge Note is outstanding
on the Maturity Date, this Series 1 Bridge Note shall be due and payable as
follows:
(i) if on the Maturity Date a Registration Statement IS effective with
respect to the Conversion Shares, the Company shall give written notice to
Holder of its intent to redeem the then outstanding principal amount of this
Series 1 Bridge Note, which notice shall state the election of the Company to
pay the redemption price in cash or by conversion of this Series 1 Bridge Note
into Common Stock, in the manner contemplated by Section 3(c) hereof.
Regardless of the manner in which paid, the redemption price (the "MATURITY DATE
REDEMPTION PRICE") shall be equal to 112.5% of the then outstanding principal
amount of this Series 1 Bridge Note PLUS accrued and unpaid interest thereon at
the Note Rate through and including the Maturity Date and at the Default Rate
after the Maturity Date through and including the date the payment is disbursed
(whether by issuance of Conversion Shares or a payment in cash).
(ii) if on the Maturity Date a Registration Statement IS NOT effective
with respect to the Conversion Shares, Holder may, in addition to all other
rights and remedies of Holder hereunder and under the Purchase Agreement, elect
to make written demand to the Company to redeem, all or part of the then
outstanding principal under this Series 1 Bridge Note. Such demand shall specify
Holder's election to accept payment of the redemption price in cash or by
conversion of this Series 1 Bridge Note into Common Stock, in the manner
contemplated by Section 3(c) hereof. The Company shall have three (3) Business
Days after its receipt of such demand to confirm its intention to redeem this
Series 1 Bridge Note by tendering to Holder either (A) cash or (B) Conversion
Shares (as specified in Holder's demand), in the manner contemplated by Section
3(c) hereof. In either case the redemption price shall be equal to the Maturity
Date Redemption Price.
(iii) The date of any redemption under either subparagraph (i) or (ii)
above shall be referred to as a "REDEMPTION DATE."
(b) VOLUNTARY REDEMPTION. At any time from and after the Original
Issue Date up to but not including the Maturity Date, the Company may, at its
option, call and redeem this Series 1 Bridge Note, at the redemption price set
forth in subparagraph (i), below, PLUS accrued and unpaid interest on such
redeemed amount through and including the Voluntary Redemption Date, as such
term is defined below (such redemption being the "VOLUNTARY REDEMPTION"), under
and in accordance with the following terms and procedures:
(i) The Company at its option prior to the Maturity Date may redeem
this Series 1 Bridge Note at the Redemption Price set forth below PLUS all
accrued and unpaid interest on the principal amount through and including the
Voluntary Redemption Date (the "VOLUNTARY REDEMPTION PRICE") as of a Voluntary
Redemption Date:
REDEMPTION DATE REDEMPTION PRICE
Original Issue Date through and including the 90th day 110%
afterthe Original Issue Date
91st day after the Original Issue Date through and including 112.5%
the 120th day after the Original Issue Date
121st day after the Original Issue Date through and including 115%
the date of redemption or conversion
2
(ii) At least ten (10) days before a Voluntary Redemption, the Company
shall mail a notice of redemption to Holder, stating (A) the redemption date,
which shall be a business day in New York, New York (the "VOLUNTARY REDEMPTION
DATE"), (B) the aggregate principal amount of this Series 1 Bridge Note to be
redeemed, (C) the Voluntary Redemption Price, and (D) the name and address of
the Person to whom this Series 1 Bridge Note must be presented to receive
payment if required pursuant to paragraph (iv) below. Once notice of redemption
is mailed and the Company shall have complied with paragraph (iii) below, the
Voluntary Redemption Price shall become due and payable on the Voluntary
Redemption Date.
(iii) On or before the third (3rd) day prior to the Voluntary Redemption
Date, the Company shall deposit into a bank trust account for the benefit of the
Holder of this Series 1 Bridge Note money sufficient to pay the Redemption Price
and all accrued and unpaid interest.
(iv) The Company may, at its option, require as a condition to the receipt
of a payment pursuant to this Section 3(b) that Holder present the Series 1
Bridge Notes to the Person specified in paragraph (ii) above for surrender.
(v) No Voluntary Redemption of this Series 1 Bridge Note can be effected after
the 179th day after the Original Issue Date.
(c) CONVERSION INTO COMMON STOCK IN LIEU OF PAYMENTS.
(i) In lieu of payment of cash to Holder pursuant to Section 3(a)(i) hereof
and Section 3(b) hereof, the Company may, elect to pay all or part of the
Maturity Date Redemption Price or the Voluntary Redemption Price in Conversion
Shares, under the terms of Section 3(d) hereof.
(ii) In lieu of cash, pursuant to Section 3(a)(ii) hereof, Holder may
require the Company to pay all or part of the Maturity Date Redemption Price in
Conversion Shares, under the terms of Section 3(d) hereof.
The Repricing Warrant shall apply to each share of Common Stock received by
Holder pursuant to this Section 3(c).
(d) The number of shares of Common Stock issuable in payment of the
Mandatory Redemption Price or the Voluntary Redemption Price is equal to the
quotient of the Mandatory Redemption Price or the Voluntary Redemption Price (as
the case may be) DIVIDED BY $_______, (the "CONVERSION PRICE") {AVERAGE CLOSING
BID PRICE - 5 DAYS PRIOR TO ORIGINAL ISSUE DATE}. Fractional shares will not be
issued. In lieu of any fraction of a share, the Company shall deliver its check
for the dollar amount of the less-than full share remainder.
3
SECTION 4. METHOD OF PAYMENT.
(a) Interest accruing through and including the Maturity Date shall be
computed at the Note Rate. Interest accruing after the Maturity date shall be
computed at the Default Rate. Accrued and unpaid interest shall be due and
payable at the time the principal and premium of this Series 1 Bridge Note is
paid. All such interest shall be computed on the basis of the actual number of
days elapsed during any interest period in a year of 360 days. Interest shall
begin to accrue on the Original Issue Date.
(b) The Company shall pay interest and principal on this Series 1
Bridge Note (except defaulted interest) to the Person who is the registered
Holder of this Series 1 Bridge Note on the day on which the interest or
principal payment is due. If the Company defaults in a payment of interest on
this Series 1 Bridge Note, it may pay the defaulted interest, PLUS any interest
on the defaulted interest if permitted provided by Section 4(d) below, to the
Person who is the registered Holder of this Series 1 Bridge Note on the date
Such payment is made.
(c) The Company shall pay interest by check payable in money of the
United States of America that at the time of payment is legal tender for public
and private debts. Payments of interest shall be mailed to Holder's address
shown in the register maintained pursuant to Section 2; PROVIDED HOWEVER, that
with respect to the final payment of principal and accrued and unpaid interest
necessary to pay this Series 1 Bridge Note in full, to receive such payment
Holder must surrender this Series 1 Bridge Note for cancellation to the Company
or to a paying agent appointed by the Company. Principal and interest shall be
considered paid on the date due, and no interest shall accrue thereafter, if
there is on deposit on that date, in a bank trust account for the benefit of
Holder of this Series 1 Bridge Note, money sufficient to pay the Redemption
Price and all accrued and unpaid interest due under this Series 1 Bridge Note.
SECTION 5. CONVERSION PRICE AND ADJUSTMENTS.
(a) At anytime AFTER the Maturity Date, Holder may convert all or any
portion of the Redemption Price and accrued and unpaid interest due on this
Series 1 Bridge Note into shares of Common Stock.
(b) If Holder elects to convert less than the full Redemption Price of
this Series 1 Bridge Note, such conversion shall be permitted only in one
hundred (100)-share increments unless the Company has given its contemporaneous
consent to conversion of an odd lot. The provisions hereof that apply to
conversion of the entire Redemption Price of this Series 1 Bridge Note shall
also apply to conversion of a portion of the Redemption Price. Upon surrender
of the Series 1 Bridge Note for conversion in part, the Company shall issue new
Series 1 Bridge Notes in substantially the same form as this Series 1 Bridge
Note, except that the principal amount shall be reduced by the principal amount
so converted (exclusive of the redemption premium).
(c) The number of shares of Common Stock issuable upon conversion of
this Series 1 Bridge Note is equal to the quotient of the Redemption Price of
this Series 1 Bridge Note being converted DIVIDED BY Conversion Price.
Fractional shares will not be issued. In lieu of any fraction of a share, the
Company shall deliver its check for the dollar amount of the less than full
share remainder. Accrued and unpaid interest shall be included in computing the
number of Conversion Shares issuable upon conversion of this Series 1 Bridge
Note. Interest shall cease to accrue on that portion of the Redemption Price
converted from and after the Conversion Date.
4
SECTION 6. PROCEDURES FOR CONVERSION, AND ISSUANCE OF CONVERSION SHARES.
(a) HOLDERS' DELIVERY REQUIREMENTS. To convert this Series 1 Bridge
Note into Common Stock, (the "CONVERSION DATE"), the Holder hereof shall (A)
deliver or transmit by facsimile, for receipt on or prior to 11:59 P.M., Eastern
Time, on such date, a copy of a fully executed notice of conversion in the form
attached hereto as EXHIBIT A (the "CONVERSION NOTICE") to the Company or its
designated Transfer Agent, and (B) surrender to a common carrier for delivery to
the Company or the Transfer Agent as soon as practicable following such date,
the original Series 1 Bridge Note being converted (or an indemnification
undertaking with respect to such shares in the case of the loss, theft, or
destruction of the Series 1 Bridge Note) and the originally executed Conversion
Notice. The date the Company receives the Conversion Note and this Series 1
Bridge Note is hereinafter the "CONVERSION DATE."
(b) COMPANY'S RESPONSE. Upon receipt by the Company of a facsimile
copy of a Conversion Notice, the Company shall immediately send, via Facsimile,
a confirmation of receipt of such Conversion Notice to Holder. Upon receipt by
the Company or the Transfer Agent of the Series 1 Bridge Note to be converted
pursuant to a Conversion Notice, together with the originally executed
Conversion Notice, the Company or the Transfer Agent (as applicable) shall,
within five (5) business days following the date of receipt, (A) issue and
surrender to a common carrier for overnight delivery to the address as specified
in the Conversion Notice, a certificate, registered in the name of Holder or its
designee, for the number of shares of Common Stock to which Holder shall be
entitled or (B) credit the aggregate number of shares of Common Stock to which
such Holder shall be entitled to the Holder's or its designee's balance account
at The Depository Trust Company.
(c) RECORD HOLDER. The Person or persons entitled to receive the
shares of Common Stock issuable upon a conversion of this Series 1 Bridge Note
shall be treated for all purposes as the "RECORD HOLDER" or Holder of such
shares of Common Stock on the Conversion Date.
(d) COMPANY'S FAILURE TO TIMELY CONVERT. If the Company shall fail to
issue to Holder within five (5) business days following the date of receipt by
the Company or the Transfer Agent of this Series 1 Bridge Note to be converted
pursuant to a Conversion Notice, a certificate for the number of shares of
Common Stock to which each Holder is entitled upon Holder's conversion of this
Series 1 Bridge Note, in addition to all other available remedies which such
Holder may pursue hereunder and under the Purchase Agreement between the Company
and the initial Holder of this Series 1 Bridge Note (including indemnification
pursuant to Section 7.18 thereof), the Company shall pay additional damages to
Holder on each day after the fifth (5th) business day following the date of
receipt by the Company or the Transfer Agent an amount equal to 1.0% of the
product of (A) the number of shares of Common Stock not issued to Holder and to
which Holder is entitled MULTIPLIED BY (B) the Closing Bid Price of the Common
Stock on the business day following the date of receipt by the Company or the
Transfer Agent of the Conversion Notice. The foregoing notwithstanding, Holder
at its option may withdraw a Conversion Notice, and remain a Holder of this
Series 1 Bridge Note, if Holder has otherwise complied with this Section 6.
(e) ADJUSTMENTS TO CONVERSION PRICE. If any adjustment to the
Conversion Price to be made pursuant to Section 7 becomes effective immediately
after a record date for an event as therein described, and conversion occurs
prior to such event but after the record date, the Company may defer issuing,
delivering, or paying to Holder any additional shares of Common Stock or check
for any cash remainder required by reason of such adjustment until the
occurrence of such event, PROVIDED that the Company delivers to Holder a due
xxxx or other appropriate instrument evidencing the Holders' right to receive
such additional shares or check upon the occurrence of the event giving rise to
the adjustment.
5
(f) RESERVATION OF CONVERSION SHARES. Until such time as this Series 1
Bridge Note has been fully redeemed, the Company shall reserve out of its
authorized but unissued Common Stock enough shares of Common Stock to permit the
conversion of the entire Redemption Price and all accrued and unpaid interest
due on this Series 1 Bridge Note at any time. All shares of Common Stock issued
upon conversion of this Series 1 Bridge Note shall be fully paid and
nonassessable. The Company covenants that if any shares of Common Stock,
required to be reserved for purposes of conversion of this Series 1 Bridge Note
hereunder, require registration with or approval of any governmental authority
under any federal or state law or listing upon any national securities exchange
before such shares may be issued upon conversion, the Company shall in good
faith, as expeditiously as possible, endeavor to cause such shares to be duly
registered, approved or listed, as the case may be.
SECTION 7. ADJUSTMENTS TO CONVERSION PRICE.
The Conversion Price shall be subject to adjustment from time to time as
follows:
(a) If the Company at any time subdivides (by any stock split, stock
dividend, recapitalization, or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Conversion Price in
effect immediately prior to such subdivision will be proportionately reduced.
If the Company at any time combines (by combination, reverse stock split, or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination will be proportionately increased.
(b) Prior to the consummation of any Organic Change (as defined below),
the Company will make appropriate provision (in form and substance satisfactory
to the Holder to insure that Holder will thereafter have the right to acquire
and receive in lieu of, or in addition to, (as the case may be) the shares of
Common Stock immediately theretofore acquirable and receivable upon the
conversion of this Holder's Series 1 Bridge Note, such shares of stock,
securities, or assets as may be issued or payable with respect to, or in
exchange for, the number of shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of this Series 1 Bridge Note had
such Organic Change not taken place. In any such case, the Company will make
appropriate provision (in form and substance satisfactory to Holder with respect
to such Holder's rights and interests to insure that the provisions of this
Section 7b) and Sections 7(c) and 7(d) below will thereafter be applicable. The
Company will not effect any such consolidation, merger, or sale, unless prior to
the consummation thereof the successor entity (if other than the Company)
resulting from consolidation or merger or the entity purchasing such assets
assumes, by written instrument (in form and substance satisfactory to Holder,
the obligation to deliver to Holder such shares of stock, securities, or assets
as, in accordance with the foregoing provisions, that Holder may be entitled to
acquire. For purposes of this Agreement, "ORGANIC CHANGE" means any
recapitalization, reorganization, reclassification, consolidation, merger, or
sale of all or substantially all of the Company's assets to another Person (as
defined below), or other similar transaction which is effected in such a way
that holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities, or assets with respect to or in
exchange for Common Stock; and "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, and a government or any department or agency
thereof.
6
SECTION 8. NOTICES.
The Company shall give the following notices at the times specified:
(a) Immediately upon any adjustment of the Conversion Price, the
Company will give written notice thereof to Holder, setting forth in reasonable
detail and certifying the calculation of such adjustment.
(b) The Company will give written notice to Holder, at least twenty
(20) days prior to the date on which the Company closes its books or takes a
record (i) with respect to any dividend or distribution upon the Common Stock,
(ii) with respect to any pro rata subscription offer to Holder of Common Stock,
or (iii) for determining rights to vote with respect to any Organic Change,
dissolution, or liquidation.
(c) The Company will also give written notice to Holder at least twenty
(20) days prior to the date on which any Organic Change, Major Transaction (as
defined below), dissolution, or liquidation will take place.
SECTION 9. SUCCESSORS TO THE COMPANY.
The Company shall not consolidate or merge with or into, or sell all or
substantially all of its assets to, any Person unless: (i) the Person is a
corporation; (ii) such Person executes, and mails to Holder a copy of, an
instrument by which such Person or an affiliate assumes the due and punctual
payment of the principal of and interest on this Series 1 Bridge Note and the
performance and observance of all the obligations of the Company under this
Series1 Bridge Note; and (iii) immediately after giving effect to the
transaction, no Event of Default or event which after notice or lapse of time or
both would become an Event of Default shall have occurred. Upon compliance with
this Section 9, Successor Corporation shall succeed to and be substituted for
the Company under this Series 1 Bridge Note with the same effect as if the
Successor Corporation had been named as the Company herein. Nothing in this
Series 1 Bridge Note shall prevent any consolidation or merger in which the
Company is the surviving corporation, or any acquisition by the Company by
purchase or otherwise of all or any part of the assets of any other Person, and
no such consolidation, merger, or acquisition shall require compliance with this
Section 9.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
(a) As used herein, an "EVENT OF DEFAULT" occurs if:
(i) the Company defaults in the payment of principal and/or interest
when the same becomes due and payable, and such failure is not cured within five
(5) days after the Company receives written demand from Holder to remedy the
same;.
(ii) the Company fails to comply with any other provision contained in
this Series 1 Bridge Note, the Purchase Agreement, the Warrant, the Repricing
Warrant, or the Registration Rights Agreement, and such failure is not cured
within ten (10) days after the Company receives written demand from Holder to
remedy the same;
(iii) the Company defaults in any payment of principal of or interest
on any Debt (excluding trade payables) in excess of $100,000 beyond any period
of grace provided with respect thereto and the effect of such failure is to
cause the holder of such Debt to accelerate the Debt such that such Debt becomes
due prior to its stated maturity;
(iv) any representation or warranty made in writing by or on behalf of
(i) the Company in the Purchase Agreement or in any writing furnished in
connection with or pursuant to the Purchase Agreement or in connection with the
transactions contemplated by this Agreement, or (ii) the Company in the
Registration Rights Agreement, or (iii) the Company in the Escrow Agreement,
shall be false in any material respect on the date as of which made;
7
(v) the Company makes an assignment for the benefit of creditors or is
generally not paying its debts as such debts become due;
(vi) any order or decree for relief in respect of the Company is
entered under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution, or liquidation or similar law,
whether now or hereafter in effect (herein called the "BANKRUPTCY LAW"), of any
jurisdiction;
(vii) the Company petitions or applies to any tribunal for, or consents
to, the appointment of, or taking possession by, a trustee, receiver, custodian,
liquidation, or similar official of the Company, or of any substantial part of
the assets of the Company, or commences a voluntary case under the Bankruptcy
Law of the United States or any proceedings relating to the Company under the
Bankruptcy Law of any other jurisdiction;
(viii) any petition or application described in Section 10(a)(vi) above
is filed, or any such proceedings are commenced, against the Company and the
Company by any act indicates its approval thereof, consent thereto or
acquiescence therein, or an order, judgment or decree is entered appointing any
such trustee, receiver, custodian, liquidator, or similar official, or approving
the petition in any such proceedings, and such order, judgment, or decree
remains unstayed and in effect for more than sixty (60) days;
(ix) any order, judgment, or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such order,
judgment, or decree remains unstayed and in effect for more than sixty (60)
days; or
(x) a final judgment (not fully covered by insurance) in an amount in
excess of $100,000 is rendered against the Company and, within ten (10) business
days after entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within ten (10) days after the expiration of any such
stay, such judgment is not discharged; or
(xi) the Company fails to obtain shareholder approval for its proposed
increase in authorized capital stock from 50,000,000 shares of Common Stock to
93,000,000 shares of Common Stock at its shareholder meeting scheduled for
August 27, 1999.
