EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of
October 1, 2004, is made by and among Remote Dynamics, Inc., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), and the
purchaser or purchasers (individually, a "PURCHASER" and collectively the
"PURCHASERS") set forth on the execution pages hereof (each, an "EXECUTION PAGE"
and collectively the "EXECUTION PAGES").
BACKGROUND
A. The Company and each Purchaser are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("REGULATION D"), as promulgated by
the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
B. Upon the terms and conditions stated in this Agreement, the
Company desires to issue and sell to the Purchasers, and each Purchaser desires
to purchase, units (the "UNITS"), each Unit consisting of (i) one share of the
Company's Series A Convertible Preferred Stock, par value $0.01 per share (the
"PREFERRED STOCK"), which Preferred Stock shall have the rights, preferences and
privileges set forth in the form of Certificate of Designation, Preferences and
Rights attached hereto as Exhibit A (the "CERTIFICATE OF DESIGNATION"), (ii) a
warrant, in the form attached hereto as Exhibit B (the "STRUCTURED WARRANTS"),
to acquire initially 200 shares of the Company's common stock, par value $0.01
per share (the "COMMON STOCK"), and (iii) a warrant, in the form attached hereto
as Exhibit C (the "INCENTIVE WARRANTS"), to acquire initially 125 shares of
Common Stock. The Structured Warrants and the Incentive Warrants are together
referred to herein as the "WARRANTS." The shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Preferred Stock are referred to
herein as the "CONVERSION SHARES" and the shares of Common Stock issuable upon
exercise of or otherwise pursuant to the Warrants are referred to herein as the
"WARRANT SHARES." The Preferred Stock, the Warrants, the Conversion Shares and
the Warrant Shares are collectively referenced herein as the "SECURITIES" and
each of them may individually be referred to herein as a "SECURITY."
C. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as Exhibit D (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws. This Agreement,
the Certificate of Designation, the Warrants and the Registration Rights
Agreement are collectively referred to herein as the "TRANSACTION DOCUMENTS."
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchasers,
intending to be legally bound, hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
(a) Purchase and Sale of Securities. Subject to the terms and
conditions hereof, at the Closing (as defined in Section 1(b) below), the
Company shall issue and sell to each Purchaser, and each Purchaser, severally
and not jointly, shall purchase from the Company, such number of Units as is set
forth on such Purchaser's Execution Page, for a purchase price (as to each
Purchaser, the "PURCHASE PRICE") per Unit equal to One Thousand Dollars
($1,000.00).
(b) The Closing. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the closing of the transactions
contemplated hereby (the "CLOSING") shall take place at the offices of Drinker
Xxxxxx & Xxxxx LLP at One Xxxxx Square, 00xx & Xxxxxx Xxxxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000 at 10:00 a.m., Philadelphia, Pennsylvania time, on the date
hereof, or such other time or place as the Company and the Purchasers may
mutually agree (the "CLOSING DATE").
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
Each Purchaser severally, but not jointly, represents and warrants to
the Company as follows:
(a) Purchase for Own Account, Etc. Such Purchaser is purchasing
the Securities for such Purchaser's own account for investment purposes only and
not with a present view towards the public sale or distribution thereof, except
pursuant to sales that are exempt from the registration requirements of the
Securities Act and/or sales registered under the Securities Act. Such Purchaser
understands that such Purchaser must bear the economic risk of this investment
indefinitely, unless the Securities are registered pursuant to the Securities
Act and any applicable state securities or blue sky laws or an exemption from
such registration is available, and that the Company has no present intention of
registering the resale of any such Securities other than as contemplated by the
Registration Rights Agreement. Notwithstanding anything in this Section 2(a) to
the contrary, by making the representations herein, such Purchaser does not
agree to hold the 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 from the registration
requirements under the Securities Act and applicable state securities laws.
(b) Accredited Investor Status. Such Purchaser is an "Accredited
Investor" as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Purchaser understands that the
Securities are being offered and sold to such Purchaser in reliance upon
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and
accuracy of, and such Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire the Securities.
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(d) Information. Such Purchaser and its counsel, if any, have been
furnished all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities that have
been specifically requested by such Purchaser or its counsel. Neither such
inquiries nor any other investigation conducted by such Purchaser or its counsel
or any of its representatives shall modify, amend or affect such Purchaser's
right to rely on the Company's representations and warranties contained in
Section 3 below. Such Purchaser understands that such Purchaser's investment in
the Securities involves a high degree of risk.
(e) Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
(f) Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Purchaser and are valid and binding agreements
of such Purchaser enforceable against such Purchaser in accordance with their
respective terms.
(g) Residency. Such Purchaser is a resident of the jurisdiction
set forth under such Purchaser's name on the Execution Page hereto executed by
such Purchaser.
(h) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication, and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(i) Ability of such Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(j) No Brokers. Other than the fee to North Consulting Corp.
referred to in Section 4(r), such Purchaser has taken no action that would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the transactions
contemplated hereby.
Each Purchaser's representations and warranties made in this Article 2
are made solely for the purpose of permitting the Company to make a
determination that the offer and sale of the Securities pursuant to this
Agreement comply with applicable U.S. federal and state securities laws and not
for any other purpose. Accordingly, the Company may not rely on such
representations and warranties for any other purpose. No Purchaser has made or
hereby makes any other representations or warranties, express or implied, to the
Company in connection with the transactions contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Disclosure Schedule executed and delivered by
the Company to each Purchaser (the "DISCLOSURE SCHEDULE"), the Company
represents and warrants to each Purchaser as follows:
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(a) Organization and Qualification. The Company and each of its
direct and indirect subsidiaries (collectively, the "SUBSIDIARIES") is a
corporation duly organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated or organized, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify or be in good standing would have
a Material Adverse Effect. For purposes of this Agreement, "MATERIAL ADVERSE
EFFECT" means any effect which, individually or in the aggregate with all other
effects, reasonably would be expected to be materially adverse to (i) the sale,
issuance or value of the Securities, (ii) the ability of the Company to perform
its obligations under this Agreement or the other Transaction Documents or (iii)
the business, operations, properties, prospects, financial condition or results
of operations of the Company and its Subsidiaries, taken as a whole; provided,
however, that any such effect resulting solely from changes affecting the
economy or financial markets generally shall not constitute a Material Adverse
Effect.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents, to issue and sell the Units
in accordance with the terms hereof, to issue the Conversion Shares upon
conversion of the Preferred Stock in accordance with the terms thereof and to
issue the Warrant Shares upon exercise of the Warrants in accordance with the
terms thereof; (ii) the execution, delivery and performance of this Agreement
and the other Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Units and the issuance and reservation for issuance of the
Conversion Shares and Warrant Shares) 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 any committee of the Board of Directors is required, and
(iii) this Agreement constitutes, and, upon execution and delivery by the
Company of the other Transaction Documents, such Transaction Documents will
constitute, valid and binding obligations of the Company enforceable against the
Company in accordance with their terms. Neither the execution, delivery or
performance by the Company of its obligations under this Agreement or the other
Transaction Documents, nor the consummation by it of the transactions
contemplated hereby or thereby (including, without limitation, the issuance of
the Units or the issuance or reservation for issuance of the Conversion Shares
or Warrant Shares) requires any consent or authorization of the Company's
stockholders.
