EXHIBIT 10M
AUTOINFO, INC.
0000 Xxxxxxxx Xxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
January 21, 2004
Kinderhook Partners, LP
0 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxx, XX 00000
This letter constitutes an agreement, subject to the terms and conditions
contained herein, between Kinderhook Partners, LP and/or its affiliates (the
"Purchaser") and AutoInfo Inc. ("AutoInfo" or the "Company"), pursuant to which
Purchaser will buy and AutoInfo will sell, common stock to the Purchaser.
1. Purchaser agrees to buy from AutoInfo, and AutoInfo agrees to sell to
Purchaser, 1,333,333 authorized but unissued shares of AutoInfo common stock
(the "New AutoInfo Shares"), for a total consideration of $442,201.76 payable in
cash at closing by wire transfer to an account designated by AutoInfo.
2. The Purchaser acknowledges that it is acquiring the New AutoInfo Shares as
principal for its own account for investment purposes only. The Purchaser is an
"accredited investor" as defined in Rule 501(a) under the Securities Act, of
1933 as amended (the "Securities Act"). The 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 New AutoInfo Shares, and has so
evaluated the merits and risks of such investment to its satisfaction. The
Purchaser is able to bear the economic risk of an investment in the New AutoInfo
Shares. The Purchaser understands and acknowledges that (i) the New AutoInfo
Shares are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and the Purchaser hereby consents to such
reliance.
3. AutoInfo represents and warrants:
(a) it is duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, and is duly qualified to do business and is
in good standing in each jurisdiction in which such qualification is required by
law; except where the failure to so qualify would not have a material adverse
effect on the Company;
(b) it has the corporate power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the business
it transacts;
(c) it has the full right, power and authority to enter into this agreement and
perform the transactions
contemplated hereunder;
(d) this agreement has been duly executed and delivered on behalf of AutoInfo
and constitutes the valid and binding obligation of AutoInfo, enforceable in
accordance with its terms;
(e) the execution, delivery and performance of this agreement, the sale and
delivery of the New AutoInfo Shares, and compliance with the provisions hereof
by AutoInfo, do not and will not, with or without the passage of time or the
giving of notice or both, (i) violate any provision of law, statute, ordinance,
rule or regulation or any ruling, writ, injunction, order, judgment or decree of
any court, administrative agency or other governmental body, or (ii) result in
any breach of any of the terms, conditions or provisions of, or constitute a
default (or give rise to any right of termination, cancellation or acceleration)
under any note, indenture, mortgage or lease, or any other material contract or
other instrument, document or agreement, to which AutoInfo is a party or by
which it or any of its property is bound or affected;
(f) AutoInfo is not a party to, subject to or bound by any agreement or any
judgment, order, writ, prohibition, injunction or decree of any court or other
governmental body which would prevent the execution or delivery of this
agreement or the issuance, conveyance and sale of the New AutoInfo Shares to the
Purchaser pursuant to the terms hereof;
(g) all consents, approvals or authorizations of, or registrations, filings or
declarations with, any governmental authority, stock exchange or market,
AutoInfo's board of directors and shareholders, or any other person, required in
connection with the execution, delivery and performance of this agreement or the
transactions contemplated hereby have been or by the Closing Date (as defined
below) will have been obtained by AutoInfo and will be in full force and effect;
(h) except as set forth on Schedule 3(h) hereto, there are no actions,
investigations, demands, suits or proceedings pending or threatened against or
affecting AutoInfo, or affecting the rights of AutoInfo to enter into this
agreement or consummate the transactions contemplated hereby and any matters
