Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
LAURUS MASTER FUND, LTD.
and
RPM TECHNOLOGIES, INC.
DATED: July 13, 2007
1. Agreement to Sell and Purchase..................1
2. Fees and Warrant................................1
3. Closing, Delivery and Payment...................2
3.1 Closing.........................................2
3.2 Delivery........................................2
4. Representations and Warranties of the Company...2
4.1 Organization, Good Standing and Qualification...2
4.2 Subsidiaries....................................3
4.3 Capitalization; Voting Rights...................3
4.4 Authorization; Binding Obligations..............4
4.5 Liabilities.....................................4
4.6 Agreements; Action..............................5
4.7 Obligations to Related Parties..................6
4.8 Changes.........................................7
4.9 Title to Properties and Assets; Liens, Etc......8
4.10 Intellectual Property...........................8
4.11 Compliance with Other Instruments...............9
4.12 Litigation......................................9
4.13 Tax Returns and Payments.......................10
4.14 Employees......................................10
4.15 Registration Rights and Voting Rights..........11
4.16 Compliance with Laws; Permits..................11
4.17 Environmental and Safety Laws..................11
4.18 Valid Offering.................................12
4.19 [Intentionally Omitted]........................12
4.20 Insurance......................................12
4.21 SEC Reports....................................12
4.22 Listing........................................12
4.23 No Integrated Offering.........................12
4.24 Stop Transfer..................................13
4.25 Dilution.......................................13
4.26 Patriot Act....................................13
4.27 ERISA..........................................13
5. Representations and Warranties of the Purchaser14
5.1 No Shorting....................................14
5.2 Requisite Power and Authority..................14
5.3 Investment Representations.....................14
5.4 The Purchaser Bears Economic Risk..............15
5.5 Acquisition for Own Account....................15
5.6 The Purchaser Can Protect Its Interest.........15
5.7 Accredited Investor............................15
5.8 Legends........................................15
6. Covenants of the Company.......................16
6.1 Stop-Orders....................................16
6.2 Listing........................................16
6.3 Market Regulations.............................16
6.4 Reporting Requirements.........................16
6.5 Use of Funds...................................18
6.6 Access to Facilities...........................18
6.7 Taxes..........................................18
6.8 Insurance......................................18
6.9 Intellectual Property..........................20
6.10 Properties.....................................20
6.11 Confidentiality................................20
6.12 Required Approvals.............................20
6.13 Reissuance of Securities.......................21
6.14 Opinion........................................21
6.15 Margin Stock...................................22
6.16 Financing Right of First Refusal...............22
6.17 Authorization and Reservation of Shares........23
7. Covenants of the Purchaser.....................23
7.1 Confidentiality................................23
7.2 Non-Public Information.........................23
7.3 Limitation on Acquisition of Common Stock of
the Company....................................23
8. Covenants of the Company and the Purchaser
Regarding Indemnification......................23
8.1 Company Indemnification........................23
8.2 Purchaser's Indemnification....................24
9. Exercise of the Warrant........................24
9.1 Mechanics of Exercise..........................24
10. Registration Rights............................25
10.1 Registration Rights Granted....................25
10.2 Offering Restrictions..........................26
11. Miscellaneous..................................26
11.1 Governing Law, Jurisdiction and Waiver of
Jury Trial.....................................26
11.2 Severability...................................27
11.3 Survival.......................................27
11.4 Successors.....................................27
11.5 Entire Agreement; Maximum Interest.............28
11.6 Amendment and Waiver...........................28
11.7 Delays or Omissions............................28
11.8 Notices........................................28
11.9 Attorneys' Fees................................29
11.10 Titles and Subtitles...........................29
11.11 Facsimile Signatures; Counterparts.............29
11.12 Broker's Fees..................................30
11.13 Construction...................................30
LIST OF EXHIBITS
Form of Secured Term Note Exhibit A
Form of Warrant Exhibit B
Form of Escrow Agreement Exhibit C
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of July 13, 2007, by and between RPM TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), and LAURUS MASTER FUND, LTD., a Cayman Islands
company (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a Secured Term
Note in the aggregate principal amount of Seven Hundred Ten Thousand Dollars
($710,000) in the form of Exhibit A hereto (as amended, modified and/or
supplemented from time to time, the "Note");
WHEREAS, the Company wishes to issue to the Purchaser a warrant in the form of
Exhibit B hereto (as amended, modified and/or supplemented from time to time,
the "Warrant") to purchase up to 8,000,000 shares of the Company's Common Stock
(subject to adjustment as set forth therein) in connection with the Purchaser's
purchase of the Note;
WHEREAS, the Purchaser desires to purchase the Note and the Warrant on the terms
and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to the
Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company shall sell to the Purchaser, and the Purchaser shall purchase from the
Company, the Note. The sale of the Note on the Closing Date shall be known as
the "Offering." The Note will mature on the Maturity Date (as defined in the
Note). Collectively, the Note and Warrant and Common Stock issuable upon
exercise of the Warrant are referred to as the "Securities."
2. Fees and Warrant. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser the Warrant to
purchase up to 8,000,000 shares of Common Stock (subject to adjustment as set
forth therein) in connection with the Offering, pursuant to Section 1 hereof.
All the representations, covenants, warranties, undertakings, and
indemnification, and other rights made or granted to or for the benefit of the
Purchaser by the Company are hereby also made and granted for the benefit of any
subsequent holder of the Warrant and shares of the Company's Common Stock
issuable upon exercise of the Warrant (the "Warrant Shares"), but not including
any transferee of such shares to the extent that such shares are transferred
pursuant to Rule 144 of the Securities Act of 1933, as amended, or pursuant to
an effective registration statement.
(b) Subject to the terms of Section 2(d) below, the Company shall pay to
Laurus Capital Management, LLC, the manager of the Purchaser, a closing payment
in an amount equal to $30,940.50 of the aggregate principal amount of the Note.
The foregoing fee is referred to herein as the "Closing Payment."
(c) [Intentionally Omitted.]
(d) The Closing Payment (net of deposits previously paid by the Company)
shall be paid at closing out of funds held pursuant to the Escrow Agreement (as
defined below).
3. Closing, Delivery and Payment.
3.1 Closing. Subject to the terms and conditions herein, the closing of the
transactions contemplated hereby (the "Closing"), shall take place on the date
hereof, at such time or place as the Company and the Purchaser may mutually
agree (such date is hereinafter referred to as the "Closing Date").