(c) Capitalization. The capitalization of the Company as of the
date hereof, including the authorized capital stock, the number of shares issued
and outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company's stock option plans (including the Company's Revised
Management Incentive Plan), the number of shares issuable and reserved for
issuance pursuant to the Company's Third Amended Joint Plan of Reorganization,
dated June 28, 2004 (the "PLAN OF REORGANIZATION"), the number of shares
issuable and reserved for issuance pursuant to securities (other than the
Preferred Stock and the Warrants) exercisable or exchangeable for,
or convertible into, any shares of capital stock and the number of shares to be
reserved for issuance upon conversion of the Preferred Stock and exercise of the
Warrants is set forth in Section 3(c) of the Disclosure Schedule. All of such
outstanding shares of capital stock have been, or upon issuance in accordance
with the terms of any such exercisable, exchangeable
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or convertible securities will be, validly issued, fully paid and
non-assessable. No shares of capital stock of the Company (including the
Conversion Shares and the Warrant Shares) are subject to preemptive rights or
any other similar rights of the stockholders of the Company or any liens or
encumbrances. Except for the Securities and as set forth in Section 3(c) of the
Disclosure Schedule, (i) 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 or exercisable or
exchangeable for, 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,
nor are any such issuances, contracts, commitments, understandings or
arrangements contemplated, (ii) there are no contracts, commitments,
understandings or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their securities
under the Securities Act (except the Registration Rights Agreement); (iii) there
are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem or otherwise acquire
any security of the Company or any of its Subsidiaries; and (iv) the Company
does not have any shareholder rights plan, "poison pill" or other anti-takeover
plans. Section 3(c) of the Disclosure Schedule sets forth all of the securities
or instruments issued by the Company or any of its Subsidiaries that contain
anti-dilution or similar provisions, and, except as and to the extent set forth
thereon, the sale and issuance of the Securities will not trigger any
anti-dilution adjustments to any such securities or instruments. The Company has
furnished to each Purchaser true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof ("CERTIFICATE OF
INCORPORATION"), the Company's Bylaws as in effect on the date hereof (the
"BYLAWS"), and all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for capital stock of the
Company, all of which instruments and agreements are set forth in Section 3(c)
of the Disclosure Schedule. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or any such Subsidiary.
(d) Issuance of Securities. The Units (and the securities
comprising the Units) are duly authorized and, upon issuance in accordance with
the terms of this Agreement, (i) will be validly issued, fully paid and
non-assessable and free from all taxes, liens, claims and encumbrances, (ii)
will not be subject to preemptive rights, rights of first refusal or other
similar rights of stockholders of the Company or any other person and (iii) will
not impose personal liability on the holder thereof. The Conversion Shares and
Warrant Shares are duly authorized and reserved for issuance, and, upon
conversion of the Preferred Stock and exercise of the Warrants in accordance
with the terms thereof, (x) will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances, (y)
will not be subject to preemptive rights, rights of first refusal or other
similar rights of stockholders of the Company or any other person and (z) will
not impose personal liability upon the holder thereof.
(e) No Conflicts; Consents. The execution, delivery and
performance of this Agreement and the other Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the
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issuance of the Units and the issuance and reservation for issuance of the
Conversion Shares and Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation or Bylaws, (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment
(including, without limitation, the triggering of any anti-dilution provisions),
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
United States federal and state securities laws, rules and regulations and rules
and regulations of any self-regulatory organizations to which either the Company
or its securities are subject) 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, with respect to clauses (ii) and
(iii), for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations that would not, individually or in the aggregate,
have a Material Adverse Effect). Except (w) as may be required under the
Securities Act in connection with the performance of the Company's obligations
under the Registration Rights Agreement, (x) for the filing of a Form D with the
SEC, (y) as may be required for compliance with applicable state securities or
"blue sky" laws, or (z) as otherwise set forth in Section 3(e) of the Disclosure
Schedule, the Company is not required to obtain any consent, approval,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency or other third
party (including, without limitation, pursuant to any Material Contract (as
defined in Section 3(g) below)) in order for it to execute and deliver this
Agreement or any of the other Transaction Documents or perform any of its
obligations hereunder or thereunder.
(f) Compliance. The Company is not in violation of its Certificate
of Incorporation, Bylaws or other organizational documents and no Subsidiary is
in violation of any of its organizational documents. Neither the Company nor any
of its Subsidiaries is in default (and no event has occurred that with notice or
lapse of time or both would put the Company or any of its Subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) 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 (including, without limitation, the Material
Contracts), except for actual or possible violations, defaults or rights that
would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations the sanctions for which either individually or in the
aggregate have not had and would not have a Material Adverse Effect. Neither the
Company, nor any of its Subsidiaries, nor any director, officer, agent, employee
or other person acting on behalf of the Company or any Subsidiary has, in the
course of his actions for, or on behalf of, the Company or any Subsidiary, used
any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity, made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds, violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, provincial or foreign regulatory authorities that are material to the
conduct of its business, and neither the Company
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nor any of its Subsidiaries has received any notice of proceeding relating to
the revocation or modification of any such certificate, authorization or permit.
(g) SEC Documents, Financial Statements. Since August 31, 2001,
the Company has timely filed (within applicable extension periods) 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 "EXCHANGE 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, the "SEC
DOCUMENTS"). The Company has delivered to each Purchaser true and complete
copies of the SEC Documents, or such documents are available on XXXXX. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Exchange Act or the Securities Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the statements made in any such SEC Documents is,
or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings made prior
to the date hereof). As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied, during the periods
involved (except as may be otherwise indicated in such financial statements or
the notes thereto or, in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the consolidated financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal, immaterial
year-end audit adjustments). Except as set forth in the financial statements of
the Company included in the Select SEC Documents (as defined below), the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to the date of such financial
statements and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under GAAP to be reflected in such
financial statements, which liabilities and obligations referred to in clauses
(i) and (ii), individually or in the aggregate, are not material to the
financial condition or operating results of the Company. Without limiting the
generality of the foregoing, the Company has either satisfied or has set aside
on its books and records provisions reasonably adequate for the satisfaction of
all Claims (as defined in the Plan of Reorganization) pursuant to the Plan of
Reorganization. To the extent required by the rules and regulations of the SEC
applicable thereto, the Select SEC Documents contain a complete and accurate
list of all material undischarged written or oral contracts, agreements, leases
or other instruments to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound or to which any of the properties
or assets of the Company or any Subsidiary is subject (each, a "MATERIAL
CONTRACT"). Except as set forth in the Select SEC Documents, none of the
Company, its Subsidiaries or, to the best knowledge of the Company, any of the
other parties thereto is in breach or violation of any Material Contract, which
breach or violation
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would have a Material Adverse Effect. For purposes of this Agreement, "SELECT
SEC DOCUMENTS" means the Company's (A) Proxy Statement relating to its 2003
Annual Meeting, (B) Annual Report on Form 10-K for the fiscal year ended August
31, 2003 (the "2003 ANNUAL REPORT"), (C) Quarterly Reports on Form 10-Q for the
fiscal quarters ended November 30, 2003, February 29, 2004 and May 31, 2004 and
(D) Current Reports on Form 8-K filed since August 31, 2003.
(h) Internal Accounting Controls. Although the Company has not
implemented, and is not yet required to implement, the requirements of Section
404 of the Xxxxxxxx-Xxxxx Act of 2002 and the rules and regulations promulgated
thereunder, the Company and each of its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such
disclosures controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company's Annual Report on Form 10-K or Quarterly Report on Form 10-Q,
as the case may be, is being prepared. The Company's certifying officers have
evaluated the effectiveness of the Company's controls and procedures as of a
date within 90 days prior to the filing date of the 2003 Annual Report and the
Company's most recently filed Quarterly Report on Form 10-Q (each such date, an
"EVALUATION DATE"). The Company presented in the 2003 Annual Report and its most
recently filed Quarterly Report on Form 10-Q the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the respective Evaluation Date. Since the Evaluation
Date for the 2003 Annual Report, there have been no significant changes in the
Company's "internal controls" (as such term is defined in Item 307(b) of
Regulation S-K under the Exchange Act) or, to the Company's knowledge, in other
factors that could significantly affect the Company's internal controls.