disclosed on Schedule 3(h) hereto would not reasonably be expected to have a
material adverse effect on the Company or its subsidiaries;
(i) AutoInfo has complied with all applicable laws, statutes, codes, acts,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations, directions and requirements of governmental
entities, except for such non-compliance which would not reasonably be expected
to have a material adverse effect on it or its subsidiaries;
(j) AutoInfo has correctly prepared and filed all tax returns or reports that
are required to have been filed in any jurisdiction, and has timely paid in full
all taxes due and payable with respect thereto;
(k) upon consummation of the purchase contemplated hereby, the New AutoInfo
Shares shall have been duly and validly authorized and issued, fully paid and
non-assessable and free and clear of all liens, pledges, security interests and
encumbrances, except for any liens, pledges, security interests and encumbrances
created by Purchaser;
(l) in reliance on the investment representations made by the Purchaser
contained herein, the offer, issuance, sale and delivery of the New AutoInfo
Shares, are exempt from the registration requirements of the Securities Act and
all applicable state securities laws;
(m) a copy of AutoInfo's Annual Report on Form 10-K for the year ended December
31, 2002 (the "2002 10-K") and each report, schedule, effective registration
statement and definitive proxy statement filed by AutoInfo with the Securities
and Exchange Commission (the "Commission") since December 31, 2002, (as the
documents may have been amended since the time of their filing, the "Commission
Documents") has been made available to the Purchaser either by physical delivery
or via the Commission's XXXXX System. As of their respective filing dates, each
Commission Document complied in all material respects with the requirements of
the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable, and the rules and regulations of the Commission
thereunder applicable to the Commission Documents, and no Commission Document
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements included in the Commission Documents were
prepared in accordance with United States generally accepted accounting
principles ("GAAP"), applied consistently with the past practices of the Company
(except as may be indicated in the notes thereto), and as of their respective
dates, fairly present, in all material respects, the consolidated financial
position of the Company and the results of its operations as of the time and for
the periods indicated therein and complied as to form in all material respects
with then applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto;
(n) since September 30, 2003, except as disclosed in the Commission Documents
filed subsequent to that date, there has not been any material adverse change in
the business, financial condition or operating results of AutoInfo or its
subsidiaries;
(o) AutoInfo has not since December 31, 2002, received notice (written or oral)
from any stock exchange or market on which its common stock is or has been
listed (or on which it has been quoted) to the effect that it is not in
compliance with the continuing listing or maintenance requirements of such
exchange or market; and
(p) the authorized capital stock of the Company consists of one hundred million
shares of common stock ("Common Stock") and ten million shares of preferred
stock ("Preferred Stock"). As of the date hereof, without giving effect to the
issuance of the New AutoInfo Shares, there are issued and outstanding 27,382,923
shares of Common Stock and no shares of Preferred Stock. All such issued and
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth on Schedule 3(p) hereto, there are
no outstanding rights, options, warrants, conversion rights, preemptive rights,
rights of first refusal or similar rights for the purchase or acquisition from
the Company of any securities of the Company. All outstanding shares have been
issued in compliance with state and federal securities laws. There are no
agreements to which the Company is a party or, to the knowledge of the Company,
to which any stockholder of the Company is a party, with respect to the voting
or transfer of the capital stock of the Company.