3.2 Delivery. Pursuant to the Escrow Agreement, at the Closing on the
Closing Date, the Company will deliver to the Purchaser, among other things, the
Note and the Warrant and the Purchaser will deliver to the Company, among other
things, the amounts set forth in the Disbursement Letter by wire transfer of
immediately available funds (it being understood that $679,059.50 of the
proceeds of the Note will be deposited in the Restricted Account (as defined in
the Restricted Account Agreement referred to below)). The Company hereby
acknowledges and agrees that Purchaser's obligation to purchase the Note from
the Company on the Closing Date shall be contingent upon the satisfaction (or
waiver by the Purchaser in its sole discretion) of the items and matters set
forth in the closing checklist provided by the Purchaser to the Company on or
prior to the Closing Date.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
4.1 Organization, Good Standing and Qualification. Each of the Company and
each of its Subsidiaries is a corporation, partnership or limited liability
company, as the case may be, duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of the
Company and each of its Subsidiaries has the corporate, limited liability
company or partnership, as the case may be, power and authority to own and
operate its properties and assets and, insofar as it is or shall be a party
thereto, to (a) execute and deliver (i) this Agreement, (ii) the Note and the
Warrant to be issued in connection with this Agreement, (iii) the Amended and
Restated Registration Rights Agreement relating to the Securities dated as of
the date hereof between the Company and the Purchaser (as amended, modified
and/or supplemented from time to time, the "Registration Rights Agreement"),
(iv) the Funds Escrow Agreement dated as of the date hereof among the Company,
the Purchaser and the escrow agent referred to therein, substantially in the
form of Exhibit C hereto, (as amended, modified and or supplemented from time to
time, the "Escrow Agreement"), (v) the Reaffirmation and Ratification Agreement
dated as of the date hereof between the Company and the Purchaser (as amended,
modified and/or supplemented from time to the (the "Reaffirmation"), (vi) the
Restricted Account Agreement dated as of the date hereof among the Company, the
Purchaser and North Fork Bank (as amended, modified and/or supplemented from
time to time (the "Restricted Account Agreement"), (vii) the Restricted Account
Side Letter dated as of the date hereof among the Company, the Purchaser and
North Fork Bank relating to the Restricted Account Agreement and (viii) all
other documents, instruments and agreements entered into in connection with the
transactions contemplated hereby and thereby (the preceding clauses (ii) through
(viii), collectively, the "Related Agreements"); (b) issue and sell the Note;
(c) issue and sell the Warrant and the Warrant Shares pursuant to the terms of
the Warrant; and (d) carry out the provisions of this Agreement and the Related
Agreements and to carry on its business as presently conducted. Each of the
Company and each of its Subsidiaries is duly qualified and is authorized to do
business and is in good standing as a foreign corporation, partnership or
limited liability company, as the case may be, in all jurisdictions in which the
nature or location of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions in
which failure to do so has not, or could not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the business,
assets, liabilities, condition (financial or otherwise), properties, operations
or prospects of the Company and its Subsidiaries, taken individually and as a
whole (a "Material Adverse Effect").
4.2 Subsidiaries. The Company has no direct or indirect Subsidiaries. For
the purpose of this Agreement, a "Subsidiary" of any person or entity means (a)
a corporation or other entity whose shares of stock or other ownership interests
having ordinary voting power (other than stock or other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the directors of such corporation, or other persons or entities
performing similar functions for such person or entity, are owned, directly or
indirectly, by such person or entity or (b) a corporation or other entity in
which such person or entity owns, directly or indirectly, more than 50% of the
equity interests at such time.
4.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, as of the date hereof
consists of 250,000,000 shares, of which 250,000,000 are shares of Common Stock,
par value $0.001 per share, 41,047,541 shares of which are issued and
outstanding.
(b) Except as disclosed on Schedule 4.3, other than: (i) the shares
reserved for issuance under the Company's stock option plans; and (ii) shares
which may be granted pursuant to this Agreement, the Related Agreements, the
Securities Purchase Agreement dated as of June 19, 2006 between the Company and
the Purchaser (the "June Purchase Agreement") and the "Related Agreements"
referred to therein (the "June Related Agreements"), there are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal), proxy or stockholder agreements, or arrangements or
agreements of any kind for the purchase or acquisition from the Company of any
of its securities. Except as disclosed on Schedule 4.3, neither the offer,
issuance or sale of any of the Note or the Warrant, or the issuance of any of
the Warrant Shares, nor the consummation of any transaction contemplated hereby
will result in a change in the price or number of any securities of the Company
outstanding, under anti-dilution or other similar provisions contained in or
affecting any such securities.
(c) All issued and outstanding shares of the Company's Common Stock: (i)
have been duly authorized and validly issued and are fully paid and
nonassessable; and (ii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of the shares of
the Common Stock are as stated in the Company's Certificate of Incorporation
(the "Charter"). The Warrant Shares have been duly and validly reserved for
issuance. When issued in compliance with the provisions of this Agreement and
the Charter, the Securities will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Securities may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise required by
such laws at the time a transfer is proposed.
4.4 Authorization; Binding Obligations. All corporate, partnership or
limited liability company, as the case may be, action on the part of the Company
and each of its Subsidiaries (including their respective officers and directors)
necessary for the authorization of this Agreement and the Related Agreements,
the performance of all obligations of the Company and its Subsidiaries hereunder
and under the other Related Agreements at the Closing and, the authorization,
sale, issuance and delivery of the Note and Warrant has been taken or will be
taken prior to the Closing. This Agreement and the Related Agreements, when
executed and delivered and to the extent the Company or any Subsidiary is a
party thereto, will be valid and binding obligations of each of the Company and
each of its Subsidiaries, enforceable against each such entity in accordance
with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) general principles of equity that restrict the availability of equitable
or legal remedies.
The sale of the Note is not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
The issuance of the Warrant and the subsequent exercise of the Warrant for
Warrant Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
4.5 Liabilities. Neither the Company nor any of its Subsidiaries has any
liabilities, except current liabilities incurred in the ordinary course of
business and liabilities disclosed in any of the Company's filings under the
Securities Exchange Act of 1934 ("Exchange Act") made prior to the date of this
Agreement (collectively, the "Exchange Act Filings"), copies of which have been
made available to the Purchaser.
4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as disclosed
in any Exchange Act Filings:
(a) Other than in connection with the June Purchase Agreement and the June
Related Agreements, there are no agreements, instruments, contracts, judgments,
orders, writs or decrees to which the Company or any of its Subsidiaries is a
party or by which it is bound which may involve: (i) obligations (contingent or
otherwise) of, or payments to, the Company or any of its Subsidiaries in excess
of $50,000 (other than obligations of, or payments to, the Company or any of its
Subsidiaries arising from purchase or sale agreements entered into in the
ordinary course of business); or (ii) the transfer or license of any patent,
copyright, trade secret or other proprietary right to or from the Company or any
of its Subsidiaries (other than licenses arising from the purchase of "off the
shelf" or other standard products); or (iii) provisions restricting the
development, manufacture or distribution of the Company's or any of its
Subsidiaries products or services; or (iv) indemnification by the Company or any
of its Subsidiaries with respect to infringements of proprietary rights.