(b) Upon the occurrence of an Event of Default described in subsection
(vi), (vii), or (viii) of Section 10(a), the principal of and accrued interest
on this Series 1 Bridge Note shall automatically become immediately due and
payable, without presentment, demand, protest or other requirements of any kind,
all of which are hereby expressly waived by the Company. If any other Event of
Default exists, Holder may, in addition to the exercise of any right, power, or
remedy permitted to Holder by law, declare (by written notice or notices to the
Company) the entire principal of and all interest accrued on this Series 1
Bridge Note to be due and payable, and this Series 1 Bridge Note shall thereupon
become immediately due and payable, without presentment, demand, protest, or
other notice of any kind, all of which are hereby expressly waived by the
Company. Upon such declaration, the Company will immediately pay to Holder of
this Series 1 Bridge Note the then outstanding principal of and accrued and
unpaid interest on the Series 1 Bridge Notes. If at any time after acceleration
of the maturity of the Series 1 Bridge Notes, the Company shall pay all arrears
of interest and all payments on account of principal which shall have become due
other than by acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rate specified in the Series 1
Bridge Notes) and all Events of Default (other than nonpayment of principal of
or interest on this Series 1 Bridge Note due and payable solely by virtue of
acceleration) shall be remedied or waived by Holder by written notice to the
Company may rescind and annul the acceleration and its consequences, but such
action shall not affect any subsequent Event of Default or impair any right
consequent thereon.
8
(c) A delay or omission by the Holder of this Series 1 Bridge Note in
exercising any right or remedy arising upon an Event of Default shall not impair
such right or remedy or constitute a waiver of or an acquiescence in the Event
of Default.
(d) If any Event of Default shall occur and be continuing, the Holder
of this Series 1 Bridge Note may proceed to protect and enforce their rights
under this Agreement and this Series 1 Bridge Note by exercising such remedies
as are available to such Holder either by suit in equity or by action at law, or
both, whether for specific performance of any covenant or other agreement
contained in this Agreement or in aid of the exercise of any power granted in
this Agreement. No remedy conferred in this Agreement upon Holder is intended
to be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
SECTION 11. EXCHANGE, TRANSFER, REPLACEMENT OR CANCELLATION.
(a) This Series 1 Bridge Note may be exchanged for an equal principal
amount of Series 1 Bridge Notes in denominations of US$25,000.00 or in greater
multiples of US$5,000.00 upon written request to the Company accompanied by
surrender of this Series 1 Bridge Note to the Company or to an agent designated
for that purpose. Any Series 1 Bridge Notes issued in exchange for this Series
1 Bridge Note shall be one of this Series 1 Bridge Note referred to in Section
1, and shall be entitled to all the rights thereof.
(b) The Series 1 Bridge Notes may not be transferred except upon the
conditions specified in this Section 11(b), which conditions are intended to
insure compliance with the provisions of the Securities Act of 1933, as amended
(the "SECURITIES ACT"). Prior to any proposed transfer of this Series 1 Bridge
Note the Holder hereof shall give written notice to the Company of the proposed
disposition and shall furnish to the Company a statement of the circumstances
surrounding the proposed disposition and an opinion of counsel reasonably
satisfactory to the Company to the effect that (i) such disposition will not
require registration of such securities under the Securities Act or
qualification of such securities under the blue sky or state securities laws of
any state in which such qualification would be required, or (ii) appropriate
action necessary for compliance with the Securities Act or the blue sky or
securities laws of such states has been taken. The Holder hereof shall cause any
proposed transferee of such securities to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this Section 11.
The Company or any co-registrar appointed by the Company may require the Holder
to furnish appropriate endorsements and/or transfer documents, including
information regarding any proposed transferee's name, address and social
security or taxpayer identification number, and to pay any issue or transfer
taxes or fees as may be required by law. The registered Holder of this Series 1
Bridge Note may be treated as its owner for all purposes.
(c) If Holder claims this Series 1 Bridge Note has been lost, destroyed, or
wrongfully taken, the Company shall issue a replacement Series 1 Bridge Note
upon (i) receipt of any indemnity bond or other assurance requested by the
Company to protect it from any loss which it may suffer by reason of such
replacement or subsequent presentment of the original Series 1 Bridge Note, and
(ii) payment of any expenses reasonably incurred by the Company in replacing the
Series 1 Bridge Note.
9
SECTION 12. AMENDMENTS AND WAIVERS.
This Series 1 Bridge Note may, with the consent of the Company and the
Holder be amended or any provision thereof waived.
SECTION 13. NOTICE.
Any notice or communication hereunder shall be in writing and delivered by
first-class mail, return receipt requested, to each Holder at its address shown
in the register kept by the Company or any co-registrar appointed by the Company
and to the Company at the address of its office to be maintained pursuant to
Section 2. Failure to mail, or any defect in, a notice or communication to any
other Holder of this Series 1 Bridge Note shall not affect its sufficiency with
respect to the other Holders. If a notice or communication is mailed to Holder
in the manner provided above within the time prescribed, it shall be deemed duly
given and effective on the tenth (10th) business day after it was deposited in
the mail, whether or not Holder actually receives it.
SECTION 14. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, or shareholder, as such, of the Company
shall not have any liability for any obligations of the Company under this
Series 1 Bridge Note or for any claim based on, in respect of or by reason of
such obligations or their creation. The Holder of this Series 1 Bridge Note by
accepting this Series 1 Bridge Note waives and releases all such liability and
such waiver and release are part of the consideration for the issue of the
Series 1 Bridge Note.
SECTION 15. GOVERNING LAW.
The Series 1 Bridge Notes shall be governed by and construed in accordance
with the laws of the State of Georgia, irrespective of the choice of law
provisions thereof. The parties agree that any appropriate state court located
in Xxxxxx County, Georgia, or any Federal Court located in Atlanta, Georgia,
including without limitation to the United States District Court for the
Northern District of Georgia, shall have exclusive jurisdiction of any case or
controversy arising under or in connection with this Agreement and shall be a
proper forum in which to adjudicate such case or controversy. The parties
consent to the jurisdiction of such courts.
IN WITNESS WHEREOF, the parties have caused this Series 1 Bridge Financing
Note to be duly executed under seal as of day and year first above written.
[Signatures on the following page]
10
COMPANY SIGNATURE PAGE
TO
SERIES 1 BRIDGE FINANCING NOTE
THE TRACKER CORPORATION OF
AMERICA
By:
--------------------------------------
Xxx X. Xxxxxxxx, President
ATTEST:
By:
---------------------
Assistant Secretary
[CORPORATE SEAL]
11
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED
UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II)
THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
THE TRACKER CORPORATION OF AMERICA
ATTACHED REPRICING WARRANT
Warrant No. RPW-____ __,000 shares
Original Issue Date:____________, 1999
THIS CERTIFIES THAT, FOR VALUE RECEIVED, _______________ {Purchaser of
Bridge Notes} or its assigns (the "HOLDER") is entitled to purchase, on the
terms and conditions hereinafter set forth, at any time or from time to time
during the Exercise Period, but not thereafter, a number of shares of the Common
Stock, par value $.001 (the "COMMON STOCK"), of THE TRACKER CORPORATION OF
AMERICA, a Delaware corporation (the "COMPANY"), determined in accordance
with Section 2 hereof, at a price of $.001 per share (the "EXERCISE PRICE").
Each share of Common Stock as to which this Repricing Warrant is exercisable is
a "REPRICING SHARE" and all such shares are collectively referred to as the
"REPRICING SHARES." This Repricing Warrant shall remain attached to the Series
1 Bridge Financing Note issued to Holder on the Original Issue Date (the "BRIDGE
NOTE"), until conversion of the Bridge Note, at which time it shall
automatically detach.
SECTION 1. DEFINITIONS.
The following capitalized terms are not defined elsewhere in this Repricing
Warrant, and are used herein with the meanings thereafter ascribed:
"AVERAGE MARKET PRICE" means, the arithmetic mean of the Closing Bid Prices
of the Common Stock for each trading day in a five (5) trading day period
immediately preceding the Conversion Date.
"CLOSING BID PRICE" means, the last closing bid price of the Common Stock
on the NASDAQ National Market (the "NASDAQ-NM") as reported by Bloomberg
Financial Markets ("BLOOMBERG"), or, if the NASDAQ-NM is not the principal
trading market for the Common Stock, the last closing bid price of the Common
Stock on the principal securities exchange or trading market where the Common
Stock is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price of the Common Stock in the over-the-counter
market on the pink sheets or bulletin board for the Common Stock as reported by
Bloomberg, or, if no closing bid price is reported for the Common Stock by
Bloomberg, the last closing trade price of the Common Stock as reported by
Bloomberg. If the Closing Bid Price cannot be calculated for the Common Stock
on such date on any of the foregoing bases, the Closing Bid Price of the Common
Stock on such date shall be the fair market value as reasonably determined in
good faith by the Board of Directors of the Company (all as appropriately
adjusted for any stock dividend, stock split, or other similar transaction
during such period);
"CONVERSION DATE" means the date Holder converts the Bridge Note.
"CONVERSION PRICE" means $________ {125% OF THE CONVERSION PRICE OF THE
BRIDGE NOTE}.
1
"CONVERSION SHARES" means the number of shares of Common Stock issued upon
conversion of the Bridge Note.
"EXERCISE PERIOD" means a ninety (90) period which commences on the
Repricing Date and ends at 5:00 p.m. (Eastern Time) on the Expiration Date.
"EXPIRATION DATE" means the ninetieth (90th) day after the Repricing Date.
"REPRICING DATE" means the twenty-first (21st) Trading Day after the
Conversion Date.
SECTION 2. DETERMINATION OF NUMBER OF REPRICING SHARES.
The number of Repricing Shares issuable upon exercise of this Repricing
Warrant shall be determined on the Repricing Date. The number of Repricing
Shares shall be equal to: the number of Conversion Shares MULTIPLIED BY a
fraction, (a) the numerator of which is the Conversion Price MINUS the Average
Market Price and (b) the denominator of which is the Average Market Price. In
the case of a dispute as to the determination of the Average Market Price or the
arithmetic calculation of the Exercise Price, the Company shall promptly issue
to such Holder(s) the number of shares of Common Stock that is not disputed and
shall submit the disputed determinations or arithmetic calculations to the
holder via facsimile within three (3) business days of receipt of such holder's
Conversion Notice. If such Holder(s) and the Company are unable to agree upon
the determination of the Average Market Price or arithmetic calculation of the
Exercise Price within two (2) business days of such disputed determination or
arithmetic calculation being submitted to the holder, then the Company shall
within one (1) business day submit via facsimile (A) the disputed determination
of the Average Market Price to an independent, reputable investment bank or (B)
the disputed arithmetic calculation of the Exercise Price to its independent,
outside accountant. The Company shall cause the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and such Holders of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
manifest error.
SECTION 3. EXERCISE OF WARRANT; CONVERSION OF WARRANT; ELECTION TO PAY CASH.
(a) This Warrant may, at the option of the Holder, be exercised in
whole or in part from time to time by delivery to the Company at its office at
000 Xxxxxx Xxxxxx West, 26th Floor, Toronto, Ontario, Canada M5G 1Z8 Attention:
President, or to any transfer agent for the Common Stock, on or before 5:00
p.m., Eastern Time, on the Expiration Date, (i) a written notice of such
registered Holder's election to exercise this Warrant (the "EXERCISE NOTICE"),
which notice may be in the form of the Notice of Exercise attached hereto,
properly executed and completed by the registered Holder or an authorized
officer thereof, (ii) a check payable to the order of the Corporation, in an
amount equal to the product of the Exercise Price MULTIPLIED BY the number of
Repricing Shares specified in the Exercise Notice, AND (iii) this Warrant (the
items specified in (i), (ii), and (iii) are collectively the "EXERCISE
MATERIALS").
(b) This Warrant may, at the option of the Holder, be converted into
Common Stock in whole but not in part, if and only if the Value of one share of
Common Stock on the Effective Date (as defined in Section 1(c) hereof) is
greater than the Exercise Price, by delivery to the Company at the address
designated in Section 1(a) above or to any transfer agent for the Common Stock,
on or before 5:00 p.m. Eastern Time on the Expiration Date, (i) a written notice
of Holder's election to convert this Warrant (the "CONVERSION NOTICE"), properly
executed and completed by the registered Holder or an authorized officer
thereof, AND (ii) this Warrant (the items specified in (i) and (ii) are
collectively the "CONVERSION MATERIALS"). The number of shares of Common Stock
issuable upon conversion of this Warrant is equal to the quotient of (x) the
product of the number of Repricing Shares then issuable upon exercise of this
Warrant (assuming an exercise for cash) MULTIPLIED BY the difference between (A)
the Average Market Price MINUS (B) the then effective Exercise Price DIVIDED BY
(y) the Average Market Price. Any fraction resulting from the calculation of
the number of Repricing Shares then issuable in a conversion of this Repricing
Warrant shall be truncated;
2
(c) Upon timely receipt of the Exercise Materials or Conversion
Materials (whichever is applicable), the Company shall, as promptly as
practicable, and in any event within five (5) business days after its receipt of
the Exercise Materials or Conversion Materials, execute or cause to be executed
and delivered to Holder a certificate or certificates representing the number of
Repricing Shares specified in the Exercise Notice or if Holder delivered a
Conversion Notice, the number of shares of Common Stock issuable upon conversion
of this Warrant (whichever is applicable), together with cash in lieu of any
fraction of a share, and, (x) if the Warrant is exercised in full, a copy of
this Warrant marked "Exercised," or (y) if the Warrant is partially exercised, a
copy of this Warrant marked "Partially Exercised" together with a new Warrant on
the same terms for the unexercised balance of the Repricing Shares, or (z) if
the Warrant is converted, a copy of this Warrant marked "Converted." The stock
certificate or certificates shall be registered in the name of the registered
Holder of this Warrant or such other name or names as shall be designated in the
Exercise Notice or Conversion Notice. The date on which the Warrant shall be
deemed to have been exercised or converted (the "EFFECTIVE DATE"), and the date
the person in whose name any certificate evidencing the Common Stock issued upon
the exercise or conversion hereof is issued shall be deemed to have become the
holder of record of such shares, shall be the date the Corporation receives the
Exercise Materials or Conversion Materials, irrespective of the date of delivery
of a certificate or certificates evidencing the Common Stock issued upon the
exercise or conversion hereof, except that, if the date on which the Exercise
Materials or Conversion Materials are received by the Company is a date on which
the stock transfer books of the Company are closed, the Effective Date shall be
the date the Company receives the Exercise Materials or Conversion Materials,
and the date such person shall be deemed to have become the holder of the Common
Stock issued upon the exercise or conversion hereof shall be the next succeeding
date on which the stock transfer books are open. All shares of Common Stock
issued upon the exercise or conversion of this Warrant will, upon issuance, be
fully paid and nonassessable and free from all taxes, liens, and charges with
respect thereto.
(d) If the Company shall fail to issue to Holder within five (5)
business days following the date of receipt by the Company or the Transfer Agent
of the Exercise Materials or the Conversion Materials, a certificate for the
number of shares of Common Stock to which such holder is entitled upon such
holder's exercise or conversion of this Warrant, in addition to all other
available remedies which such holder may pursue hereunder and under this Warrant
and the Series 1 Bridge Note Purchase and Security Agreement between the Company
and the initial holder of the Warrant (the "SECURITIES PURCHASE AGREEMENT")
including indemnification pursuant to Section 7.18 thereof, the Company shall
pay additional damages to such holder on each day after the Effective Date, an
amount equal to 1.0% of the product of (A) the number of Repricing Shares not
issued to Holder and to which Holder is entitled MULTIPLIED BY (B) the Closing
Bid Price of the Common Stock on the Effective Date. Such damages shall be
computed daily and are due and payable daily.
3
(e) The Company may, in lieu of issuing the Repricing Shares pay Holder
an amount equal to the number of Repricing Shares issuable on the Effective Date
MULTIPLIED BY the Average Market Price (the "PAYMENT AMOUNT"). In such event,
the Company shall be obligated to deliver the Payment Amount to Holder within
five (5) business days following the Effective Date. If the Company shall fail
to deliver the Payment Amount within five (5) business days after the Effective
Date, in addition to all other available remedies which Holder may pursue at law
or equity, including indemnification pursuant to Section 7.18 of the Securities
Purchase Agreement, the Company shall pay additional damages to Holder on each
day after the Effective Date, until the Payment Amount has been paid, an amount
equal to 1.0% of the Payment Amount. Such damages shall be computed daily and
are due and payable daily.
SECTION 4. ADJUSTMENTS TO REPRICING SHARES.
The number of Repricing Shares issuable upon the exercise hereof shall be
subject to adjustment as follows:
(a) In the event the Company is a party to a consolidation, share
exchange, or merger, or the sale of all or substantially all of the assets of
the Company to, any person, or in the case of any consolidation or merger of
another corporation into the Company in which the Company is the surviving
corporation, and in which there is a reclassification or change of the shares of
Common Stock of the Company, this Warrant shall after such consolidation, share
exchange, merger, or sale be exercisable for the kind and number of securities
or amount and kind of property of the Company or the corporation or other entity
resulting from such share exchange, merger, or consolidation, or to which such
sale shall be made, as the case may be (the "SUCCESSOR COMPANY"), to which a
holder of the number of shares of Common Stock deliverable upon the exercise
(immediately prior to the time of such consolidation, share exchange, merger, or
sale) of this Warrant would have been entitled upon such consolidation, share
exchange, merger, or sale; and in any such case appropriate adjustments shall be
made in the application of the provisions set forth herein with respect to the
rights and interests of the registered Holder of this Warrant, such that the
provisions set forth herein shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to the number and kind of securities
or the type and amount of property thereafter deliverable upon the exercise of
this Warrant. The above provisions shall similarly apply to successive
consolidations, share exchanges, mergers, and sales. Any adjustment required by
this Section 2 (a) because of a consolidation, share exchange, merger, or sale
shall be set forth in an undertaking delivered to the registered Holder of this
Warrant and executed by the Successor Company which provides that the Holder of
this Warrant shall have the right to exercise this Warrant for the kind and
number of securities or amount and kind of property of the Successor Company or
to which the holder of a number of shares of Common Stock deliverable upon
exercise (immediately prior to the time of such consolidation, share exchange,
merger, or sale) of this Warrant would have been entitled upon such
consolidation, share exchange, merger, or sale. Such undertaking shall also
provide for future adjustments to the number of Repricing Shares and the
Exercise Price in accordance with the provisions set forth in Section 2 hereof.
(b) In the event the Company should at any time, or from time to time
after the Original Issue Date, fix a record date for the effectuation of a stock
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock, or securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"COMMON STOCK EQUIVALENTS") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon exercise or
exercise thereof), then, as of such record date (or the date of such dividend,
distribution, split, or subdivision if no record date is fixed), the number of
Repricing Shares issuable upon the exercise hereof shall be proportionately
increased and the Exercise Price shall be appropriately decreased by the same
proportion as the increase in the number of outstanding Common Stock Equivalents
of the Company resulting from the dividend, distribution, split, or subdivision.
Notwithstanding the preceding sentence, no adjustment shall be made to decrease
the Exercise Price below $.001 per Share.
4
(c) In the event the Company should at any time or from time to time
after the Original Issue Date, fix a record date for the effectuation of a
reverse stock split, or a transaction having a similar effect on the number of
outstanding shares of Common Stock of the Company, then, as of such record date
(or the date of such reverse stock split or similar transaction if no record
date is fixed), the number of Repricing Shares issuable upon the exercise hereof
shall be proportionately decreased and the Exercise Price shall be appropriately
increased by the same proportion as the decrease of the number of outstanding
Common Stock Equivalents resulting from the reverse stock split or similar
transaction.
