Exhibit 10.44
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
among
THE TRACKER CORPORATION OF AMERICA
(the "COMPANY")
and
The Persons Listed On The Signature Pages Hereto
(the "PURCHASERS")
Dated as of August 18, 1999
This Series 1 Bridge Notes Purchase And Security Agreement provides for the
offer, sale, issuance, and delivery of up to $3,000,000 in principal amount of
Secured, Convertible, Series 1 Bridge Financing Notes with attached Repricing
Warrants and accompanying Purchaser Warrants and Callable Warrants.
TABLE OF CONTENTS
SECTION 1. Bridge Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Authorization, Issuance, and Sale of Notes.. . . . . . . . . . . . . 2
Section 1.2 Authorization and Issuance of Warrants and Callable Warrants.. . . . 2
Section 1.3 Form of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2. SECURITY AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1 Grant of Security Interest.. . . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Remedies Upon Default. . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Financing Statements.. . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 Notice.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.5 Appointment of Purchaser Representative. . . . . . . . . . . . . . . 5
Section 2.6 Assurances.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.7 Default and Acceleration Procedures. . . . . . . . . . . . . . . . . 6
Section 2.8 Standard of Care of the Representative.. . . . . . . . . . . . . . . 7
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.. . . . . . . . . . . . . 8
Section 3.1 Organization and Qualification.. . . . . . . . . . . . . . . . . . . 8
Section 3.2 Authorization, Enforcement, Compliance with Other Instruments. . . . 9
Section 3.3 Capitalization.. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.4 Issuance of Securities.. . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.5 No Conflicts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.6 SEC Documents; Financial Statements.. . . . . . . . . . . . . . . . 11
Section 3.7 Absence of Certain Changes.. . . . . . . . . . . . . . . . . . . . . 11
Section 3.8 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.9 Purchase of Securities.. . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.10 No Undisclosed Events, Liabilities, Developments, or Circumstances. 12
Section 3.11 No General Solicitation.. . . . . . . . . . . . . . . . . . . . . . 12
Section 3.12 No Integrated Offering. . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.13 Employee Relations. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.14 Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . 12
Section 3.15 Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.16 Title.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.17 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.18 Regulatory Permits. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.19 Internal Accounting Controls. . . . . . . . . . . . . . . . . . . . 13
Section 3.20 No Materially Adverse Contracts, Etc. . . . . . . . . . . . . . . . 13
Section 3.21 Tax Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.22 Certain Transactions. . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.23 Dilutive Effect.. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.24 Fees and Rights of First Refusal. . . . . . . . . . . . . . . . . . 14
Section 3.25 Foreign Corrupt Practices Act.. . . . . . . . . . . . . . . . . . . 14
Section 3.26 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4. REPRESENTATION AND WARRANTIES OF PURCHASERs. . . . . . . . . . . . . . 15
Section 4.1 Investment Purpose.. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.2 Accredited Investor Status.. . . . . . . . . . . . . . . . . . . . . 15
Section 4.3 Reliance on Exemptions.. . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.4 Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.5 No Governmental Review.. . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.6 Transfer or Resale.. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.7 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.8 Authorization Enforcement. . . . . . . . . . . . . . . . . . . . . . 16
Section 4.9 Residence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.10 No Scheme to Evade Registration.. . . . . . . . . . . . . . . . . . 17
Section 4.11 Covenant Not to Trade.. . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5. CONDITIONS OF INITIAL CLOSING. . . . . . . . . . . . . . . . . . . . . 18
Section 5.1 Transaction Agreements.. . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.2 Opinion of Counsel.. . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.3 Representations and Warranties; No Default.. . . . . . . . . . . . . 18
Section 5.4 Purchase and Loan Permitted by Applicable Laws.. . . . . . . . . . . 18
Section 5.5 No Adverse Litigation. . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.6 Approvals and Consents.. . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.7 No Material Adverse Change.. . . . . . . . . . . . . . . . . . . . . 18
Section 5.8 Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.9 Secretary Certificate. . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.10 Transfer Agent Instructions.. . . . . . . . . . . . . . . . . . . . 19
SECTION 6. CONDITIONS TO SUBSEQUENT CLOSINGS. . . . . . . . . . . . . . . . . . . 19
Section 6.1 Representations and Warranties; No Default.. . . . . . . . . . . . . 19
Section 6.2 No Suspensions.. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.3 Opinion of Counsel.. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.4 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.5 Shareholder Approval.. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.6 No Material Adverse Change.. . . . . . . . . . . . . . . . . . . . . 20
SECTION 7. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.1 Financial Information. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.2 Form D.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.3 Reporting Status.. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.4 Inspection of Property.. . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.5 Maintenance of Properties; Insurance.. . . . . . . . . . . . . . . . 21
Section 7.6 Maintenance of Security Interest.. . . . . . . . . . . . . . . . . . 21
Section 7.7 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.8 Authorized Shares of Common Stock, Reservation of Shares.. . . . . . 22
Section 7.9 Corporate Existence, Etc.. . . . . . . . . . . . . . . . . . . . . . 22
Section 7.10 Transfer Agents.. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.11 Shareholder Approval; Proxy.. . . . . . . . . . . . . . . . . . . . 22
Section 7.12 Transfer Agent Instructions.. . . . . . . . . . . . . . . . . . . . 22
Section 7.13 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.14 Compliance with Laws, Etc.. . . . . . . . . . . . . . . . . . . . . 23
Section 7.15 Use of Proceeds.. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.16 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.17 Listings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.18 Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.2 Restrictions on Debt.. . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.3 Restrictions on Dividends. . . . . . . . . . . . . . . . . . . . . . 25
Section 8.4 Restrictions on Transactions with Affiliates.. . . . . . . . . . . . 25
Section 8.5 Restrictions on Investments. . . . . . . . . . . . . . . . . . . . . 26
Section 8.6 Restrictions on Sale and Lease-Back Transactions.. . . . . . . . . . 26
Section 8.7 Restrictions on Sales of Assets. . . . . . . . . . . . . . . . . . . 26
Section 8.8 Restrictions on Subsidiaries.. . . . . . . . . . . . . . . . . . . . 26
Section 8.9 Change in Business; Operations.. . . . . . . . . . . . . . . . . . . 27
Section 8.10 Exceptions With Consent of Purchasers.. . . . . . . . . . . . . . . 27
SECTION 9. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.1 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.2 Headings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.3 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.4 Entire Agreement. Amendments.. . . . . . . . . . . . . . . . . . . . 27
Section 9.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.6 Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.7 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.8 No Third Party Beneficiaries.. . . . . . . . . . . . . . . . . . . . 28
Section 9.9 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.10 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.11 No Strict Construction. . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.12 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
TABLE OF SCHEDULES AND EXHIBITS
Schedule 1 Disclosure Schedule
Exhibit A. Form of Series 1 Bridge Notes (with form of Repricing
Warrant attached as Attachment 1)
Exhibit B. Form of Purchaser Warrant
Exhibit C. Form of Callable Warrant
Exhibit D. Form of Registration Rights Agreement
Exhibit E. Form of Escrow Agreement
Exhibit F. Form of Opinion of Company Counsel to Purchasers
Exhibit G. Form of Irrevocable Transfer Agent Instructions
Exhibit H. List of Collateral
Exhibit II Copies of Financing Statements Filed in Ontario
CROSS-REFERENCE TO DEFINED TERMS
Term Page where defined
----------------------------- ------------------
1933 Act. . . . . . . . . . . 1
1934 Act. . . . . . . . . . . 11
Additional Closing. . . . . . 3
Additional Closing Date . . . 3
Agreement . . . . . . . . . . 1
Bridge Notes. . . . . . . . . 1
Bylaws. . . . . . . . . . . . 10
Callable. . . . . . . . . . . 1
Callable Warrant Shares . . . 1
Change in Business. . . . . . 27
Charter . . . . . . . . . . . 10
Closing . . . . . . . . . . . 3
Closing Date. . . . . . . . . 3
Collateral. . . . . . . . . . 4
Common Stock. . . . . . . . . 1
Company . . . . . . . . . . . 1
Compliance Certificate. . . . 4
Consents. . . . . . . . . . . 18
Conversion Shares . . . . . . 1
Debt. . . . . . . . . . . . . 24
Disclosure Schedule . . . . . 8
Environmental Laws. . . . . . 13
Escrow Agent. . . . . . . . . 2
Escrow Agreement. . . . . . . 3
Excess Cash . . . . . . . . . 26
Financial Statements. . . . . 11
First Closing . . . . . . . . 2
First Closing Date. . . . . . 2
First Closing Pledged Shares. 3
Indemnified Liabilities . . . 24
Indemnitees . . . . . . . . . 24
Minimum Amount. . . . . . . . 2
NASD. . . . . . . . . . . . . 22
Obligations . . . . . . . . . 4
Parent Guaranty . . . . . . . 3
Pledged . . . . . . . . . . . 4
Preferred Stock . . . . . . . 9
Purchase Price. . . . . . . . 2
Purchased Bridge Notes. . . . 2
Purchaser . . . . . . . . . . 1
Registration Period . . . . . 21
Registration Rights Agreement 1
Regulation D. . . . . . . . . 1
Repricing Shares. . . . . . . 1
Repricing Warrant . . . . . . 1
Rule 144. . . . . . . . . . . 16
SEC Documents . . . . . . . . 11
Secretary Certificate . . . . 4
Securities. . . . . . . . . . 9
Transaction Agreements. . . . 9
Transfer Agent Instructions . 4
Warrant Shares. . . . . . . . 1
Warrants. . . . . . . . . . . 1
SERIES 1 BRIDGE NOTES PURCHASE AND SECURITY AGREEMENT
THIS SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT (the "AGREEMENT") is
made and entered into as of this 18th day of August, 1999, among THE TRACKER
CORPORATION OF AMERICA, a Delaware corporation (the "COMPANY") and the persons
listed on the Purchaser signature pages attached hereto (each of whom is
individually referred to as a "PURCHASER" and all of whom collectively are
referred to as the "PURCHASERS").
BACKGROUND
The Company has authorized the issuance, sale, and delivery of up to $3,000,000
in original principal amount of the Company's Series 1 Secured Convertible
Bridge Notes, in substantially the form attached hereto as EXHIBIT A (the
"BRIDGE NOTES"). The Bridge Notes are convertible into shares of the Company's
common stock, par value $.001 (the "COMMON STOCK"). The Common Stock issuable
upon conversion of the Bridge Notes is hereinafter referred to as the
"CONVERSION SHARES". The Bridge Notes have attached repricing rights evidenced
by a warrant in substantially the form of ATTACHMENT 1 to the Bridge Notes (the
"REPRICING WARRANT"), exercisable under certain circumstances for additional
shares of Common Stock (the "REPRICING SHARES") at the exercise price of $.001.