(i) Absence of Certain Changes. Except as set forth in the Select
SEC Documents, since August 31, 2003, there has been no material adverse change
and no material adverse development in the business, properties, operations,
prospects, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole. The Company does not currently expect to take
any steps to seek protection pursuant to any bankruptcy or receivership law, nor
does the Company or any of its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy proceedings
with respect to the Company or any of its Subsidiaries.
(j) Transactions With Affiliates. Except as set forth in the
Select SEC Documents, none of the officers, directors, or employees of the
Company or any of its Subsidiaries is presently a party to any transaction with
the Company or any of its Subsidiaries (other than for ordinary course services
solely in their capacity as officers, directors or employees), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by,
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providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has an ownership interest of five percent or more or is an
officer, director, trustee or partner.
(k) Absence of Litigation. Except as disclosed in the Select SEC
Documents and as set forth in Section 3(k) of the Disclosure Schedule, there is
no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body
(including, without limitation, the SEC) pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
any of its Subsidiaries, or any of their respective directors or officers in
their capacities as such. There are no facts which, if known by a potential
claimant or governmental authority, could give rise to a claim or proceeding
which, if asserted or conducted with results unfavorable to the Company or any
of its Subsidiaries, could reasonably be expected to have a Material Adverse
Effect.
(l) Intellectual Property. Each of the Company and its
Subsidiaries owns or is duly licensed (and, in such event, has the unfettered
right to grant sublicenses) to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, permits, inventions, discoveries, processes, scientific,
technical, engineering and marketing data, object and source codes, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "INTANGIBLES") necessary for the conduct of
its business as now being conducted and as presently contemplated to be
conducted in the future. Section 3(l) of the Disclosure Schedule sets forth a
list of all Intangibles owned and/or used by the Company in its business. To the
knowledge of the Company and its Subsidiaries, neither the Company nor any
Subsidiary of the Company infringes or is in conflict with any right of any
other person with respect to any third party Intangibles. Neither the Company
nor any of its Subsidiaries has received written notice of any pending conflict
with or infringement upon such third party Intangibles. Except as set forth on
Section 3(l) of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries has entered into any consent agreement, indemnification agreement,
forbearance to xxx or settlement agreement with respect to the validity of the
Company's or its Subsidiaries' ownership of or right to use its Intangibles and
the Company has no knowledge of any reasonable basis for any such claim to be
successful. The Intangibles are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or canceled or is the
subject of cancellation or other adversarial proceedings, and all applications
therefor are pending and in good standing. The Company and its Subsidiaries have
complied, in all material respects, with their respective contractual
obligations relating to the protection of the Intangibles used pursuant to
licenses. To the Company's knowledge, no person is infringing on or violating
the Intangibles owned or used by the Company or its Subsidiaries.
(m) Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and merchantable
title to all personal property owned by them that is material to the business of
the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property
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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 materially interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries.
(n) Tax Status. Except as set forth in the Select SEC Documents,
the Company and each of its Subsidiaries has made or filed all foreign, U.S.
federal, state, provincial and local 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 provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. Except as set forth on Section 3(n) of the Disclosure
Schedule, 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. The Company has not executed a waiver with
respect to any statute of limitations relating to the assessment or collection
of any foreign, federal, state, provincial or local tax. None of the Company's
tax returns is presently being audited by any taxing authority.
(o) Key Employees. Each of the Company's directors and officers
and any Key Employee (as defined below) is currently serving the Company in the
capacity disclosed in the Select SEC Documents. No Key Employee is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its Subsidiaries to any material liability with respect to any
of the foregoing matters. Each Key Employee has entered into an employment
contract with the Company that provides for a term of employment as set forth on
Section 3(o) of the Disclosure Schedule. To the knowledge of the Company and its
Subsidiaries, no Key Employee has any intention to terminate or limit his
employment with, or services to, the Company or any of its Subsidiaries, nor is
any such Key Employee subject to any constraints which would cause such employee
to be unable to devote his full time and attention to such employment or
services. For purposes of this Agreement, "KEY EMPLOYEE" means the persons
listed in Section 3(o) of the Disclosure Schedule and any individual who assumes
or performs any of the duties of a Key Employee.
(p) Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any material union labor dispute nor, to the
knowledge of the Company or any of its Subsidiaries, is any such dispute
threatened. The Company and its Subsidiaries believe that their relations with
their employees are good. No executive officer (as defined in Rule 501(f) of the
Securities Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company. The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, result in a
Material Adverse Effect.
-10-
(q) Insurance. The Company and each of its Subsidiaries has in
force fire, casualty, product liability and other insurance policies, with
extended coverage, sufficient in amount to allow it to replace any of its
material properties or assets which might be damaged or destroyed or sufficient
to cover liabilities to which the Company may reasonably become subject, and
such types and amounts of other insurance with respect to its business and
properties, on both a per occurrence and an aggregate basis, as are customarily
carried by persons engaged in the same or similar business as the Company. No
default or event has occurred that could give rise to a default under any such
policy.
(r) Environmental Matters. There is no environmental litigation or
other environmental proceeding pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened by any governmental regulatory authority or
others with respect to the current or any former business of the Company or any
of its Subsidiaries or any partnership or joint venture currently or at any time
affiliated with the Company or any of its Subsidiaries. No state of facts exists
as to environmental matters or Hazardous Substances (as defined below) that
involves the reasonable likelihood of a material capital expenditure by the
Company or any of its Subsidiaries that may otherwise have a Material Adverse
Effect. To the Company's knowledge, no Hazardous Substances have been treated,
stored or disposed of, or otherwise deposited, in or on the properties owned or
leased by the Company or any of its Subsidiaries or by any partnership or joint
venture currently or at any time affiliated with the Company or any of its
Subsidiaries in violation of any applicable environmental laws. The
environmental compliance programs of the Company and each of its Subsidiaries
comply in all respects with all environmental laws, whether foreign, federal,
state, provincial or local, currently in effect. For purposes of this Agreement,
"HAZARDOUS SUBSTANCES" means any substance, waste, contaminant, pollutant or
material that has been determined by any governmental authority to be capable of
posing a risk of injury to health, safety, property or the environment.
(s) Solvency. Based on the financial condition of the Company as
of the Closing Date, (i) the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).
(t) Listing. The Common Stock is currently listed for trading on
the Nasdaq SmallCap Market (the "SMALLCAP MARKET"). Except for the Nasdaq
Marketplace Rule 4450 requirement that the Company's common stock maintain a
minimum bid price per share of $1.00, the Company is not in violation of the
listing requirements of the SmallCap Market and does not presently reasonably
anticipate that the Common Stock will be delisted by the SmallCap Market during
the one-year period immediately following the Closing. The Company has not
-11-
received any notice regarding the possible delisting of the Common Stock from
the SmallCap Market. On or prior to the Closing, the Company will have secured
the listing of the Conversion Shares and Warrant Shares on the SmallCap Market
and on each other national securities exchange, automated quotation system or
over-the-counter market upon which shares of Common Stock are currently listed
(subject to official notice of issuance).