(d) In the event the Company should at any time or from time to time
after the Original Issue Date, fix a record date for a reclassification of its
Common Stock, then, as of such record date (or the date of the reclassification
if no record date is set), this Warrant shall thereafter be convertible into
such number and kind of securities as would have been issuable as the result of
such reclassification to a holder of a number of shares of Common Stock equal to
the number of Repricing Shares issuable upon exercise of this Warrant
immediately prior to such reclassification, and the Exercise Price shall be
unchanged.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through reorganization, consolidation, merger, dissolution,
issue, or sale of securities, sale of assets or any other voluntary action, void
or seek to avoid the observance or performance of any of the terms of the
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment. Without limiting the generality of the foregoing, the Company
(x) will not create a par value of any share of stock receivable upon the
exercise of the Warrant above the amount payable therefor upon such exercise,
and (y) will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and non-assessable
shares upon the exercise of the Warrant.
(f) When any adjustment is required to be made in the number or kind of
shares purchasable upon exercise of the Warrant, or in the Exercise Price, the
Company shall promptly notify the Holder of such event and of the number of
shares of Common Stock or other securities or property thereafter purchasable
upon exercise of the Warrants and of the Exercise Price, together with the
computation resulting in such adjustment.
(g) The Company covenants and agrees that all Repricing Shares which
may be issued will, upon issuance, be validly issued, fully paid, and
non-assessable. The Company further covenants and agrees that the Company will
at all times have authorized and reserved, free from preemptive rights, a
sufficient number of shares of its Common Stock to provide for the exercise of
the Warrant in full.
5
SECTION 5. NO STOCKHOLDER RIGHTS.
This Warrant shall not entitle the Holder hereof to any voting rights or
other rights as a stockholder of the Company.
SECTION 6. TRANSFER OF SECURITIES.
(a) This Warrant and the Repricing Shares and any shares of capital
stock received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon, or otherwise, shall not be
transferable except upon compliance with the provisions of the Securities Act of
1933, as amended (the "SECURITIES ACT") and applicable state securities laws
with respect to the transfer of such securities. The Holder of this Warrant, by
acceptance of this Warrant, agrees to be bound by the provisions of Section 4
hereof and to indemnify and hold harmless the Company against any loss or
liability arising from the disposition of this Warrant or the Repricing Shares
issuable upon exercise hereof or any interest in either thereof in violation of
the provisions of this Warrant.
(b) Each certificate for the Repricing Shares and any shares of capital
stock received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon or otherwise, and each
certificate for any such securities issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the provisions hereof) be
stamped or otherwise imprinted with a legend in substantially the following
form:
Legend for Repricing Shares or other shares of capital stock:
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED
UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II)
THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
SECTION 7. MISCELLANEOUS.
(a) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the Common Stock issued or issuable upon the exercise
hereof.
(b) Except as otherwise provided herein, this Warrant and all rights
hereunder are transferable by the registered holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant,
properly endorsed, to the Company. The Company may deem and treat the
registered holder of this Warrant at any time as the absolute owner hereof for
all purposes and shall not be affected by any notice to the contrary.
(c) Notwithstanding any provision herein to the contrary, Holder hereof
may not exercise, sell, transfer, or otherwise assign this Warrant unless the
Company is provided with an opinion of counsel satisfactory in form and
substance to the Company, to the effect that such exercise, sale, transfer, or
assignment would not violate the Securities Act or applicable state securities
laws.
(d) This Warrant may be divided into separate Warrants covering one
share of Common Stock or any whole multiple thereof, for the total number of
shares of Common Stock then subject to this Warrant at any time, or from time to
time, upon the request of the registered holder of this Warrant and the
surrender of the same to the Company for such purpose. Such subdivided Warrants
shall be issued promptly by the Company following any such request and shall be
of the same form and tenor as this Warrant, except for any requested change in
the name of the registered holder stated herein.
6
(e) All notices, requests, demands, and other communications required
or permitted under this Warrant and the transactions contemplated herein shall
be in writing and shall be deemed to have been duly given, made, and received
when personally delivered the day after deposited with a recognized national
overnight delivery service prior to its dead-line for receiving packages for
next day delivery or upon the fifth day after deposited in the United States
registered or certified mail with postage prepaid, return receipt requested, in
each case addressed as set forth below:
If to the Company:
The Tracker Corporation of America
000 Xxxxxx Xxxxxx West, 00xx Xxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attn: [Name]
Facsimile: (416)
If to the Holder hereof, to the address of such Holder appearing on the
books of the Company.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of _________, irrespective of the choice of law
provisions thereof. The parties agree that any appropriate state court located
in New Castle County, Delaware, or any federal Court located in Wilmington,
Delaware, including without limitation to the United States District Court of
Delaware, shall have exclusive jurisdiction of any case or controversy arising
under or in connection with this Agreement and shall be a proper forum in which
to adjudicate such case or controversy. The parties consent to the jurisdiction
of such courts.
[Signatures on the following page]
7
SIGNATURE PAGE
TO
ATTACHED REPRICING WARRANT
IN WITNESS WHEREOF, the Company, has caused this Warrant to be executed in
its name by its duly authorized officers under seal, and to be dated as of the
date first above written.
THE TRACKER CORPORATION OF
AMERICA
By:
---------------------------------
Name, Title
ATTEST:
_________________________________ [CORPORATE SEAL]
Secretary/Assistant Secretary
8
ASSIGNMENT
(To be Executed by the Registered Holder to effect a Transfer of the
foregoing Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, and assigns and transfers
unto ___________________________________________________________________________
the foregoing Warrant and the rights represented thereto to purchase shares of
Common Stock of The Tracker Corporation of America in accordance with
terms and conditions thereof, and does hereby irrevocably constitute and appoint
________________ Attorney to transfer the said Warrant on the books of the
Company, with full power of substitution.
Holder:
______________________________________
______________________________________
Address
Dated: __________________, 19__
In the presence of:
______________________________________
FORM OF NOTICE OF EXERCISE OR CONVERSION
[To be signed only upon exercise of Warrant]
To: THE TRACKER CORPORATION OF AMERICA
The undersigned registered Holder of the attached Warrant hereby
irrevocably elects to exercise the Warrant for, and to purchase thereunder,
________ shares of Common Stock of The Tracker Corporation of America,
issuable upon exercise of said Warrant and hereby surrenders said Warrant.
CHOOSE ONE:
The Holder herewith delivers to The Tracker Corporation of America, a
check in the amount of $______ representing the Exercise Price for such shares.
OR
The Holder elects a cashless exercise pursuant to Section 2(b) of the
Warrant. The Average Market Price as of _______ was $_____.
The undersigned herewith requests that the certificates for such shares be
issued in the name of, and delivered to the undersigned, whose address is
________________________________.
Dated: ___________________
Holder:
____________________________________
____________________________________
By:_________________________________
__________________
NOTICE
The signature above must correspond to the name as written upon the face of
the within Warrant in every particular, without alteration or enlargement or any
change whatsoever.
EXHIBIT B
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF PURCHASER WARRANT
Form Attached hereto.
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED
UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II)
THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
THE TRACKER CORPORATION OF AMERICA
COMMON STOCK PURCHASE WARRANT
Warrant No. S1BN/PW-____ __,000 shares
Original Issue Date: August ___, 1999
THIS CERTIFIES THAT, FOR VALUE RECEIVED, _______________ {Purchaser of
Bridge Notes} or its assigns (the "HOLDER") is entitled to purchase, on the
terms and conditions hereinafter set forth, at any time or from time to time
from the date hereof until 5:00 p.m., Eastern Time, on the fifth (5th)
anniversary of the Original Issue Date set forth above, or if such date is not a
day on which the Company is open for business, then the next succeeding day on
which the Company is open for business (such date is the "EXPIRATION DATE"), but
not thereafter, to purchase up to _______ THOUSAND (___,000) shares of the
Common Stock, par value $.001 (the "COMMON STOCK"), of THE TRACKER CORPORATION
OF AMERICA, a Delaware corporation (the "COMPANY"), at the greater of (i) $____
{120% OF CLOSING BID PRICE ON ORIGINAL ISSUE DATE} or (ii) $_____ {75% OF THE
AVERAGE CLOSING BID PRICE FOR THE 5 TRADING DAYS IMMEDIATELY PRIOR TO THE
EXERCISE DATE} per share (the "EXERCISE PRICE"), such number of shares and
Exercise Price being subject to adjustment upon the occurrence of the
contingencies set forth in this Warrant. Each share of Common Stock as to which
this Warrant is exercisable is a "WARRANT SHARE" and all such shares are
collectively referred to as the "WARRANT SHARES."
SECTION EXERCISE OF WARRANT; CONVERSION OF WARRANT.
(a) This Warrant may, at the option of the Holder, be exercised in
whole or in part from time to time by delivery to the Company at its office at
000 Xxxxxx Xxxxxx West, 26th Floor, Toronto, Ontario Canada M5G 1Z8, Attention:
President, or to any transfer agent for the Common Stock, on or before 5:00
p.m., Eastern Time, on the Expiration Date, (i) a written notice of such
registered Holder's election to exercise this Warrant (the "EXERCISE NOTICE"),
which notice may be in the form of the Notice of Exercise attached hereto,
properly executed and completed by the registered Holder or an authorized
officer thereof, (ii) a check payable to the order of the Corporation, in an
amount equal to the product of the Exercise Price MULTIPLIED BY the number of
Warrant Shares specified in the Exercise Notice, AND (iii) this Warrant (the
items specified in (i), (ii), and (iii) are collectively the "EXERCISE
MATERIALS").
(b) This Warrant may, at the option of the Holder, be converted into
Common Stock in whole but not in part, if and only if the Average Market Price
of one share of Common Stock on the Effective Date (as defined in Section 1(c)
hereof) is greater than the Exercise Price, by delivery to the Company at the
address designated in Section 1(a) above or to any transfer agent for the Common
Stock, on or before 5:00 p.m. Eastern Time on the Expiration Date, (i) a written
notice of Holder's election to convert this Warrant (the "CONVERSION NOTICE"),
properly executed and completed by the registered Holder or an authorized
officer thereof, AND (ii) this Warrant (the items specified in (i) and (ii) are
1
collectively the "CONVERSION MATERIALS"). The number of shares of Common Stock
issuable upon conversion of this Warrant is equal to the quotient of (x) the
product of the number of Warrant Shares then issuable upon exercise of this
Warrant (assuming an exercise for cash) MULTIPLIED BY the difference between (A)
the Average Market Price of one share of Common Stock for the five (5) trading
day period ended the day prior to the Effective Date (as such term is defined in
Section 1(c) hereof) MINUS (B) the then effective Exercise Price DIVIDED BY (y)
the Average Market Price of one share of Common Stock for the five (5) trading
day period ended the day prior to the Effective Date. As used herein, "AVERAGE
MARKET PRICE" on any particular date (a "DETERMINATION DATE") means, with
respect to one share of Common Stock for any Determination Date, that price
which is equal to the arithmetic average of the Closing Bid Price (as defined
below) for the Common Stock for each trading day in a five trading day period
ended on the day prior to a Determination Date. As used herein, "CLOSING BID
PRICE" means, for any security as of any date, the last closing bid price on the
NASDAQ National Market (the "NASDAQ-NM") as reported by Bloomberg Financial
Markets ("Bloomberg"), or, if the NASDAQ-NM is not the principal trading market
for the Common Stock, the last closing bid price of the Common Stock on the
principal securities exchange or trading market where the Common Stock is listed
or traded as reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price of the Common Stock in the over-the-counter market on the pink
sheets or bulletin board for the Common Stock as reported by Bloomberg, or, if
no closing bid price is reported for the Common Stock by Bloomberg, the last
closing trade price of the Common Stock as reported by Bloomberg. If the
Closing Bid Price cannot be calculated for the Common Stock on such date on any
of the foregoing bases, the Closing Bid Price of the Common Stock on such date
shall be the fair market value as reasonably determined in good faith by the
Board of Directors of the Company (all as appropriately adjusted for any stock
dividend, stock split, or other similar transaction during such period);
(c) Upon timely receipt of the Exercise Materials or Conversion
Materials (whichever is applicable), the Company shall, as promptly as
practicable, and in any event within five (5) business days after its receipt of
the Exercise Materials or Conversion Materials, execute or cause to be executed
and delivered to Holder a certificate or certificates representing the number of
Warrant Shares specified in the Exercise Notice or if Holder delivered a
Conversion Notice, the number of shares of Common Stock issuable upon conversion
of this Warrant (whichever is applicable), together with cash in lieu of any
fraction of a share, and, (x) if the Warrant is exercised in full, a copy of
this Warrant marked "Exercised," or (y) if the Warrant is partially exercised, a
copy of this Warrant marked "Partially Exercised" together with a new Warrant on
the same terms for the unexercised balance of the Warrant Shares, or (z) if the
Warrant is converted, a copy of this Warrant marked "Converted." The stock
certificate or certificates shall be registered in the name of the registered
Holder of this Warrant or such other name or names as shall be designated in the
Exercise Notice or Conversion Notice. The date on which the Warrant shall be
deemed to have been exercised or converted (the "EFFECTIVE DATE"), and the date
the person in whose name any certificate evidencing the Common Stock issued upon
the exercise or conversion hereof is issued shall be deemed to have become the
holder of record of such shares, shall be the date the Corporation receives the
Exercise Materials or Conversion Materials, irrespective of the date of delivery
of a certificate or certificates evidencing the Common Stock issued upon the
exercise or conversion hereof, except that, if the date on which the Exercise
Materials or Conversion Materials are received by the Company is a date on which
the stock transfer books of the Company are closed, the Effective Date shall be
the date the Company receives the Exercise Materials or Conversion Materials,
and the date such person shall be deemed to have become the holder of the Common
Stock issued upon the exercise or conversion hereof shall be the next succeeding
date on which the stock transfer books are open. All shares of Common Stock
issued upon the exercise or conversion of this Warrant will, upon issuance, be
fully paid and nonassessable and free from all taxes, liens, and charges with
respect thereto.
2
(d) If the Company shall fail to issue to Holder within five (5)
business days following the Effective Date a certificate for the number of
shares of Common Stock to which such holder is entitled upon such holder's
exercise or conversion of this Warrant, in addition to all other available
remedies which such holder may pursue hereunder and the Series 1 Bridge Note
Purchase and Security Agreement between the Company and the initial holder of
the Warrant (the "SECURITIES PURCHASE AGREEMENT") including indemnification
pursuant to Section 7.18 thereof (all of which shall be cumulative), the Company
shall pay additional damages to such holder on each day after the Effective
Date, an amount equal to 1.0% of the product of (A) the number of Warrant Shares
not issued to Holder and to which Holder is entitled MULTIPLIED BY (B) the
Closing Bid Price of the Common Stock on the Effective Date. Such damages shall
be computed daily and are due and payable daily.
SECTION 2. ADJUSTMENTS TO WARRANT SHARES.
The number of Warrant Shares issuable upon the exercise hereof shall be
subject to adjustment as follows:
(a) In the event the Company is a party to a consolidation, share
exchange, or merger, or the sale of all or substantially all of the assets of
the Company to, any person, or in the case of any consolidation or merger of
another corporation into the Company in which the Company is the surviving
corporation, and in which there is a reclassification or change of the shares of
Common Stock of the Company, this Warrant shall after such consolidation, share
exchange, merger, or sale be exercisable for the kind and number of securities
or amount and kind of property of the Company or the corporation or other entity
resulting from such share exchange, merger, or consolidation, or to which such
sale shall be made, as the case may be (the "SUCCESSOR COMPANY"), to which a
holder of the number of shares of Common Stock deliverable upon the exercise
(immediately prior to the time of such consolidation, share exchange, merger, or
sale) of this Warrant would have been entitled upon such consolidation, share
exchange, merger, or sale; and in any such case appropriate adjustments shall be
made in the application of the provisions set forth herein with respect to the
rights and interests of the registered Holder of this Warrant, such that the
provisions set forth herein shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to the number and kind of securities
or the type and amount of property thereafter deliverable upon the exercise of
this Warrant. The above provisions shall similarly apply to successive
consolidations, share exchanges, mergers, and sales. Any adjustment required by
this Section 2 (a) because of a consolidation, share exchange, merger, or sale
shall be set forth in an undertaking delivered to the registered Holder of this
Warrant and executed by the Successor Company which provides that the Holder of
this Warrant shall have the right to exercise this Warrant for the kind and
number of securities or amount and kind of property of the Successor Company or
to which the holder of a number of shares of Common Stock deliverable upon
exercise (immediately prior to the time of such consolidation, share exchange,
merger, or sale) of this Warrant would have been entitled upon such
consolidation, share exchange, merger, or sale. Such undertaking shall also
provide for future adjustments to the number of Warrant Shares and the Exercise
Price in accordance with the provisions set forth in Section 2 hereof.
3
(b) In the event the Company should at any time, or from time to time
after the Original Issue Date, fix a record date for the effectuation of a stock
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock, or securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"COMMON STOCK EQUIVALENTS") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon exercise or
exercise thereof), then, as of such record date (or the date of such dividend,
distribution, split, or subdivision if no record date is fixed), the number of
Warrant Shares issuable upon the exercise hereof shall be proportionately
increased and the Exercise Price shall be appropriately decreased by the same
proportion as the increase in the number of outstanding Common Stock Equivalents
of the Company resulting from the dividend, distribution, split, or subdivision.
Notwithstanding the preceding sentence, no adjustment shall be made to decrease
the Exercise Price below $.001 per Share.
(c) In the event the Company should at any time or from time to time
after the Original Issue Date, fix a record date for the effectuation of a
reverse stock split, or a transaction having a similar effect on the number of
outstanding shares of Common Stock of the Company, then, as of such record date
(or the date of such reverse stock split or similar transaction if no record
date is fixed), the number of Warrant Shares issuable upon the exercise hereof
shall be proportionately decreased and the Exercise Price shall be appropriately
increased by the same proportion as the decrease of the number of outstanding
Common Stock Equivalents resulting from the reverse stock split or similar
transaction.
(d) In the event the Company should at any time or from time to time
after the Original Issue Date, fix a record date for a reclassification of its
Common Stock, then, as of such record date (or the date of the reclassification
if no record date is set), this Warrant shall thereafter be convertible into
such number and kind of securities as would have been issuable as the result of
such reclassification to a holder of a number of shares of Common Stock equal to
the number of Warrant Shares issuable upon exercise of this Warrant immediately
prior to such reclassification, and the Exercise Price shall be unchanged.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through reorganization, consolidation, merger, dissolution,
issue, or sale of securities, sale of assets or any other voluntary action, void
or seek to avoid the observance or performance of any of the terms of the
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment. Without limiting the generality of the foregoing, the Company
(x) will not create a par value of any share of stock receivable upon the
exercise of the Warrant above the amount payable therefor upon such exercise,
and (y) will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and non-assessable
shares upon the exercise of the Warrant.
(f) When any adjustment is required to be made in the number or kind of
shares purchasable upon exercise of the Warrant, or in the Exercise Price, the
Company shall promptly notify the Holder of such event and of the number of
shares of Common Stock or other securities or property thereafter purchasable
upon exercise of the Warrants and of the Exercise Price, together with the
computation resulting in such adjustment.
(g) The Company covenants and agrees that all Warrant Shares which may
be issued will, upon issuance, be validly issued, fully paid, and
non-assessable. The Company further covenants and agrees that the Company will
at all times have authorized and reserved, free from preemptive rights, a
sufficient number of shares of its Common Stock to provide for the exercise of
the Warrant in full.