(b) Since December 31, 2006 (the "Balance Sheet Date"), neither the Company
nor any of its Subsidiaries has: (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock; (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than ordinary course obligations) individually in
excess of $50,000 or, in the case of indebtedness and/or liabilities
individually less than $50,000, in excess of $100,000 in the aggregate; (iii)
made any loans or advances to any person or entity not in excess, individually
or in the aggregate, of $100,000, other than ordinary course advances for travel
expenses; or (iv) sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of business.
(c) For the purposes of subsections (a) and (b) above, all indebtedness,
liabilities, agreements, instruments and contracts involving the same person or
entity (including persons or entities the Company or any Subsidiary of the
Company has reason to believe are affiliated therewith) shall be aggregated for
the purpose of meeting the individual minimum dollar amounts of such
subsections.
(d) The Company maintains disclosure controls and procedures ("Disclosure
Controls") designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized, and reported, within the time periods specified
in the rules and forms of the Securities and Exchange Commission ("SEC").
(e) The Company makes and keep books, records, and accounts, that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the Company's assets. The Company maintains internal control
over financial reporting ("Financial Reporting Controls") designed by, or under
the supervision of, the Company's principal executive and principal financial
officers, and effected by the Company's board of directors, management, and
other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles ("GAAP"),
including that:
(i) transactions are executed in accordance with management's general or
specific authorization;
(ii) unauthorized acquisition, use, or disposition of the Company's assets
that could have a material effect on the financial statements are prevented or
timely detected;
(iii) transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that the Company's receipts
and expenditures are being made only in accordance with authorizations of the
Company's management and board of directors;
(iv) transactions are recorded as necessary to maintain accountability for
assets; and
(v) the recorded accountability for assets is compared with the existing
assets at reasonable intervals, and appropriate action is taken with respect to
any differences.
(f) There is no weakness in any of the Company's Disclosure Controls or
Financial Reporting Controls that is required to be disclosed in any of the
Exchange Act Filings, except as so disclosed.
4.7 Obligations to Related Parties. Except as set forth on Schedule 4.7,
there are no obligations of the Company or any of its Subsidiaries to officers,
directors, stockholders or employees of the Company or any of its Subsidiaries
other than:
(a) for payment of salary for services rendered and for bonus payments;
(b) reimbursement for reasonable expenses incurred on behalf of the Company
and its Subsidiaries;
(c) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of the Company and each Subsidiary of
the Company, as applicable); and
(d) obligations listed in the Company's and each of its Subsidiary's
financial statements or disclosed in any of the Company's Exchange Act Filings.
Except as described above or set forth on Schedule 4.7, none of the officers,
directors or, to the Company's knowledge, key employees or stockholders of the
Company or any of its Subsidiaries or any members of their immediate families,
are indebted to the Company or any of its Subsidiaries, individually or in the
aggregate, in excess of $50,000 or have any direct or indirect ownership
interest in any firm or corporation with which the Company or any of its
Subsidiaries is affiliated or with which the Company or any of its Subsidiaries
has a business relationship, or any firm or corporation which competes with the
Company or any of its Subsidiaries, other than passive investments in publicly
traded companies (representing less than one percent (1%) of such company) which
may compete with the Company or any of its Subsidiaries. Except as described
above, no officer, director or stockholder of the Company or any of its
Subsidiaries, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company or any of its
Subsidiaries and no agreements are contemplated between the Company or any of
its Subsidiaries and any such person. Except as set forth on Schedule 4.7,
neither the Company nor any of its Subsidiaries is a guarantor or indemnitor of
any indebtedness of any other person or entity.
4.8 Changes. Since the Balance Sheet Date, except as disclosed in any
Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) any change in the business, assets, liabilities, condition (financial or
otherwise), properties, operations or prospects of the Company or any of its
Subsidiaries, which individually or in the aggregate has had, or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;
(b) any resignation or termination of any officer, key employee or group of
employees of the Company or any of its Subsidiaries;
(c) any material change, except in the ordinary course of business, in the
contingent obligations of the Company or any of its Subsidiaries by way of
guaranty, endorsement, indemnity, warranty or otherwise;
(d) any damage, destruction or loss to the Company's assets, whether or not
covered by insurance, which has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(e) any waiver by the Company or any of its Subsidiaries of a valuable right
or of a material debt owed to it;
(f) any direct or indirect loans made by the Company or any of its
Subsidiaries to any stockholder, employee, officer or director of the Company or
any of its Subsidiaries, other than advances made in the ordinary course of
business;
(g) any material change in any compensation arrangement or agreement with
any employee, officer, director or stockholder of the Company or any of its
Subsidiaries;
(h) any declaration or payment of any dividend or other distribution of the
assets of the Company or any of its Subsidiaries;
(i) to the Company's knowledge, any labor organization activity related to
the Company or any of its Subsidiaries;
(j) any debt, obligation or liability incurred, assumed or guaranteed by the
Company or any of its Subsidiaries, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business;
(k) any sale, assignment or transfer of any patents, trademarks, copyrights,
trade secrets or other intangible assets owned by the Company or any of its
Subsidiaries;
(l) any change in any material agreement to which the Company or any of its
Subsidiaries is a party or by which either the Company or any of its
Subsidiaries is bound which either individually or in the aggregate has had, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(m) to the Company's knowledge, any other event or condition of any
character that, either individually or in the aggregate, has had, or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect; or
(n) any arrangement or commitment by the Company or any of its Subsidiaries
to do any of the acts described in subsection (a) through (m) above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set forth on
Schedule 4.9, each of the Company and each of its Subsidiaries has good and
marketable title to its properties and assets, and good title to its leasehold
interests, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than:
(a) those resulting from taxes which have not yet become delinquent;
(b) minor liens and encumbrances which do not materially detract from the
value of the property subject thereto or materially impair the operations of the
Company or any of its Subsidiaries, so long as in each such case, such liens and
encumbrances have no effect on the lien priority of the Purchaser in such
property; and
(c) those that have otherwise arisen in the ordinary course of business, so
long as they have no effect on the lien priority of the Purchaser therein.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair, ordinary wear and tear excepted, and are reasonably fit
and usable for the purposes for which they are being used. Except as set forth
on Schedule 4.9, the Company and its Subsidiaries are in compliance with all
material terms of each lease to which it is a party or is otherwise bound.
4.10 Intellectual Property. Except as set forth on Schedule 4.10:
(a) Each of the Company and each of its Subsidiaries owns or possesses
sufficient legal rights to all patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes necessary for its business as now conducted and, to the Company's
knowledge, as presently proposed to be conducted (the "Intellectual Property"),
without any known infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to any
Intellectual Property owned by the Company, nor is the Company or any of its
Subsidiaries bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard products.
(b) Neither the Company nor any of its Subsidiaries has received any
communications alleging that the Company or any of its Subsidiaries has violated
any of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity, nor is the
Company or any of its Subsidiaries aware of any true basis therefor.