4. AutoInfo covenants and agrees as follows:
(a) to file a registration statement on or before March 31, 2004 (the "Filing
Date") on Form SB-2, or such other form that is appropriate, covering the resale
of the New AutoInfo Shares and the shares of common stock to be issued to the
Purchaser upon conversion of the Company's 12% convertible subordinated
debentures (the "Debentures") being purchased by the Purchaser from the holders
thereof (the "Conversion Shares" and together with the New AutoInfo Shares,
collectively, the "Registrable Securities"). AutoInfo will cause the
registration statement to become effective on or before June 30, 2004 (the
"Effectiveness Date"); provided that, if (1) the registration statement is not
filed by the Filing
Date, (2) the registration statement is not declared effective by the
Effectiveness Date, (3) prior to the time that the Registrable Securities may be
resold pursuant to Rule 144, the registration statement shall cease to be
available for use by the Purchaser due to the fault of AutoInfo (including,
without limitation, by reason of a stop order, a material misstatement or
omission in such registration statement or the information contained in such
registration statement having become outdated), or (4) AutoInfo fails, refuses
or is otherwise unable timely to issue Conversion Shares upon conversion of the
Debentures, then AutoInfo shall pay to the Purchaser an amount equal to one
percent (1%) of the purchase price paid for the Debentures and the New AutoInfo
Shares purchased by the Purchaser. Thereafter, for every 30 days that pass
during which any of the events described in clauses (1), (2), (3) and (4) above
is continuing (the "Blackout Period"), AutoInfo shall pay to the Purchaser an
additional amount equal to one percent (1%) of the purchase price paid for the
Debentures and the New AutoInfo Shares purchased by the Purchaser. Each such
payment shall be due within five (5) days of the end of each calendar month of
the Blackout Period until the termination of the Blackout Period and within five
(5) days after such termination. Such payments shall be in partial compensation
to the Purchaser, and shall not constitute the Purchaser's exclusive remedy for
such events. The Blackout Period shall terminate upon (x) the filing of the
registration statement in the case of clause (1) above; (y) the effectiveness of
the registration statement in the case of clauses (2) and (3) above; or (z)
delivery of such shares or certificates in the case of clause (4) above. In
addition to the foregoing, in the event that the Registration Statement has not
been declared effective on or before December 31, 2004 or was declared effective
and subsequently ceased to be available for use by the Purchaser due to the
fault of AutoInfo (including, without limitation, by reason of a stop order, a
material misstatement or omission in such registration statement or the
information contained in such registration statement having become outdated) and
has not been declared effective again by December 31, 2004, the Purchaser shall
have the right in its sole discretion to rescind all transactions hereunder and
receive from AutoInfo, the full purchase price paid by the Purchaser for the New
AutoInfo Shares. AutoInfo shall make such payment in cash by wire transfer
within sixty (60) days after receipt of written demand for recission by the
Purchaser. Notwithstanding anything to the contrary contained in this Agreement,
provided that a registration statement covering the Registrable Securities has
been filed and declared effective, no amounts shall be due and payable to the
Purchaser as a result of blackout periods imposed by the Company due to (i) the
Company being involved in a confidential proposed transaction involving a merger
or acquisition, purchase or sale of assets, contractual agreement or
negotiations therefor, (ii) an imminent public announcement by the Company of an
updated or new product or technology or (iii) the financial statements included
in the prospectus covering the Registrable Securities requiring updating and the
required annual audited financial statements not being available; provided,
however, that such blackout periods shall not exceed thirty (30) trading days in
the aggregate per year nor more than twenty (20) consecutive calendar days.
(b) if at any time prior to the two year anniversary of the date the Purchaser
acquires the Registrable Securities, AutoInfo or any shareholder of AutoInfo
proposes to register any of its common stock or any securities convertible into
common stock under the Securities Act (other than pursuant to an offering of
securities in connection with an employee benefit, share dividend, share
ownership or dividend reinvestment plan) and (a) the Registrable Securities are
not then covered by an effective registration statement, and (b) the
registration form to be used may be used by AutoInfo for the registration of the
Registrable Securities, AutoInfo shall give prompt written notice to the
Purchaser of its intention to effect such a registration (each a "Piggyback
Notice") and, shall include in such registration all Registrable Securities with
respect to which AutoInfo has received written request from the Purchaser for
inclusion therein within ten (10) days after the date of sending the Piggyback
Notice (the "Piggyback Registration") to the Purchaser.