In connection with the issuance of the Bridge Notes, the Company has authorized
the issuance of Purchase Warrants, in substantially the form attached hereto as
EXHIBIT B (the "WARRANTS") and Callable Warrants in substantially the form
attached hereto as EXHIBIT C (the "CALLABLE WARRANTS"), each giving a Purchaser
the right to purchase Common Stock. Each Purchaser will be issued a Warrant at
that Closing exercisable for 20,000 shares of Common Stock for each $100,000 in
principal amount of Bridge Notes purchased, and a Callable Warrant exercisable
for $1,000 worth of Common Stock for each $1,000 in principal amount of Bridge
Notes purchased by such Purchaser. The shares of Common Stock issuable upon
exercise of the Warrants are hereinafter referred to as the "WARRANT SHARES,"
and the shares of Common Stock issuable upon exercise of the Callable Warrants
are hereinafter referred to as the "CALLABLE WARRANT SHARES." The proceeds of
the Bridge Notes will be used to provide the Company with operating capital,
repayment of certain limited existing indebtedness of the Company, and capital
expenditures. The Bridge Notes are generally secured by a pledge of the assets
of the Company and of its parent, The Global Tracker Corporation as part of its
guaranty of the Company's Obligations hereunder. The Bridge Notes are also
secured by certain shares of the Company's Common Stock and certain shares and
option rights exercisable for shares of the Company's Common Stock owned or held
by certain Company officers pledged as part of their limited guaranty of the
Company's Obligations hereunder, having a value of approximately 200% of the
principal amount of the Bridge Notes at any time outstanding. Purchasers wish
to purchase, upon the terms and conditions stated in this Agreement, up to
$3,000,000 in principal amount of the Bridge Notes, with each Purchaser
purchasing Bridge Notes in the principal amount set forth on such Purchaser's
signature page affixed to this Agreement. Contemporaneously with the execution
and delivery of this Agreement, the parties hereto are executing and delivering
a Registration Rights Agreement in substantially the form attached hereto as
EXHIBIT D (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company
has agreed to provide certain registration rights in respect of the Conversion
Shares, the Warrant Shares, the Callable Warrant Shares, and the Repricing
Shares under the Securities Act of 1933 ("1933 ACT") and the rules and
regulations promulgated thereunder, and applicable state securities laws. The
Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemption from securities registration pursuant to Section
4(2) and Regulation D ("REGULATION D").
AGREEMENT
For and in consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and each Purchaser hereby agree as
follows:
SECTION 1. BRIDGE NOTES.
SECTION 1.1 AUTHORIZATION, ISSUANCE, AND SALE OF NOTES.
The Company has authorized the sale and issuance, in accordance with the terms
of this Agreement, of up to $3,000,000 in principal amount of its Bridge Notes
at one or more closings. The Company agrees to issue and sell to each Purchaser
and each Purchaser agrees to purchase from the Company, at a Closing, a Bridge
Note in the principal amount (the "PURCHASED BRIDGE NOTES") set forth adjacent
to the caption "PURCHASED BRIDGE NOTES" on the signature page to this Agreement
of each Purchaser hereto at a purchase price (the "PURCHASE PRICE") of 100% of
the principal amount of Bridge Notes purchased.
SECTION 1.2 AUTHORIZATION AND ISSUANCE OF WARRANTS AND CALLABLE WARRANTS.
The Company has authorized the issuance and delivery of Warrants exercisable for
up to 600,000 shares of Common Stock in connection with the issuance, sale, and
delivery of the Bridge Notes. The Company agrees to issue and deliver to each
Purchaser a Warrant exercisable for 20,000 shares of Common Stock for each
$100,000 in principal amount of the Bridge Notes purchased by such Purchaser,
PROVIDED HOWEVER, that in the event that any Bridge Note issued hereunder is
redeemed by the Company for cash and not converted into Common Stock, then in
such event such Purchaser's Warrant shall be exercisable for 25,000 shares of
Common Stock for each $100,000 in principal amount of the Bridge Notes purchased
by such Purchaser. The Company has authorized the issuance and delivery of
Callable Warrants exercisable for up to $3,000,000 worth of shares of Common
Stock in connection with the issuance, sale, and delivery of the Bridge Notes.
The Company agrees to issue and deliver to each Purchaser a Callable Warrant
exercisable for up to $100,000 worth of shares of Common Stock for each $100,000
in principal amount of the Bridge Notes purchased by such Purchaser.
SECTION 1.3 FORM OF PAYMENT.
On or before the Closing Date, each Purchaser shall pay the Purchase Price for
the Purchased Bridge Notes to be issued and sold to such Purchaser at the
Closing, by wire transfer of immediately available funds to:
Bank: SunTrust Bank, Atlanta
Center: 008
Account No.: 9088000008
ABA Routing No.: ▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Re: The Tracker Corporation of America-Escrow Account
SECTION 1.4 CLOSING.
All closings of the purchase and sale of the Purchased Bridge Notes shall take
place at the offices of ▇▇▇▇▇▇▇ Law Group LLC, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, within five (5) business days following the date that
$1,000,000 (the "MINIMUM AMOUNT") is held by SunTrust Bank, Atlanta (the "ESCROW
AGENT"), subject to notification of satisfaction (or waiver) of the conditions
to the Closing set forth in Section 5 below (such closing being called the
"FIRST CLOSING" and such date and time being called the "FIRST CLOSING DATE").
Following the First Closing, the Company anticipates it will continue to offer
the Bridge Notes until the offering of the Bridge Notes is terminated or all
$3,000,000 in principal amount is purchased. From time to time, one or more
additional closings may occur at such time and date as is mutually agreeable
between the Purchasers purchasing Bridge Notes at such closing and the Company
(each such closing being called an "ADDITIONAL CLOSING" and such date and time
being called an "ADDITIONAL CLOSING DATE," and all of such closings are
hereinafter referred to individually as a "CLOSING" and collectively as the
"CLOSINGS," and each date on which a Closing shall occur is hereinafter referred
to as a "CLOSING DATE" and collectively as the "CLOSING DATES"). Each Closing
is expected to take place by exchange of faxed signature pages with originals to
follow by overnight delivery.
SECTION 1.5 DELIVERIES AT CLOSING.
At each Closing the Company shall deliver to the Purchasers:
(a) the original of this Agreement;
(b) Bridge Notes in definitive form with attached Repricing Warrants,
registered in the name of each Purchaser, or the designee of such Purchaser,
representing the Purchased Bridge Notes purchased by such Purchaser;
(c) Warrants in definitive form, registered in the name of each Purchaser,
or the designee of such Purchaser;
(d) Callable Warrants in definitive form, registered in the name of each
Purchaser, or the designee of such Purchaser;
(e) a copy of the Registration Rights Agreement;
(f) a copy of the Escrow Agreement in substantially the form of EXHIBIT E
hereto (the "ESCROW AGREEMENT");
(g) a Guaranty Agreement executed by each of the Company and its parent, The
Global Tracker Corporation, a Canadian corporation, as guarantor thereunder (the
"PARENT GUARANTY");
(h) a Security Agreement executed by The Global Tracker Corporation, which
is giving a security interest in all its assets as additional security for the
Bridge Notes issued hereunder;
(i) a Guaranty Agreement executed by the Company and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as
guarantor thereunder and an accompanying Stock Pledge Agreement executed by ▇▇▇
▇. ▇▇▇▇▇▇▇▇ as pledgor of certain shares or rights to acquire shares of Common
Stock of the Company for a particular Closing;
(j) a Guaranty Agreement executed by the Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇ as
guarantor thereunder and an accompanying Stock Pledge Agreement executed by
▇▇▇▇▇ ▇. ▇▇▇▇▇ as pledgor of certain shares or rights to acquire shares of
Common Stock of the Company (the shares and option rights pledged by each of
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ are hereinafter referred to as the "FIRST CLOSING PLEDGED
SHARES") for a particular Closing, along with share certificates representing
the Pledged Shares;
(k) a copy of the opinion of counsel to the Company, in substantially the
form of EXHIBIT F hereto;
(l) a copy of the Irrevocable Transfer Agent Instructions, in substantially
the form of EXHIBIT G hereto, (the "TRANSFER AGENT INSTRUCTIONS");
(m) the Compliance Certificate of the Company (the "COMPLIANCE
CERTIFICATE"); and
(n) the Secretary Certificate of the Company (the "SECRETARY CERTIFICATE").
SECTION 2. SECURITY AGREEMENT.
The provisions of this Section 2 shall remain in effect so long as any of the
Bridge Notes shall remain outstanding.
SECTION 2.1 GRANT OF SECURITY INTEREST.
In order to secure the obligations of the Company due to the Purchasers (such
obligations are sometimes hereinafter referred to as the "OBLIGATIONS") under
the Bridge Notes issued on the First Closing Date, in addition to the general
credit of the Company and the First Closing Pledged Shares being pledged and
delivered at the First Closing, the Company hereby grants to Purchasers,
effective at the First Closing a continuing first priority security interest in
and a general lien upon:
(a) all the assets of the Company, as listed and described on EXHIBIT H
hereto (the "PLEDGED ASSETS"); and
(b) all proceeds, as such term is defined in Section 9-306(1) of the UCC
and, in any event, shall include, without limitation, (i) any and all proceeds
of any insurance, indemnity, warranty, or guaranty payable to the Company from
time to time with respect to any of the Pledged Assets, (ii) any and all
payments (in any form whatsoever) made or due and payable to the Company from
time to time in connection with any requisitions, confiscation, condemnation,
seizure, or forfeiture of all or any part of the Pledged Assets by any
governmental authority (or any person acting under color of governmental
authority), and (iii) any and all other amounts from time to time paid or
payable under or in connection with any of the Pledged Assets (collectively, the
"COLLATERAL").
SECTION 2.2 REMEDIES UPON DEFAULT.
Upon the occurrence or existence of an Event of Default as defined in Section 10
of the Bridge Notes issued on the First Closing Date, each such Purchaser of
such Bridge Notes subject to the provisions of the Article 2 shall have the
right to pursue all available remedies at law or in equity, including without
limitation:
(a) all of the rights and remedies available to a secured party under the
Canadian version of the Uniform Commercial Code as adopted in the Province of
Ontario, Canada, and any other applicable law, all of which shall be cumulative
and none of which shall be exclusive to the fullest extent permitted by law, and
all other legal and equitable rights under this Agreement and the Transaction
Agreements which may be available to Purchasers, all of which shall be
cumulative;
(b) the right to take possession of the Collateral upon reasonable notice
and to enter the offices of the Company during normal business hours to take
possession of the Collateral; the right of the Purchaser to (a) enter upon the
premises of Company or any of its subsidiaries, or any other place or places
where the Collateral is located and kept, through self-help and without judicial
process, without first obtaining a final judgment or giving Company or any of
its subsidiaries notice and opportunity for a hearing on the validity of the
Purchaser's claim and without any obligation to pay rent to Company or any of
its subsidiaries, and remove the Collateral therefrom to the premises of
Purchaser or any agent of Purchaser, for such time as Purchaser may desire, in
order to effectively collect or liquidate the Collateral; and/or (b) require
Company to assemble the Collateral and make it available to Purchaser at a place
to be designated by the Purchaser, in their sole discretion.