(c) The Company does not believe it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its employees
made prior to their employment by the Company or any of its Subsidiaries, except
for inventions, trade secrets or proprietary information that have been
rightfully assigned to the Company or any of its Subsidiaries.
4.11 Compliance with Other Instruments. Neither the Company nor any of its
Subsidiaries is in violation or default of (a) any term of its Charter or
Bylaws, or (b) any provision of any indebtedness, mortgage, indenture, contract,
agreement or instrument to which it is party or by which it is bound or of any
judgment, decree, order or writ, which violation or default, in the case of this
clause (b), has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. The execution,
delivery and performance of and compliance with this Agreement and the Related
Agreements to which it is a party, and the issuance and sale of the Note by the
Company and the other Securities by the Company each pursuant hereto and
thereto, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term or provision, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or any of its Subsidiaries or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
4.12 Litigation. Except as set forth on Schedule 4.12 hereto, there is no
action, suit, proceeding or, to the Company's knowledge, investigation, pending
or, to the Company's knowledge, currently threatened against the Company or any
of its Subsidiaries that prevents the Company or any of its Subsidiaries from
entering into this Agreement or the other Related Agreements, or from
consummating the transactions contemplated hereby or thereby, or which has had,
or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect or any change in the current equity
ownership of the Company or any of its Subsidiaries, nor is the Company aware
that there is any true basis to assert any of the foregoing. Neither the
Company nor any of its Subsidiaries is a party to or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company or any of its Subsidiaries currently pending or
which the Company or any of its Subsidiaries intends to initiate.
4.13 Tax Returns and Payments. Each of the Company and each of its
Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by the
Company or any of its Subsidiaries on or before the Closing, have been paid or
will be paid prior to the time they become delinquent. Except as set forth on
Schedule 4.13, neither the Company nor any of its Subsidiaries has been advised:
(a) that any of its returns, federal, state or other, have been or are being
audited as of the date hereof; or
(b) of any adjustment, deficiency, assessment or court decision in respect
of its federal, state or other taxes.
The Company has no knowledge of any liability for any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14 Employees. Except as set forth on Schedule 4.14, neither the Company
nor any of its Subsidiaries has any collective bargaining agreements with any of
its employees. To the Company's knowledge, there is no labor union organizing
activity pending or threatened with respect to the Company or any of its
Subsidiaries. Except as disclosed in the Exchange Act Filings or on Schedule
4.14, neither the Company nor any of its Subsidiaries is a party to or bound by
any currently effective employment contract, deferred compensation arrangement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. To the Company's knowledge, no
employee of the Company or any of its Subsidiaries, nor any consultant with whom
the Company or any of its Subsidiaries has contracted, is in violation of any
term of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company or any of its Subsidiaries because of the nature of
the business to be conducted by the Company or any of its Subsidiaries; and, to
the Company's knowledge, the continued employment by the Company and its
Subsidiaries of their present employees, and the performance of the Company's
and its Subsidiaries' contracts with their independent contractors, will not
result in any such violation. Neither the Company nor any of its Subsidiaries
is aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency that
would interfere with their duties to the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries has received any notice alleging
that any such violation has occurred. Except for employees who have a current
effective employment agreement with the Company or any of its Subsidiaries, no
employee of the Company or any of its Subsidiaries has been granted the right to
continued employment by the Company or any of its Subsidiaries or to any
material compensation following termination of employment with the Company or
any of its Subsidiaries. Except as set forth on Schedule 4.14, the Company is
not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries have a present
intention to terminate the employment of any officer, key employee or group of
employees.
4.15 Registration Rights and Voting Rights. Except as set forth on Schedule
4.15 or except as disclosed in Exchange Act Filings, neither the Company nor any
of its Subsidiaries is presently under any obligation, and neither the Company
nor any of its Subsidiaries has granted any rights, to register any of the
Company's or its Subsidiaries' presently outstanding securities or any of its
securities that may hereafter be issued. Except as set forth on Schedule 4.15
or except as disclosed in Exchange Act Filings, to the Company's knowledge, no
stockholder of the Company or any of its Subsidiaries has entered into any
agreement with respect to the voting of equity securities of the Company or any
of its Subsidiaries.
4.16 Compliance with Laws; Permits. Neither the Company nor any of its
Subsidiaries is in violation of any material provision of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of 2002 or any SEC-related material regulation or rule or any material rule of
the Principal Market (as hereafter defined) promulgated thereunder or any other
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which has had, or
could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement or any other Related Agreement and the issuance of
any of the Securities, except such as have been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. Each of the Company and its Subsidiaries has
all material franchises, permits, licenses and any similar authority necessary
for the conduct of its business as now being conducted by it, the lack of which
could, either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
4.17 Environmental and Safety Laws. Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation. Except as set forth on
Schedule 4.17, no Hazardous Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or any of its Subsidiaries or, to
the Company's knowledge, by any other person or entity on any property owned,
leased or used by the Company or any of its Subsidiaries. For the purposes of
the preceding sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as "hazardous" or
"toxic" under any applicable local, state, federal and/or foreign laws and
regulations that govern the existence and/or remedy of contamination on
property, the protection of the environment from contamination, the control of
hazardous wastes, or other activities involving hazardous substances, including
building materials; or
(b) any petroleum products or nuclear materials.
4.18 Valid Offering. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
4.19 [Intentionally Omitted]
4.20 Insurance. Each of the Company and each of its Subsidiaries has general
commercial, product liability, fire and casualty insurance policies with
coverages which the Company believes are customary for companies similarly
situated to the Company and its Subsidiaries in the same or similar business.
4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company has
filed all proxy statements, reports and other documents required to be filed by
it under the Exchange Act. The Company has made available to the Purchaser
copies of: (a) its Annual Report on Form 10-KSB for its fiscal year ended
December 31, 2006; and (b) its Quarterly Report on Form 10-QSB for its fiscal
quarter ended March 31, 2007, and the Form 8-K filings which it has made during
the fiscal year ending 2006 and 2007 to date (collectively, the "SEC Reports").
Except as set forth on Schedule 4.21, each SEC Report was, at the time of its
filing, in substantial compliance with the requirements of its respective form
and none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.22 Listing. The Company's Common Stock is listed or quoted, as applicable,
on a Principal Market and satisfies and at all times hereafter will satisfy, all
requirements for the continuation of such listing or quotation, as applicable.
The Company has not received any notice, the subject of which remains
unremediated, that its Common Stock will be delisted from, or no longer quoted
on, as applicable, the Principal Market or that its Common Stock does not meet
all requirements for such listing or quotation, as applicable. For purposes
hereof, the term "Principal Market" means the NASD Over The Counter Bulletin
Board, NASDAQ Capital Market, NASDAQ National Markets System, American Stock
Exchange or New York Stock Exchange (whichever of the foregoing is at the time
the principal trading exchange or market for the Common Stock).