(u) Form S-3 Eligibility. The Company is eligible to register the
resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form S-3 with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement). The Company has no basis to believe that its past or present
independent public auditors will withhold their consent to the inclusion, or
incorporation by reference, of their audit opinion concerning the Company's
financial statements which are included in the Registration Statement required
to be filed pursuant to the Registration Rights Agreement.
(v) Anti-Takeover Provisions. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under its Certificate of Incorporation or the laws of
the state of its incorporation which is or could become applicable to any
Purchaser as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities and any
and all Purchaser's ownership of the Securities.
(w) Acknowledgment Regarding Each Purchaser's Purchase of the
Securities. The Company acknowledges and agrees that each Purchaser is acting
solely in the capacity of arm's length purchaser with respect to this Agreement
and the other Transaction Documents and the transactions contemplated hereby and
thereby, and that, as of the date of this Agreement and as of Closing, no
Purchaser is (i) an officer or director of the Company, or (ii) an "affiliate"
of the Company (as defined in Rule 144 under the Securities Act (including any
successor rule, "RULE 144")). The Company further acknowledges that no Purchaser
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement or the other Transaction Documents and
the transactions contemplated hereby and thereby, and any advice given by a
Purchaser or any of its representatives or agents in connection with this
Agreement or the other Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Purchaser's purchase of the
Securities. The Company further represents to each Purchaser that the Company's
decision to enter into this Agreement and the other Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives.
(x) No General Solicitation or Integrated Offering. Neither the
Company nor any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or any such distributor, has conducted any "general solicitation" (as such term
is defined in Regulation D) with respect to any of the Securities being offered
hereby. 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 the Securities being offered hereby under the
Securities Act or cause this offering of Securities to be integrated
-12-
with any prior offering of securities of the Company for purposes of the
Securities Act, which result of such integration would require registration
under the Securities Act, or any applicable stockholder approval provisions.
(y) No Brokers. Other than the fee to North Consulting Corp.
referred to in Section 4(r), the Company has taken no action that would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby.
(z) Acknowledgment Regarding Securities. The number of Conversion
Shares issuable upon conversion of the Preferred Stock and the number of Warrant
Shares issuable upon exercise of the Warrants may increase in certain
circumstances. The Company's directors and executive officers have studied and
fully understand the nature of the Securities being sold hereunder. The Company
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Stock in accordance with the terms thereof and the Warrant Shares
upon the exercise of the Warrants in accordance with the terms thereof is
absolute and unconditional, regardless of the dilution that such issuance may
have on the ownership interests of other stockholders and the availability of
remedies provided for in any of the Transaction Documents relating to a failure
or refusal to issue Conversion Shares or Warrant Shares. Taking the foregoing
into account, the Company's Board of Directors has determined in its good faith
business judgment that the issuance of the Units hereunder and the consummation
of the other transactions contemplated hereby are in the best interests of the
Company and its stockholders.
(aa) Disclosure. All information relating to or concerning the
Company and/or any of its Subsidiaries set forth in this Agreement or provided
to the Purchasers pursuant to Section 2(d) hereof or otherwise in connection
with the transactions contemplated hereby is true and correct in all material
respects and the Company has not omitted to state any material fact necessary in
order to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or its
Subsidiaries or their respective businesses, properties, prospects, operations
or financial conditions, which has not been publicly disclosed but, under
applicable law, rule or regulation, would be required to be disclosed by the
Company in an annual or quarterly report filed on the date hereof by the Company
under the Exchange Act.
4. COVENANTS.
(a) Commercially Reasonable Efforts. The parties shall use their
respective commercially reasonable efforts timely to satisfy each of the
conditions described in Sections 6 and 7 of this Agreement.
(b) Form D; Blue Sky Laws. The Company shall file with the SEC a
Form D with respect to the Securities as required under Regulation D and 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 sale to each Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to each Purchaser on or prior to the
Closing Date. Before the beginning
-13-
of the trading day immediately following the Closing Date, the Company shall
file a Form 8-K with the SEC concerning this Agreement and the transactions
contemplated hereby, which Form 8-K shall attach this Agreement and its Exhibits
as exhibits to such Form 0-X (xxx "0-X XXXXXX"). As of the date of the 8-K
Filing, the Company hereby acknowledges that no Purchaser shall be in possession
of any material nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents,
that is not disclosed in the 8-K Filing. The Company shall not, and shall cause
each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents not to, provide any Purchaser with any material
nonpublic information regarding the Company or any of its Subsidiaries from and
after the 8-K Filing without the express written consent of such Purchaser;
provided, however, that a Purchaser that exercises its rights under Section 4(m)
hereof or Article XI.B, XI.C or XI.D of the Certificate of Designation shall be
deemed to have given such express written consent, but only with respect to the
information obtained as a direct result of the assertion of such rights. Subject
to the foregoing, neither the Company nor any Purchaser shall issue 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 any Purchaser, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Purchaser shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release).
(c) Reporting Status. So long as any Purchasers (or any of their
respective affiliates) beneficially own any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer that
files reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination. In addition, the Company
shall take all actions necessary to meet the "registrant eligibility"
requirements set forth in the general instructions to Form S-3 or any successor
form thereto, to continue to be eligible to register the resale of its Common
Stock on a registration statement on Form S-3 under the Securities Act.
(d) Use of Proceeds. The Company shall use the proceeds from the
sale and issuance of the Units for general corporate purposes and working
capital. Such proceeds shall not be used to (i) pay dividends; (ii) pay for any
increase in executive compensation, pay any severance fee or similar payment, or
make any loan or other advance to any officer, employee, shareholder, director
or other affiliate of the Company, without the express approval of the Board of
Directors acting in accordance with past practice; (iii) purchase debt or equity
securities of any entity (including redeeming the Company's own securities),
except for (A) evidences of indebtedness issued or fully guaranteed by the
United States of America and having a maturity of not more than one year from
the date of acquisition, (B) certificates of deposit, notes, acceptances and
repurchase agreements having a maturity of not more than one year from the date
of acquisition issued by a bank organized in the United States having capital,
surplus and undivided profits of at least $500,000,000, (C) the highest-rated
commercial paper having a maturity of not more than one year from the date of
acquisition, and (D) "Money Market" fund shares, or money market accounts fully
insured by the Federal Deposit Insurance Corporation and sponsored by banks and
other financial institutions, provided that the investments consist principally
of the types of investments described in clauses (A), (B), or (C) above; (iv)
make any investment not directly
-14-
related to the current business of the Company; or (v) to satisfy any
obligations pursuant to the Plan of Reorganization, including the payment of any
Claims (as defined therein) pursuant thereto.
(e) Financial Information. So long as any Purchasers (or any of
their respective affiliates) beneficially own any of the Securities, the Company
shall send (via electronic transmission or otherwise) the following reports to
each such Purchaser: (i) within ten days after the filing with the SEC, a copy
of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy
statements and any Current Reports on Form 8-K; and (ii) within one day after
release, copies of all press releases issued by the Company or any of its
Subsidiaries.
(f) Reservation of Shares. The Company currently has authorized
and reserved for the purpose of issuance 5,000,000 shares of Common Stock to
provide for the full conversion of the Preferred Stock and issuance of the
Conversion Shares in connection therewith, the full exercise of the Warrants and
the issuance of the Warrant Shares in connection therewith and as otherwise
required by the Preferred Stock, the Warrants and the Registration Rights
Agreement (collectively, the "ISSUANCE OBLIGATIONS"). In the event such number
of shares becomes insufficient to satisfy the Issuance Obligations, the Company
shall take all necessary action to authorize and reserve such additional shares
of Common Stock necessary to satisfy the Issuance Obligations.