4
SECTION 3. NO STOCKHOLDER RIGHTS.
This Warrant shall not entitle the Holder hereof to any voting rights or
other rights as a stockholder of the Company.
SECTION 4. TRANSFER OF SECURITIES.
(a) This Warrant and the Warrant Shares and any shares of capital stock
received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon, or otherwise, shall not be
transferable except upon compliance with the provisions of the Securities Act of
1933, as amended (the "SECURITIES ACT") and applicable state securities laws
with respect to the transfer of such securities. The Holder of this Warrant, by
acceptance of this Warrant, agrees to be bound by the provisions of Section 4
hereof and to indemnify and hold harmless the Company against any loss or
liability arising from the disposition of this Warrant or the Warrant Shares
issuable upon exercise hereof or any interest in either thereof in violation of
the provisions of this Warrant.
(b) Each certificate for the Warrant Shares and any shares of capital
stock received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon or otherwise, and each
certificate for any such securities issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the provisions hereof) be
stamped or otherwise imprinted with a legend in substantially the following
form:
Legend for Warrant Shares or other shares of capital stock:
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED
UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II)
THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
SECTION 5. REGISTRATION.
All Warrant Shares are subject to the rights and privileges granted in and
under the Registration Rights Agreement dated August 18, 1999, as Registrable
Securities (as defined in the Registration Rights Agreement) thereunder.
SECTION 6. MISCELLANEOUS.
(a) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the Common Stock issued or issuable upon the exercise
hereof.
(b) Except as otherwise provided herein, this Warrant and all rights
hereunder are transferable by the registered holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant,
properly endorsed, to the Company. The Company may deem and treat the
registered holder of this Warrant at any time as the absolute owner hereof for
all purposes and shall not be affected by any notice to the contrary.
5
(c) Notwithstanding any provision herein to the contrary, Holder hereof
may not exercise, sell, transfer, or otherwise assign this Warrant unless the
Company is provided with an opinion of counsel satisfactory in form and
substance to the Company, to the effect that such exercise, sale, transfer, or
assignment would not violate the Securities Act or applicable state securities
laws.
(d) This Warrant may be divided into separate Warrants covering one
share of Common Stock or any whole multiple thereof, for the total number of
shares of Common Stock then subject to this Warrant at any time, or from time to
time, upon the request of the registered holder of this Warrant and the
surrender of the same to the Company for such purpose. Such subdivided Warrants
shall be issued promptly by the Company following any such request and shall be
of the same form and tenor as this Warrant, except for any requested change in
the name of the registered holder stated herein.
(e) All notices, requests, demands, and other communications required
or permitted under this Warrant and the transactions contemplated herein shall
be in writing and shall be deemed to have been duly given, made, and received
when personally delivered the day after deposited with a recognized national
overnight delivery service prior to its dead-line for receiving packages for
next day delivery or upon the fifth day after deposited in the United States
registered or certified mail with postage prepaid, return receipt requested, in
each case addressed as set forth below:
If to the Company: The Tracker Corporation of America
000 Xxxxxx Xxxxxx, West, 26th Floor
Toronto, Ontario
Canada M5G 1Z8
Attn: Xxx X. Xxxxxxxx
Facsimile: (416)
If to the Holder hereof, to the address of such Holder appearing on the
books of the Company.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia, irrespective of the choice of law
provisions thereof. The parties agree that any appropriate state court located
in New Castle County, Delaware, or any federal Court located in Wilmington,
Delaware, including without limitation to the United States District Court of
Delaware, shall have exclusive jurisdiction of any case or controversy arising
under or in connection with this Agreement and shall be a proper forum in which
to adjudicate such case or controversy. The parties consent to the jurisdiction
of such courts.
[Signatures on the following page]
6
SIGNATURE PAGE
TO
COMPANY
COMMON STOCK PURCHASE WARRANT
IN WITNESS WHEREOF, the Company, has caused this Warrant to be executed in
its name by its duly authorized officers under seal, and to be dated as of the
date first above written.
THE TRACKER CORPORATION OF
AMERICA
By:
---------------------------------
Xxx X. Xxxxxxxx, President
ATTEST:
------------------------------
Assistant Secretary
[CORPORATE SEAL]
7
ASSIGNMENT
(To be Executed by the Registered Holder to effect a Transfer of the
foregoing Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, and assigns and transfers
unto ___________________________________________________________________________
the foregoing Warrant and the rights represented thereto to purchase shares of
Common Stock of The Tracker Corporation of America in accordance with terms and
conditions thereof, and does hereby irrevocably constitute and appoint
________________ Attorney to transfer the said Warrant on the books of the
Company, with full power of substitution.
Holder:
_________________________________
_________________________________
Address
Dated: __________________, 19__
In the presence of:
_________________________________
FORM OF NOTICE OF EXERCISE OR CONVERSION
[To be signed only upon exercise of Warrant]
To: THE TRACKER CORPORATION OF AMERICA
The undersigned registered Holder of the attached Warrant hereby
irrevocably elects to exercise the Warrant for, and to purchase thereunder,
_____ shares of Common Stock of The Tracker Corporation of America, issuable
upon exercise of said Warrant and hereby surrenders said Warrant.
CHOOSE ONE:
The Holder herewith delivers to The Tracker Corporation of America, a check
in the amount of $______ representing the Exercise Price for such shares.
OR
The Holder elects a cashless exercise pursuant to Section 1(b) of the
Warrant. The Average Market Price as of _______ was $_____.
The undersigned herewith requests that the certificates for such shares be
issued in the name of, and delivered to the undersigned, whose address is
________________________________
Dated: ___________________
Holder:
____________________________________
____________________________________
By:_________________________________
__________________
NOTICE
The signature above must correspond to the name as written upon the face of
the within Warrant in every particular, without alteration or enlargement or any
change whatsoever.
EXHIBIT C
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF CALLABLE WARRANT
Form Attached hereto.
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED
UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II)
THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
THE TRACKER CORPORATION OF AMERICA
CALLABLE WARRANT
Warrant No. S1BN/CW-____ __,000 shares
Original Issue Date: August ___, 1999
THIS CERTIFIES THAT, FOR VALUE RECEIVED, _______________ {Purchaser of
Bridge Notes} or its assigns (the "HOLDER") is entitled to purchase, on the
terms and conditions hereinafter set forth, at any time or from time to time
from the date hereof until 5:00 p.m., Eastern Time, until the FIRST (1ST)
ANNIVERSARY of the Original Issue Date set forth above, or if such date is not a
day on which the Company is open for business, then the next succeeding day on
which the Company is open for business (such date is the "EXPIRATION DATE"), but
not thereafter, to purchase up to _______ THOUSAND (___,000) shares of the
Common Stock, par value $.001 (the "COMMON STOCK"), of THE TRACKER CORPORATION
OF AMERICA, a Delaware corporation (the "COMPANY"), at a price per share equal
to 80% of the average Closing Bid Price of the Common Stock of the Company for
the five trading days ended the day immediately prior to the Exercise Date (as
defined below) (the "EXERCISE PRICE"), such number of shares and Exercise Price
being subject to adjustment upon the occurrence of the contingencies set forth
in this Warrant. Each share of Common Stock as to which this Warrant is
exercisable is a "WARRANT SHARE" and all such shares are collectively referred
to as the "WARRANT SHARES." This Warrant is callable by the Company in
accordance with the terms hereof, and in such event this Warrant shall remain
exercisable by the holder up to the Redemption Date.
SECTION 1. RIGHT TO REDEEM WARRANT.
At any time or from time to time, the Company shall have the absolute right
to call this Warrant in part or in full for redemption by delivery of written
notice to Holder of the Company's election to call this Warrant for redemption
(the "CALL NOTICE"), which notice shall include (a) the number of Warrant Shares
being called for redemption, (b) the aggregate consideration which shall be paid
to Holder in respect of the redemption, at the rate of $.001 for each Warrant
Share that is called for redemption (the "REDEMPTION PRICE"), and (c) the date
(the REDEMPTION DATE") that the Redemption Price is to be paid and the
redemption is effective, which shall be not less than twenty (20) nor more than
sixty (60) days from the date of the Call Notice. If the Company calls this
Warrant for redemption in accordance with this Section 1, the Holder shall be
under a mandatory obligation to surrender this Warrant to the Company on the
Redemption Date and receive the Redemption Price payable in respect thereof,
PROVIDED HOWEVER, that after Holder has received a Call Notice in respect of
this Warrant, Holder may exercise this Warrant an any time prior to the
Redemption Date. On the Redemption Date, this Warrant shall automatically be
converted into, and thereafter represent, solely the right to receive, upon
surrender hereof to the Company at its office at 000 Xxxxxx Xxxxxx, West, 26th
Floor, Toronto, Ontario, Canada M5G 1Z8, Attention: President, the Redemption
Price payable in respect of this Warrant, PROVIDED HOWEVER, that if the Company
shall call less than all of the Warrant Shares represented by this Warrant for
redemption, the Warrant shall, in addition, represent the right to obtain a new
Warrant of like tenor herewith, upon surrender of this Warrant to the Company at
its office as specified above, representing the right to purchase the number of
Warrant Shares originally evidenced by this Warrant MINUS the number of Warrant
Shares called for redemption.
1
SECTION 2. EXERCISE OF WARRANT.
(a) This Warrant may, at the option of the Holder, be exercised in
whole or in part from time to time, until 5:00 p.m., Eastern Time, on the
Expiration Date, by delivery to the Company at its office at 000 Xxxxxx Xxxxxx,
West, 26th Floor, Toronto, Ontario, Canada M5G 1Z8, Attention: President (i) a
written notice of such registered Holder's election to exercise this Warrant
(the "EXERCISE NOTICE"), which notice may be in the form of the Notice of
Exercise attached hereto, properly executed and completed by the registered
Holder or an authorized officer thereof, (ii) a check payable to the order of
the Company, in an amount equal to the product of the Exercise Price MULTIPLIED
BY the number of Warrant Shares specified in the Exercise Notice, AND (iii) this
Warrant (the items specified in (i), (ii), and (iii) are collectively the
"EXERCISE MATERIALS").
(b) Upon timely receipt of the Exercise Materials, the Company shall,
as promptly as practicable, and in any event within five (5) business days after
its receipt of the Exercise Materials, execute or cause to be executed and
delivered to Holder a certificate or certificates representing the number of
Warrant Shares specified in the Exercise Notice, together with cash in lieu of
any fraction of a share, and, (x) if the Warrant is exercised in full, a copy of
this Warrant marked "Exercised," or (y) if the Warrant is partially exercised, a
copy of this Warrant marked "Partially Exercised" together with a new Warrant on
the same terms for the unexercised balance of the Warrant Shares. The stock
certificate or certificates shall be registered in the name of the registered
Holder of this Warrant or such other name or names as shall be designated in the
Exercise Notice. The date on which the Warrant shall be deemed to have been
exercised (the "EFFECTIVE DATE"), and the date the person in whose name any
certificate evidencing the Common Stock issued upon the exercise hereof is
issued shall be deemed to have become the holder of record of such shares, shall
be the date the Company receives the Exercise Materials, irrespective of the
date of delivery of a certificate or certificates evidencing the Common Stock
issued upon the exercise hereof, except that, if the date on which the Exercise
Materials are received by the Company is a date on which the stock transfer
books of the Company are closed, the Effective Date shall be the date the
Company receives the Exercise Materials, and the date such person shall be
deemed to have become the holder of the Common Stock issued upon the exercise
hereof shall be the next succeeding date on which the stock transfer books are
open. All shares of Common Stock issued upon the exercise of this Warrant
will, upon issuance, be fully paid and nonassessable and free from all taxes,
liens, and charges with respect thereto.
(c) If the Company shall fail to issue to Holder within five (5)
business days following the Effective Date a certificate for the number of
shares of Common Stock to which such holder is entitled upon such holder's
exercise of this Warrant, in addition to all other available remedies which such
holder may pursue hereunder and under the Series 1 Bridge Note Purchase and
Security Agreement dated August 18, 1999 between the Company and the initial
holder of the Warrant (the "SECURITIES PURCHASE AGREEMENT"), including
indemnification pursuant to Section 7.18 thereof (all of which shall be
cumulative), the Company shall pay additional damages to such holder on each day
after the Effective Date, an amount equal to 1.0% of the product of (A) the
number of Warrant Shares not issued to Holder and to which Holder is entitled
MULTIPLIED BY (B) the Closing Bid Price of the Common Stock on the Effective
Date. Such damages shall be computed daily and are due and payable daily.
2
(d) As used herein, "CLOSING BID PRICE" means, for any security as of
any date, the last closing bid price on the NASDAQ National Market (the
"NASDAQ-NM") as reported by Bloomberg Financial Markets ("Bloomberg"), or, if
the NASDAQ-NM is not the principal trading market for the Common Stock, the last
closing bid price of the Common Stock on the principal securities exchange or
trading market where the Common Stock is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price of the
Common Stock in the over-the-counter market on the pink sheets or bulletin board
for the Common Stock as reported by Bloomberg, or, if no closing bid price is
reported for the Common Stock by Bloomberg, the last closing trade price of the
Common Stock as reported by Bloomberg. If the Closing Bid Price cannot be
calculated for the Common Stock on such date on any of the foregoing bases, the
Closing Bid Price of the Common Stock on such date shall be the fair market
value as reasonably determined in good faith by the Board of Directors of the
Company (all as appropriately adjusted for any stock dividend, stock split, or
other similar transaction during such period).
SECTION 3. ADJUSTMENTS TO WARRANT SHARES.
The number of Warrant Shares issuable upon the exercise hereof shall be
subject to adjustment as follows:
(a) In the event the Company is a party to a consolidation, share
exchange, or merger, or the sale of all or substantially all of the assets of
the Company to, any person, or in the case of any consolidation or merger of
another corporation into the Company in which the Company is the surviving
corporation, and in which there is a reclassification or change of the shares of
Common Stock of the Company, this Warrant shall after such consolidation, share
exchange, merger, or sale be exercisable for the kind and number of securities
or amount and kind of property of the Company or the corporation or other entity
resulting from such share exchange, merger, or consolidation, or to which such
sale shall be made, as the case may be (the "SUCCESSOR COMPANY"), to which a
holder of the number of shares of Common Stock deliverable upon the exercise
(immediately prior to the time of such consolidation, share exchange, merger, or
sale) of this Warrant would have been entitled upon such consolidation, share
exchange, merger, or sale; and in any such case appropriate adjustments shall be
made in the application of the provisions set forth herein with respect to the
rights and interests of the registered Holder of this Warrant, such that the
provisions set forth herein shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to the number and kind of securities
or the type and amount of property thereafter deliverable upon the exercise of
this Warrant. The above provisions shall similarly apply to successive
consolidations, share exchanges, mergers, and sales. Any adjustment required by
this Section 3(a) because of a consolidation, share exchange, merger, or sale
shall be set forth in an undertaking delivered to the registered Holder of this
Warrant and executed by the Successor Company which provides that the Holder of
this Warrant shall have the right to exercise this Warrant for the kind and
number of securities or amount and kind of property of the Successor Company or
to which the holder of a number of shares of Common Stock deliverable upon
exercise (immediately prior to the time of such consolidation, share exchange,
merger, or sale) of this Warrant would have been entitled upon such
consolidation, share exchange, merger, or sale. Such undertaking shall also
provide for future adjustments to the number of Warrant Shares and the Exercise
Price in accordance with the provisions set forth in this Section 3.
3
(b) In the event the Company should at any time, or from time to time
after the Original Issue Date, fix a record date for the effectuation of a stock
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock, or securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"COMMON STOCK EQUIVALENTS") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon exercise or
exercise thereof), then, as of such record date (or the date of such dividend,
distribution, split, or subdivision if no record date is fixed), the number of
Warrant Shares issuable upon the exercise hereof shall be proportionately
increased and the Exercise Price shall be appropriately decreased by the same
proportion as the increase in the number of outstanding Common Stock Equivalents
of the Company resulting from the dividend, distribution, split, or subdivision.
Notwithstanding the preceding sentence, no adjustment shall be made to decrease
the Exercise Price below $.001 per Share.
(c) In the event the Company should at any time or from time to time
after the Original Issue Date, fix a record date for the effectuation of a
reverse stock split, or a transaction having a similar effect on the number of
outstanding shares of Common Stock of the Company, then, as of such record date
(or the date of such reverse stock split or similar transaction if no record
date is fixed), the number of Warrant Shares issuable upon the exercise hereof
shall be proportionately decreased and the Exercise Price shall be appropriately
increased by the same proportion as the decrease of the number of outstanding
Common Stock Equivalents resulting from the reverse stock split or similar
transaction.
(d) In the event the Company should at any time or from time to time
after the Original Issue Date, fix a record date for a reclassification of its
Common Stock, then, as of such record date (or the date of the reclassification
if no record date is set), this Warrant shall thereafter be convertible into
such number and kind of securities as would have been issuable as the result of
such reclassification to a holder of a number of shares of Common Stock equal to
the number of Warrant Shares issuable upon exercise of this Warrant immediately
prior to such reclassification, and the Exercise Price shall be unchanged.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through reorganization, consolidation, merger, dissolution,
issue, or sale of securities, sale of assets or any other voluntary action, void
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment. Without limiting the generality of the foregoing, the Company
(x) will not create a par value of any share of stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise,
and (y) will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and non-assessable
shares upon the exercise of the Warrant.
(f) When any adjustment is required to be made in the number or kind of
shares purchasable upon exercise of the Warrant, or in the Exercise Price, the
Company shall promptly notify the Holder of such event and of the number of
shares of Common Stock or other securities or property thereafter purchasable
upon exercise of the Warrants and of the Exercise Price, together with the
computation resulting in such adjustment.
(g) The Company covenants and agrees that all Warrant Shares which may
be issued will, upon issuance, be validly issued, fully paid, and
non-assessable. The Company further covenants and agrees that the Company will
at all times have authorized and reserved, free from preemptive rights, a
sufficient number of shares of its Common Stock to provide for the exercise of
the Warrant in full.
4
SECTION 4. NO STOCKHOLDER RIGHTS.
This Warrant shall not entitle the Holder hereof to any voting rights or
other rights as a stockholder of the Company.
SECTION 5. TRANSFER OF SECURITIES.
(a) This Warrant and the Warrant Shares and any shares of capital stock
received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon, or otherwise, shall not be
transferable except upon compliance with the provisions of the Securities Act of
1933, as amended (the "SECURITIES ACT") and applicable state securities laws
with respect to the transfer of such securities. The Holder of this Warrant, by
acceptance of this Warrant, agrees to be bound by the provisions of Section 5
hereof and to indemnify and hold harmless the Company against any loss or
liability arising from the disposition of this Warrant or the Warrant Shares
issuable upon exercise hereof or any interest in either thereof in violation of
the provisions of this Warrant.
(b) Each certificate for the Warrant Shares and any shares of capital
stock received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon or otherwise, and each
certificate for any such securities issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the provisions hereof) be
stamped or otherwise imprinted with a legend in substantially the following
form:
Legend for Warrant Shares or other shares of capital stock:
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED
UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II)
THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
SECTION 6. REGISTRATION.
All Warrant Shares are subject to the rights and privileges granted in and
under the Registration Rights Agreement dated August 18, 1999, as Registrable
Securities (as defined in the Registration Rights Agreement) thereunder.
SECTION 7. MISCELLANEOUS.