(c) the right to sell or otherwise dispose of all or any part of the
Collateral in its then condition, at public or private sale or sales, with such
notice as may be required by law, in lots or in bulk, for cash or on credit, all
as such Purchaser may deem advisable, and purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations, and to apply the proceeds realized from such sale,
after allowing two (2) business days for collection, first to the reasonable
costs, expenses, and attorneys' fees and expenses incurred by such Purchaser for
collection and for acquisition, storage, sale, and delivery of the Collateral,
secondly to interest due upon the Obligations, and thirdly to the principal of
the Obligations; and
(d) the right to proceed by an action or actions at law or in equity to
obtain possession of the Collateral, to recover the Obligations and amounts
secured hereunder or to foreclose under this Agreement and sell the Collateral
or any portion thereof, pursuant to a judgment or decree of a court or courts of
competent jurisdiction, all without the necessity of posting any bond.
SECTION 2.3 FINANCING STATEMENTS.
The Company and each of Global Tracker, ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇ agree to file or
cause to be filed on or before the First Closing financing statements in the
Province of Ontario evidencing the security interests granted herein, in the
Security Agreement given by Global Tracker, and in the Stock Pledge Agreements
executed by each of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, copies of which are attached hereto as
EXHIBIT I.
SECTION 2.4 NOTICE.
Any notice required to be given by Purchaser of a sale, lease, or other
disposition of the Collateral or any other intended action by Purchaser, given
to Company in the manner set forth in Section 9.5 below, at least ten (10) days
prior to such proposed action, shall constitute commercially reasonable and fair
notice thereof to Company.
SECTION 2.5 APPOINTMENT OF PURCHASER REPRESENTATIVE.
Each Purchaser hereto hereby irrevocably appoints SovCap Equity Partners, Ltd.,
a corporation organized under the laws of the Bahamas and a First Closing
Purchaser hereunder, to act as the sole and exclusive agent and representative
(the "REPRESENTATIVE") of each such Purchaser to act on behalf of such Purchaser
and in such Purchaser's name, place, and stead, to (i) exercise all rights of
such Purchaser, and (ii) take all action on behalf of Purchaser that may be
taken by Purchaser with respect to the collateral under this Agreement, the
Bridge Notes, and the other Transaction Agreements. Without limiting the
generality of the foregoing:
(a) The Representative shall, on behalf of all Purchasers, send all notices
which shall or may be given by Purchasers, under the Transaction Agreements,
declare Events of Default under this Agreement, the Bridge Notes, and the other
Transaction Agreements, accelerate the Bridge Notes, rescind acceleration of the
Bridge Notes, and enforce the Bridge Notes, this Agreement, and the other
Transaction Agreements. The Representative reserves the right, in its sole
discretion, in each instance without prior notice to the Purchasers, (i) to
agree to the modification, waiver, or release of any of the terms of any of the
Transaction Agreements, including, without limitation, the waiver or release of
any of the conditions precedent for the purchase and sale of the Bridge Notes;
(ii) to consent to any action or failure to act by the Company; and (iii) to
exercise or refrain from exercising any powers, rights, or remedies that the
Purchasers have or may have with respect to collateral under the Transaction
Agreements; PROVIDED HOWEVER, that the Representative shall not, without
obtaining the prior written consent of each Purchaser (which consent shall not
be unreasonably withheld or delayed), exercise any of such rights so as to
knowingly release or waive any claim against the Company or any other person who
may be liable with respect to the Bridge Notes if such action would have a
materially adverse effect on the collection of the indebtedness evidenced by the
Bridge Notes or the enforcement of the Transaction Agreements.
If any Purchaser shall refuse to consent to any amendment, modification, waiver,
release, or subordination requiring the written consent of the Purchasers, the
Purchasers who consent to such amendment, modification, waiver, release, or
subordination may, at their option, at any time thereafter (but shall not be
obligated to) purchase the Bridge Note or Bridge Notes held by the
non-consenting Purchaser or Purchasers by paying to such non-consenting
Purchaser or Purchasers an amount equal to the unpaid principal and accrued but
unpaid interest on the Bridge Note held by such non-consenting Purchaser or
Purchasers.
(b) The Representative shall collect, enforce, and bring any action on the
Transaction Agreements and any collateral granted therein in the name of the
Representative for the benefit of all Purchasers.
SECTION 2.6 ASSURANCES.
(a) Each Purchaser hereby authorizes third parties with whom Representative
deals in carrying out the responsibilities of Representative hereunder, to rely
conclusively on the instructions and decisions of the Representative as to any
action taken pursuant to and in accordance with the terms of this Agreement and
the other Transaction Agreements without any further or additional approval or
authorization from such Purchaser, including without limitation, the execution
and delivery of any documents or instruments, or any other actions required to
be taken by the Representative under this Agreement and the other Transaction
Agreements, and no Purchaser shall have any cause of action against third
parties with whom Representative deals in carrying out the responsibilities of
Representative hereunder or under the other Transaction Agreements for any
action taken by such third parties in reliance upon the instructions or
decisions of the Representative;
(b) All actions, decisions, and instructions of the Representative shall be
conclusive and binding upon all of the Purchasers, and no Purchaser shall have
any cause of action against the Representative for any actions taken, decision
made or instruction given by the Representative under this Agreement, except for
fraud or willful misconduct by Representative acting in such capacity hereunder.
SECTION 2.7 DEFAULT AND ACCELERATION PROCEDURES.
(a) Each Purchaser acknowledges and agrees that its respective rights in,
to, and under any collateral granted in the Transaction Agreements are limited
to the specific collateral securing the Bridge Notes purchased by each such
Purchaser as granted by the Company pursuant to the Closing at which such Bridge
Notes are purchased.
(b) The Representative shall give all Purchasers written notice of any Event
of Default under the Bridge Notes, this Agreement, or the other Transaction
Agreements which, in the judgment of the Representative, adversely affects the
respective interests of the Purchasers under any of the Transaction Agreements.
In the event of any Event of Default thereunder, the Representative shall pursue
any remedies available to Purchasers under the Transaction Agreements which the
Representative in its sole discretion shall deem advisable, and Representative
may also elect to postpone the pursuit of remedies if in its sole discretion and
judgment it is appropriate under the circumstances to do so.
(c) In the event proceedings are instituted for a sale under power of sale
or a judicial foreclosure of the collateral provided under the Transaction
Agreements, the provisions of the Georgia UCC, absent written agreement to the
contrary, shall govern such proceedings and the actions taken pursuant thereto,
as among the Representative and the Purchasers.
(d) In the event the Representative acquires title to any of the collateral
provided under the Transaction Agreements pursuant to a foreclosure or
conveyance in lieu of foreclosure, title shall be taken in a form acceptable to
the Representative and shall be held by or on behalf of the Representative for
the benefit of only the Purchasers holding Bridge Notes which were secured by
such collateral, in their Proportionate Share. The Representative shall manage
such collateral in its ordinary course of business and in accordance with its
customary practices and procedures for as long as such title is held in whole or
in part in the name of or on behalf of the Representative. The Representative
shall contemporaneously endeavor to sell such collateral on terms and conditions
reasonably acceptable to the Representative.
(e) If the Representative receives a payment after acceleration of the
Bridge Notes, whether pursuant to a demand for payment or as a result of legal
proceedings against the Company, or from any source whatsoever, such payment in
respect of the specific Bridge Notes so paid shall be applied in the following
order (unless mandated otherwise by the Transaction Agreements or validly by the
express terms of such payment):
(1) To the expenses incurred in effecting such recovery or in enforcing any
right or remedy under the Transaction Agreements, and any other expenses
theretofore incurred by the Representative and not previously reimbursed by the
Company;
(2) To accrued interest, payable by the Company, according to Purchaser's
Proportionate Share of such accrued interest in respect of such Bridge Notes;
and
(3) To the unpaid principal of such Bridge Notes with each Purchaser
receiving such Purchaser's Proportionate Share of such principal.
(f) The term "PROPORTIONATE SHARE" shall mean the amount of each Purchaser's
Bridge Note purchased at a specific Closing DIVIDED BY the total amount of
Bridge Notes purchased at such Closing.
SECTION 2.8 STANDARD OF CARE OF THE REPRESENTATIVE.
(a) The Representative shall endeavor in good faith to perform all services
and duties and exercise all powers hereunder specifically assigned and delegated
to the Representative, and the Representative shall perform and exercise, and
shall have the right and power to perform and exercise, such other services and
powers as are reasonably incidental thereto. The Representative shall not be
liable to the Purchasers, however, for any action or failure to act or any error
of judgment, negligence, mistake, or oversight by it or any of its agents,
officers, employees, or attorneys, with respect to the Transaction Agreements,
PROVIDED the Representative has acted in good faith and has not been guilty of
willful misconduct or gross negligence. Without limiting the generality of the
foregoing, the Representative may consult with counsel or other advisors
selected by it, and the Representative shall not be liable for any action taken
or omitted to be taken in good faith by it in accordance with the advice of such
counsel or other advisors. In performing its obligations hereunder and under
the Transaction Agreements, the Representative may rely in good faith on written
and telephonic communications received by the Representative without
investigating the genuineness thereof or the power and authority of the author
of such communications. Each Purchaser acknowledges and agrees that the
Representative's duties and obligations under this Agreement are administrative
and ministerial in nature, and that the Representative has no fiduciary
obligation to the Purchasers.
(b) The Representative does not assume, and shall not have, any
responsibility or liability, express or implied, for the adequacy, sufficiency,
validity, collectability, genuineness, or enforceability of any of the
Transaction Agreements, for the financial condition of the Company, for
compliance by the Company with the terms and conditions of the Transaction
Agreements, or for the accuracy of any financial or other information furnished
to the Purchaser by the Representative or by any other party. The
Representative shall not be required to ascertain or inquire as to the
performance or observance by the Company of any of the terms, conditions,
provisions, covenants, or agreements contained in any of the Transaction
Agreements or as to the use of the proceeds of the offering of the Bridge Notes
or of the existence or possible existence of any Event of Default thereunder.