(g) Listing. So long as any Purchasers (or any of their respective
affiliates) beneficially own any of the Securities, the Company shall maintain
the listing of all Conversion Shares and Warrant Shares from time to time
issuable upon conversion of the Preferred Stock and exercise of the Warrants on
each national securities exchange, automated quotation system or electronic
bulletin board on which shares of Common Stock are currently listed. The Company
shall use commercially reasonable efforts to continue the listing and trading of
its Common Stock on the SmallCap Market or on the Nasdaq National Market (the
"NATIONAL MARKET"), the New York Stock Exchange (the "NYSE") or the American
Stock Exchange (the "AMEX") and shall comply in all respects with the reporting,
filing and other obligations under the bylaws or rules of the National
Association of Securities Dealers, Inc. (the "NASD"), such exchanges, or such
electronic system, as applicable. The Company shall promptly provide to each
Purchaser copies of any notices it receives regarding the continued eligibility
of the Common Stock for trading on any securities exchange or automated
quotation system on which securities of the same class or series issued by the
Company are then listed or quoted, if any.
(h) Corporate Existence. So long as any Purchasers (or any of
their respective affiliates) beneficially own any of the Securities, the Company
shall maintain its corporate existence, and in the event of a merger,
consolidation or sale of all or substantially all of the Company's assets, the
Company shall ensure that the surviving or successor entity in such transaction
(i) assumes the Company's obligations under this Agreement and the other
Transaction Documents and the agreements and instruments entered into in
connection herewith and therewith regardless of whether or not the Company would
have had a sufficient number of shares of Common Stock authorized and available
for issuance in order to effect the conversion of all the Preferred Stock and
exercise in full of all Warrants outstanding as of the date of such transaction
and (ii) except in the event of a merger, consolidation of the Company into any
other corporation, or the sale or conveyance of all or substantially all of the
assets of the Company
-15-
where the consideration consists solely of cash, the surviving or successor
entity is a publicly traded corporation whose common stock is listed for trading
on the SmallCap Market, the National Market, the NYSE or the AMEX.
(i) No Integrated Offerings. The Company shall not make any offers
or sales of any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold hereunder
under the Securities Act or cause this offering of the Securities to be
integrated with any other offering of securities by the Company for purposes of
any stockholder approval provision applicable to the Company or its securities.
(j) Legal Compliance. The Company shall conduct its business and
the business of its Subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
(k) Redemptions, Dividends and Repayments of Indebtedness. So long
as any Purchasers (or any of their respective affiliates) beneficially own any
of the Preferred Stock, the Company shall not, without first obtaining the
written approval of the holders of a majority of the shares of Preferred Stock
then outstanding (which approval may be given or withheld by such holders in
their sole and absolute discretion), repurchase, redeem or declare or pay any
cash dividend or distribution on any shares of capital stock of the Company or
repay or prepay any indebtedness of the Company other than as expressly required
pursuant to the terms of such indebtedness as in effect on the date hereof.
(l) Information. So long as any Purchasers (or any of their
respective affiliates) beneficially own any of the Securities, the Company shall
furnish to each such Purchaser:
(i) concurrently with the filing with the SEC of its
annual reports on Form 10-K, a certificate of the President, a Vice President or
a senior financial officer of the Company stating that, based upon such
examination or investigation and review of this Agreement as in the opinion of
the signer is necessary to enable the signer to express an informed opinion with
respect thereto, neither the Company nor any of its Subsidiaries is or has
during such period been in default in the performance or observance of any of
the terms, covenants or conditions hereof, or, if the Company or any of its
Subsidiaries shall be or shall have been in default, specifying all such
defaults, and the nature and period of existence thereof, and what action the
Company or such Subsidiary has taken, is taking or proposes to take with respect
thereto; and
(ii) the information the Company must deliver to any
holder or to any prospective transferee of Securities in order to permit the
sale or other transfer of such Securities pursuant to Rule 144A of the SEC or
any similar rule then in effect.
The Company shall keep at its principal executive office a true copy of this
Agreement (as at the time in effect), and cause the same to be available for
inspection at such office during normal business hours by any holder of
Securities or any prospective transferee of Securities designated by a holder
thereof.
-16-
(m) Inspection of Properties and Books. So long as any Purchasers
(or any of their respective affiliates) beneficially own any of the Securities,
each such Purchaser who then holds Securities and its representatives and agents
(collectively, the "INSPECTORS") shall have the right, at such Purchaser's
expense, to visit and inspect any of the properties of the Company and of its
Subsidiaries, to examine the books of account and records of the Company and of
its Subsidiaries, to make or be provided with copies and extracts therefrom, to
discuss the affairs, finances and accounts of the Company and of its
Subsidiaries with, and to be advised as to the same by, its and their officers,
employees and independent public accountants (and by this provision the Company
authorizes such accountants to discuss such affairs, finances and accounts,
whether or not a representative of the Company is present) all at such
reasonable times and intervals and to such reasonable extent as the Purchasers
may desire; provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to such Purchaser) of any such information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement filed pursuant to the Registration Rights Agreement (in
which case the Company shall immediately promptly (but in no event more than two
trading days after receiving notification from the Inspector) a Form 8-K with
the SEC disclosing such information), (ii) the release of such information is
ordered pursuant to a subpoena or other order from a court or government body of
competent jurisdiction, or (iii) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. Each Purchaser agrees that it shall, upon learning that
disclosure of such information 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 information
deemed confidential.
(n) Shareholders Rights Plan. No claim shall be made or enforced
by the Company or any director, officer, employee, representative or other
person acting on behalf of the Company that any Purchaser is an "Acquiring
Person" under any shareholders rights plan or similar plan or arrangement in
effect or hereafter adopted by the Company, or that any Purchaser could be
deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities under this Agreement or any other Transaction Documents or
under any other agreement between the Company and the Purchasers.
(o) Pledge of Securities. The Company acknowledges and agrees that
the Securities may be pledged by any Purchaser in connection with a bona fide
margin agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Purchaser effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document. The Company shall execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Purchaser.
(p) Variable Securities. So long as any Purchasers (or any of
their respective affiliates) beneficially own any of the Securities, the Company
shall not, without first obtaining the written approval of the holders of a
majority of the shares of Preferred Stock then outstanding
-17-
(which approval may be given or withheld by such holders in their sole and
absolute discretion), issue or sell any rights, warrants or options to subscribe
for or purchase Common Stock, or any other securities directly or indirectly
convertible into or exchangeable or exercisable for Common Stock, at an
effective conversion, exchange or exercise price that varies or may vary with
the market price of the Common Stock, including by way of one or more reset(s)
to any fixed price.
(q) Participation Right. Subject to the terms and conditions
specified in this Section 4(q), for twelve months following the Closing Date,
the Purchasers shall have a right to participate with respect to the issuance or
possible issuance of (i) future equity or equity-linked securities, or (ii) debt
which is convertible into equity or in which there is an equity component
("ADDITIONAL SECURITIES") on the same terms and conditions as offered by the
Company to the other purchasers of such Additional Securities. Each time the
Company proposes to offer any Additional Securities, the Company shall make an
offering of such Additional Securities to each Purchaser in accordance with the
following provisions:
(i) the Company shall deliver a notice (the "NOTICE") to
the Purchasers stating (i) its bona fide intention to offer such Additional
Securities, (ii) the number of such Additional Securities to be offered, (iii)
the price and terms, if any, upon which it proposes to offer such Additional
Securities, and (iv) the anticipated closing date of the sale of such Additional
Securities.