4.23 No Integrated Offering. Neither the Company, nor any of its
Subsidiaries or 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 cause the offering of
the Securities pursuant to this Agreement or any of the Related Agreements to be
integrated with prior offerings by the Company for purposes of the Securities
Act which would prevent the Company from selling the Securities pursuant to Rule
506 under the Securities Act, or any applicable exchange-related stockholder
approval provisions, nor will the Company or any of its affiliates or
Subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.
4.24 Stop Transfer. The Securities are restricted securities as of the date
of this Agreement. Neither the Company nor any of its Subsidiaries will issue
any stop transfer order or other order impeding the sale and delivery of any of
the Securities at such time as the Securities are registered for public sale or
an exemption from registration is available, except as reasonably required by
state and federal securities laws.
4.25 Dilution. The Company specifically acknowledges that its obligation to
issue the shares of Common Stock upon exercise of the Warrant is binding upon
the Company and enforceable regardless of the dilution such issuance may have on
the ownership interests of other shareholders of the Company.
4.26 Patriot Act. The Company certifies that, to the Company's knowledge,
neither the Company nor any of its Subsidiaries has been designated, nor is or
shall be owned or controlled, by a "suspected terrorist" as defined in Executive
Order 13224. The Company hereby acknowledges that the Purchaser seeks to comply
with all applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the Company hereby represents, warrants and
covenants that: (a) none of the cash or property that the Company or any of its
Subsidiaries will pay or will contribute to the Purchaser has been or shall be
derived from, or related to, any activity that is deemed criminal under United
States law; and (b) no contribution or payment by the Company or any of its
Subsidiaries to the Purchaser, to the extent that they are within the Company's
and/or its Subsidiaries' control shall cause the Purchaser to be in violation of
the United States Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Company
shall promptly notify the Purchaser if any of these representations, warranties
or covenants ceases to be true and accurate regarding the Company or any of its
Subsidiaries. The Company shall provide the Purchaser all additional
information regarding the Company or any of its Subsidiaries that the Purchaser
deems necessary or convenient to ensure compliance with all applicable laws
concerning money laundering and similar activities. The Company understands and
agrees that if at any time it is discovered that any of the foregoing
representations, warranties or covenants are incorrect, or if otherwise required
by applicable law or regulation related to money laundering or similar
activities, the Purchaser may undertake appropriate actions to ensure compliance
with applicable law or regulation, including but not limited to segregation
and/or redemption of the Purchaser's investment in the Company. The Company
further understands that the Purchaser may release confidential information
about the Company and its Subsidiaries and, if applicable, any underlying
beneficial owners, to proper authorities if the Purchaser, in its sole
discretion, determines that it is in the best interests of the Purchaser in
light of relevant rules and regulations under the laws set forth in subsection
(b) above.
4.27 ERISA. Based upon the Employee Retirement Income Security Act of 1974
("ERISA"), and the regulations and published interpretations thereunder: (a)
neither the Company nor any of its Subsidiaries has engaged in any Prohibited
Transactions (as defined in Section 406 of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code")); (b) each of the Company
and each of its Subsidiaries has met all applicable minimum funding requirements
under Section 302 of ERISA in respect of its plans; (c) neither the Company nor
any of its Subsidiaries has any knowledge of any event or occurrence which would
cause the Pension Benefit Guaranty Corporation to institute proceedings under
Title IV of ERISA to terminate any employee benefit plan(s); (d) neither the
Company nor any of its Subsidiaries has any fiduciary responsibility for
investments with respect to any plan existing for the benefit of persons other
than the Company's or such Subsidiary's employees; and (e) neither the Company
nor any of its Subsidiaries has withdrawn, completely or partially, from any
multi-employer pension plan so as to incur liability under the Multiemployer
Pension Plan Amendments Act of 1980.
5. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not, except as otherwise expressly provided, lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
5.1 No Shorting. The Purchaser or any of its affiliates and investment
partners has not, will not and will not cause any person or entity, to engage in
"short sales" of the Company's Common Stock as long as the Note shall be
outstanding.
5.2 Requisite Power and Authority. The Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
corporate action on the Purchaser's part required for the lawful execution and
delivery of this Agreement and the Related Agreements have been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
the Purchaser, enforceable in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.3 Investment Representations. The Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon the Purchaser's
representations contained in this Agreement, including, without limitation, that
the Purchaser is an "accredited investor" within the meaning of Regulation D
under the Securities Act. The Purchaser confirms that it has received or has
had full access to all the information it considers necessary or appropriate to
make an informed investment decision with respect to the Note and the Warrant to
be purchased by it under this Agreement and the Warrant Shares acquired by it
upon the exercise of the Warrant, respectively. The Purchaser further confirms
that it has had an opportunity to ask questions and receive answers from the
Company regarding the Company's and its Subsidiaries' business, management and
financial affairs and the terms and conditions of the Offering, the Note, the
Warrant and the Securities and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to the
Purchaser or to which the Purchaser had access.
5.4 The Purchaser Bears Economic Risk. The Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser must bear the economic
risk of this investment until the Securities are sold pursuant to: (a) an
effective registration statement under the Securities Act; or (b) an exemption
from registration is available with respect to such sale.
5.5 Acquisition for Own Account. The Purchaser is acquiring the Note and
Warrant and the Warrant Shares for the Purchaser's own account for investment
only, and not as a nominee or agent and not with a view towards or for resale in
connection with their distribution.
5.6 The Purchaser Can Protect Its Interest. The Purchaser represents that
by reason of its, or of its management's, business and financial experience, the
Purchaser has the capacity to evaluate the merits and risks of its investment in
the Note, the Warrant and the Securities and to protect its own interests in
connection with the transactions contemplated in this Agreement and the Related
Agreements. Further, the Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement
or the Related Agreements.
5.7 Accredited Investor. The Purchaser represents that it is an "accredited
investor" within the meaning of Regulation D under the Securities Act.
5.8 Legends.
(a) The Warrant Shares, if not issued by DWAC system (as hereinafter
defined), shall bear a legend which shall be in substantially the following form
until such shares are covered by an effective registration statement filed with
the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO RPM
TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO RPM
TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
6. Covenants of the Company. The Company covenants and agrees with the
Purchaser, (a) in the case of Sections 6.1 through 6.4 and 6.13, until the
Warrant Shares are disposed of by the Purchaser, (b) in the case of Sections 6.5
through 6.10, 6.15 and 6.16, until the Note is repaid in full, (c) in the case
of Sections 6.11, 6.12, 6.14 and 6.17, in perpetuity or otherwise in accordance
with the terms thereof, as follows:
6.1 Stop-Orders. The Company will advise the Purchaser, promptly after it
receives notice of issuance by the SEC, any state securities commission or any
other regulatory authority of any stop order or of any order preventing or
suspending any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock of the Company for offering or sale in
any jurisdiction, or the initiation of any proceeding for any such purpose.