(c) The Representative may accept deposits from, lend money to, and
generally engage in any kind of banking, trust, financial advisory, or other
business with the Company or any affiliate thereof as if it were not performing
the duties specified herein, and may accept fees and other consideration from
the Company or affiliate for services in connection with such services, without
having to account for the same to the Purchasers."
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
To induce the Purchasers to purchase the Bridge Notes, the Company represents
and warrants to each Purchaser, except as referenced on SCHEDULE 1 hereto (the
"DISCLOSURE SCHEDULE"), which reference shall set forth the specific section to
which the qualification relates and the statement which constitutes the
qualification, that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION.
The Company and its subsidiaries are corporations duly organized, validly
existing, and in good standing under the laws of the jurisdiction in which they
are incorporated, and have the requisite corporate power to own their properties
and to carry on their business as now being conducted. Each of the Company and
each subsidiary is duly qualified as a foreign corporation to do business and is
in good standing in each jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
SECTION 3.2 AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER INSTRUMENTS.
(a) The Company has the requisite corporate power and authority to enter
into and perform each of this Agreement, any and all amendments thereto, the
Bridge Notes, the Repricing Warrants, the Warrants, the Callable Warrants, the
Registration Rights Agreement, the Escrow Agreement, the Global Tracker guaranty
and security agreement, the individual guaranties and stock pledge agreements of
each of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, the Transfer Agent Instructions, the Financing
Statement, and any related agreements (collectively, the "TRANSACTION
AGREEMENTS" and individually a "TRANSACTION AGREEMENT"), and to issue the Bridge
Notes, the Repricing Warrants, the Warrants, the Callable Warrants, the
Conversion Shares, the Repricing Shares, the Warrant Shares, and the Callable
Warrant Shares in accordance with the terms hereof and thereof;
(b) the execution and delivery by the Company of each of the Transaction
Agreements and the consummation by it of the transactions contemplated thereby,
including without limitation the issuance of the Bridge Notes, the Warrants, the
Callable Warrants, and the Repricing Warrants, the reservation for issuance and
the issuance of the Conversion Shares issuable upon conversion of the Bridge
Notes and the reservation for issuance and the issuance of the Repricing Shares,
the Warrant Shares, and the Callable Warrant Shares upon exercise of the
Repricing Warrants, the Warrants, and the Callable Warrants (the Bridge Notes,
the Repricing Warrants, the Warrants, the Callable Warrants, the Conversion
Shares, the Repricing Shares, the Warrant Shares, and the Callable Warrant
Shares are hereinafter collectively, the "SECURITIES") have been duly authorized
by the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors, or its stockholders;
(c) each of the Transaction Agreements have been duly and validly executed
and delivered by the Company; and
(d) each of the Transaction Agreements constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
SECTION 3.3 CAPITALIZATION.
Immediately prior to Closing, the authorized capital stock of the Company
consisted of 56,600,000 shares of capital stock, of which 50,100,000 shares are
Common Stock, par value $.001, of which 50,388,579 shares are issued and
outstanding, and 6,500,000 shares of preferred stock ("PREFERRED STOCK"), par
value $.001, none of which are issued and outstanding. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. Except as
described in Section 3.3 of the Disclosure Schedule, no shares of Common Stock
or preferred stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company. Except as
disclosed in Section 3.3 of the Disclosure Schedule, as of the effective date of
this Agreement, (a) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings,
or arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries, or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, (b) there are no outstanding debt securities, and (c) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement). There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities in the manner contemplated by this
Agreement. The Company has furnished to the Purchaser true and correct copies
of the Company's Certificate of Incorporation, as amended (the "CHARTER") and
the Company's Bylaws, as in effect on the date hereof (the "BYLAWS"), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
SECTION 3.4 ISSUANCE OF SECURITIES.
The Bridge Notes have been duly authorized and are free from all taxes, liens,
and charges with respect to the issue thereof. The Conversion Shares issuable
upon conversion of the Bridge Notes have been duly authorized and reserved for
issuance. The Repricing Warrants have been duly authorized and are free from
all taxes, liens, and charges with respect to the issuance thereof. The
Repricing Shares issuable upon exercise of the Repricing Warrants have been duly
authorized and reserved for issuance. The Warrants have been duly authorized
and are free from all taxes, liens, and charges with respect to the issuance
thereof. The Warrant Shares issuable upon exercise of the Warrants have been
duly authorized and reserved for issuance. The Callable Warrants have been duly
authorized and are free from all taxes, liens, and charges with respect to the
issuance thereof. The Callable Warrant Shares issuable upon exercise of the
Callable Warrants have been duly authorized and reserved for issuance. Upon
conversion of the Bridge Notes, the Conversion Shares will, and upon exercise of
the Repricing Warrants, the Warrants, and the Callable Warrants, the Repricing
Shares, the Warrant Shares, and the Callable Warrant Shares will, be duly and
validly issued, fully paid, and nonassessable, and free from all taxes, liens,
and charges, with respect to the issuance thereof, with the holders being
entitled to all rights accorded to a holder of Common Stock.
SECTION 3.5 NO CONFLICTS.
Except as disclosed in Section 3.5 of the Disclosure Schedule, the execution,
delivery, and performance of the Transaction Agreements by the Company, and the
consummation by the Company of the transactions contemplated thereby, will not
(a) result in a violation of the Charter or the Bylaws of the Company or (b)
conflict with, constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration, or cancellation of, any agreement,
indenture, or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment,
or decree (including federal and state securities laws and regulations and the
rules and regulations of the principal market or exchange on which the Common
Stock is traded or listed) applicable to the Company or any of its subsidiaries
or by which any property or asset of the Company or any of its subsidiaries is
bound or affected. Except as described in Section 3.5 of the Disclosure
Schedule, neither the Company nor any subsidiary is in violation of any term of,
or in default under, its Charter or the Bylaws or their organizational charter
or Bylaws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree, or order or any statute,
rule, or regulation applicable to the Company or its subsidiaries. The business
of the Company and its subsidiaries is not being conducted in violation of any
law, ordinance, or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
and any applicable state securities laws, the Company is not required to obtain
any consent, authorization, or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver, and
perform any of its obligations under or contemplated by the Transaction
Agreements in accordance with the terms thereof. Except as disclosed in Section
3.5 of the Disclosure Schedule, all consents, authorizations, orders, filings,
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
SECTION 3.6 SEC DOCUMENTS; FINANCIAL STATEMENTS.
Since July 16, 1999, the Company has filed all reports, schedules, forms,
statements, and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "1934 ACT") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred to as
the "SEC DOCUMENTS"). The Company has made available to each Purchaser or its
representative true and complete copies of the SEC Documents. The Company (i)
is a "reporting issuer" as defined in Rule 902(1) of Regulation S and (ii) has a
class of securities registered under Section 12(b) or 12(g) of the 1934 Act or
is required to file reports pursuant to Section 15(d) of the 1934 Act, and has
filed all the materials required to be filed as reports pursuant to the Exchange
Act for the period the Company was required by law to file such material. As of
their respective dates, the financial statements of the Company included in the
SEC Documents (the "FINANCIAL STATEMENTS") complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (a) as may be
otherwise indicated in such financial statements or the notes thereto, or (b) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and present fairly, in all
material respects, the financial position of the Company as of the dates
thereof, and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Purchaser which is not included in the SEC Documents, including, without
limitation, information referred to in Section 3.5 of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
SECTION 3.7 ABSENCE OF CERTAIN CHANGES.
Except as described in Section 3.7 of the Disclosure Schedule, since the date of
the most recent audited balance sheet included in the SEC Documents, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of operations, or
prospects of the Company or its subsidiaries. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or its subsidiaries have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings.
SECTION 3.8 ABSENCE OF LITIGATION.
There is no action, suit, proceeding, inquiry, or investigation before or by any
court, public board, government agency, self-regulatory organization, or body
pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company, the Common Stock, or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(a) have a material adverse effect on the transactions contemplated hereby, (b)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under the Transaction Agreements, or
(c) except as expressly set forth in Schedule 3.8 of the Disclosure Schedule,
have a material adverse effect on the business, operations, properties,
financial condition, or results of operation of the Company and its subsidiaries
taken as a whole.
SECTION 3.9 PURCHASE OF SECURITIES.
The Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Purchasers or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Purchaser's
purchase of the Securities. The Company further represents to the Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation by the Company and its representatives.
SECTION 3.10 NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS, OR
CIRCUMSTANCES.
No event, liability, development, or circumstance has occurred or exists, or to
the knowledge of the Company is contemplated to occur, with respect to the
Company or its subsidiaries or their respective business, properties, prospects,
operations, or financial condition, which could be material but which has not
been publicly announced or disclosed in writing to the Purchaser.
SECTION 3.11 NO GENERAL SOLICITATION.
Neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the ▇▇▇▇ ▇▇▇) in
connection with the offer or sale of the Bridge Notes or the Conversion Shares.
The Company represents that it has not offered the Bridge Notes or Conversion
Shares to the Purchaser in the U.S. or, to the best knowledge of the Company, to
any person in the United States or any U.S. person.
SECTION 3.12 NO INTEGRATED OFFERING.
Neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of any of the Securities under the 1933 Act or cause
this offering to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions.
SECTION 3.13 EMPLOYEE RELATIONS.
Neither the Company nor any of its subsidiaries is involved in any labor dispute
nor, to the knowledge of the Company or any of its subsidiaries, is any such
dispute threatened. None of the Company's or its subsidiaries' employees is a
member of a union and the Company and its subsidiaries believe that their
relations with their employees are good.
SECTION 3.14 INTELLECTUAL PROPERTY RIGHTS.
The Company and its subsidiaries own or possess adequate rights or licenses to
use all trademarks, trade names, service marks, service ▇▇▇▇ registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets, and rights necessary to
conduct their respective businesses as now conducted. Except as set forth on
Section 3.14 of the Disclosure Schedule, none of the Company's trademarks, trade
names, service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets, or other intellectual property rights have expired or terminated,
or are expected to expire or terminate in the near future. The Company and its
subsidiaries do not have any knowledge of any infringement by the Company or its
subsidiaries of the trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service ▇▇▇▇
registrations, trade secret, or other similar rights of others. Except as set
forth on Section 3.14 of the Disclosure Schedule, there is no claim, action, or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service ▇▇▇▇ registrations, trade secret, or other infringement,
and the Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company and its subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality,
and value of all of their intellectual properties.
SECTION 3.15 ENVIRONMENTAL LAWS.