(ii) by written notification received by the Company,
within fifteen (15) days after giving of the Notice, any Purchaser may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up to
that portion of such Additional Securities which equals one-half multiplied by
the proportion that the subscription amount of such Purchaser for the Units (as
set forth on such Purchaser's Execution Page) bears to the aggregate
subscription amount of all Purchasers for the Units, provided, however, that if
the terms set forth in the Notice contemplate consideration for such Additional
Securities to be paid in a form other than cash, any Purchaser may elect to
purchase or obtain such Additional Securities at a price equal to the fair
market value of the consideration set forth in the Notice, as reasonably
determined by the Board of Directors. The Company shall promptly, in writing,
inform each Purchaser that elects to purchase all of the Additional Securities
available to it ("FULLY-EXERCISING PURCHASER") of any other Purchaser's failure
to do likewise. During the five-day period commencing after such information is
given, each Fully-Exercising Purchaser shall be entitled to obtain that portion
of the Additional Securities for which the Purchasers were entitled to subscribe
but that were not subscribed for by the Purchasers that is equal to the
proportion that the number of shares of Common Stock that such Fully-Exercising
Purchaser would have the right to acquire (assuming the full conversion of such
Purchaser's shares of Preferred Stock into Conversion Shares) bears to the total
number of shares of Common Stock that all Fully-Exercising Purchasers who wish
to purchase some of the unsubscribed shares would have the right to acquire
(assuming the full conversion, without any limitations or restrictions, of such
Purchasers' shares of Preferred Stock into Conversion Shares);
(iii) if all Additional Securities that the Purchasers are
entitled to obtain pursuant to subsection 4(q)(ii) are not elected to be
obtained as
-18-
provided in subsection 4(q)(ii) hereof, the Company may, during the 90-day
period following the expiration of the period provided in subsection 4(q)(ii)
hereof, offer the remaining unsubscribed portion of such Additional Securities
to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than, those specified in the Notice. If the Company
does not consummate the sale of such Additional Securities within such period,
the right provided hereunder shall be deemed to be revived and such Additional
Securities shall not be offered or sold unless first reoffered to the Purchasers
in accordance herewith;
(iv) the participation right in this Section 4(q) shall
not be applicable to (i) the issuance or sale of shares of Common Stock (or
options therefor) to employees, officers, directors, or consultants of the
Company for the primary purpose of soliciting or retaining their employment or
service pursuant to a stock option plan (or similar equity incentive plan)
approved by the Board of Directors and the stockholders, (ii) upon conversion of
any convertible securities outstanding as of Closing and as disclosed in Section
3(c) of the Disclosure Schedule, (iii) the issuance of securities in connection
with a bona fide public offering at an offering price per share (prior to
underwriter's commissions and discounts) of not less than the Conversion Price
(as such term is defined in the Certificate of Designation) (as adjusted to
reflect any stock dividends, distributions, combinations, reclassifications and
other similar transactions effected by the Corporation in respect to its Common
Stock) that is underwritten by a nationally recognized underwriting firm and
results in net proceeds to the Company of at least twenty-five million dollars
($25,000,000), (iv) the issuance or sale of the Preferred Stock, (v) the
issuance of securities in connection with mergers, acquisitions, strategic
business partnerships or joint ventures, the primary purpose of which, in the
reasonable judgment of the Board of Directors, is not to raise additional
capital, or (vi) any issuance of securities as to which the holders of a
majority of the then outstanding shares of Preferred Stock shall have executed a
written waiver of the rights contained in this Section 4(q).
(v) the participation right set forth in this Section
4(q) may not be assigned or transferred, except that such right is assignable by
each Purchaser to any wholly-owned subsidiary or parent of, or to any
corporation or entity that is, within the meaning of the Securities Act,
controlling, controlled by or under common control with, any such Purchaser or
to any permitted transferee of the Preferred Stock.
(r) Expenses. At the Closing, the Company shall pay to each
Purchaser reimbursement for the out-of-pocket expenses reasonably incurred by
such Purchaser, its affiliates and its or their advisors in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby, including, without limitation, each Purchaser's and their
respective affiliates' and advisors' reasonable due diligence and attorneys'
fees and expenses (the "EXPENSES"); provided, however, that each Purchaser shall
be permitted, in its discretion, to deduct all of its Expenses from the Purchase
Price payable by such Purchaser hereunder; and provided, further, that, unless
prior approval is obtained from the Company, the aggregate amount of the
Expenses payable to all Purchasers shall not exceed $99,000.00 (the "EXPENSE
CAP"), which Expense Cap shall be allocated, first, to SDS Capital Group SPC,
Ltd., and, second, any remaining amount within the Expense Cap shall be
allocated among the remaining Purchasers (other than SDS Capital Group SPC,
Ltd.) pro rata in accordance with their respective Purchase Price amounts. In
addition, from time to time thereafter, upon any Purchaser's written request,
the Company shall pay to such Purchaser such additional Expenses
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(not to exceed, in the aggregate for all Purchasers, the Expense Cap), if any,
not covered by such payment, in each case to the extent reasonably incurred by
such Purchaser, its affiliates or its or their advisors in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby. In addition to the foregoing, the Company shall pay North
Consulting Corp. a fee in the amount of $250,000.00, which SDS Capital Group
SPC, Ltd. shall be entitled to deduct from the Purchase Price payable by it
hereunder and pay directly to North Consulting Corp.
(s) Right of First Refusal. If the Company desires to contract
with or otherwise engage any unrelated third party to provide technical
recruiting, call center service, outsourced software engineering and integration
services, or any similar services (collectively, the "OUTSOURCED SERVICES"), the
Company shall give written notification (the "OUTSOURCING NOTIFICATION") of such
desire to SDS Capital Group SPC, Ltd. SDS Capital Group SPC, Ltd. shall have
fifteen (15) days from its receipt of the Outsourcing Notification in which to
advise the Company of its desire to appoint a designee (the "OUTSOURCING
DESIGNEE") to provide such Outsourced Services to the Company. The Outsourcing
Designee shall then have the exclusive right, during the thirty (30) day period
following the date on which the Company receives written notice of such
Outsourcing Designee's appointment, to develop and deliver to the Company a
formal proposal (the "PROPOSAL") for the provision of such Outsourced Services.
The Company shall accept such Proposal if the terms of the Proposal are
commercially reasonable. If an Outsourcing Designee is not appointed, or if the
Outsourcing Designee fails to deliver to the Company a Proposal in the manner
described above, the Company shall have the right to solicit and consider
alternative proposals to provide such Outsourced Services, provided, however,
that if a contract to provide such Outsourced Services is not executed within
ninety (90) days after the Outsourcing Notification, then the provisions of this
Section 4(s) will apply again to the Outsourced Services as if the initial
Outsourcing Notification had ever been provided.
5. SECURITIES TRANSFER MATTERS.
(a) Conversion and Exercise. Upon conversion of the Preferred
Stock or exercise of the Warrants by any person, (i) if the DTC Transfer
Conditions (as defined below) are satisfied, the Company shall cause its
transfer agent to electronically transmit all Conversion Shares and Warrant
Shares by crediting the account of such person or its nominee with the
Depository Trust Company ("DTC") through its Deposit Withdrawal Agent Commission
system; or (ii) if the DTC Transfer Conditions are not satisfied, the Company
shall issue and deliver, or instruct its transfer agent to issue and deliver,
certificates (subject to the legend and other applicable provisions hereof and
the Certificate of Designation and Warrants), registered in the name of such
person its nominee, physical certificates representing the Conversion Shares and
Warrant Shares, as applicable. Even if the DTC Transfer Conditions are
satisfied, any person effecting a conversion of Preferred Stock or exercising
Warrants may instruct the Company to deliver to such person or its nominee
physical certificates representing the Conversion Shares and Warrant Shares, as
applicable, in lieu of delivering such shares by way of DTC Transfer. For
purposes of this Agreement, "DTC TRANSFER CONDITIONS" means that (A) the
Company's transfer agent is participating in the DTC Fast Automated Securities
Transfer program and (B) the certificates for the Conversion Shares or Warrant
Shares required to be delivered do not bear a legend and the
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person effecting such conversion or exercise is not then required to return such
certificate for the placement of a legend thereon.