(c) in connection with any registration, AutoInfo will, as expeditiously as
possible:
(i) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for a period of time required for the
disposition of such securities by the Purchaser;
(ii) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the sale or other
disposition of all securities covered by such registration statement until the
such time as all of such securities have been disposed of;
(iii) furnish to the Purchaser such number of copies of a summary
prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as the Purchaser may reasonably request;
(iv) register or qualify the securities covered by such registration
statement under such other securities or blue sky laws of such jurisdictions
within the United States and Puerto Rico as the Purchaser shall reasonably
request (provided, however, that it shall not be obligated to qualify as a
foreign corporation to do business under the laws of any jurisdiction in which
it is not then qualified or to file any general consent to service or process),
and do such other reasonable acts and things as may be required of it to enable
the Purchaser to consummate the disposition in such jurisdiction of the
securities covered by such registration statement;
(v) notify the Purchaser at any time when the Registration Statement
contains an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and at the request of
the Purchaser, prepare and furnish to such person(s) such reasonable number of
copies of any amendment or supplement to the Registration Statement as may be
necessary so that, as thereafter delivered to the purchasers of such shares,
such Registration Statement shall not include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances then
existing;
(vi) keep the Purchaser informed of the Company's best estimate of the
earliest date on which the offering documents will become effective, and
promptly notify the Purchaser of (A) the effectiveness of such offering
documents, (B) a request by the Commission for an amendment or supplement to
such offering documents, (C) the issuance by the Commission of an order
suspending the effectiveness of the offering documents, or of the threat of any
proceeding for that purpose, and (D) the suspension of the qualification of any
securities to be included in the offering documents for sale in any jurisdiction
or the initiation or threat of any proceeding for that purpose;
(vii) cause all Registrable Securities registered hereunder to be listed
on each securities exchange on which similar securities issued by the Company
are then listed; and
(viii) not less than three business days prior to the filing of the
Registration Statement or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), the Company shall furnish to the Purchaser and its counsel copies of
all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
reasonable review and comment of the Purchaser and its counsel.
(d) all registrations (piggyback or otherwise) made by the Purchaser will be
made solely at AutoInfo's expense, other than (x) the underwriters',
broker-dealers' and placement agents' selling discounts, commissions and fees
relating to the sale of the Purchaser's securities, (y) any costs and expenses
of counsel, accountants or other advisors retained by the Purchaser and (z) all
transfer, franchise, capital stock and other taxes, if any, applicable to the
Purchaser's securities (collectively, "Purchaser's Expenses") which shall be
paid by the Purchaser.
(e) In the event of any registration of any Registrable Securities under the
Securities Act pursuant to this agreement, the Company shall indemnify and hold
harmless the holder of such Registrable Securities, such holder's directors and
officers, and each other person who participated in the offering of such
Registrable Securities and each other person, if any, who controls such holder
or such participating person within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which such
holder or any such director or officer or participating person or controlling
person may become subject under the Securities Act or any other statute or at
common law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any untrue statement or
any alleged untrue statement of any material fact contained, on the effective
date thereof, in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, (ii) any
omission or any alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any other violation of any applicable securities laws, and in each of the
foregoing circumstances shall reimburse such holder or such director, officer or
participating person or controlling person for any legal or any other expenses
reasonably incurred by such holder or such director, officer or participating
person or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any actual or alleged
untrue statement or actual or alleged omission made in such registration
statement, preliminary prospectus, prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such holder specifically for use therein. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such holder or such director, officer or participating person or controlling
person, and shall survive the transfer of such securities by such holder.
(f) In the event of any registration of any Registrable Securities under the
Securities Act pursuant to this Agreement, each holder of Registrable
Securities, by acceptance hereof, agrees to indemnify and hold harmless the
Company, its directors and officers and each other person, if any, who controls
the Company within the meaning of the Securities Act and any other holder
against any losses, claims, damages or liabilities, joint or several, to which
the Company or any such director or officer or any such person may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or any alleged untrue
statement of any material fact contained, on the effective date thereof, in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or (ii) any omission or any
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in either case
only to the extent that such untrue statement or omission is (A) made in
reliance on and in conformity with any information furnished in writing by such
holder to the Company concerning such holder specifically for inclusion in the
offering documents relating to such offering, and (B) is not corrected by such
holder and distributed to the purchasers of shares within a reasonable period of
time. Notwithstanding the provisions of this paragraph, no holder shall be
required to indemnify any person pursuant to this
paragraph or to contribute pursuant to paragraph (g) below in an amount in
excess of the amount of the aggregate net proceeds received by such holder in
connection with any such registration under the Securities Act.