(a) The Company covenants that it will at all times reserve and keep
available, solely for the purpose of issuance upon the exercise hereof, a
sufficient number of shares of Common Stock to permit the exercise hereof in
full.
(b) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the Common Stock issued or issuable upon the exercise
hereof.
(c) Except as otherwise provided herein, this Warrant and all rights
hereunder are transferable by the registered holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant,
properly endorsed, to the Company. The Company may deem and treat the
registered holder of this Warrant at any time as the absolute owner hereof for
all purposes and shall not be affected by any notice to the contrary.
5
(d) Notwithstanding any provision herein to the contrary, Holder hereof
may not exercise, sell, transfer, or otherwise assign this Warrant unless the
Company is provided with an opinion of counsel satisfactory in form and
substance to the Company, to the effect that such exercise, sale, transfer, or
assignment would not violate the Securities Act or applicable state securities
laws.
(e) This Warrant may be divided into separate Warrants covering one
share of Common Stock or any whole multiple thereof, for the total number of
shares of Common Stock then subject to this Warrant at any time, or from time to
time, upon the request of the registered holder of this Warrant and the
surrender of the same to the Company for such purpose. Such subdivided Warrants
shall be issued promptly by the Company following any such request and shall be
of the same form and tenor as this Warrant, except for any requested change in
the name of the registered holder stated herein.
(f) All notices, requests, demands, and other communications required
or permitted under this Warrant and the transactions contemplated herein shall
be in writing and shall be deemed to have been duly given, made, and received
when personally delivered the day after deposited with a recognized national
overnight delivery service prior to its dead-line for receiving packages for
next day delivery or upon the fifth day after deposited in the United States
registered or certified mail with postage prepaid, return receipt requested, in
each case addressed as set forth below:
If to the Company: The Tracker Corporation of America
000 Xxxxxx Xxxxxx, Xxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attn: President
Facsimile: (416)
If to the Holder hereof, to the address of such Holder appearing on the
books of the Company.
(g) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia, irrespective of the choice of law
provisions thereof. The parties agree that any appropriate state court located
in New Castle County, Delaware, or any federal Court located in Wilmington,
Delaware, including without limitation to the United States District Court of
Delaware, shall have exclusive jurisdiction of any case or controversy arising
under or in connection with this Agreement and shall be a proper forum in which
to adjudicate such case or controversy. The parties consent to the jurisdiction
of such courts.
[Signatures on the following page]
6
COMPANY SIGNATURE PAGE
TO
CALLABLE WARRANT
IN WITNESS WHEREOF, the Company, has caused this Callable Warrant to be
executed in its name by its duly authorized officers under seal, and to be dated
as of the date first above written.
THE TRACKER CORPORATION OF
AMERICA
By:____________________________________
Xxx X. Xxxxxxxx, President
ATTEST:
__________________________________
Assistant Secretary
[CORPORATE SEAL]
7
ASSIGNMENT
(To be Executed by the Registered Holder to effect a Transfer of the
foregoing Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, and assigns and transfers
unto ___________________________________________________________________________
the foregoing Callable Warrant and the rights represented thereto to purchase
shares of Common Stock of The Tracker Corporation of America in accordance with
terms and conditions thereof, and does hereby irrevocably constitute and appoint
_________________________ Attorney to transfer the said Warrant on the books of
the Company, with full power of substitution.
Holder:
___________________________________
___________________________________
Address
Dated: __________________, 19____
In the presence of:
___________________________________
{BA013484.DOC 2}
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of Callable Warrant]
To: THE TRACKER CORPORATION OF AMERICA
Pursuant to the Call Notice issued by the Company on ______________, 19___,
the undersigned registered Holder of the attached Callable Warrant hereby
irrevocably elects to exercise the Callable Warrant for, and to purchase
thereunder, ___________ shares of Common Stock of The Tracker Corporation of
America, issuable upon exercise of said Warrant and hereby surrenders said
Warrant.
The Holder herewith delivers to The Tracker Corporation of America, a check
in the amount of $______________ representing the Exercise Price for such
shares.
The undersigned herewith requests that the certificates for such shares be
issued in the name of, and delivered to the undersigned, whose address is
__________________________________________.
Dated: ___________________
Holder:
____________________________________
____________________________________
By:
_________________________________
__________________
NOTICE
The signature above must correspond to the name as written upon the face of
the within Callable Warrant in every particular, without alteration or
enlargement or any change whatsoever.
EXHIBIT D
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT
Form Attached hereto.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT"), is made and entered into
as of the __ day of August, 1999, by and among THE TRACKER CORPORATION OF
AMERICA, a DELAWARE corporation (the "COMPANY"), and the Persons listed on
the Purchaser Signature Pages hereto (each of whom is individually referred to
as a "PURCHASER" and all of whom collectively are referred to as the
"PURCHASERS").
BACKGROUND
In connection with the consummation of the transactions contemplated by
that Series 1 Bridge Note Purchase and Security Agreement (the "PURCHASE
AGREEMENT") of even date herewith by and among the Company and the Purchasers,
the Company has agreed, upon the terms and subject to the conditions of the
Purchase Agreement, to issue and sell to the Purchasers from time to time up to
$3,000,000 in maximum principal amount of Series 1 Convertible Subordinated
Secured Bridge Financing Notes (the "BRIDGE NOTES") together with Common Stock
Purchase Warrants (the "PURCHASER WARRANTS"). Attached to the Bridge Notes are
Repricing Warrants (the "Repricing Warrants"). Collectively, the Bridge Notes,
and the Purchaser Warrants, and the Repricing Warrants are hereinafter
collectively referred to as the "PURCHASED SECURITIES"). The Bridge Notes are
convertible into, and the Purchaser Warrants and the Repricing Warrants are
exercisable for, shares of the Company's common stock, .001 par value per share
(the "COMMON STOCK"). The Common Stock issuable upon conversion of the Bridge
Notes is hereinafter referred to as the "CONVERSION SHARES," and the Common
Stock issuable upon exercise of the Purchaser Warrants is hereinafter referred
to as the "PURCHASER WARRANT SHARES," and the Common Stock issuable upon
exercise of the Repricing Warrants is hereinafter called the "REPRICING WARRANT
SHARES." To induce Purchasers to execute and deliver the Purchase Agreement,
the Company has agreed to file a Registration Statement covering the Conversion
Shares, the Purchaser Warrant Shares, and the Repricing Warrant Shares under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "1933 ACT"), and applicable
state securities laws.
AGREEMENT
For and in consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Purchasers hereby agree as
follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following capitalized terms are used with
the meanings there after ascribed:
(a) "INVESTOR" means any Purchaser and any transferee or assignee
thereof to whom any Purchaser assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9.
(b) "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof, or a governmental agency.
(c) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
1
(d) "REGISTRABLE SECURITIES" means the Conversion Shares, the Purchaser
Warrant Shares, the Repricing Warrant Shares, {ADD REFERENCE TO PLACEMENT
WARRANT SHARES}and any shares of capital stock issued or issuable with respect
to the Purchased Securities, Conversion Shares, the Purchaser Warrant Shares, or
the Repricing Warrant Shares, as a result of any stock split, stock dividend,
recapitalization, exchange, or similar event.
(e) "REGISTRATION STATEMENT" means a registration statement of the
Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Purchase Agreement.
SECTION 2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare and file with
the SEC a Registration Statement or Registration Statements (as is necessary) on
Form S-3 (or, if such form is unavailable for such a registration, on such other
form as is available for such a registration, subject to the consent of each
Purchaser and the provisions of Section 2(e), which consent will not be
unreasonably withheld), covering the resale of all of the Registrable
Securities, within THIRTY (30) days after the first to occur of (1) the
issuance, sale, and delivery of $3,000,000 in maximum principal amount of, or
(2) the date the Company receives written notice from Sovereign Capital
Advisors, LLC of termination of further offers of the Bridge Notes (the "FILING
DEADLINE"). The Registration Statement(s) shall state that, in accordance with
Rule 416 promulgated under the 1933 Act, such Registration Statement(s) also
covers such indeterminate number of additional shares of Common Stock as may
become issuable (i) upon conversion of the Bridge Notes and exercise of the
Purchaser Warrants to prevent dilution resulting from stock splits, stock
dividends, or similar transactions, and (ii) by reason of the Repricing Warrants
in accordance with the terms thereof. Such Registration Statement shall
initially register for resale at least 100% of the Conversion Shares and the
Purchaser Warrant Shares, subject to adjustment as provided in Section 3(b)
hereof, and such registered shares of Common Stock shall be allocated among the
Investors pro rata based on the total number of Registrable Securities issued or
issuable as of each date that a Registration Statement, as amended, relating to
the resale of the Registrable Securities is declared effective by the SEC. The
Company shall use its best efforts to have the Registration Statement declared
effective by the SEC within ninety (90) days after the Filing Deadline (the
"REGISTRATION DEADLINE"). The Company shall permit the registration statement
to become effective within five (5) business days after receipt of a "no review"
notice from the SEC. Such Registration Statement shall be kept current and
effective for a period of twelve (12) months from the Closing Date. {THIS
SUBSECTION WILL NEED TO BE REVISED SLIGHTLY TO REFLECT TERMS OF AGREEMENT ON
TIMING OF REGISTRATION}
(b) UNDERWRITTEN OFFERING. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) involves an underwritten offering, the
Purchasers shall have the right to select one legal counsel and an investment
banker or bankers and manager or managers to administer their interest in the
offering, which investment banker or bankers or manager or managers shall be
reasonably satisfactory to the Company.
2
(c) PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) the Company proposes to file
with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans) the Company shall promptly send to each Investor
who is entitled to registration rights under this Section 2(c) written notice of
the Company's intention to file a Registration Statement and of such Investor's
rights under this Section 2(c) and, if within twenty (20) days after receipt of
such notice, such Investor shall so request in writing, the Company shall
include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, subject to the priorities
set forth in Section 2(d) below. No right to registration of Registrable
Securities under this Section 2(c) shall be construed to limit any registration
required under Section 2(a) hereof. The obligations of the Company under this
Section 2(c) may be waived by Investors holding a majority of the Registrable
Securities. If an offering in connection with which an Investor is entitled to
registration under this Section 2(c) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering.
(d) PRIORITY IN PIGGY-BACK REGISTRATION RIGHTS IN CONNECTION WITH
REGISTRATIONS FOR COMPANY ACCOUNT. If the registration referred to in Section
2(c) is to be an underwritten public offering for the account of the Company and
the managing underwriter(s) advise the Company in writing, that in their
reasonable good faith opinion, marketing or other factors dictate that a
limitation on the number of shares of Common Stock which may be included in the
Registration Statement is necessary to facilitate and not adversely affect the
proposed offering, then the Company shall include in such registration: (i)
first, all securities the Company proposes to sell for its own account, (ii)
second, up to the full number of securities proposed to be registered for the
account of the holders of securities entitled to inclusion of their securities
in the Registration Statement by reason of demand registration rights, and (iii)
third, the securities requested to be registered by the Investors and other
holders of securities entitled to participate in the registration, drawn from
them pro rata based on the number each has requested to be included in such
registration.
(e) ELIGIBILITY FOR FORM S-3. The Company represents, warrants
covenants that it has filed and shall file all reports required to be filed by
the Company with the SEC in a timely manner so as to obtain and maintain such
eligibility for the use of Form S-3. In the event that Form S-3 is not
available for sale by the Investors of the Registrable Securities, then (i) the
Company, with the consent of each Investor pursuant to Section 2(a), shall
register the sale of the Registrable Securities on another appropriate form,
such as Form SB-2 and (ii) the Company shall undertake to register the
Registrable Securities on Form S-3 as soon as such form is available.
3
SECTION 3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(c) hereof, or at such time as the Company is
obligated to file a Registration Statement with the SEC pursuant to Section 2(a)
hereof, the Company will use its best efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall have the following obligations:
(a) The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the Filing Deadline), for the registration of Registrable Securities pursuant
to Section 2(a) and use its best efforts to cause such Registration Statement(s)
relating to Registrable Securities to become effective as soon as possible after
such filing and in any event by the Registration Date, and keep the Registration
Statement(s) effective pursuant to Rule 415 at all times until the later of (i)
the date as of which the Investors may sell all of the Registrable Securities
without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto) or (ii) the date on which (A) the Investors shall have sold
all the Registrable Securities and (B) none of the Bridge Notes are outstanding
(the "REGISTRATION PERIOD"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus (es) used in connection with the Registration
Statement(s), which prospectus (es) are to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s). In the event the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities, the Company shall amend the Registration Statement, or
file a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover all of the Registrable Securities, in each
case, as soon as practicable, but in any event within fifteen (15) days after
the necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Registrable Securities" if at any time the number of Registrable
Securities issued or issuable upon conversion of the Bridge Notes together with
the number of Registrable Securities issued or issuable upon exercise of the
Purchaser Warrants and the Repricing Warrants is greater than the quotient
determined by dividing (i) the number of shares of Common Stock available for
resale under such Registration Statement by (ii) {1.0}. For purposes of the
calculation set forth in the foregoing sentence, any restrictions on the
convertibility of the Bridge Notes or exercise of the Purchaser Warrants and the
Repricing Warrants shall be disregarded and such calculation shall assume that
the Bridge Notes are then convertible into shares of Common Stock at the then
prevailing Conversion Price (as defined in the Bridge Notes) and that the
Purchaser Warrants and the Repricing Warrants are exercised at the then current
exercise price.
4
(c) The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal counsel,
without charge, (i) promptly after the same is prepared and filed with the SEC
at least one copy of the Registration Statement and any amendment thereto,
including financial statements and schedules, all documents incorporated therein
by reference, and all exhibits, the prospectus (es) included in such
Registration Statement(s) (including each preliminary prospectus) and all
correspondence by or on behalf of the Company to the SEC or the staff of the SEC
and all correspondence from the SEC or the staff of the SEC to the Company or
its representatives, related to such Registration Statement(s), (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably
request), and (iii) such other documents, including any preliminary prospectus,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor.
(d) The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as any Investor reasonably requests, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; PROVIDED HOWEVER, that
the Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d) hereof, (B) subject
itself to general taxation in any such jurisdiction, or (C) file a general
consent to service of process in any such jurisdiction. The Company shall
promptly notify each Investor who holds Registrable Securities of the receipt by
the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
(e) In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
(f) As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor in writing of the happening of any event, of
which the Company has knowledge, as a result of which, the prospectus included
in a Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and promptly prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to each Investor (or such other number of copies as such Investor may
reasonably request). The Company shall also promptly notify each Investor in
writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Investor by facsimile on the same day
of such effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
5
(g) The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment, and to notify each Investor who holds Registrable Securities being sold
(and, in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof, or its receipt of actual
notice of the initiation, or threatened initiation of any proceeding for such
purpose.
(h) The Company shall permit each Investor a single firm of counsel or
such other counsel as thereafter designated as selling stockholders' counsel by
the Investors who hold a majority of the Registrable Securities being sold, to
review and comment upon the Registration Statement(s) and all amendments and
supplements thereto at least seven (7) days prior to their filing with the SEC,
and not file any document in a form to which such counsel reasonably objects.
The Company shall not submit a request for acceleration of the effectiveness of
a Registration Statement(s) or any amendment or supplement thereto without the
prior approval of such counsel, which consent shall not be unreasonably
withheld.
(i) At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) if required by an underwriter, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope, and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.
(j) The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors, and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence PROVIDED HOWEVER, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (A) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (B) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (C) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement. Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.
6
(k) The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement.
The Company agrees that it shall, upon learning that disclosure of such
information concerning an Investor is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Investor and allow such Investor, at the Investor's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(l) The Company shall use its best efforts either to (i) cause all the
Registrable Securities covered by a Registration Statement to be listed on each
national securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, (ii)
to secure designation and quotation of all the Registrable Securities covered by
the Registration Statement on the NASDAQ [NATIONAL SMALL CAP] Market, (iii) if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i) or (ii) to
secure the inclusion for quotation on the NASDAQ [NATIONAL SMALL CAP] Market for
such Registrable Securities or, (iv) if, despite the Company's best efforts to
satisfy the preceding clause (iii), the Company is unsuccessful in satisfying
the preceding clause (iii), to secure the inclusion for quotation on the
over-the-counter market for such Registrable Securities, and, without limiting
the generality of the foregoing, in the case of clause (iii) or (iv), to arrange
for at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(1).
(m) The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, any managing underwriter
or underwriters, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or, if there is no managing
underwriter or underwriters, the Investors may reasonably request and registered
in such names as the managing underwriter or underwriters, if any, or the
Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
unlegended securities in a timely fashion that complies with then mandated
securities settlement procedures for regular way market transactions.
7
(n) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
(o) The Company shall provide a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.
(p) If requested by the managing underwriters or an Investor, the
Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters, and with respect to
any other terms of the underwritten (or best efforts underwritten) offering of
the Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and supplement or make amendments to any Registration
Statement if requested by a shareholder or any underwriter of such Registrable
Securities.
(q) The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
(r) The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
SECTION 4. OBLIGATIONS OF THE INVESTORS.
(a) At least seven (7) days prior to the first anticipated filing date
of the Registration Statement, the Company shall notify each Investor in writing
of the information the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities, and shall execute such documents in connection
with such registration as the Company may reasonably request.
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement(s) hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
8
(c) In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) and, if so directed by the Company, such Investor shall
deliver to the Company (at the expense of the Company) or destroy all copies in
such Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements, and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
SECTION 5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings, or qualifications pursuant
to Sections 2 and 3, including, without limitation, all registration, listing
and qualifications fees, printers and printing fees, accounting fees, and fees
and disbursements of counsel for the Company and fees and disbursements of one
counsel for the Investors, shall be borne by the Company.
SECTION 6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless, and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, employees, agents,
and each Person, if any, who controls any Investor within the meaning of the
1933 Act or the Securities Exchange Act of 1934, as amended (the "1934 ACT"),
and any underwriter (as defined in the 0000 Xxx) for the Investors, and the
directors and officers of, and each Person, if any, who controls, any such
underwriter within the meaning of the 1933 Act or the 1934 Act (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively, "CLAIMS") incurred in
investigating, preparing, or defending any action, claim, suit, inquiry,
proceeding, investigation, or appeal taken from the foregoing by or before any
court or governmental, administrative, or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
9
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("BLUE SKY FILING"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which the statements therein were made, not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or,
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c); (ii) with respect to any
preliminary prospectus, shall not inure to the benefit of any such person from
whom the person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or mission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(c), and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
violation and such Indemnified Person, notwithstanding such advice, used (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company, and (iv) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each Person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim
or Indemnified Damages to which any of them may become subject, under the 1933
10
Act, the 1934 Act, or otherwise, insofar as such Claim or Indemnified Damages
arise out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject
to Section 6(d), such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; PROVIDED HOWEVER, that the indemnity agreement contained in this
Section 6(b) and Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; PROVIDED FURTHER
HOWEVER, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers, and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; PROVIDED HOWEVER, that an Indemnified
Person or Indemnified Party shall have the right to retain its own counsel with
the fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for
11
any settlement of any action, claim or proceeding effected without its written
consent, PROVIDED HOWEVER, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties,
firms, or corporations relating to the matter for which indemnification has been
made. The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
(e) The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
(f) The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
SECTION 7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; PROVIDED HOWEVER, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation, and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
SECTION 8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the investors to sell securities of the Company
to the public without registration ("RULE 144"), the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section ____ of the
Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act, and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the investors to
sell such securities pursuant to Rule 144 without registration.