(b) Transfer or Resale. Each Purchaser understands that (i) except
as provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(A) the transfer is made pursuant to and as set forth in an effective
registration statement under the Securities Act covering the Securities; or (B)
such Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration under the Securities Act or any state securities laws; or (C) sold
under and in compliance with Rule 144; and (ii) neither the Company nor any
other person is under any obligation to register such Securities under the
Securities Act or any state securities laws (other than pursuant to the terms of
the Registration Rights Agreement). Notwithstanding the foregoing or anything
else contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement, provided such pledge is consistent with applicable laws, rules and
regulations.
(c) Legends. Each Purchaser understands that the Preferred Stock
and Warrants and, until such time as the Conversion Shares and Warrant Shares
have been registered under the Securities Act (including registration pursuant
to Rule 416 thereunder) as contemplated by the Registration Rights Agreement or
otherwise may be sold by such Purchaser under Rule 144, the certificates for the
Conversion Shares and Warrant Shares may bear a restrictive legend in
substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
the securities laws of any state of the United States or in
any other jurisdiction. The securities represented hereby may
not be offered, sold or transferred in the absence of an
effective registration statement for the securities under
applicable securities laws unless offered, sold or transferred
pursuant to an available exemption from the registration
requirements of those laws.
The Company shall, immediately prior to a registration statement
covering the Securities (including, without limitation, the Registration
Statement contemplated by the Registration Rights Agreement) being declared
effective, deliver to its transfer agent an opinion letter of counsel, opining
that at any time such registration statement is effective, the transfer agent
shall issue, in connection with the issuance of the Conversion Shares and
Warrant Shares, certificates representing such Conversion Shares and Warrant
Shares without the restrictive legend above, provided such Conversion Shares and
Warrant Shares are to be sold pursuant to the prospectus contained in such
registration statement. Upon receipt of such opinion, the Company shall use
commercially reasonable efforts to cause the transfer agent to confirm, for the
benefit of the holders, that no further opinion of counsel is required at the
time of transfer in order to issue such shares without such restrictive legend.
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The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (i) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder); (ii) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the Securities Act; or
(iii) such holder provides the Company with reasonable assurances that such
Security can be sold under Rule 144. In the event the above legend is removed
from any Security and thereafter the effectiveness of a registration statement
covering such Security is suspended or the Company determines that a supplement
or amendment thereto is required by applicable securities laws, then upon
reasonable advance written notice to such Purchaser the Company may require that
the above legend be placed on any such Security that cannot then be sold
pursuant to an effective registration statement or under Rule 144 and such
Purchaser shall cooperate in the replacement of such legend. Such legend shall
thereafter be removed when such Security may again be sold pursuant to an
effective registration statement or under Rule 144.
(d) Transfer Agent Instruction. Upon compliance by any Purchaser
with the provisions of this Section 5 with respect to the transfer of any
Securities, the Company shall permit the transfer of such Securities and, in the
case of the transfer of Conversion Shares or Warrant Shares, promptly instruct
its transfer agent to issue one or more certificates (or effect a DTC Transfer)
in such name and in such denominations as specified by such Purchaser. The
Company shall not give any instructions to its transfer agent with respect to
the Securities, other than any permissible or required instructions provided in
this Section 5, and the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Units to
each Purchaser hereunder is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions as to such Purchaser, provided
that such conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
(a) Execution of Transaction Documents. Each Purchaser shall have
executed such Purchaser's Execution Page to this Agreement and each other
Transaction Document to which such Purchaser is a party and delivered the same
to the Company.
(b) Payment of Purchase Price. Each Purchaser shall have delivered
the full amount of such Purchaser's Purchase Price to the Company by wire
transfer in accordance with the Company's written wiring instructions.
(c) Representations and Warranties True; Covenants Performed. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date, which representations and warranties shall be true and
correct as of such date), and such Purchaser shall have performed, satisfied and
complied
-22-
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to the
Closing Date.
(d) No Legal Prohibition. No statute, rule, regulation, executive
order, decree, ruling, injunction, action or proceeding shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which restricts or prohibits the consummation of
any of the transactions contemplated by this Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase the Units for
which it is subscribing from the Company hereunder is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that such conditions are for each Purchaser's individual
and sole benefit and may be waived by any Purchaser as to such Purchaser at any
time in such Purchaser's sole discretion:
(a) Execution of Transaction Documents. The Company shall have
executed such Purchaser's Execution Page to this Agreement and each other
Transaction Document to which the Company is a party and delivered executed
originals of the same to such Purchaser.
(b) Filing of Certificate of Designation. The Certificate of
Designation shall have been filed and accepted for filing with the Secretary of
State of the State of Delaware and a copy thereof certified by the Secretary of
State of the State of Delaware shall have been delivered to such Purchaser.
(c) Delivery of Securities. The Company shall have delivered to
such Purchaser duly executed certificates representing the Preferred Stock and
Warrants for the number of Units being purchased by such Purchaser (each in such
denominations as such Purchaser shall reasonably request), registered in such
Purchaser's name.
(d) Listing. The Common Stock shall be authorized for quotation
and listed on the SmallCap Market and trading in the Common Stock (or on the
SmallCap Market generally) shall not have been suspended by the SEC or the
SmallCap Market. The Nasdaq Stock Market, Inc. Listing Qualifications Department
(the "LISTING DEPARTMENT") shall have advised the Company in writing of the
Listing Department's concurrence that the issuance of the Securities does not
require stockholder approval.
(e) Representations and Warranties True; Covenants Performed. The
representations and warranties of the Company, to the extent qualified by
materiality or Material Adverse Effect, shall be true and correct as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date); the
representations and warranties of the Company, to the extent not qualified by
materiality or Material Adverse Effect, shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct in
all material
-23-
respects as of such date); and the Company shall have performed, satisfied and
complied with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date. Such Purchaser shall have received a certificate, executed
by the Chief Executive Officer of the Company after reasonable investigation,
dated as of the Closing Date to the foregoing effect and as to such other
matters as may reasonably be requested by such Purchaser.
(f) No Legal Prohibition. No statute, rule, regulation, executive
order, decree, ruling, injunction, action or proceeding shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which restricts or prohibits the consummation
of, any of the transactions contemplated by this Agreement.
(g) Legal Opinion. Such Purchaser shall have received an opinion
of the Company's counsel, dated as of the Closing Date, in the form attached
hereto as Exhibit E.
(h) No Material Adverse Change. There shall have been no material
adverse changes and no material adverse developments in the business,
properties, operations, prospects, financial condition or results of operations
of the Company and its Subsidiaries, taken as a whole, since the date hereof.
(i) Corporate Approvals. Such Purchaser shall have received a copy
of resolutions, duly adopted by the Board of Directors of the Company, which
shall be in full force and effect at the time of the Closing, authorizing the
execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents and the consummation by the Company of the
transactions contemplated hereby and thereby, certified as such by the Secretary
or Assistant Secretary of the Company, and such other documents they reasonably
request in connection with the Closing.