6.2 Listing. The Company shall promptly secure the listing or quotation, as
applicable, of the Warrant Shares on the Principal Market upon which shares of
Common Stock are listed or quoted for trading, as applicable (subject to
official notice of issuance) and shall maintain such listing or quotation, as
applicable, so long as any other shares of Common Stock shall be so listed or
quoted, as applicable. The Company will maintain the listing or quotation, as
applicable, of its Common Stock on the Principal Market, and will comply in all
material respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the National Association of Securities Dealers
("NASD") and such exchanges, as applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD and
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to the
Purchaser and promptly provide copies thereof to the Purchaser.
6.4 Reporting Requirements. The Company will deliver, cause to be
delivered, or make available to the Purchaser, each of the following:
(a) As soon as available, and in any event within ninety (90) days after the
end of each fiscal year of the Company (unless a suitable extension is duly
filed with the SEC, in which case such deadline shall be the deadline for filing
of the Company's applicable annual report with the SEC), each of the Company's
and each of its Subsidiaries' audited financial statements with a report of
independent certified public accountants of recognized standing selected by the
Company and acceptable to the Purchaser (the "Accountants"), which annual
financial statements shall be without qualification and shall include each of
the Company's and each of its Subsidiaries' balance sheet as at the end of such
fiscal year and the related statements of each of the Company's and each of its
Subsidiaries' income, retained earnings and cash flows for the fiscal year then
ended, prepared on a consolidating and consolidated basis to include the
Company, each Subsidiary of the Company and each of their respective affiliates,
all in reasonable detail and prepared in accordance with GAAP, together with (i)
if and when available, copies of any management letters prepared by the
Accountants; and (ii) a certificate of the Company's President, Chief Executive
Officer or Chief Financial Officer stating that such financial statements have
been prepared in accordance with GAAP and whether or not such officer has
knowledge of the occurrence of any Event of Default (as defined in the Note)
and, if so, stating in reasonable detail the facts with respect thereto;
(b) As soon as available and in any event within forty five (45) days after
the end of each fiscal quarter of the Company (unless a suitable extension is
duly filed with the SEC, in which case such deadline shall be the deadline for
filing of the Company's applicable quarterly report with the SEC), an
unaudited/internal balance sheet and statements of income, retained earnings and
cash flows of the Company and each of its Subsidiaries as at the end of and for
such quarter and for the year to date period then ended, prepared on a
consolidating and consolidated basis to include all the Company, each Subsidiary
of the Company and each of their respective affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and periods
in the previous year, all prepared in accordance with GAAP, subject to year-end
adjustments and accompanied by a certificate of the Company's President, Chief
Executive Officer or Chief Financial Officer, stating (i) that such financial
statements have been prepared in accordance with GAAP, subject to year-end audit
adjustments, and (ii) whether or not such officer has knowledge of the
occurrence of any Event of Default (as defined in the Note) not theretofore
reported and remedied and, if so, stating in reasonable detail the facts with
respect thereto;
(c) As soon as available and in any event within fifteen (15) days after the
end of each calendar month, a report of revenues and accounts receivable
generated in such calendar month and for the year to date period then ended,
together with an accounts payable ageing for such calendar month, all prepared
in accordance with GAAP, subject to year-end adjustments and accompanied by a
brief narrative describing the Company's progress since the previous report
under this subsection and a certificate of the Company's President, Chief
Executive Officer or Chief Financial Officer, stating (i) that such financial
information has been prepared in accordance with GAAP, subject to year-end audit
adjustments, and (ii) whether or not such officer has knowledge of the
occurrence of any Event of Default (as defined in the Note) not theretofore
reported and remedied and, if so, stating in reasonable detail the facts with
respect thereto;
(d) The Company shall timely file with the SEC all reports required to be
filed pursuant to the Exchange Act and refrain from terminating its status as an
issuer required by the Exchange Act to file reports thereunder even if the
Exchange Act or the rules or regulations thereunder would permit such
termination. Promptly after (i) the filing thereof, copies of the Company's
most recent registration statements and annual, quarterly, monthly or other
regular reports which the Company files with the SEC, and (ii) the issuance
thereof, copies of such financial statements, reports and proxy statements as
the Company shall send to its stockholders; and
(e) The Company shall deliver, or cause the applicable Subsidiary of the
Company to deliver, such other information as the Purchaser shall reasonably
request.
6.5 Use of Funds. The Company shall use the proceeds of the sale of the
Note and the Warrant for general working capital purposes only.
6.6 Access to Facilities. Each of the Company and each of its Subsidiaries
will permit any representatives designated by the Purchaser (or any successor of
the Purchaser), upon reasonable notice and during normal business hours, at such
person's expense and accompanied by a representative of the Company or any
Subsidiary (provided that no such prior notice shall be required to be given and
no such representative of the Company or any Subsidiary shall be required to
accompany the Purchaser in the event the Purchaser believes such access is
necessary to preserve or protect the Collateral (as defined in the Master
Security Agreement (as defined in the Reaffirmation)) or following the
occurrence and during the continuance of an Event of Default (as defined in the
Note) , to:
(a) visit and inspect any of the properties of the Company or any of its
Subsidiaries;
(b) examine the corporate and financial records of the Company or any of its
Subsidiaries (unless such examination is not permitted by federal, state or
local law or by contract) and make copies thereof or extracts therefrom; and
(c) discuss the affairs, finances and accounts of the Company or any of its
Subsidiaries with the directors, officers and independent accountants of the
Company or any of its Subsidiaries.
6.7 Taxes. Each of the Company and each of its Subsidiaries will promptly
pay and discharge, or cause to be paid and discharged, when due and payable, all
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company and its Subsidiaries; provided,
however, that any such tax, assessment, charge or levy need not be paid
currently if (a) the validity thereof shall currently and diligently be
contested in good faith by appropriate proceedings, (b) such tax, assessment,
charge or levy shall have no effect on the lien priority of the Purchaser in any
property of the Company or any of its Subsidiaries and (c) the Company and/or
such Subsidiary shall have set aside on its books adequate reserves with respect
thereto in accordance with GAAP; and provided, further, that the Company and its
Subsidiaries will pay all such taxes, assessments, charges or levies forthwith
upon the commencement of proceedings to foreclose any lien which may have
attached as security therefor.