12
SECTION 9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment; (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (A) the name and
address of such transferee or assignee, and (B) the securities with respect to
which such registration rights are being transferred or assigned; (iii)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the 1933 Act
and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement; (vi) such
transferee shall be an "accredited investor" as that term is defined in Rule 501
of Regulation D promulgated under the 1933 Act; and (vii) in the event the
assignment occurs subsequent to the date of effectiveness of the Registration
Statement required to be filed pursuant to Section 2(a), the transferee agrees
to pay all reasonable expenses of amending or supplementing such Registration
Statement to reflect such assignment.
SECTION 10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Investors
who hold two-thirds of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
SECTION 11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices, or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice, or election received from the registered owner of such Registrable
Securities.
(b) Any notices consents, waivers, or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mall, return receipt requested, or (iv) one (1) day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
13
If to the Company: The Tracker Corporation of America
000 Xxxxxx Xxxxxx Xxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attn:
Telephone: (000) 000-0000
Facsimile: ()
with a copy (which shall not constitute notice) to:
_________________, Esq.
Telephone: ( )
Facsimile: ( )
If to a Purchaser, to its address and facsimile number on the Schedule of
Purchasers, with copies to such Purchaser's counsel as set forth on the Schedule
of Purchasers. Each party shall provide five (5) days prior written notice to
the other party of any change in address or facsimile number.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of _______ without regard to the principles of
conflict of laws. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) This Agreement and the Purchase Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties, or undertakings,
other than those set forth or referred to herein and therein. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
(f) Subject to the requirements of Section 9, this Agreement shall
inure to the benefit and of and be binding upon the permitted successors and
assigns of each of the parties hereto.
(g) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the signature of the party so delivering this
Agreement.
14
(i) Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments, and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
15
COMPANY SIGNATURE PAGE
TO
REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
THE TRACKER CORPORATION OF
AMERICA
By:__________________________________
Name, Title
[Purchasers Signature on Following Pages]
16
PURCHASER SIGNATURE PAGE
TO
REGISTRATION RIGHTS AGREEMENT
PURCHASER:
By:__________________________________
Name:________________________________
Title:_______________________________
PURCHASER NAME ("PURCHASER")
ADDRESS AND
FACSIMILE NUMBER
--------------------------------------------------------------------------------
SECURITIES PURCHASED $____________
--------------------------------------------------------------------------------
PURCHASE PRICE _________________________________________
--------------------------------------------------------------------------------
PURCHASER'S LEGAL COUNSEL _________________________________________
ADDRESS AND
FACSIMILE NUMBER _________________________________________
_________________________________________
_________________________________________
--------------------------------------------------------------------------------
17
EXHIBIT E
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF ESCROW AGREEMENT
Form Attached hereto.
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "ESCROW AGREEMENT"), is made and entered into as
of August 6, 1999, by and between THE TRACKER CORPORATION OF AMERICA, a Delaware
corporation (the "COMPANY"), and the Persons listed on the Purchaser Signature
Pages attached hereto (each of whom is individually referred to as a "PURCHASER"
and all of whom collectively are referred to as the "PURCHASERS"), and SUNTRUST
BANK, ATLANTA, a Georgia banking corporation, as Escrow Agent hereunder ("ESCROW
AGENT").
BACKGROUND
The Company has engaged Sovereign Capital Advisors, LLC, a Nevada limited
liability company ("SOVEREIGN") to assist it in locating qualified investors to
purchase up to $3,000,000 in original principal amount of convertible, secured,
Series 1 Bridge Notes of the Company (the "SECURITIES"), pursuant to a Series 1
Bridge Note Purchase and Security Agreement (the "PURCHASE AGREEMENT").
Pursuant to the Purchase Agreement, Purchasers are required to deliver to Escrow
Agent full payment of the purchase price of the Securities purchased at the time
such Purchasers execute the Purchase Agreement (the "ESCROW FUNDS"). Escrow
Agent shall accept, hold, and disburse the Escrow Funds deposited with Escrow
Agent in accordance with the terms of this Escrow Agreement. There is no
minimum amount of Escrow Funds which must be held by Escrow Agent before the
Escrow Agent may disburse Escrow Funds to the Company pursuant to a Release
Notice meeting all of the terms and conditions set forth herein.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, for themselves, their successors,
and assigns, hereby agree as follows:
SECTION 1. DEFINITIONS.
The following terms shall have the following meanings when used herein:
"CASH INVESTMENT" means the purchase price of the Securities to be
purchased by any Purchaser as set forth on the signature page to the Purchase
Agreement executed by such Purchaser.
"CASH INVESTMENT INSTRUMENT" means a wire transfer of immediately available
funds deposited in the "The Tracker Corporation of America-Escrow Account," in
full payment of the purchase price of the Securities to be purchased by any
Purchaser as set forth on the signature page to the Purchase Agreement executed
by such Purchaser.
"ESCROW FUNDS" means the Cash Investments deposited with the Escrow Agent
pursuant to this Escrow Agreement.
"RELEASE NOTICE" shall mean a written notification, or written
notifications, if more than one, signed by the Company which shall indicate: (a)
the name and address, the Securities purchased, and the Cash Investment of each
Purchaser, (b) any withdrawal of a subscription by the Purchaser, (c) any other
termination, for whatever reason, of a subscription, and (d) a closing statement
which identifies the total proceeds from the sale of the Securities, the fees,
reimbursable costs, and expenses of Sovereign and counsel to Sovereign, and the
instructions for disbursement of the Escrow Fund.
1
SECTION 2. APPOINTMENT OF AND ACCEPTANCE BY ESCROW AGENT.
The Company and Purchasers hereby appoint Escrow Agent to serve as Escrow
Agent hereunder, and Escrow Agent hereby accepts such appointment in accordance
with the terms of this Escrow Agreement. The Company agrees that prior to
commencement of the offering to Purchasers, the Company shall request in writing
that Escrow Agent shall establish the "The Tracker Corporation of America-Escrow
Account," as more particularly described in Section 3(a) hereto (the "ESCROW
ACCOUNT") into which the Cash Investment Instruments from Purchasers shall be
deposited. Escrow Agent agrees to establish the Escrow Account promptly after
such request and after the Escrow Agent shall have received all information
reasonably requested from the Company and Sovereign. Escrow Agent is authorized
to rely on written communications from Sovereign concerning all matters related
to this Escrow Agreement, provided, that Sovereign shall not have the power to
waive any conditions or to modify or amend the terms of this Escrow Agreement,
without express authorization of the Company or Purchasers and Escrow Agent, as
the case may be.
SECTION 3. DEPOSITS INTO ESCROW.
(a) All Cash Investment Instruments from Purchasers shall be deposited
into the Escrow Account described below:
Bank: SunTrust Bank, Atlanta
Corporate Trust Department
ABA Routing No.: 061000104
Center: 008
Account No.: 9088000008
Attn: Xxxxxxx Xxxxxxx
Re: The Tracker Corporation of America-
Escrow Account
ALL ESCROW FUNDS DEPOSITED IN THE ESCROW ACCOUNT SHALL REMAIN THE PROPERTY OF
THE PURCHASERS ACCORDING TO THEIR RESPECTIVE INTERESTS AND SHALL NOT BE SUBJECT
TO ANY LIEN OR CHARGE BY ESCROW AGENT OR BY JUDGMENT OR CREDITORS' CLAIMS
AGAINST THE COMPANY UNTIL RELEASED TO THE COMPANY IN ACCORDANCE WITH SECTION 5
HEREOF.
(b) Purchasers will transmit Escrow Funds by wire transfer. Wire
transfers are subject to collection requirements of presentment and final
payment. Escrow Funds in the Escrow Account cannot be drawn upon or disbursed
until such time as final payment has been made and all of the wire transfers are
no longer subject to dishonor. Upon receipt, Escrow Agent shall process each
Cash Investment Instrument for collection, and the proceeds thereof shall be
held as part of the Escrow Funds until disbursed in accordance with Section 5
hereof. If, upon presentment for payment, any Cash Investment Instrument is
dishonored, Escrow Agent's sole obligation shall be to notify the Company of
such dishonor and to return such Cash Investment Instrument to Purchaser.
Notwithstanding the foregoing, if for any reason any Cash Investment Instrument
is uncollectible after payment of the Escrow Funds represented thereby has been
made by Escrow Agent in accordance with this Escrow Agreement, the Company shall
immediately reimburse Escrow Agent upon receipt from Escrow Agent of written
notice thereof.
(c) All Cash Investment Instruments shall be immediately available
Escrow Funds sent by wire transfer to the Escrow Account and Escrow Agent shall
not be obligated to accept, or present for payment, any Cash Investment
Instrument that is not payable in that manner.
2
SECTION 4. OTHER INFORMATION TO BE FURNISHED TO ESCROW AGENT.
The Company shall, on the date hereof, provide to Escrow Agent the name,
taxpayer identification number, address, and such other information as may be
required for withholding and reporting purposes such as either U.S. Treasury
Department Form W-9 or another applicable form, e.g., W-8 for each Purchaser.
SECTION 5. DISBURSEMENTS OF ESCROW FUNDS.
(a) RELEASE NOTICE UPON COMPLETION OF OFFERING. Subject to the
provisions of Section 13 hereof, Escrow Agent shall disburse the amounts in the
Escrow Account as directed in a Release Notice, by wire transfer, promptly after
receipt of a Release Notice from Company. Notwithstanding the foregoing Escrow
Agent shall not be obligated to disburse the Escrow Funds if Escrow Agent has
grounds to believe that (a) Cash Investment Instruments have not been received,
deposited with, and collected by the Escrow Agent in an amount at least equal to
the amount specified in the Release Notice or (b) the Release Notice is
materially incorrect or incomplete.
(b) REJECTION OF ANY SUBSCRIPTION OR TERMINATION OF THE OFFERING. No
later than fifteen (15) business days after receipt by Escrow Agent of written
notice (i) from the Company or Sovereign that the Company intends to reject a
Purchaser's subscription, or (ii) from the Company or Sovereign that there will
be no closing of the sale of Securities to Purchasers, Escrow Agent shall pay to
the applicable Purchasers, by certified or bank check sent by first class mail,
the amount of the Cash Investment paid by each Purchaser, without interest or
deduction.
(c) EXPIRATION OF OFFERING PERIOD. Notwithstanding anything to the
contrary contained herein, if Escrow Agent shall not have received a Release
Notice for the First Closing on or before August 19, 1999, and a Release Notice
for the final closing on or before February 19, 1999, Escrow Agent shall, within
fifteen (15) business days after each such date and without any further
instruction or direction from Sovereign or the Company, return to each
Purchaser, by certified or bank check sent by first class mail, all their
respective Cash Investments then held by Escrow Agent.
SECTION 6. PROVISIONS FOR BENEFIT OF ESCROW AGENT.
(a) Escrow Agent undertakes to perform only such duties as are
expressly set forth herein, and no additional duties or obligations shall be
implied hereunder. In performing its duties under this Escrow Agreement, or
upon the claimed failure to perform any of its duties hereunder, Escrow Agent
shall not be liable to anyone for any damages, losses, or expenses which may be
incurred as a result of Escrow Agent so acting or failing to so act; PROVIDED
HOWEVER, Escrow Agent shall not be relieved from liability for damages arising
out of its proven gross negligence or willful misconduct under this Escrow
Agreement. Escrow Agent shall in no event incur any liability with respect to
(i) any action taken or omitted to be taken in good faith upon advice of legal
counsel, which may be counsel to any party hereto, given with respect to any
question relating to the duties and responsibilities of Escrow Agent hereunder,
or (ii) any action taken or omitted to be taken in reliance upon any in
instrument delivered to Escrow Agent and believed by it to be genuine and to
have been signed or presented by the proper party or parties. Escrow Agent
shall not be bound in any way by any agreement or contract between the Company
and Purchaser, whether or not Escrow Agent has knowledge of any such agreement
or contract.
3
(b) The Company and Purchasers each warrant to and agree with Escrow
Agent that, unless otherwise expressly set forth in this Escrow Agreement, there
is no security interest in the Escrow Funds or any part of the Escrow Account;
no financing statement under the Uniform Commercial Code of any jurisdiction is
on file in any jurisdiction claiming a security interest in or describing,
whether specifically or generally, the Escrow Funds or any part of the Escrow
Funds; and the Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the Escrow Funds or any
part of the Escrow Funds or to file any financing statement under the Uniform
Commercial Code of any jurisdiction with respect to the Escrow Funds or any part
thereof.
SECTION 7. SUSPENSION OF PERFORMANCE OR DISBURSEMENT INTO COURT.
(a) As an additional consideration for and as an inducement for Escrow
Agent to act hereunder, it is understood and agreed that, in the event of any
disagreement between the parties to this Escrow Agreement or among them or any
other person(s) resulting in adverse claims and demands being made in connection
with or for any money or other property involved in or affected by this Escrow
Agreement, Escrow Agent shall be entitled to refuse to comply with the demands
of such parties, or any of such parties, so long as such disagreement shall
continue. In such event, Escrow Agent shall make no delivery or other
disposition of the Escrow Funds or any part of such Escrow Funds. Anything
herein to the contrary notwithstanding, Escrow Agent shall not be or become
liable to such parties or any of them for the failure of Escrow Agent to comply
with the conflicting or adverse demands of such parties or any of such parties.
Escrow Agent shall be entitled to continue to refrain and refuse to deliver or
otherwise dispose of the Escrow Funds or any part thereof or to otherwise act
hereunder, as stated above, unless and until: (a) the rights of such parties
have been finally settled by binding arbitration or duly adjudicated in a court
having jurisdiction of the parties and the Escrow Funds and Escrow Agent shall
have received written notice thereof OR (b) the parties have reached an
agreement resolving their differences and have notified Escrow Agent in writing
of such agreement and have provided Escrow Agent with indemnity satisfactory to
Escrow Agent pursuant to Section 12 hereof against any liability, claims, or
damages resulting from compliance by Escrow Agent with such agreement.
(b) In the event of a disagreement between such parties as described
above, Escrow Agent shall have the right, in addition to the rights described
above and at the option of Escrow Agent, to tender into the registry or custody
of any court having jurisdiction, all money and property comprising the Escrow
Account and may take such other legal action as may be appropriate or necessary,
in the opinion of Escrow Agent or its counsel. Upon such tender, the parties
hereto agree that Escrow Agent shall be discharged from all further duties under
this Escrow Agreement; PROVIDED HOWEVER, that the filing of any such legal
proceedings shall not deprive Escrow Agent of its compensation hereunder earned
prior to such filing and discharge of Escrow Agent of its duties hereunder.
(c) Escrow Agent shall have no liability to Sovereign, the Company, any
Purchaser, or any other person with respect to any such suspension of
performance or disbursement into court, specifically including any liability or
claimed liability that may arise, or be alleged to have arisen, out of or as a
result of any delay in the disbursement of Escrow Funds held in the Escrow
Account or any delay in or with respect to any other action required or
requested of Escrow Agent.
4
(d) The parties hereto agree that, in the event any controversy arises
under or in connection with this Escrow Agreement or the Escrow Funds, or Escrow
Agent is made a party to or intervenes in any litigation pertaining to this
Escrow Agreement or the Escrow Funds, to pay to Escrow Agent reasonable
compensation for its extraordinary services and to reimburse Escrow Agent for
all costs and expenses associated with such controversy or litigation.
(e) Escrow Agent shall have no obligation to take any legal action in
connection with this Escrow Agreement or towards its enforcement, or to appear
in, prosecute, or defend any action or legal proceeding which would or might
involve it in any cost, expense, loss, or liability unless security and
indemnity, as provided in Section 12 hereof shall be furnished.
SECTION 8. INVESTMENT OF ESCROW FUNDS.
Escrow Agent shall not invest or reinvest the Escrow Funds. The parties to
this Escrow Agreement acknowledge that no interest shall accrue or be paid with
respect to the Escrow Funds.
SECTION 9. REMOVAL OF ESCROW AGENT.
Escrow Agent may be removed, with or without cause, by the Company and all
Purchasers, acting jointly, in writing, at any time by the giving of thirty (30)
days prior written notice to Escrow Agent. Such removal shall take effect upon
the appointment of a successor escrow agent as provided hereinbelow. Upon any
such notice of removal, the Company shall appoint a successor escrow agent
hereunder, which shall be a commercial bank, trust company, or other financial
institution with a combined capital and surplus in excess of $100,000,000. Upon
the acceptance in writing of any appointment as Escrow Agent hereunder by a
successor escrow agent, such successor escrow agent shall thereupon succeed to,
and become vested with, all the rights, powers, privileges, and duties of the
retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from
its duties and obligations under this Escrow Agreement. After any retiring
Escrow Agent's removal, the provisions of this Escrow Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Escrow Agent under this Escrow Agreement.
SECTION 10. RESIGNATION OF ESCROW AGENT.
Escrow Agent may resign at any time from its obligations under this Escrow
Agreement by providing written notice to the parties hereto. Such resignation
shall be effective on the date set forth in such written notice which shall be
no earlier than 20 days after such written notice has been given. In the event
no successor escrow agent has been appointed on or prior to the date such
resignation is to become effective, Escrow Agent shall be entitled to tender
into the custody of a court of competent jurisdiction all assets then held by it
hereunder and shall thereupon be relieved of all further duties and obligations
under this Escrow Agreement. Escrow Agent shall have no responsibility for the
appointment of a successor escrow agent hereunder. After Escrow Agent's
resignation the provisions of this Escrow Agreement shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was escrow agent
under this Escrow Agreement.
SECTION 11. LIABILITY OF ESCROW AGENT.
(a) Escrow Agent's sole responsibility shall be for the safekeeping and
disbursement of the Escrow Funds in accordance with the terms of this Escrow
Agreement. Escrow Agent shall have no implied duties or obligations and shall
not be charged with knowledge or notice of any fact or circumstance not
specifically set forth herein.
(b) Escrow Agent shall not be liable for any error of judgment, or for
any act done or step taken or omitted by it in good faith, or for any mistake of
fact or law, or for anything which it may do or refrain from doing in connection
herewith, except for its own gross negligence or willful misconduct.
5
(c) In no event shall Escrow Agent be liable for incidental, indirect,
special, consequential, or punitive damages. Escrow Agent shall not be
obligated to take any legal action or commence any proceeding in connection with
the Escrow Funds or the Escrow Account in which Escrow Funds are deposited or
this Escrow Agreement, or to appear in, prosecute, or defend any such legal
action or proceeding. Without limiting the generality of the foregoing, Escrow
Agent shall not be responsible for or required to enforce any of the terms or
conditions of any Purchase Agreement with any Purchaser or any other agreement
between the Company, Sovereign, and/or any Purchaser. Escrow Agent shall not be
responsible or liable in any manner for the performance by the Company or any
Purchaser of their respective obligations under any Purchase Agreement nor shall
Escrow Agent be responsible or liable in any manner for the failure of the
Company, Sovereign, or any third party (including any Purchaser) to honor any of
the provisions of this Escrow Agreement. Escrow Agent may consult legal counsel
selected by it in the event of any dispute or question as to the construction of
any of the provisions hereof or of any other agreement or of its duties
hereunder, and shall incur no liability and shall be fully indemnified pursuant
to Section 12 hereof from any liability whatsoever in acting in accordance with
the opinion or instruction of such counsel. The Company shall promptly pay,
upon demand, the reasonable fees and expenses of any such counsel.