The Company and its subsidiaries are (a) in compliance with any and all
applicable foreign, federal, state, and local laws and regulations relating to
the protection of human health and safety, the environment, or hazardous, toxic
substances, wastes, pollutants, or contaminants ("ENVIRONMENTAL LAWS"), (b) have
received all permits, licenses, or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses, and (c)
are in compliance with all terms and conditions of any such permit, license, or
approval.
SECTION 3.16 TITLE.
The Company and its subsidiaries have good and marketable title in fee simple to
all real property and good and marketable title to all personal property owned
by them which is material to the business of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances, and defects except as
described in Section 3.16 of the Disclosure Schedule or as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its subsidiaries. Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting, and enforceable leases
with such exceptions as are not material, and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries. The Pledged Assets are owned by the Company free and clear of any
and all encumbrances, liens, and adverse claims whatsoever, has been at all
times prior to the date hereof, and shall remain from and after the date of this
Agreement in the possession of the Company and located at its principal
executive offices located in ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇. The fair market value of the
Pledged Assets is not less than $6,000,000.
SECTION 3.17 INSURANCE.
The Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks, and in such amounts, as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company nor
any such subsidiary has been refused any insurance coverage sought or applied
for, and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial, or otherwise, or the earnings,
business, or operations of the Company and its subsidiaries, taken as a whole.
SECTION 3.18 REGULATORY PERMITS.
The Company and its subsidiaries possess all certificates, authorizations, and
permits issued by the appropriate federal, state, or foreign regulatory
authorities necessary to conduct their respective businesses, except to the
extent that the failure to possess any such certificate, authorization, and
permit would not have a material adverse effect on the Company and its
subsidiaries taken as a whole, and neither the Company nor any such subsidiary
has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization, or permit.
SECTION 3.19 INTERNAL ACCOUNTING CONTROLS.
The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (a)
transactions are executed in accordance with management's general or specific
authorizations, (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (c) access to assets is
permitted only in accordance with management's general or specific
authorization, and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
SECTION 3.20 NO MATERIALLY ADVERSE CONTRACTS, ETC.
Neither the Company nor any of its subsidiaries is subject to any charter,
corporate, or other legal restriction, or any judgment, decree, order, rule, or
regulation which in the judgment of the Company's officers has, or to the
knowledge of the Company is expected in the future to have, a material adverse
effect on the business, properties, operations, financial condition, results of
operations, or prospects of the Company or its subsidiaries. Neither the
Company nor any of its subsidiaries is a party to any contract or agreement
which in the judgment of the Company's officers has, or to the knowledge of the
Company is expected to have, a material adverse effect on the business,
properties, operations, financial condition, results of operations, or prospects
of the Company or its subsidiaries.
SECTION 3.21 TAX STATUS.
Except as set forth on Section 3.21 of the Disclosure Schedule, the Company and
each of its subsidiaries has made or filed all federal and state income and all
other tax returns, reports, and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes), and has paid all taxes and
other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports, and declarations, except those
being contested in good faith, and has set aside on its books amounts deemed
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports, or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim, and except as set forth on Schedule 3.21, there are no open years,
examinations in progress or claims against it for federal, state or other taxes
(including penalties and interest) for any period or periods prior to the date
hereof.
SECTION 3.22 CERTAIN TRANSACTIONS.
Except as set forth on Section 3.22 of the Disclosure Schedule and in the SEC
Documents, and except for arm's length transactions pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than the
grant of stock options disclosed on Section 3.3 of the Disclosure Schedule, none
of the officers, directors, or employees of the Company is presently a party to
any transaction with the Company (other than for services as employees,
officers, and directors), including any contract, agreement, or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director, or such employee or, to the knowledge of the
Company, any corporation, partnership, trust, or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee, or partner.
SECTION 3.23 DILUTIVE EFFECT.
The Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Bridge Notes will increase in certain
circumstances. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Bridge Notes in accordance with this
Agreement and the Bridge Notes is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
SECTION 3.24 FEES AND RIGHTS OF FIRST REFUSAL.
The Company is not obligated to offer the securities offered hereunder on a
right of first refusal basis or otherwise to any third parties including, but
not limited to, current or former shareholders of the Company, underwriters,
brokers, agents, or other third parties.
SECTION 3.25 FOREIGN CORRUPT PRACTICES ACT.
The Company has not made, offered, or agreed to offer anything of value to any
government official, political party, or candidate for government office nor has
it taken any action which would cause the Company to be in violation of the
Foreign Corrupt Practices Act of 1977.
SECTION 3.26 DISCLOSURE.
Neither this Agreement nor any Schedule or Exhibit hereto, contains an untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein not misleading. None of the statements,
documents, certificates or other items prepared or supplied by the Company with
respect to the transactions contemplated hereby contains an untrue statement of
a material fact or omits a material fact necessary to make the statements
contained therein not misleading.
SECTION 4. REPRESENTATION AND WARRANTIES OF PURCHASERS
Each Purchaser represents and warrants to the Company, with respect to such
Purchaser only that:
SECTION 4.1 INVESTMENT PURPOSE.
Purchaser is acquiring the Securities for its own account for investment only
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof, except pursuant to sales registered or exempted under
the 1933 Act; PROVIDED HOWEVER, that by making the representations herein,
Purchaser does not agree to hold any Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.
SECTION 4.2 ACCREDITED INVESTOR STATUS.
Purchaser is an "accredited investor" as that term is defined in Rule 501(a)(3)
of Regulation D.
SECTION 4.3 RELIANCE ON EXEMPTIONS.
Purchaser understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and Purchaser's compliance with, the
representations, warranties, agreements, acknowledgments, and understandings of
Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of Purchaser to acquire such securities.
SECTION 4.4D. INFORMATION.
Purchaser and its advisors, if any, have been furnished with all materials
relating to the business, finances, and operations of the Company and materials
relating to the offer and sale of the Securities, which have been requested by
such Purchaser. Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by Purchaser or its advisors, if
any, or its representatives shall modify, amend, or affect such Purchaser's
right to rely on the Company's representations and warranties contained in
Section 3 hereof. Purchaser understands that its investment in the Securities
involves a high degree of risk. Purchaser has sought such accounting, legal,
and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
SECTION 4.5 NO GOVERNMENTAL REVIEW.
Purchaser understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities, or the fairness or suitability of the investment
in the Securities, nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
SECTION 4.6 TRANSFER OR RESALE.
Purchaser understands that except as provided in the Registration Rights
Agreement:
(a) the Securities have not been and are not being registered under the 1933
Act or any state securities laws, and may not be offered for sale, sold,
assigned, or transferred unless;
(i) subsequently registered thereunder;
(ii) Purchaser shall have delivered to the Company an opinion of counsel, in
a generally acceptable form, to the effect that such securities to be sold,
assigned, or transferred may be sold, assigned, or transferred pursuant to an
exemption from such registration; or
(iii) Purchaser provides the Company with reasonable assurance that such
securities can be sold, assigned, or transferred pursuant to Rule 144 or
promulgated under the 1933 Act (or a successor rule thereto);
(b) any sale of such securities made in reliance on Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) ("RULE 144") may be made only
in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the ▇▇▇▇ ▇▇▇) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and
(c) neither the Company nor any other person is under any obligation to
register such securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
SECTION 4.7 LEGENDS.
Purchaser understands that the certificates or other instruments representing
the Bridge Notes and, until such time as the sale of the Conversion Shares have
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares shall bear
a restrictive legend in substantially the following form (and a stop transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN EFFECTive REGIStratiON
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Bridge Notes and the
Conversion Shares, upon which it is stamped, if, unless otherwise required by
state securities laws, (a) the sale of the Conversion Shares is registered under
the 1933 Act, (b) in connection with a sale transaction, such holder provides
the Company with an opinion of counsel, in a generally acceptable form, to the
effect that a public sale, assignment, or transfer of the Bridge Notes and the
Conversion Shares may be made without registration under the 1933 Act, or (c)
such holder provides the Company with reasonable assurances that the Bridge
Notes and the Conversion Shares can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold.
SECTION 4.8 AUTHORIZATION ENFORCEMENT.
This Agreement has been duly and validly authorized, executed, and delivered on
behalf of Purchaser and is a valid and binding agreement of Purchaser
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
SECTION 4.9 RESIDENCE.
Purchaser is a resident of that country specified in its address on the Schedule
of Purchaser.
SECTION 4.10 NO SCHEME TO EVADE REGISTRATION.
Purchaser represents and warrants to the Company, as to itself only, that the
acquisition of the Securities is not a transaction (or any element of a series
of transactions) that is part of a plan or scheme by the Purchaser to evade the
registration provisions of the 1933 Act and that
(a) such Purchaser is an "accredited investor" within the meaning of Rule
501 under the Securities Act;
(b) such Purchaser has sufficient knowledge and experience to evaluate the
risks and merits of its investment in the Company and it is able financially to
bear the risks thereof;
(c) such Purchaser has had an opportunity to ask questions of and receive
answers from and to discuss the Company's business, management, and financial
affairs with the Company's management;
(d) the Securities are being acquired for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof;
(e) such Purchaser was not offered nor made aware of the Company's interest
in issuing the Bridge Notes by any means of public advertisement or
solicitation;
(f) in connection with such Purchaser's purchase of the Securities, it has
been solely responsible for its own (i) due diligence investigation of the
Company and (ii) investment decision, and has not engaged or relied upon any
agent or "purchaser representative" to review or analyze the Company's business
and affairs or advise Purchaser with respect to the merits of the investment;
(g) such Purchaser has full power and authority to execute, deliver, and
perform this Agreement; and this Agreement constitutes the legal, valid, and
binding obligation of such Purchaser, enforceable against it in accordance with
their respective terms; and
(h) if such Purchaser proposes to sell the Securities pursuant to Rule 144A
under the Securities Act, it will (A) take reasonable steps to obtain the
information required by such Rule to establish a reasonable belief that the
prospective purchaser is a "qualified institutional buyer" as such term is
defined in Rule 144A and (B) advise the prospective purchaser that the Purchaser
is relying on the exemption from the registration provisions of the Securities
Act available pursuant to Rule 144A.
SECTION 4.11 COVENANT NOT TO TRADE.
Each Purchaser for itself and on behalf of each affiliate and associate of such
Purchaser covenants and agrees, not to purchase, sell, make any short sale of,
pledge, grant any option for the purchase or sale of or otherwise trade any
Common Stock prior to the conversion of the Bridge Notes (other than a purchase
of Common Stock from the Company pursuant to the exercise of the Repricing
Warrant or the Warrant or the Callable Warrant), without the prior written
consent of the Company.
SECTION 5. CONDITIONS OF INITIAL CLOSING
The Purchaser's obligation to purchase and pay for the Securities is subject to
the satisfaction prior to or at the Closing of the following conditions:
SECTION 5.1 TRANSACTION AGREEMENTS.