6.8 Insurance. Each of the Company and its Subsidiaries will keep its
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in similar business similarly situated
as the Company and its Subsidiaries; and the Company and its Subsidiaries will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner which the Company reasonably believes is customary for companies in
similar business similarly situated as the Company and its Subsidiaries and to
the extent available on commercially reasonable terms. The Company, and each of
its Subsidiaries, will jointly and severally bear the full risk of loss from any
loss of any nature whatsoever with respect to the assets pledged to the
Purchaser as security for their respective obligations hereunder and under the
Related Agreements. At the Company's and each of its Subsidiaries' joint and
several cost and expense in amounts and with carriers reasonably acceptable to
the Purchaser, each of the Company and each of its Subsidiaries shall (a) keep
all its insurable properties and properties in which it has an interest insured
against the hazards of fire, flood, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to the
Company's or the respective Subsidiary's including business interruption
insurance; (b) maintain a bond in such amounts as is customary, if any, in the
case of companies engaged in businesses similar to the Company's or the
respective Subsidiary's insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of the
Company or any of its Subsidiaries either directly or through governmental
authority to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain all
such worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which the Company or the respective
Subsidiary is engaged in business; and (e) furnish the Purchaser with (i) copies
of all policies and evidence of the maintenance of such policies at least thirty
(30) days before any expiration date, (ii) excepting the Company's workers'
compensation policy, endorsements to such policies naming the Purchaser as "co-
insured" or "additional insured" and appropriate loss payable endorsements in
form and substance satisfactory to the Purchaser, naming the Purchaser as loss
payee, and (iii) evidence that as to the Purchaser the insurance coverage shall
not be impaired or invalidated by any act or neglect of the Company or any
Subsidiary and the insurer will provide the Purchaser with at least thirty (30)
days notice prior to cancellation. The Company and each Subsidiary shall
instruct the insurance carriers that in the event of any loss thereunder, the
carriers shall make payment for such loss to the Company and/or the Subsidiary
and the Purchaser jointly. In the event that as of the date of receipt of each
loss recovery upon any such insurance, the Purchaser has not properly declared
an Event of Default (as defined in the Note), then the Company and/or such
Subsidiary shall be permitted to direct the application of such loss recovery
proceeds toward investment in property, plant and equipment that would comprise
"Collateral" secured by the Purchaser's security interest pursuant to the Master
Security Agreement (as defined in the Reaffirmation) or such other security
agreement as shall be required by the Purchaser, with any surplus funds to be
applied toward payment of the obligations of
the Company to the Purchaser. In the event that the Purchaser has properly
declared an Event of Default (as defined in the Note), then all loss recoveries
received by the Purchaser upon any such insurance thereafter may be applied to
the obligations of the Company hereunder and under the Related Agreements, in
such order as the Purchaser may determine. Any surplus (following satisfaction
of all Company obligations to the Purchaser) shall be paid by the Purchaser to
the Company or applied as may be otherwise required by law. Any deficiency
thereon shall be paid by the Company or the Subsidiary, as applicable, to the
Purchaser, on demand.
6.9 Intellectual Property. Each of the Company and each of its Subsidiaries
shall use their commercially reasonable efforts to maintain in full force and
effect its existence, rights and franchises and all licenses and other rights to
use Intellectual Property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business.
6.10 Properties. Each of the Company and each of its Subsidiaries will keep
its properties in good repair, working order and condition, reasonable wear and
tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and each of the
Company and each of its Subsidiaries will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6.11 Confidentiality. The Company will not, and will not permit any of its
Subsidiaries to, disclose, and will not include in any public announcement, the
name of the Purchaser, unless expressly agreed to by the Purchaser or unless and
until such disclosure is required by law or applicable regulation, and then only
to the extent of such requirement. Notwithstanding the foregoing, the Company
may disclose the Purchaser's identity and the terms of this Agreement to its
current and prospective debt and equity financing sources.
6.12 Required Approvals. (a) For so long as twenty-five percent (25%) of the
principal amount of the Note is outstanding, the Company, without the prior
written consent of the Purchaser, shall not, and shall not permit any of its
Subsidiaries to:
(i) (A) directly or indirectly declare or pay any dividends, other than
dividends paid to the Company or any of its wholly-owned Subsidiaries, (B) issue
any preferred stock that is manditorily redeemable prior to the one year
anniversary of the Maturity Date (as defined in the Note) or (C) redeem any of
its preferred stock or other equity interests;
(ii) liquidate, dissolve or effect a material reorganization (it being
understood that in no event shall the Company or any of its Subsidiaries
dissolve, liquidate or merge with any other person or entity (unless, in the
case of such a merger, the Company or, in the case of merger not involving the
Company, such Subsidiary, as applicable, is the surviving entity);
(iii) become subject to (including, without limitation, by way of amendment to
or modification of) any agreement or instrument which by its terms would (under
any circumstances) restrict the Company's or any of its Subsidiaries, right to
perform the provisions of this Agreement, any Related Agreement or any of the
agreements contemplated hereby or thereby;
(iv) materially alter or change the scope of the business of the Company and
its Subsidiaries taken as a whole; or
(v) (A) create, incur, assume or suffer to exist any indebtedness (exclusive
of trade debt and debt incurred to finance the purchase of equipment (not in
excess of twenty-five percent (25%) of the fair market value of the Company's
and its Subsidiaries' assets)) whether secured or unsecured other than (1) the
Company's obligations owed to the Purchaser, (2) indebtedness set forth on
Schedule 6.12(e) attached hereto and made a part hereof and any refinancings or
replacements thereof on terms no less favorable to the Purchaser than the
indebtedness being refinanced or replaced, and (3) any indebtedness incurred in
connection with the purchase of assets (other than equipment) in the ordinary
course of business, or any refinancings or replacements thereof on terms no less
favorable to the Purchaser than the indebtedness being refinanced or replaced,
so long as any lien relating thereto shall only encumber the fixed assets so
purchased and no other assets of the Company or any of its Subsidiaries; (B)
cancel any indebtedness owing to it in excess of $50,000 in the aggregate during
any twelve (12) month period; (C) assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligations of any other
person or entity, except the endorsement of negotiable instruments by the
Company or any Subsidiary thereof for deposit or collection or similar
transactions in the ordinary course of business or guarantees of indebtedness
otherwise permitted to be outstanding pursuant to this clause (v); and
(b) The Company, without the prior written consent of the Purchaser, shall
not, and shall not permit any of its Subsidiaries to, create or acquire any
Subsidiary after the date hereof unless (i) such Subsidiary is a wholly-owned
Subsidiary of the Company and (ii) such Subsidiary becomes a party to the Master
Security Agreement (as defined in the Reaffirmation) and a customary guaranty in
favor of Purchaser of the Company's obligations hereunder and under the Related
Agreements and, to the extent required by the Purchaser, satisfies each
condition of this Agreement and the Related Agreements as if such Subsidiary
were a Subsidiary on the Closing Date.
6.13 Reissuance of Securities. The Company agrees to reissue certificates
representing the Warrant Shares without the legends set forth in Section 5.8
above at such time as:
(a) the holder thereof is permitted to dispose of such Securities pursuant
to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement after such
Securities are registered under the Securities Act and upon receiving reasonably
requested representations from Purchaser, including with regard to compliance
with the plan of distribution set forth in the related prospectus and applicable
prospectus delivery requirements.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the Purchaser and broker, if any.