(d) Escrow Agent is authorized to comply with orders issued or process
entered by any court with respect to the Escrow Funds, without determination by
the Escrow Agent of such court's jurisdiction in the matter. If any portion of
the Escrow Funds is at any time attached, garnished, or levied upon under any
court order, or in case the payment, assignment, transfer, conveyance, or
delivery of any such property shall be stayed or enjoined by any court order, or
in case any order, judgment, or decree shall be made or entered by any court
affecting such property or any part thereof, then and in any such event, the
Escrow Agent is authorized, in its sole discretion, to rely upon and comply with
any such order, writ, judgment, or decree without the need for appeal or other
action; and if the Escrow Agent complies with any such order, writ, judgment, or
decree, it shall not be liable to any of the parties hereto or to any other
person or entity by reason of such compliance even though such order, writ,
judgment, or decree may be subsequently reversed, modified, annulled, set aside,
or vacated.
SECTION 12. INDEMNIFICATION OF ESCROW AGENT.
The Company and Purchasers jointly and severally agree to indemnify Escrow
Agent and it officers, directors, employees, and agents and save Escrow Agent
and its officers, directors, employees, and agents harmless from and against any
and all Claims (as hereinafter defined) and Losses (as hereinafter defined)
which may be incurred by Escrow Agent or any of such officers, directors,
employees, or agents as a result of Claims asserted against Escrow Agent or any
of such officers, directors, employees, or agents as a result of or in
connection with Escrow Agent's capacity as such under this Escrow Agreement by
any person or entity. For the purposes hereof the term "CLAIMS" shall mean all
claims, lawsuits, causes of action, or other legal actions and proceedings of
whatever nature brought against (whether by way of direct action, counterclaim,
cross action, or impleader) Escrow Agent or any such officer, director,
employee, or agent, even if groundless, false, or fraudulent, so long as the
claim, lawsuit, cause of action, or other legal action or proceeding is alleged
or determined, directly or indirectly, to arise out of, result from, relate to,
or be based upon, in whole or in part: (a) the acts or omissions of the Company
or Purchasers, (b) the appointment of Escrow Agent as escrow agent under this
Escrow Agreement, or (c) the performance by Escrow Agent of its powers and
duties under this Escrow Agreement; and the term "LOSSES" shall mean losses,
costs, damages, expenses, judgments, and liabilities of whatever nature
(including, but not limited to, attorneys', accountants', and other
professionals' fees, litigation, and court costs and expenses and amounts paid
in settlement), directly or indirectly resulting from, arising out of, or
relating to one or more Claims. Upon the written request of Escrow Agent or any
such officer, director, employee, or agent (each referred to hereinafter as an
"INDEMNIFIED PARTY"), the Company and Purchasers jointly and severally agree to
assume the investigation and defense of any Claim, including the employment of
counsel acceptable to the applicable Indemnified Party and the payment of all
expenses related thereto and, notwithstanding any such assumption, the
Indemnified Party shall have the right, and the Company and Purchasers jointly
and severally agree to pay the cost and expense thereof, to employ separate
counsel with respect to any such Claim and participate in the investigation and
defense thereof in the event that such Indemnified Party shall have been advised
by counsel that there may be one or more legal defenses available to such
Indemnified Party which are different from or additional to these available to
either the Company or Purchasers. The Company and Purchasers hereby agree that
the indemnifications and protections afforded Escrow Agent in this section shall
survive the termination of the Escrow Agreement or the resignation, removal, or
effective resignation of Escrow Agent pursuant to Section 7(b) hereof.
6
SECTION 13. COMPENSATION TO ESCROW AGENT.
The Company agrees to pay Escrow Agent for its ordinary services hereunder,
the fees determined in accordance with and payable as specified in the Schedule
of Fees set forth in EXHIBIT A attached hereto and made a part hereof. In
addition, the Company agrees to pay to Escrow Agent its expenses incurred in
connection with this Escrow Agreement including, but not limited to, the
reasonable cost of legal services in the event Escrow Agent reasonably deems it
necessary to retain counsel. Such expenses shall be paid to Escrow Agent within
30 days following receipt by the parties hereto of a written statement setting
forth such expenses. As security for all fees and expenses of Escrow Agent
hereunder and any and all losses, claims, damages, liabilities, and expenses
incurred by Escrow Agent in connection with its acceptance of appointment
hereunder or with the performance of its obligations under this Escrow Agreement
and to secure the obligation of the parties hereto to indemnify Escrow Agent as
set forth in Section 12 hereof, Escrow Agent is hereby granted a security
interest in and a lien upon the Escrow Funds, which security interest and lien
shall be prior to all other security interests, liens, or claims against the
Escrow Funds or any part thereof.
SECTION 14. REPRESENTATIONS AND WARRANTIES.
(a) The Company makes the following representations and warranties to
Escrow Agent:
(i) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware, and has full power and
authority to execute and deliver this Escrow Agreement and to perform its
obligations hereunder.
(ii) This Escrow Agreement has been duly approved by all necessary
corporate action of the Company, including any necessary shareholder approval,
has been executed by duly authorized officers of the Company, and constitutes a
valid and binding agreement of the Company, enforceable in accordance with its
terms; PROVIDED HOWEVER, that enforceability is subject to: (a) applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance, and
similar federal and state laws affecting the rights and remedies of creditors
generally, and (b) general principles of equity limiting the availability of
equitable remedies (including but not limited to the remedy of specific
performance), whether considered in a proceeding at law or in equity.
(iii) The execution, delivery, and performance by the Company of this
Escrow Agreement will not violate, conflict with, or cause a default under, the
certificate of incorporation or bylaws of the Company, any applicable law or
regulation, any court order or administrative ruling or decree to which the
Company is a party or any of its property is subject, or any agreement,
contract, indenture, or other binding arrangement to which the Company is a
party or any of its property is subject.
7
(iv) No party other than the parties hereto and the prospective
Purchasers have, or shall have, any lien or claim against, or security interest
in, the Escrow Funds or any part thereof. No financing statement under the
Uniform Commercial Code is on file in any jurisdiction claiming a security
interest in or describing (whether specifically or generally) the Escrow Funds
or any part thereof.
(v) The Company hereby acknowledges that the status of Escrow Agent is
that of agent only for the limited purposes set forth herein, and hereby
represents and covenants that no representation or implication shall be made
that the Escrow Agent has investigated the desirability or advisability of
investment in the Securities or has approved, endorsed, or passed upon the
merits of the investment therein and that the name of the Escrow Agent has not
and shall not be used in any manner in connection with the offer or sale of the
Securities other than to state that the Escrow Agent has agreed to serve as
escrow agent for the limited purposes set forth herein.
(vi) All of the representations and warranties of the Company contained
herein are true and complete as of the date hereof and will be true and complete
at the time of any deposit to or disbursement from the Escrow Account.
(b) Each Purchaser makes the following representations and warranties
to Escrow Agent:
(i) Purchaser has full power and authority to execute and deliver this
Escrow Agreement, the Transaction Documents, and to perform its obligations
hereunder.
(ii) This Escrow Agreement and the Transaction Documents have been duly
approved by all necessary action of Purchaser, including any necessary
shareholder approval, has been executed by persons duly authorized by Purchaser,
and constitutes a valid and binding agreement of Purchaser, enforceable in
accordance with its terms.
(iii) The execution, delivery, and performance by Purchaser of this
Escrow Agreement will not violate, conflict with, or cause a default under, the
organizational or governing documents of Purchaser, any applicable law or
regulation, any court order or administrative ruling or decree to which
Purchaser is a party or any of its property is subject, or any agreement,
contract, indenture, or other binding arrangement to which Purchaser is a party
or any of its property is subject.
(iv) Purchaser hereby acknowledges that the status of Escrow Agent is
that of agent only for the limited purposes set forth herein, and hereby
represents and covenants that no representation or implication shall be made
that the Escrow Agent has investigated the desirability or advisability of
investment in the Securities or has approved, endorsed, or passed upon the
merits of the investment therein and that the name of the Escrow Agent has not
and shall not be used in any manner in connection with the offer or sale of the
Securities other than to state that the Escrow Agent has agreed to serve as
escrow agent for the limited purposes set forth herein.
8
(v) All of the representations and warranties of Purchaser contained
herein and in the Transaction Documents are true and complete as of the date
hereof and will be true and complete at the time of any deposit to or
disbursement from the Escrow Account.
SECTION 15. CONSENT TO JURISDICTION AND VENUE.
In the event that the Company and Escrow Agent hereto commence a lawsuit or
other proceeding relating to or arising from this Escrow Agreement, the Company
and Escrow Agent hereto agree that the United States District Court for the
Northern District of Georgia shall have the sole and exclusive jurisdiction over
any such proceeding. If such court lacks federal subject matter jurisdiction,
the Company and Escrow Agent agree that the Superior Court of Xxxxxx County,
Georgia shall have sole and exclusive jurisdiction. Any of these courts shall
be proper venue for any such lawsuit or judicial proceeding and the Company and
Escrow Agent waive any objection to such venue. The Company and Escrow Agent
consent to and agree to submit to the jurisdiction of any of the courts
specified herein and agree to accept service or process to vest personal
jurisdiction over them in any of these courts. It is the intention of the
parties to this Escrow Agreement that the situs of the Escrow Account created by
this Escrow Agreement be, and that it be administered in the state in which the
principal office of the Escrow Agent is located from time to time acting
hereunder.
SECTION 16. NOTICE.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been validly served, given, or delivered five (5) days
after deposit in the United States mails, by certified mail with return receipt
requested and postage prepaid, when delivered personally, one (1) day after
delivery to any overnight courier, or when transmitted by facsimile transmission
facilities (with machine generated receipt confirmation), and addressed to the
party to be notified as follows:
If to the Company at:
The Tracker Corporation of America
000 Xxxxxx Xxxxxx West, 26th Floor
Toronto, Ontario
Canada M5G 1Z8
Attn: Xxx X. Xxxxxxxx, President
Telephone: (416)
Facsimile: (416)
Tax ID #00-0000000
If to Sovereign at:
Sovereign Capital Advisors, LLC
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxx Xxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
9
If to the Escrow Agent at:
SunTrust Bank, Atlanta
Corporate Trust Division
00 Xxxx Xxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to Purchaser at: The address set forth on the
counterpart signature page hereto or
to such other address as each party
may designate for itself by like
notice.
SECTION 17. AMENDMENT WAIVER, ETC.
This Escrow Agreement may be changed, waived, discharged, or terminated
only by a writing signed by the Company, Purchasers, and Escrow Agent. No delay
or omission by any party in exercising any right with respect hereto shall
operate as a waiver. A waiver on any one occasion shall not be construed as a
bar to, or waiver of, any right or remedy on any future occasion. No waiver,
modification, amendment, termination, or rescission of this Escrow Agreement
shall be effective or binding upon Escrow Agent unless Escrow Agent shall have
specifically consented thereto in writing.
SECTION 18. SEVERABILITY.
To the extent any provision of this Escrow Agreement is prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Escrow Agreement.
SECTION 19. GOVERNING LAW.
This Escrow Agreement shall be construed and interpreted in accordance with
the internal laws of the State of Georgia without giving effect to the
principles or rules governing conflict of laws.
SECTION 20. ENTIRE AGREEMENT.
This Escrow Agreement constitutes the entire agreement among the parties
relating to the acceptance, collection, holding, and disbursement of the Escrow
Funds and sets forth in their entirety the obligations and duties of the Escrow
Agent with respect to the Escrow Funds.
SECTION 21. BINDING EFFECT.
All of the terms of this Escrow Agreement, as amended from time to time,
shall be binding upon, inure to the benefit of and be enforceable by the
respective successors and assigns of the Company, Purchasers, and Escrow Agent.
SECTION 22. EXECUTION IN COUNTERPARTS.
This Escrow Agreement may be executed in two or more counterparts, which
when so executed shall constitute one and the same agreement.
SECTION 23. TERMINATION.
Upon the first to occur of the disbursement of all amounts in the Escrow
Account or deposit of all amounts in the Escrow Account into court pursuant to
Section 7 hereof, this Escrow Agreement shall terminate and Escrow Agent shall
have no further obligation or liability whatsoever with respect to this Escrow
Agreement or the Escrow Funds.
10
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be
executed under seal as of the date first above written.
[Remainder of page intentionally left blank; signatures on following pages]
11
COMPANY SIGNATURE PAGE
TO
ESCROW AGREEMENT
IN WITNESS WHEREOF, the Company hereto has caused this Escrow Agreement to
be executed under seal as of the date first above written.
THE COMPANY:
THE TRACKER CORPORATION OF
AMERICA
By:_________________________________
Name:_______________________________
Title:______________________________
12
ESCROW AGENT SIGNATURE PAGE
TO
ESCROW AGREEMENT
IN WITNESS WHEREOF, the Escrow Agent hereto has caused this Escrow
Agreement to be executed under seal as of the date first above written.
ESCROW AGENT:
SunTrust Bank, Atlanta
as Escrow Agent
By:_________________________________
Its:________________________________
[Purchaser Signature Pages Attached]
13
PURCHASER SIGNATURE PAGE
TO
ESCROW AGREEMENT
IN WITNESS WHEREOF, the Purchaser hereto has caused this Escrow Agreement
to be executed under seal as of the date first above written.
PURCHASER
By:_________________________________
Name:_______________________________
Title:______________________________
PURCHASER NAME __________________________________________________
("PURCHASER")
ADDRESS AND __________________________________________________
FACSIMILE NUMBER
__________________________________________________
__________________________________________________
SECURITIES PURCHASED
__________________________________________________
PURCHASE PRICE
__________________________________________________
PURCHASER'S LEGAL COUNSEL __________________________________________________
ADDRESS AND
FACSIMILE NUMBER __________________________________________________
__________________________________________________
1
EXHIBIT A
TO
ESCROW AGREEMENT
SCHEDULE OF FEES
Schedule of Fees:
------------------
Escrow Fee $2,000.00
Wire Transfer Fee 10.00 per wire
1
EXHIBIT F
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF OPINION OF COMPANY COUNSEL TO PURCHASERS
Form Attached hereto.
December 15, 1999
To: Purchasers of the Company's Series 1 Bridge Notes
c/o Sovereign Capital Advisors, LLC
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Re: The Tracker Corporation of America
Ladies and Gentlemen:
We have acted as special counsel to The Tracker Corporation of America, a
Delaware corporation (the "Company"), in connection with the Series 1 Bridge
Note Purchase and Security Agreement, dated as of August 18, 1999, between you
and the Company (the "Purchase Agreement") and the transactions contemplated
thereby. This opinion is furnished to you pursuant to Section 5.2 of the
Purchase Agreement in connection with the closing of Series 1 Bridge Financing
Notes with ________________ occurring on __________, 1999 (the "______
Closing"). Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings assigned to such terms in the Purchase Agreement.
In connection with the opinion expressed below, we have examined the
following documents:
(i) The Certificate of Incorporation and Bylaws of the Company, each
as currently in effect;
(ii) Resolutions of the Board of Directors of the Company authorizing
the issuance and sale of the Series 1 Bridge Notes;
(iii) The Purchase Agreement;
(iv) The Bridge Notes;
(v) The Escrow Agreement;
(vi) The form of Warrant for issuance to Purchaser;
(vii) The Registration Rights Agreement;
(viii) The form of Repricing Warrant for Purchasers;
(ix) The form of Callable Warrant for Purchasers;
(x) The Irrevocable Transfer Agent Instructions;
(xi) The Placement Agency Agreement with Sovereign Capital Advisors,
LLC;
(xii) A Certificate of Good Standing dated August 18, 1999 from the
Secretary of State of the State of Delaware reflecting that the Company is a
corporation in good standing in the State of Delaware as of today's date (the
"Delaware Good Standing Certificate");
(xiii) The Minute Books of the Company (the "Company Minute Books");
(xiv) The disbursement instructions issued to you by the Company with
respect to the consideration to be paid for the Bridge Notes and the other
documents delivered at closing;
(xv) The Global Tracker Corporation Guaranty Agreement;
(xvi) The Guaranty Agreement from Xxx X. Xxxxxxxx;
(xvii) The Stock Pledge Agreement from Xxx X. Xxxxxxxx;
(xviii) The Guaranty Agreement from Xxxxx X. Xxxxx;
(xix) The Stock Pledge Agreement from Xxxxx X. Xxxxx;
(xx) The agreements to which the Company is a party or by which its
property is bound that the Company has identified to us as being material and
which are described on Attachment A hereto (the "Material Agreements");
The Purchase Agreement, the Bridge Notes, the Registration Rights
Agreement, the Escrow Agreement, the forms of the Warrants, the Irrevocable
Transfer Agent Instructions, the Placement Agency Agreement, the Global Tracker
Corporation Guaranty Agreement, the Guaranty Agreement from Xxx X. Xxxxxxxx and
the Stock Pledge Agreement from Xxx X. Xxxxxxxx, the Guaranty Agreement from
Xxxxx X. Xxxxx and the Stock Pledge Agreement from Xxxxx X. Xxxxx are herein
referred to collectively as the "Transaction Agreements." The Guaranty
Agreement from Xxx X. Xxxxxxxx, the Guaranty Agreement from Xxxxx X. Xxxxx and
the Stock Pledge Agreement from Xxxxx X. Xxxxx are herein referred to
collectively as the "Pledge Documents." We have also examined and considered
such corporate records, certificates, and other statements of corporate officers
of the Company and matters of law as we have deemed appropriate as a basis for
our opinions set forth below.
The opinions expressed herein are subject to the following assumptions,
limitations, qualification, and exceptions:
(a) We have assumed the genuineness of all signatures, the authenticity
of all Transaction Agreements submitted to us as originals, the conformity with
originals of all Transaction Agreements submitted to us as copies, the
authenticity of certificates of public officials, and the due authorization,
execution, and delivery of all Transaction Agreements (except the due
authorization, execution, and delivery by the Company of the Transaction
Agreements).
(b) In examining agreements (including the Transaction Agreements)
executed by parties other than the Company (the "Other Parties"), we have
assumed that each Other Party has the legal right, capacity, and power to enter
into, enforce and perform all of its obligations under such agreements.
Furthermore, we have assumed the due authorization by each of the Other Parties
of all requisite action and the due execution and delivery of such agreements by
each of the Other Parties, and that such agreements are valid and binding upon
each of the Other Parties and are enforceable against each Other Party in
accordance with their terms.
(c) As to our opinion regarding the valid existence and good standing
of the Company, we have relied solely upon the Delaware Good Standing
Certificate and the Certificate of the Officer of the Company.
(d) As to our opinion regarding the power and authority of the Company
to execute and deliver the Transaction Documents, we have relied solely upon the
following as sources of the Company's power and authority as an organization:
the Delaware Business Corporation Law, the Company's Certificate of
Incorporation, the resolution of the Company's Board of Directors authorizing
the transactions contemplated in the Transaction Documents, and the
understanding that "power" refers only to whether the acts referenced in the
Transaction Documents are not ultra xxxxx.