The Company shall have delivered to Purchaser the Transaction Agreements as
provided in Section 1.5, above, executed by all the parties thereto.
SECTION 5.2 OPINION OF COUNSEL.
Purchaser shall have received from counsel for the Company, an opinion in
substantially the form of EXHIBIT F, addressed to Purchaser, dated the Closing
Date. To the extent that the opinion referred to in the preceding sentence is
rendered in reliance upon the opinion of any other counsel, Purchaser shall have
received a copy of such opinion of such other counsel, dated the Closing Date
and addressed to Purchaser, or a letter from such other counsel, dated the
Closing Date and addressed to Purchaser, authorizing Purchaser to rely on such
other counsel's opinion.
SECTION 5.3 REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The representations and warranties of the Company contained in this Agreement
and those otherwise made in writing by or on behalf of the Company in connection
with the transactions contemplated by this Agreement shall be true in all
material respects, except to the extent of changes caused by the transactions
contemplated herein; PROVIDED HOWEVER, that there shall exist at the time of the
Closing and after giving effect to such transactions no Event of Default (as
defined in Section 10 of the Bridge Notes).
SECTION 5.4 PURCHASE AND LOAN PERMITTED BY APPLICABLE LAWS.
The purchase of, and payment for, all the Securities evidenced by or attendant
to the Bridge Notes shall not violate any applicable domestic law or
governmental regulation (including, without limitation, Section 5 of the
Securities Act) and shall not subject Purchaser to any tax, penalty, liability,
or other onerous condition under, or pursuant to, any applicable law or
governmental regulation or order.
SECTION 5.5 NO ADVERSE LITIGATION.
There shall be no action, suit, investigation, or proceeding, pending or, to the
best of Purchaser's or the Company's knowledge, threatened, against or affecting
Purchaser, the Company, any of Purchaser's or the Company's properties or
rights, or any of Purchaser's or the Company's Affiliates, officers, or
directors, by or before any court, arbitrator, or administrative or governmental
body which (i) seeks to restrain, enjoin, prevent the consummation of, or
otherwise affect the transactions contemplated by this Agreement or (ii)
questions the validity or legality of any such transactions, or (iii) seeks to
recover damages or obtain other relief in connection with any such transactions,
and, to the best of Purchaser's and the Company's knowledge, there shall be no
valid basis for any such action, proceeding, or investigation, and Purchaser
shall have received a certificate executed by the chief executive officer of the
Company, dated the Closing Date, to such effect.
SECTION 5.6 APPROVALS AND CONSENTS.
The Company shall have duly received all authorizations, waivers, consents,
approvals, licenses, franchises, permits, and certificates (collectively,
"CONSENTS") by or of all federal, state, and local governmental authorities and
all material consents by or of all other persons necessary or advisable for the
issuance of the Bridge Notes, all such consents shall be in full force and
effect at the time of Closing, and Purchaser shall have received a certificate
executed by the chief executive officer of the Company, dated the Closing Date,
to such effect.
SECTION 5.7 NO MATERIAL ADVERSE CHANGE.
Since {INSERT DATE OF LAST 10-Q - ▇▇▇/▇▇▇}, there shall not have been any
material adverse change in the business, condition (financial or other), assets,
properties, operations, or prospects of the Company, and Purchaser shall have
received a certificate executed by the chief executive officer of the Company,
dated the Closing Date, to such effect.
SECTION 5.8 PROCEEDINGS.
All proceedings taken or to be taken in connection with the transactions
contemplated hereby, and all documents incident thereto shall be reasonably
satisfactory in form and substance to Purchaser and Purchasers counsel, and
Purchaser and Purchasers counsel shall have received all such counterpart
originals or certified or other copies of such documents as the Purchaser or
Purchasers' counsel may reasonably request.
SECTION 5.9 SECRETARY CERTIFICATE.
Purchaser shall have received a Secretary's Certificate from the Secretary or an
Assistant Secretary of the Company dated the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of the Charter as then in
effect, certified or bearing evidence of filing by the Secretary of State of
Delaware, and (B) a certificate of said Secretary of State, dated as of a recent
date as to the due incorporation and good standing of the Company, the payment
of all franchise taxes by the Company, and listing all documents of the Company
on file with said Secretary of State; (C) that attached thereto is a true and
complete copy of the Bylaws of the Company as in effect on the date of such
certification; (D) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors or the shareholders of the Company
authorizing the execution, delivery, and performance of Transaction Agreements
and the issuance, sale, and delivery of the Securities, and that all such
resolutions are in full force and effect and are all the resolutions adopted in
connection with the foregoing agreements and the transactions contemplated
thereby; (E) that the Charter has not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to clause (A) above;
and (F) to the incumbency and specimen signature of each officer of the Company
executing all Transaction Agreements and any certificate or instrument furnished
pursuant hereto, and a certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate.
SECTION 5.10 TRANSFER AGENT INSTRUCTIONS.
The Transfer Agent Instructions, in form and substance satisfactory to the
Purchaser, shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
SECTION 6. CONDITIONS TO SUBSEQUENT CLOSINGS
SECTION 6.1 REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The representations and the warranties of the Company contained in this
Agreement and those otherwise made in writing by or on behalf of the Company in
connection with the transactions contemplated by this Agreement shall be true in
all material respects, except to the extent of changes caused by the
transactions contemplated herein; PROVIDED HOWEVER, that there shall exist no
Event of Default under this Agreement or any of the Bridge Notes at the time of
the Subsequent Closing.
SECTION 6.2 NO SUSPENSIONS.
There shall be no suspensions of trading in or in delisting (or pending
delisting) of the Common Stock.
SECTION 6.3 OPINION OF COUNSEL.
Purchaser shall have received from counsel for the Company, an opinion in
substantially the form of EXHIBIT F, addressed to Purchaser, dated as of each
Additional Closing Date. To the extent that the opinion referred to in the
preceding sentence is rendered in reliance upon the opinion of any other
counsel, Purchaser shall have received a copy of such opinion of such other
counsel, dated the Additional Closing Date and addressed to Purchaser, or a
letter from such other counsel, dated the Additional Closing Date and addressed
to Purchaser, authorizing Purchaser to rely on such other counsel's opinion.
SECTION 6.4 DUE DILIGENCE.
Purchaser shall be satisfied with the results of periodic due diligence
investigations and shall have received a "comfort" letter from the Company's
auditors with respect to the financial statements filed by the Company in its
quarterly and annual securities filings.
SECTION 6.5 SHAREHOLDER APPROVAL.
Company, if required, must obtain shareholder approval on placement so as to
address the 20% rule.
SECTION 6.6 NO MATERIAL ADVERSE CHANGE.
Since date hereof, there shall not have been any material adverse change in the
business, condition (financial or other), assets, properties, operations, or
prospects of the Company, and Purchaser.
SECTION 7. AFFIRMATIVE COVENANTS
The Company covenants that from and after the date of this Agreement through the
Closing and thereafter so long as any of the Bridge Notes remain outstanding:
SECTION 7.1 FINANCIAL INFORMATION.
The Company shall furnish to Purchaser:
(a) within five (5) days after the filing thereof with the SEC, a copy of
its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current
Reports on Form 8-K, and any registration statements or amendments filed
pursuant to the 1933 Act;
(b) within one (1) day after release thereof, copies of all press releases
issued by the Company or any of its subsidiaries;
(c) copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders;
(d) promptly upon any officer of the Company obtaining knowledge (i) of any
condition or event which constitutes an Event of Default, (ii) that the holder
of any Bridge Notes has given any notice or taken any other action with respect
to a claimed Event of Default under this Agreement, (iii) of any condition or
event which, in the opinion of management of the Company would have a material
adverse effect on the business, condition (financial or other), assets,
properties, operations, or prospects of the Company, other than conditions or
events applicable to the economy as a whole, (iv) that any person has given any
notice to the Company or taken any other action with respect to a claimed Event
of Default, or (v) of the institution of any litigation involving claims against
the Company, unless such litigation is defended by the insurance carrier without
any reservation of rights and is reasonably expected to be fully covered by a
creditworthy insurer, in an amount equal to or greater than $250,000 with
respect to any single cause of action or of any adverse determination in any
litigation involving a potential liability to the Company equal to or greater
than $100,000 with respect to any single cause of action, a certificate executed
by the chief executive officer of the Company specifying the nature and period
of existence of any such condition or event, or specifying the notice given or
action taken by such holder or person and the nature of such claimed Event of
Default, event or condition, and what action the Company has taken, is taking,
or proposes to take with respect thereto; and
(e) with reasonable promptness, such other information and data with respect
to the Company as Purchaser may reasonably request.
SECTION 7.2 FORM D.
The Company agrees to file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof to each Purchaser promptly
after such filing. The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary to qualify the
Securities for, or obtain exemption for the Securities for, sale to the
Purchaser at the Closing pursuant to this Agreement under applicable securities
or "Blue Sky" laws of the states of the United States, and shall provide
evidence of any such action so taken to the Purchaser on or prior to the Closing
Date.
SECTION 7.3 REPORTING STATUS.
Until the earlier of (a) the date as of which the Investors (as that term is
defined in the Registration Rights Agreement) may sell all of the Conversion
Shares without restriction pursuant to Rule l44(k) promulgated under the 1933
Act (or successor thereto), or (b) the date on which (i) the Investors shall
have sold all the Conversion Shares and (ii) none of the Bridge Notes is
outstanding (the "REGISTRATION PERIOD"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
SECTION 7.4 INSPECTION OF PROPERTY.
The Company will permit any Person designated by any Purchaser in writing, at
Purchaser's expense, to visit and inspect any of the properties of the Company,
to examine the books and financial records of the Company and make copies
thereof or extracts therefrom and to discuss its affairs, finances, and accounts
with its officers and its independent public accountants, all at reasonable
times and upon reasonable prior notice to the Company.
SECTION 7.5 MAINTENANCE OF PROPERTIES; INSURANCE.
The Company will maintain or cause to be maintained in good repair, working
order, and condition all properties used or useful in the business of the
Company and from time to time will make or cause to be made all appropriate
repairs, renewals, and replacements thereof. The Company will maintain or cause
to be maintained, with financially sound and reputable insurers (or, as to
workers' compensation or similar insurance, in an insurance fund or by
self-insurance authorized by the laws of the jurisdiction in question),
insurance with respect to their respective properties and businesses against
loss or damage of the kinds customarily insured against by corporations of
established reputation engaged in the same or similar businesses and similarly
situated, of such type and in such amounts as are customarily carried under
similar circumstances by such other corporations and as are in good faith
believed by the Company to be sufficient to prevent the Company from becoming a
co-insurer within the terms of the policies in question.