8. GOVERNING LAW; MISCELLANEOUS.
(a) Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware applicable
to contracts made and to be performed in the State of Delaware. The Company and
each Purchaser irrevocably consent to the jurisdiction of the United States
federal courts and the state courts located in the County of New Castle,
Delaware, in any suit or proceeding based on or arising under this Agreement and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. The Company and each Purchaser irrevocably waive the
defense of an inconvenient forum to the maintenance of such suit or proceeding
in such forum. The Company and each Purchaser further agree that service of
process upon the Company mailed by first class mail shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the right of the Company or any
Purchaser to serve process in any other manner permitted by law. The Company and
each Purchaser agree that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
-24-
(b) Counterparts. This Agreement may be executed in two or more
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. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed execution page(s)
hereof to be physically delivered to the other party within five days of the
execution hereof, provided that the failure to so deliver any manually executed
execution page shall not affect the validity or enforceability of this
Agreement.
(c) Construction. Whenever the context requires, the gender of any
word used in this Agreement includes the masculine, feminine or neuter, and the
number of any word includes the singular or plural. Unless the context otherwise
requires, all references to articles and sections refer to articles and sections
of this Agreement, and all references to schedules are to schedules attached
hereto, each of which is made a part hereof for all purposes. The descriptive
headings of the several articles and sections of this Agreement are inserted for
purposes of reference only, and shall not affect the meaning or construction of
any of the provisions hereof.
(d) 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 or the validity or enforceability of this Agreement
in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the other
Transaction Documents (including any schedules and exhibits hereto and thereto)
contain the entire understanding of the Purchasers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Purchasers make any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived other than by an instrument in writing signed by
the party to be charged with enforcement, and no provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and each
Purchaser.
(f) Notices. Any notices required or permitted to be given under
the terms of this Agreement shall be in writing and sent by certified or
registered mail (return receipt requested) or delivered personally, by
nationally recognized overnight carrier or by confirmed facsimile transmission,
and shall be effective five days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by nationally
recognized overnight carrier or confirmed facsimile transmission, in each case
addressed to a party as provided herein. The initial addresses for such
communications shall be as follows, and each party shall provide notice to the
other parties of any change in such party's address:
(i) If to the Company:
Remote Dynamics, Inc.
0000 Xxx Xxxxx, Xxxxx 000
-00-
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: J. Xxxxxxx Xxxxxx, Esquire
with a copy simultaneously transmitted by like
means (which transmittal shall not
constitute notice hereunder) to:
Xxxxx Liddell & Xxxx LLP
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esquire
(ii) If to any Purchaser, to the address set forth under
such Purchaser's name on the Execution Page hereto executed by such Purchaser.
(g) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. Except
as provided herein, the Company shall not assign this Agreement or any rights or
obligations hereunder. Any Purchaser may assign or transfer the Securities
pursuant to the terms of this Agreement and of such Securities, or assign such
Purchaser's rights hereunder to any other person or entity in accordance with
applicable law.
(h) 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; provided, however, that Section 4(r) may be enforced by
any Purchaser's affiliates and its or their advisors to the extent the same is
entitled to reimbursement of Expenses pursuant thereto.
(i) Survival. The representations and warranties of the Company
and the agreements and covenants set forth in Sections 3, 4, 5 and 8 hereof
shall survive the Closing for a period of two years notwithstanding any due
diligence investigation conducted by or on behalf of any Purchaser. Moreover,
none of the representations and warranties made by the Company herein shall act
as a waiver of any rights or remedies any Purchaser may have under applicable
U.S. federal or state securities laws.
(j) Publicity. The Company and each Purchaser shall have the right
to approve before issuance any press releases, SEC or, to the extent applicable,
NASD filings, 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 the Purchasers, to make any press release or SEC
or, to the extent applicable, NASD filings with respect to such transactions as
is required by applicable law and regulations (although the Purchasers shall be
consulted by the Company in connection with any such press release and filing
prior to its release and shall be provided with a copy thereof and must provide
specific consent to the use of their name in
-26-
connection therewith, which consent shall not be withheld if Company counsel
advises the Company in writing that NASD rules or applicable law explicitly
require the use of the Purchasers' names).
(k) 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.
(l) Indemnification. In consideration of each Purchaser's
execution and delivery of this Agreement and the other Transaction Documents and
purchase of the Securities hereunder, and in addition to all of the Company's
other obligations under this Agreement and the other Transaction Documents, from
and after the Closing, the Company shall defend, protect, indemnify and hold
harmless each Purchaser and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing persons' agents or other
representatives (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 any Indemnitee as a result of, or arising out of, or relating to (i)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, any other Transaction Document or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement, any other Transaction Document or any other certificate, instrument
or document contemplated hereby or thereby or (iii) any cause of action, suit,
claim, order, proceeding or process brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Company) and arising out of or resulting from (A) the execution,
delivery, performance or enforcement of this Agreement, any other Transaction
Document or any other certificate, instrument or document contemplated hereby or
thereby, (B) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance and sale of the
Securities, or (C) the status of such Purchaser or holder of the Securities 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. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 8(l) shall be the same as those set forth in
Section 6(c) of the Registration Rights Agreement.
(m) Payment Set Aside. To the extent that the Company makes a
payment or payments to any Purchaser hereunder or pursuant to any of the other
Transaction Documents or any Purchaser enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or
-27-
are required to be refunded, repaid or otherwise restored to the Company, a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
(n) Joint Participation in Drafting. Each party to this Agreement
has participated in the negotiation and drafting of this Agreement and the other
Transaction Documents. As such, the language used herein and therein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party to
this Agreement.
(o) Remedies. No provision of this Agreement or any other
Transaction Document providing for any remedy to a Purchaser shall limit any
other remedy which would otherwise be available to such Purchaser at law, in
equity or otherwise. Nothing in this Agreement or any other Transaction Document
shall limit any rights any Purchaser may have under any applicable federal or
state securities laws with respect to the investment contemplated hereby. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Purchasers by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations hereunder (including, but not
limited to, its obligations pursuant to Section 5 hereof) will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Agreement (including, but not limited to, its obligations
pursuant to Section 5 hereof), that each Purchaser shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer of the Securities, without
the necessity of showing economic loss and without any bond or other security
being required.
(p) Knowledge. As used in this Agreement, the term "knowledge" of
any person or entity shall mean and include (i) actual knowledge and (ii) that
knowledge which a reasonably prudent business person could have obtained in the
management of his or her business affairs after making due inquiry and
exercising due diligence which a prudent business person should have made or
exercised, as applicable, with respect thereto.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
REMOTE DYNAMICS, INC.
By: /s/ W. Xxxxxxx Xxxxx
--------------------------------
Name: W. Xxxxxxx Xxxxx
Title: Chief Operating Officer
PURCHASER:
SDS CAPITAL GROUP SPC, LTD. for itself and on behalf of its Class A Segregated
portfolio, Class B Segregated portfolio, Class C Segregated portfolio and all
future Segregated portfolios created by it from time to time
(Print or Type Name of Purchaser)
By: /s/ Xxxxx Xxxxx
--------------------------------
Name: Xxxxx Xxxxx
Title: Managing Member
RESIDENCE: CAYMAN ISLANDS
ADDRESS: c/o SDS Management, LLC
00 Xxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxx
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Units: 5,000
Purchase Price ($1,000 per Unit): $5,000,000.00
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