For purposes of factual matters relevant to the opinions expressed herein,
we have relied on (a) the representations and warranties of the Company
contained in the Transaction Agreements and (b) certificates of public officials
and the Company's transfer agent and statements and certificates of the officers
of the Company. Wherever any statement herein with respect to the existence or
absence of facts is qualified by the phrase "to our knowledge" or similar
phrase, it is intended to indicate that after a review of (i) the
representations and warranties of the Company contained in the Transaction
Agreements, (ii) certificates of public officials, the Company's public filings
with the U.S. Securities and Exchange Commission, and statements and
certificates of the officers of the Company, (iii) the Company Minute Books, and
(iv) the Material Agreements, during the course of our representation of the
Company through the date hereof, no information that would give us current
actual knowledge of the inaccuracy of such statement has come to the attention
of those attorneys in this firm who have represented the Company in connection
with the Transaction Agreements and the transaction contemplated thereby. The
term "knowledge" means the current actual knowledge of the lawyers who are
participating in drafting this opinion letter and in handling the transaction
described herein, but does not include, except as specifically provided
hereafter, constructive knowledge or inquiry knowledge. The term "knowledge"
does confirm that the lawyers drafting this opinion letter have made inquiry of
the one or more representatives of the Company as to the relevant facts
concerning this opinion and received answers, and have made further inquiry if
any of the alleged facts were suspect, either on their face or on the basis of
other facts known to such lawyer were open to question. The term "knowledge"
also confirms that the lawyer drafting this opinion (i) has made a reasonable
examination of his files and (ii) has made a reasonable inquiry of other members
of the lawyer's law firm if the lawyer drafting this opinion had a reasonable
belief that other lawyers in the law firm may have knowledge (as defined herein)
relating to facts relevant to this opinion. Except to the extent expressly
set forth herein, we have not undertaken any independent investigation to
determine the existence or absence of any fact, and no inference as to our
knowledge of the existence or absence of any fact should be drawn from our
representation of the Company or our rendering of the opinion set forth below.
Based upon the foregoing and subject to the assumptions, limitations,
qualifications, and exceptions stated herein, we are of the opinion that as of
the date hereof:
1. The Company is a corporation validly existing and in good standing under
the laws of the State of Delaware, and, to our knowledge, is duly qualified
as a foreign corporation to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary and in which the failure to so qualify would have a
material adverse effect on the business, operations, financial condition, or
results of operations of the Company taken as a whole (a "Material Adverse
Effect").
2. (a) The Company has the requisite corporate power and authority to
execute, deliver, and perform the Transaction Agreements; (b) the execution and
delivery of the Transaction Agreements by the Company and the consummation by it
of the transactions contemplated thereby have been duly authorized by the
Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its stockholders is required under Delaware
General Corporate Law, the Company's Certificate of Incorporation, or Bylaws;
(c) the Transaction Agreements have been duly executed and delivered by the
Company; and (d) the Transaction Agreements constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms. For purposes of this paragraph, the Transaction Documents do not
include the Pledge Documents. To our knowledge, no facts exist that would call
into question the legal capacity of the signatures to the Pledge Documents.
3. The issuance and sale of the Bridge Notes to be purchased by you has
been duly authorized by the Company, and are not subject to preemptive
rights or rights of first refusal. The issuance of the Warrants to be issued to
each Purchaser in connection with Subsequent Advances and to Sovereign Capital
Advisors, LLC in connection with the transaction contemplated by the Purchase
Agreement have been duly authorized by the Company and, upon issuance in
accordance with the terms of the Transaction Agreements, will be validly issued
by the Company and not subject to preemptive rights or rights of first refusal.
All shares of Common Stock issuable upon conversion of the Series 1 Bridge Notes
and exercise of the Warrants are duly authorized and reserved for issuance.
Upon conversion of the Bridge Notes and the exercise of the Warrants and, upon
issuance in accordance with the terms of the Transaction Agreements, the
Conversion Shares and the Warrant Shares will be validly issued, fully paid and
non-assessable, and shall not be subject to any statutory or, to our knowledge,
contractual preemptive rights or rights of first refusal.
4. As of the date hereof:
(a) The authorized capital stock of the Company consists of 100,000,000
shares of Capital Stock of which 93,400,000 shares are Common Stock, par value
$.001 per share, of which 50,389,579 shares are issued and outstanding, 100,000
shares are Class B Common Stock, par value $.00000007 par value, of which none
are issued and outstanding, and 6,500,000 shares are undesignated shares of
Preferred Stock, par value $.001 per share, none of which shares are currently
designated or are outstanding. All of such outstanding shares have been validly
issued and are fully paid and nonassessable. The shares pledged under the
Pledge Documents are validly issued, fully paid and nonassessable. Except as
disclosed in the Disclosure Schedule, no shares of Common Stock or Preferred
Stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company. Except as disclosed in
the Disclosure Schedules to the Purchase Agreement, (a) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls, or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries, or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (b) there are no outstanding debt securities
(other than the Bridge Notes), and (c) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement). There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Bridge Notes, the Conversion Shares, the Warrants, and the Warrant Shares in
the manner contemplated by the Transaction.
5. Assuming Purchaser's representations, warranties, and covenants set
forth in the Transaction Agreements are true and correct, the Bridge Notes, the
Warrants, the Conversion Shares, and the Warrant Shares may be issued to you
without registration under the 1933 Act, the securities laws of any state, or
the Trust Indenture Act of 1939.
6. No authorization, approval, or consent of, or filing with, any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market, or the stockholders of the Company, or, to our
knowledge, any third party is required to be obtained by the Company to enter
into and perform its obligations under the Transaction Agreements or for the
issuance and sale of the Bridge Notes, the Warrants, the Conversion Shares, and
the Warrant Shares as contemplated by the Transaction Agreements.
7. The execution, delivery, and performance by the Company of the
Transaction Agreements, the consummation by the Company of the transactions
contemplated thereby and compliance by the Company with the terms thereof does
not (a) violate, conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under (i) the
Certificate of Incorporation or Bylaws of the Company, (ii) the Material
Agreements, or (b) result, in any violation of any law, applicable to the
Company that in our experience normally is applicable to transactions of the
type contemplated by the Transaction Agreements, or any judgments, orders and
decrees of which we are aware.
8. To our knowledge, there is no action, suit, proceeding, inquiry, or
investigation before or by any court, public board or body, or any governmental
agency or self-regulatory organization pending or threatened against or
affecting the Company.
9. The Company is not an "investment company" or an entity controlled
by an "investment company," as such terms are defined in the Investment Company
Act of 1940, as amended.
10. The amounts to be received by the Purchaser as interest in respect
of the Bridge Notes and the Security Agreement constitute lawful interest under
the laws of the State of Georgia and are neither usurious nor illegal.
11. The Purchase Agreement creates a valid security interest in favor
of the Purchasers as security for the payment of the Obligations in all of
Global Tracker's, Stulberg's and Xxxxx' right, title, and interest in and to
All personal property pledged pursuant to the Pledge Documents (the "Code
Collateral") included within the definition of the term Collateral, the creation
of a security interest in which is governed by, and subject to, the Georgia UCC.
Upon execution of the Pledge Documents and delivery of the certificated shares
of Common Stock of the Company and Global Tracker being pledged under the Pledge
Documents, the security interest in all Code Collateral which may be perfected
by possession of such certificated securities in the state of Georgia shall be
perfected and shall grant to Purchasers a first priority security interest in
and to the Code Collateral.
12. The amounts contracted to be received by the Purchasers under the
Bridge Notes and of the Transaction Agreements, which are or which may be deemed
to be interest or other charges for the use of money, constitute lawful
interest and charges and are not usurious or illegal under Georgia law.
We are members of the Bar of the State of Georgia, and we do not express
any opinion concerning any law other than the laws of the State of Georgia, the
General Corporation Law of the State of Delaware, and the federal laws of the
United States. To the extent that the governing law with respect to any matters
covered by this opinion is the law of a jurisdiction other than the State of
Georgia or federal law, we have assumed that the law of such other jurisdiction
is identical to Georgia law.
This opinion is furnished as of the date hereof and we assume no obligation
to update this Opinion or to advise you of any events, circumstances, or
developments that occur or are otherwise brought to our attention subsequent to
the date hereof. This opinion is furnished to you solely for your benefit in
connection with the transactions contemplated by the Transaction Agreements and
may not be used, circulated, quoted, or otherwise referred to, or relied upon,
by any other person (other than the Affiliates (as defined below) of the
addressee of this opinion who shall upon a transfer of the Series 1 Bridge Notes
to such Affiliate be entitled to rely on this opinion as if they were the
addressee hereof) or for any other purpose without our express prior written
consent. This opinion is limited by, and is in accordance with the
Interpretative Standards applicable to Legal Opinions to Third Parties in
Corporate Transactions adopted by the Legal Opinion Committee of the Corporate
and Banking Law Section of the State Bar of Georgia, which Interpretative
Standards are incorporated in this letter by reference. This opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters. As used in this
opinion, the term "Affiliate" means with respect to any person or any entity
that controls, is controlled by, or is under common control with, such person.
The term "control" means the power, directly or indirectly, including through
contract, to direct investment decisions including the acquisition, disposition,
and voting of securities.
Very truly yours,
Law Firm
EXHIBIT G
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
Form Attached hereto.
TRANSFER AGENT INSTRUCTIONS
THE TRACKER CORPORATION OF AMERICA
August 18, 1999
________ Transfer, Inc.
[Address]
Attn: ___________
Dear _____________:
Reference is made to that certain Series 1 Bridge Note Purchase and
Security Agreement, of even date herewith (the "PURCHASE AGREEMENT"), by and
among The Tracker Corporation of America, a Delaware corporation (the
"COMPANY"), and the Purchasers listed on the signature pages attached thereto
(collectively, the "HOLDERS"), pursuant to which the Company is issuing to the
Holders its Series 1 Bridge Note in the aggregate original principal amount of
up to $3,000,000 (the "SERIES 1 BRIDGE NOTES"). The Series 1 Bridge Notes
evidence a series of contemplated closings pursuant to the terms of the Purchase
Agreement. In conjunction with each Bridge Note issued by the Company at each
such closing, the Company shall issue (i) to each purchaser thereof a Purchaser
Warrant (a "PURCHASER WARRANT"), exerciseable for Common Stock of the Company,
par value $.001 (the "COMMON STOCK"), a Callable Warrant (a "CALLABLE WARRANT"),
exercisable for Common Stock, and a Repricing Warrant (a "REPRICING WARRANT")
attached as ATTACHMENT 1 to such Bridge Note upon the terms is exercisable for
Common Stock, and (ii) to Sovereign Capital Advisors LLC a Warrant Certificate
pursuant to the Sovereign Warrant Agreement (the "AGREEMENT WARRANT")
exercisable for Common Stock of the Company. The Bridge Notes are convertible
into Common Stock. The Common Stock issuable upon conversion of the Bridge Notes
is hereinafter referred to as the "CONVERSION SHARES," and the Common Stock
issuable upon exercise of a Purchaser Warrant, a Callable Warrant, a Repricing
Warrant, and the Agreement Warrant is hereinafter referred to as the "EXERCISE
SHARES."
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 the Conversion Shares and the Exercise Shares upon the order of Holder
from time to time upon (i) surrender to you of a properly completed and duly
executed (1) Conversion Notice, in the form attached hereto as EXHIBIT A, or (2)
Exercise Notice, in the form attached hereto as EXHIBIT B, which has been
properly agreed and acknowledged by the Company as indicated by the signature of
a duly authorized officer of the Company thereon and (ii) the Bridge Note (or
Bridge Notes) being converted (or an indemnification undertaking with respect to
such Bridge Note in the case of their loss, theft or destruction) or a Warrant
(or Warrants) being exercised (or an indemnification undertaking with respect to
such Warrant in the case of its loss, theft or destruction). So long as you
have previously received: (i) written confirmation from counsel to the Company
that a registration statement covering resales of the Conversion Shares has been
declared effective by the U.S. Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 ACT"), and (ii) a copy
of such Registration Statement, certificates representing the Conversion Shares
and the Exercise Shares shall not bear any legend restricting transfer of the
Conversion Shares or the Exercise Shares thereby and should not be subject to
any stop-transfer restriction. However, if you have not previously received (i)
written confirmation from counsel to the Company that a registration statement
covering resales of the Conversion Shares has been declared effective by the
Securities and Exchange Commission under the 1933 Act, and (ii) a copy of such
registration statement, then the certificates representing the Conversion Shares
shall bear the following legend:
1
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT."
PROVIDED HOWEVER, that the Company may from time to time notify you to place
stop transfer restrictions on the certificates for the Conversion Shares or the
Exercise Shares in the event a registration statement covering the Conversion
Shares or the Exercise Shares is subject to amendment for events then current.
A form of opinion of counsel to the Company that the issuance of the
Conversion Shares and the Exercise Shares to the Holder will be exempt from
registration under the 1933 Act is attached hereto as EXHIBIT C.
Please be advised that the Holders are relying upon this letter as an
inducement to enter into the Purchase Agreement and, accordingly, each Holder is
a third party beneficiary to these instructions.
Should you have any questions concerning this matter please contact me at
(416) ____-______.
[Signatures on following pages]
2
COMPANY SIGNATURE PAGE
TO
TRANSFER AGENT INSTRUCTIONS
Very truly yours,
THE TRACKER CORPORATION
OF AMERICA
By:_________________________________
Xxx X. Xxxxxxxx, President
3
TRANSFER AGENT SIGNATURE PAGE
TO
TRANSFER AGENT INSTRUCTIONS
ACKNOWLEDGED AND AGREED:
TRANSFER AGENT
By:_________________________________
Name:_______________________________
Title:______________________________
Date:_______________________________
Enclosure
cc: Holders
4
EXHIBIT A
THE TRACKER CORPORATION OF AMERICA
CONVERSION NOTICE
Reference is made to the Series 1 Bridge Note in the original principal
amount of $________ originally issued to ____________________________________
{NAME OF ORIGINAL HOLDER} (the "SERIES 1 BRIDGE NOTE"). In accordance with and
pursuant to the Series 1 Bridge Note, the undersigned hereby elects to convert
$________ in principal amount of the Bridge Note into shares of Common Stock,
$.001 par value per share (the "COMMON STOCK"), of the Company, by tendering the
original Bridge Note specified below as of the date specified below.
The undersigned acknowledges that any sales by the undersigned of the
securities issuable to the undersigned upon conversion of the Bridge Note shall
be made only pursuant to (i) a registration statement effective under the
Securities Act of 1933, as amended (the "Act"), or (ii) advice of counsel that
such sale is exempt from registration required by Section 5 of the Act.
Date of Conversion:
____________________________________
Principal Amount and Identification
of Bridge Note to be converted:
____________________________________
Please confirm the following information:
Conversion Price:
____________________________________
Number of shares of Common Stock to
be issued:
____________________________________
5
Please issue the Common Stock into which the Bridge Notes are being converted in
the following name and to the following address:
Issue to:
____________________________________
____________________________________
Facsimile Number:
____________________________________
Authorization:
____________________________________
By:_________________________________
Title:______________________________
Dated:______________________________
ACKNOWLEDGED AND AGREED:
THE TRACKER CORPORATION OF
AMERICA
By:_________________________________
Name:_______________________________
Title:______________________________
Date:_______________________________
6
EXHIBIT B
THE TRACKER CORPORATION OF AMERICA
EXERCISE NOTICE
Reference is made to the Warrants issued in conjunction with certain
advances made by Holder pursuant to the that certain Series 1 Bridge Note
Purchase and Security Agreement, of even date herewith (the "PURCHASE
AGREEMENT"), by and among The Tracker Corporation of America, a Delaware
corporation (the "COMPANY"), and "HOLDER". In accordance with and pursuant to
the Warrants, the undersigned hereby elects to exercise the Warrants, and
purchase shares of Common Stock, $.001 par value per share (the "COMMON STOCK"),
of the Company, by tendering the Warrants specified below as of the date
specified below. The undersigned acknowledges that any sales by the undersigned
of the securities issuable to the undersigned upon exercise of the Warrants
shall be made only pursuant to (i) a registration statement effective under the
Securities Act of 1933, as amended (the "ACT"), or (ii) advice of counsel that
such sale is exempt from registration required by Section 5 of the Act.
Date of Conversion:
____________________________________
Description of Bridge Notes to be
Converted
____________________________________
Please confirm the following information:
Exercise Price:
____________________________________
Number of shares of Common Stock
to be issued:
____________________________________
7
Please issue the Common Stock into which the Bridge Notes are being converted or
the Warrants are being exercised in the following name and to the following
address:
Issue to:
____________________________________
____________________________________
Facsimile Number:
____________________________________
Authorization:
____________________________________
By:_________________________________
Title:______________________________
Dated:______________________________
ACKNOWLEDGED AND AGREED:
THE TRACKER CORPORATION OF
AMERICA
By:_________________________________
Name:_______________________________
Title:______________________________
Date:_______________________________
8
EXHIBIT C
THE TRACKER CORPORATION OF AMERICA
Form of Company Counsel Opinion to Transfer Agent, attached hereto.
9
To: [________________]
[Suite ___]
[________________]
[________________]
[Attn: ___________]
Dear ____________:
We have acted as counsel to The Tracker Corporation of America, a Delaware
corporation (the "COMPANY"), in connection with the Series 1 Bridge Note
Purchase and Security Agreement, dated as of August 18, 1999, between the
holders listed in EXHIBIT A, attached hereto (the "HOLDERS") and the Company
(the "AGREEMENT") and the transactions contemplated therein including, without
limitation, the issuance of the Series 1 Secured Convertible Bridge Notes (the
"BRIDGE NOTES").
In so acting, we have examined the Agreement, the Series 1 Bridge Notes,
[list all transaction agreements], the Irrevocable Transfer Agent Instructions
(the "TRANSACTION AGREEMENTS"), and the Company's Certificate of Incorporation,
as in effect on the date hereof, and we have examined and considered such
corporate records, certificates and matters of law as we have deemed appropriate
as a basis for our opinions set forth below.
Based upon the foregoing and subject to the assumptions, limitations,
qualifications, and exceptions stated herein, we are of the opinion that as of
the date hereof.
1. Upon conversion of the Bridge Notes in accordance with the terms
thereof, the shares of the Company's common stock to be issued to the holders
thereof (the "CONVERSION SHARES") will be validly issued, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issue thereof.
{DELETE EITHER 2 OR 3 DEPENDING UPON CIRCUMSTANCES UNDER WHICH CONVERSION
SHARES ARE TO BE ISSUED TO HOLDER AND WHETHER CONVERSION SHARES TO BE
FREE-TRADING UPON ISSUANCE}
[2. Based upon the representations, warranties and covenants set forth
in the Agreement, Conversion Shares may be issued to the Holders without
registration under the Securities Act of 1933, as amended.]
[3. The certificates for the Conversion Shares should bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER THE ACT."
1
These opinions are limited to the matters expressly stated herein and are
rendered solely your benefit and may not be quoted or relied upon for any other
purpose or by an other person.
The opinions expressed herein are subject to the following assumptions,
limitations, qualifications and exceptions:
(a) We have assumed the genuineness of all signatures, the authenticity
of all Transaction Agreements submitted to us as originals, the conformity with
originals of all Transaction Agreements submitted to us as copies, the
authenticity of certificates of public officials and the due authorization,
execution and delivery of all Transaction Agreements (except the due
authorization, execution and delivery by the Company of the Transaction
Agreements).
(b) We have assumed that the Holders each have the legal right,
capacity and power to enter into, enforce, and perform all of its obligations
under the Transaction Agreements. Furthermore, we have assumed the due
authorization by the Holders of all requisite action and the due execution and
delivery of the Transaction Agreements by the Holders, and that the Transaction
Agreements are valid and binding upon the Holders and are enforceable against
the Holders in accordance with their terms.
Our examination of law relevant to the matters covered by this opinion is
limited to the laws of the State of Georgia, the Corporate Law of the State of
Delaware, and the federal United States law specifically referred to herein, and
we express no opinion as to the effect on the matters covered by this opinion of
the laws of any other jurisdiction.
This opinion in given as of the date hereof and we assume no obligation, to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur.
Very truly yours,
2
EXHIBIT H
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
LIST OF COLLATERAL
On file at the Company's principal place of business.
EXHIBIT I
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FINANCING STATEMENTS FILED IN ONTARIO
On file at the Company's principal place of business.