SECTION 7.6 MAINTENANCE OF SECURITY INTEREST.
The Company will maintain or cause to be maintained a perfected first priority
security interest in certain collateral pledged as security therefor in favor of
each group of Purchasers purchasing Bridge Notes at a Closing. Each such first
priority security interest granted in collateral at each Closing shall have a
value of not less than 200% of the aggregate principal amount of the Bridge
Notes purchased at each such Closing and then outstanding.
SECTION 7.7 EXPENSES.
The Company and Purchasers shall pay all costs and expenses incurred by such
party in connection with the negotiation, investigation, preparation, execution,
and delivery of this Agreement, the Bridge Notes, the Escrow Agreement, the
Registration Rights Agreement, and other documents executed in connection with
the issuance of the Bridge Notes. The costs and expenses of Sovereign Capital,
LLC including the fees and expenses of ▇▇▇▇▇▇▇ Law Group, LLC (not to exceed
$17,500 in fees PLUS all expenses for the First Closing) shall be paid for by
the Company at the First Closing and the fees and expenses for all subsequent
Closings (not to exceed $4,500 in fees PLUS expenses for the Second Closing and
$2,500 in fees PLUS all expenses for each subsequent Closing) shall be paid at
each subsequent Closing. The fee limits of counsel to Sovereign Capital
Advisors, LLC cited in this Section 7.7 are subject in all instances to such
counsel providing all transaction documents, agreements, certificates, and the
like necessary for the transactions contemplated hereunder, and receiving a
reasonable level of comments thereto. However, should such counsel prepare such
documents, agreements, and certificates for any Additional Closing and
subsequently receive substantial additional comments to such documents,
agreements, and certificates (for example, as a result of changes requested by
or comments of the Company to any part or structure of the transactions
contemplated hereunder), then such hourly limits for any given Additional
Closing shall not apply and such counsel shall ▇▇▇▇ and the Company agrees to
pay for all such additional work at such counsel's normal hourly rates then in
effect.
SECTION 7.8 AUTHORIZED SHARES OF COMMON STOCK, RESERVATION OF SHARES.
The Company shall at all times, so long as any of the Bridge Notes are
outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Bridge
Notes, such number of shares of Common Stock equal to or greater than 150% of
the number of Conversion Shares issuable upon conversion of the Bridge Notes
which are then outstanding or which could be issued at any time under this
Agreement.
SECTION 7.9 CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and effect its
corporate existence, and rights, licenses, and franchises material to its
business, and will qualify to do business as a foreign corporation in each
jurisdiction where the failure to so qualify would have a material adverse
effect on the business, condition (financial or other), assets, properties, or
operations of the Company, taken as a whole.
SECTION 7.10 TRANSFER AGENTS.
The Company covenants and agrees that, in the event that the Company's agency
relationship with the transfer agent should be terminated for any reason prior
to a date which is two (2) years after the Closing Date, the Company shall
immediately appoint a new transfer agent and shall require that the transfer
agent execute and agree to be bound by the terms of the Irrevocable Instructions
to Transfer Agent.
SECTION 7.11 SHAREHOLDER APPROVAL; PROXY.
The Company covenants to submit to its shareholders a proposal for ratification
of the issuance of the Bridge Notes and the Conversion Shares, if and as
required by the rules of the National Association of Securities Dealers, Inc.
(the "NASD") applicable to the transaction. All officers and directors will,
upon request of Purchaser, execute a proxy authorizing Purchaser or any designee
of Purchaser to vote all shares of Common Stock, the voting of which is
controlled by such officer or director, at any meeting (or any adjournment
thereof) at which Shareholder action is proposed to ratify the issuance of the
Bridge Notes and the Conversion Shares.
SECTION 7.12 TRANSFER AGENT INSTRUCTIONS.
The Company shall issue Transfer Agent Instructions to its transfer agent to
issue certificates, registered in the name of the Purchaser or its respective
nominee(s), for the Conversion Shares, the Repricing Shares, the Warrant Shares,
and the Callable Warrant Shares in such amounts as specified from time to time
by the Purchaser to the Company upon conversion of the Bridge Notes, except as
provided in Section 7.8 herein. Prior to registration of the Conversion Shares
under the 1933 Act, all such certificates shall bear the restrictive legend
specified in Section 4.7 of this Agreement. The Company warrants that no
instruction other than the Transfer Agent Instructions referred to in this
Section 7.12, and stop transfer instructions to give effect to Section 4.7
hereof (in the case of the Conversion Shares, prior to registration of such
shares under the ▇▇▇▇ ▇▇▇) will be given by the Company to its transfer agent
and that the Bridge Notes and the Conversion Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section 7.12 shall affect in any way the Purchaser's obligations and
agreement to comply with all applicable securities laws upon resale of the
Bridge Notes or Conversion Shares. If the Purchaser provides the Company with
an opinion of counsel, reasonably satisfactory in form, and substance to the
Company, that registration of a resale by the Purchaser of any of the Bridge
Notes or Conversion Shares is not required under the 1933 Act, the Company shall
permit the transfer, and, in the case of the Conversion Shares, promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denominations as specified by the Purchaser. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Purchaser by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 7.12 will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 7.12, that the Purchaser shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
SECTION 7.13 PAYMENT OF TAXES.
The Company will pay all taxes, assessments, and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income, or properties before any penalty or significant
interest accrues thereon, and all claims (including, without limitation, claims
for labor, services, materials, and supplies) for sums which have become due and
payable and which by law have or may become a lien upon any of its properties or
assets, PROVIDED that no such charge or claim need be paid if such claim is (i)
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, and (ii) the amount of such claim is accrued on the
financial statements of the Company or other appropriate provision is made as
shall be required by generally accepted accounting principles.
SECTION 7.14 COMPLIANCE WITH LAWS, ETC.
The Company will comply with the requirements of all applicable laws, rules,
regulations, and orders of any court or other governmental authority (including,
without limitation, those related to environmental or ERISA compliance),
noncompliance with which could materially adversely affect the business,
condition (financial or other), assets, property, operations, or prospects of
the Company.
SECTION 7.15 USE OF PROCEEDS.
The Company will use the proceeds from the sale and issuance of the Bridge Notes
as follows: provide the Company with operating capital, repayment of certain
limited existing indebtedness of the Company, and capital expenditures.
SECTION 7.16 REGISTRATION STATEMENT.
The Company shall (a) file a Registration Statement, covering the resale of
shares of Common Stock received upon conversion of the Bridge Notes, the
Repricing Warrants, the Warrants, and the Callable Warrants to permit the
holder(s) thereof to resell from and after the Registration Deadline (as such
term is defined therein) in accordance with the Registration Rights Agreement,
(b) use its best efforts to have the Registration Statement declared effective
in accordance with the Registration Rights Agreement, and (c) keep such
Registration Statement current and effective for a period 12 months from the
effective date of such Registration Statement in accordance with the
Registration Rights Agreement.
SECTION 7.17 LISTINGS.
The Company shall promptly secure the listing of the Conversion Shares, the
Repricing Shares, the Warrant Shares, and the Callable Warrant Shares upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listings of all Conversion Shares, the Repricing Shares, the
Warrant Shares, and the Callable Warrant Shares from time to time issuable under
the terms of the Bridge Notes, the Repricing Warrants, the Warrants, the
Callable Warrants, and the Registration Rights Agreement. The Company shall
maintain the Common Stock's authorization for quotation in the over-the-counter
market. The Company shall promptly provide to Purchaser copies of any notices it
receives regarding the continued eligibility of the Common Stock for trading in
the over-the-counter market.
SECTION 7.18 INDEMNIFICATION.
In consideration of the Purchaser's execution and delivery of this Agreement and
acquiring the Securities hereunder and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect, indemnify,
and hold harmless each Purchaser and each other holder of the Securities and
each officer, director, employee, and agent of each Purchaser (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "INDEMNITEES") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities, and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by the Indemnitees
or any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in any Transaction Agreement or any other certificate, instrument, or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement, or obligation of the Company contained in the Transaction Agreements,
or any other certificate, instrument or document contemplated hereby or thereby,
or (c) any cause of action, suit, or claim brought or made against such
Indemnitee and arising out of or resulting from the execution, delivery,
performance, or enforcement of this Agreement or any other instrument, document,
or agreement executed pursuant hereto by any of the Indemnitees, any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Bridge Notes, or the status of the Purchaser or
holder of the Bridge Notes or the Conversion Shares, as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
SECTION 8. NEGATIVE COVENANTS
The provisions of this Section 8 shall remain in effect so long as any of the
Bridge Notes shall remain outstanding.
SECTION 8.1 DEFINITION OF DEBT. For purposes of this Agreement, the
capitalized term "DEBT" of any Person shall mean:
(a) all indebtedness of such Person for borrowed money, including without
limitation obligations evidenced by bonds, debentures, Bridge Notes, or other
similar instruments;
(b) all indebtedness guaranteed in any manner by such Person, or in effect
guaranteed by such Person through an agreement to purchase, contingent or
otherwise;
(c) all accounts payable which, to the knowledge of such Person, have
remained unpaid for a period of 90 days after the same become due and payable in
accordance with their respective terms taking into account any grace period
relating to the due date expressly set forth in the applicable invoice with
respect to the payment of such accounts payable;
(d) all indebtedness secured by any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in property owned by such Person, even
though such Person has not assumed or become liable for the payment of such
indebtedness;
(e) all indebtedness created or arising under any conditional sale agreement
or lease in the nature thereof (including obligations as lessee under leases
which shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capitalized leases) (but excluding operating
leases) or other title retention agreement with respect to property acquired by
such Person, even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession of such
property;
(f) all bankers' acceptances and letters of credit; and
(g) liabilities in respect of unfunded vested benefits under Plans covered
by Title IV of ERISA.
SECTION 8.2 RESTRICTIONS ON DEBT.
The Company will not create, assume, or incur or become or at any time be liable
in respect of, any Debt, except:
(a) the Bridge Notes issued pursuant to this Agreement;
(b) Debt outstanding on the date hereof to the extent reflected on the most
recent balance sheet of the Company or incurred in the ordinary course of
business thereafter; and
(c) Debt incurred in permitted real estate investments; and
(d) purchase money security interests not to exceed $250,000 per year.
Notwithstanding the foregoing provisions of Section 8.2, the Company will not
create, assume, or incur, or become or at any time be liable in respect of, any
Debt for money borrowed, advances made, or goods purchased, if the Purchaser,
the Person making such advances, or the vendor of such goods (or any Person who
guarantees or becomes surety for all or any part of such Debt or acquires any
right or incurs any obligation to become, either immediately or upon the
occurrence of some future contingency, the owner of all or any part thereof)
shall have any right, by reason of any statute or otherwise, to have any claim
in respect of such Debt first satisfied out of the general assets of the Company
in priority to the claims of its general creditors.