(g) If the indemnification provided for above from the indemnifying party is
unavailable to an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding. The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this paragraph were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(h) In order to permit the Purchaser to sell the Registrable Securities, if it
so desires, pursuant to any applicable resale exemption under applicable
securities laws and regulations, AutoInfo shall:
(i) comply with all rules and regulations of the Commission in connection
with use of any such resale exemption;
(ii) make and keep available adequate and current public information
regarding the Company; and
(iii) file with the Commission in a timely manner, all reports and other
documents required to be filed under the Securities Act, the Exchange Act, or
other applicable securities laws and regulations.
(i) During any period during which the Company is not a reporting company under
the Exchange Act and the Purchaser owns at least twenty-five (25%) of the
Registrable Securities, AutoInfo shall furnish to the Purchaser (A) within sixty
(60) days after the end of each fiscal quarter, an unaudited consolidated
balance sheet of the Company and its subsidiaries, and unaudited consolidated
statements of income and cash flows of the Company and its subsidiaries, for
such period, for the current fiscal year to date and (B) within ninety (90) days
after the end of each fiscal year, an unaudited consolidated balance sheet of
the Company and its subsidiaries, as of the end of such year and consolidated
statements of income, stockholders' equity and cash flows for such year, in each
case prepared in accordance with GAAP, and in the event that such financials
statements are audited, AutoInfo shall furnish to the Purchaser such audited
financial statements.
All rights of the Purchaser under this paragraph 4 shall inure to the benefit of
the Purchaser's successors and assigns, provided that any such successor or
assign obtains Registrable Securities in compliance with all applicable laws.
5. The representations and warranties of each party contained herein shall
survive the execution and
delivery of this agreement. Each party shall indemnify, defend and hold harmless
the other party from and against all liabilities, losses, and damages, together
with all reasonable costs and expenses related thereto (including, without
limitation, reasonable legal fees and expenses) based upon or arising out of any
inaccuracy or breach of any representation and warranty or covenant contained
herein.
6. Each party hereto agrees to take, or cause to be taken, from and after the
Closing Date, such further actions to execute, deliver and file, or cause to be
executed, delivered and filed, such further documents and instruments as may be
necessary in order to fully effectuate the purposes, terms and conditions of
this agreement.
7. This agreement shall be governed by the laws of the State of New York without
giving effect to choice of law principles. Any provision of this agreement which
is illegal, invalid, prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such illegality,
invalidity, prohibition or unenforceability without invalidating or impairing
the remaining provisions hereof or affecting the validity or enforceability of
such provision in any other jurisdiction. This agreement shall bind each party
and his or her successors and assigns. This agreement may be modified only with
the written consent of all of the parties hereto. This agreement may be executed
in any number of counterparts and all counterparts shall be construed together
and shall constitute one and the same instrument.
8. The parties agree that the closing of the transactions contemplated hereby
shall occur on or before January 23, 2004 on a date mutually acceptable to the
parties hereto (the "Closing Date"); provided, however, that such closing is
conditioned upon the simultaneous closing of the transaction evidenced by a
letter agreement of even date herewith between Purchaser and each holder of
AutoInfo's outstanding debentures who are parties thereto, with respect to,
among other things, the sale by such holders to the Purchaser of all of the
outstanding 12% convertible subordinated debentures issued by AutoInfo in the
aggregate principal amount of $575,000 for a total consideration of $762,798.24,
and (b) receipt from counsel for AutoInfo of a legal opinion dated as of the
Closing Date in the form of Exhibit A hereto. This letter constitutes a binding
agreement between the Purchaser and AutoInfo.
Kinderhook Partners, LP
By: _______________________________
Xxxxxxx Xxxxxxxx, Managing Partner
AutoInfo, Inc.
By: _______________________________
Xxxxx Xxxxxxx, President