SECTION 8.3 RESTRICTIONS ON DIVIDENDS.
The Company will not (a) pay any dividends, in cash or otherwise, on, (b) make
any distributions to holders of, or (c) purchase, redeem, or otherwise acquire
any of its outstanding Common Stock or Preferred Stock or set apart assets for a
sinking or other analogous fund for the purchase, redemption, retirement, or
other acquisition of, any shares of its Common Stock or Preferred Stock;
PROVIDED HOWEVER, that the Company may, so long as at the time of and after
giving effect thereof no Event of Default has occurred and is continuing: (i)
pay dividends on its outstanding Preferred Stock in accordance with the Charter;
(ii) with prior written approval of each Purchaser, repurchase shares of its
Common Stock issued or to be issued by the Company upon exercise of stock
options granted to employees and directors of the Company pursuant to the terms
of plans adopted by the Board of Directors of the Company; and (iii) pay cash in
lieu of fractional shares of its Common Stock on the exercise of outstanding
warrants to purchase its Common Stock, pursuant to the terms of such warrants.
SECTION 8.4 RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES.
The Company will not make any loans or advances to any of its officers,
directors, shareholders, or Affiliates, other than expense advances made by the
Company to its officers and employees in the ordinary course of business. The
Company will not increase the salary of any executive officer, or the
remuneration of any director.
SECTION 8.5 RESTRICTIONS ON INVESTMENTS.
Other than as permitted by this Agreement, the Company will not purchase or
acquire or invest in, or agree to purchase or acquire or invest in the business,
property, or assets of, or any securities of, any other company or business,
PROVIDED HOWEVER, that the Company may invest its Excess Cash as defined below
in:
(a) securities issued or directly and fully guaranteed or insured by the
United States government or any agency thereof having maturities of not more
than one year from the date of acquisition;
(b) certificates of deposit or eurodollar certificates of deposit, having
maturities of not more than one hundred eighty days from the date of
acquisition, or one year from the date of acquisition in the case of
certificates of deposit or eurodollar certificates of deposit being used to
secure the Company's reimbursement obligations under letters of credit (provided
that nothing contained herein shall be construed to permit letters of credit not
otherwise permitted under this Agreement);
(c) commercial paper of any Person that is not a subsidiary or an Affiliate
of the Company, maturing within one hundred eighty days after the date of
acquisition;
(d) bank loan participations; and
(e) money market instruments having maturities of not more than one hundred
eighty days from the date of acquisition, or one year from the date of
acquisition in the case of money market instruments being used to secure the
Company's reimbursement obligations under letters of credit (provided that
nothing contained herein shall be construed to permit letters of credit not
otherwise permitted under this Agreement);
in all cases of such credit quality as a prudent business person would invest
in. As used in this Section, "EXCESS CASH" shall mean that portion of the
proceeds of the Bridge Notes which has not been invested as described in Section
7.15 hereof.
SECTION 8.6 RESTRICTIONS ON SALE AND LEASE-BACK TRANSACTIONS.
The Company will not sell or transfer any of its properties to anyone with the
intention of taking back a lease of the same property or leasing other property
for substantially the same use as the property being sold or transferred;
PROVIDED HOWEVER, that (a) the Company may continue and extend its existing
leasing arrangements and may lease, under operating leases, any fixtures,
equipment, and real estate that do not constitute Pledged Assets in the ordinary
course of business of the Company, and (b) the Company may otherwise make real
estate investments but only with the consent of the Purchasers as provided for
herein.
SECTION 8.7 RESTRICTIONS ON SALES OF ASSETS.
The Company will not sell, transfer, or dispose of any property except for sales
of obsolete equipment having a book value at the time of sale of not more than
$100,000 in the aggregate in any fiscal year.
SECTION 8.8 RESTRICTIONS ON SUBSIDIARIES.
The Company will not, without the written consent of Purchaser to organize, or
transfer any assets to, any Subsidiaries, PROVIDED that, if consent of the
Purchaser is obtained and any Subsidiaries are organized, or assets transferred,
in compliance with this Section 8.8, the Company will not permit such
Subsidiaries to enter into any transaction or agreement which would violate any
of the provisions of this Section 8 if such provisions were applicable to such
Subsidiary.
SECTION 8.9 CHANGE IN BUSINESS; OPERATIONS.
The Company will not cause or effect any change in or addition to the primary
business of the Company that has not been approved by Purchaser, such that more
than 10% of the consolidated net earnings of the Company are derived from a
business other than the business in which the Company was engaged on the date
hereof as reflected in the applicable last SEC Document filed prior to the First
Closing ("CHANGE IN BUSINESS"), except any such changes approved in advance in
writing by the Representative. The business of the Company and its subsidiaries
shall not be conducted in violation of any law, ordinance, or regulation of any
governmental entity.
SECTION 8.10 EXCEPTIONS WITH CONSENT OF PURCHASERS.
The Company may seek an exception to any prohibited action under this Section by
FIRST, giving written notice to all Purchasers of Bridge Notes under this
Agreement, along with copies of all documentation requested by any Purchaser
relating to such requested exception, and SECOND, in the sole discretion of
Purchasers, satisfactorily responding to any Purchaser inquiries about the
requested action. The Company may undertake any such requested action otherwise
prohibited by this Section 8 only after receiving the advance written consent of
Purchasers representing not less than two-thirds (2/3) of all amounts due under
Bridge Notes issued hereunder and then outstanding.
SECTION 9. MISCELLANEOUS.
SECTION 9.1 COUNTERPARTS.
This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party. In the event any signature page is delivered by facsimile transmission,
the party using such means of delivery shall cause four (4) additional original
executed signature pages to be physically delivered to the other party within
five (5) days of the execution and delivery hereof.
SECTION 9.2 HEADINGS.
The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.
SECTION 9.3 SEVERABILITY.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
SECTION 9.4 ENTIRE AGREEMENT. AMENDMENTS.
This Agreement supersedes all other prior oral or written agreements between the
Purchaser, the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Purchaser makes any
representation, warranty, covenant, or undertaking with respect to such matters.
No provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the party to be charged with enforcement.
SECTION 9.5 NOTICES.
Any notices, consents, waivers, or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered (a) upon receipt, when delivered personally, (b) upon
receipt, when sent by facsimile, PROVIDED a copy is mailed by U.S. certified
mail, return receipt requested, (c) three (3) days after being sent by U.S.
certified mail, return receipt requested, or (d) one (1) day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
The Tracker Corporation of America
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention:
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
With a copy to:
[name of Firm]
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone:
Facsimile:
If to any Purchaser, to its address and facsimile number on the signature page
of such Purchaser hereto, with copies to such Purchaser's counsel as set forth
on the signature page of such Purchaser hereto. Each party shall provide five-
(5) days prior written notice to the other party of any change in address or
facsimile number.
SECTION 9.6 INTEREST.
In no event shall the amount of interest due or payable hereunder or under the
Bridge Notes exceed the maximum rate of interest allowed by applicable law, and
if any such payment is inadvertently made by the Company or is inadvertently
received by any holder of Bridge Notes, then such excess sum shall be credited
as a payment of principal, unless the applicable holder of a Bridge Notes shall
notify the Company in writing that it elects to have such excess sum returned
forthwith. It is the express intent hereof that the Company not pay and the
holder of the Bridge Notes not receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may legally be paid by the Company
under applicable law.
SECTION 9.7 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Purchasers. Any Purchaser may assign its rights hereunder
without the consent of the Company, PROVIDED HOWEVER, that any such assignment
shall not release such Purchaser from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption.
SECTION 9.8 NO THIRD PARTY BENEFICIARIES.
This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.
SECTION 9.9 PUBLICITY.
The Company and Purchasers shall have the right to approve, before issuance, any
press releases or any other public statements with respect to the transactions
contemplated hereby; PROVIDED HOWEVER, that the Company shall be entitled,
without the prior approval of Purchasers, to make any press release or other
public disclosure with respect to such transactions as is required by applicable
law and regulations (although the Purchaser shall be consulted by the Company in
connection with any such press release or other public disclosure prior to its
release and shall be provided with a copy thereof).
SECTION 9.10 FURTHER ASSURANCES.
Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments, and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
SECTION 9.11 NO STRICT CONSTRUCTION.
The language used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rules of strict construction
will be applied against any party.
SECTION 9.12 GOVERNING LAW.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Georgia without regard to the principles of conflict of laws.
The parties agree that any appropriate State court located in New Castle County,
Delaware or the Federal courts located in the District of Delaware, shall have
jurisdiction of any case or controversy arising under or in connection with this
Agreement and shall be the proper forum in which to adjudicate such case or
controversy, and the parties further agree to submit to the personal
jurisdiction of such court.
IN WITNESS WHEREOF, Purchasers and the Company have caused this Series 1 Bridge
Note Purchase and Security Agreement to be duly executed as of the date first
written above.
[Signatures on the following page]
COMPANY SIGNATURE PAGE
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
COMPANY
THE TRACKER CORPORATION OF AMERICA
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
PURCHASER SIGNATURE PAGE
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
PURCHASER
Purchaser Name:
-----------------------------
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
PURCHASER NAME
ADDRESS AND
FACSIMILE NUMBER
PRINCIPAL AMOUNT
OF BRIDGE NOTES
PURCHASED
PURCHASER'S LEGAL
COUNSEL ADDRESS
AND FACSIMILE NUMBER
SCHEDULE 1
DISCLOSURE SCHEDULE
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
EXHIBIT A
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF SERIES 1 BRIDGE NOTE
(WITH FORM OF REPRICING WARRANT ATTACHED AS ATTACHMENT 1)
Form Attached hereto.
EXHIBIT B
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF PURCHASER WARRANT
Form Attached hereto.EXHIBIT C
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF CALLABLE WARRANT
Form Attached hereto.
EXHIBIT D
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT
Form Attached hereto.
EXHIBIT E
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF ESCROW AGREEMENT
Form Attached hereto.
EXHIBIT F
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF OPINION OF COMPANY COUNSEL TO PURCHASERS
Form Attached hereto.
EXHIBIT G
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
Form Attached hereto.
EXHIBIT H
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
LIST OF COLLATERAL
Form Attached hereto.
EXHIBIT I
TO
SERIES 1 BRIDGE NOTE PURCHASE AND SECURITY AGREEMENT
FINANCING STATEMENTS FILED IN ONTARIO
Copies Attached hereto.