6.14 Opinion. On the Closing Date, the Company will deliver to the Purchaser
an opinion acceptable to the Purchaser from the Company's external legal
counsel. The Company will provide, at the Company's expense, such other legal
opinions in the future as are deemed reasonably necessary by the Purchaser (and
acceptable to the Purchaser) in connection with the exercise of the Warrant and
the transfer of the Warrant Shares under applicable securities law.
6.15 Margin Stock. The Company will not permit any of the proceeds of the
Note or the Warrant to be used directly or indirectly to "purchase" or "carry"
"margin stock" or to repay indebtedness incurred to "purchase" or "carry"
"margin stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect.
6.16 Financing Right of First Refusal.
(a) The Company hereby grants to the Purchaser a right of first refusal to
provide any Additional Financing (as defined below) to be issued by the Company
and/or any of its Subsidiaries, subject to the following terms and conditions.
From and after the date hereof, prior to the incurrence of any additional
indebtedness (other than trade payables and deferred officer compensation)
and/or the sale or issuance of any equity interests of the Company or any of its
Subsidiaries (an "Additional Financing"), the Company and/or any Subsidiary of
the Company, as the case may be, shall notify the Purchaser of its intention to
enter into such Additional Financing. In connection therewith, the Company
and/or the applicable Subsidiary thereof shall submit a fully executed term
sheet (a "Proposed Term Sheet") to the Purchaser setting forth the material
terms, conditions and pricing of any such Additional Financing (such financing
to be negotiated on "arm's length" terms and the terms thereof to be negotiated
in good faith) proposed to be entered into by the Company and/or such
Subsidiary. The Purchaser shall have the right, but not the obligation, to
deliver its own proposed term sheet (the "Purchaser Term Sheet") setting forth
the material terms and conditions upon which the Purchaser would be willing to
provide such Additional Financing to the Company and/or such Subsidiary. The
Purchaser Term Sheet shall contain terms no less favorable to the Company and/or
such Subsidiary than those outlined in Proposed Term Sheet. The Purchaser shall
deliver such Purchaser Term Sheet within ten (10) business days of receipt of
each such Proposed Term Sheet. If the provisions of the Purchaser Term Sheet
are at least as favorable to the Company and/or such Subsidiary, as the case may
be, as the provisions of the Proposed Term Sheet, the Company and/or such
Subsidiary shall, within thirty (30) days after delivery of the Purchaser Term
Sheet, enter into and consummate the Additional Financing transaction outlined
in the Purchaser Term Sheet. In the event that Purchaser fails to deliver the
Purchaser Term Sheet within ten (10) business days of Purchaser's receipt of the
Proposed Term Sheet, or the terms of the Purchaser Term Sheet are not at least
as favorable to the Company and/or its Subsidiary as the Proposed Term Sheet,
then the Company and/or its Subsidiary may proceed with the Additional Financing
pursuant to the terms of the Proposed Term Sheet with the prospective third
party to such transaction.
(b) The Company will not, and will not permit its Subsidiaries to, agree,
directly or indirectly, to any restriction with any person or entity which
limits the ability of the Purchaser to consummate an Additional Financing with
the Company or any of its Subsidiaries.
(c) Notwithstanding the foregoing, the Company may sell or issue (i) up to
an aggregate of five million (5,000,000) shares of its restricted common stock,
without registration rights of any kind, to (A) long-standing investors at a
discount price to the prevailing market price on the date of sale of no more
than fifty percent (50%), and (B) service providers, as compensation for
consulting services, at a discount price to the prevailing market price on the
date of sale of no more than twenty-five percent (25%), and (ii) up to an
aggregate of two million five hundred thousand (2,500,000) shares of its
restricted common stock, without registration rights of any kind, to new members
of the Company's board of directors (which shall not include any current members
of the Company's board of directors whether re-appointed or re-elected in the
future).
6.17 Authorization and Reservation of Shares. The Company shall at all times
have authorized and reserved a sufficient number of shares of Common Stock to
provide for the exercise of the Warrants.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with the
Company as follows:
7.1 Confidentiality. The Purchaser will not disclose, and will not include
in any public announcement, the name of the Company, unless expressly agreed to
by the Company or unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
7.2 Non-Public Information. The Purchaser will not effect any sales in the
shares of the Company's Common Stock while in possession of material, non-public
information regarding the Company if such sales would violate applicable
securities law.
7.3 Limitation on Acquisition of Common Stock of the Company.
Notwithstanding anything to the contrary contained in this Agreement, any
Related Agreement or any document, instrument or agreement entered into in
connection with any other transactions between the Purchaser and the Company,
the Purchaser may not acquire stock in the Company (including, without
limitation, pursuant to a contract to purchase, by exercising an option or
warrant, by converting any other security or instrument, by acquiring or
exercising any other right to acquire, shares of stock or other security
convertible into shares of stock in the Company, or otherwise, and such
contracts, options, warrants, conversion or other rights shall not be
enforceable or exercisable) to the extent such stock acquisition would cause any
interest (including any original issue discount) payable by the Company to the
Purchaser not to qualify as "portfolio interest" within the meaning of Section
881(c)(2) of the Code, by reason of Section 881(c)(3) of the Code, taking into
account the constructive ownership rules under Section 871(h)(3)(C) of the Code.
8. Covenants of the Company and the Purchaser Regarding Indemnification.
8.1 Company Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend the Purchaser, each of the Purchaser's officers,
directors, agents, affiliates, control persons, and principal shareholders,
against all claims, costs, expenses, liabilities, obligations, losses or damages
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser which result, arise out of or are based upon: (a) any
misrepresentation by the Company or any of its Subsidiaries or breach of any
warranty by the Company or any of its Subsidiaries in this Agreement, any
Related Agreement or in any of the schedules attached hereto or thereto; or (b)
any breach or default in performance by Company or any of its Subsidiaries of
any covenant or undertaking to be performed by Company or any of its
Subsidiaries hereunder or under any Related Agreement.
8.2 Purchaser's Indemnification. The Purchaser agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's officers,
directors, agents, affiliates, control persons and principal shareholders, at
all times against any claims, costs, expenses, liabilities, obligations, losses
or damages (including reasonable legal fees) of any nature, incurred by or
imposed upon the Company which result, arise out of or are based upon: (a) any
misrepresentation by the Purchaser or breach of any warranty by the Purchaser in
this Agreement or any Related Agreement; or (b) any breach or default in
performance by the Purchaser of any covenant or undertaking to be performed by
the Purchaser hereunder or under any Related Agreement.
9. Exercise of the Warrant.
9.1 Mechanics of Exercise.
(a) Provided the Purchaser has notified the Company of the Purchaser's
intention to sell the Warrant Shares and the Warrant Shares are included in an
effective registration statement or are otherwise exempt from registration when
sold: (i) upon the exercise of the Warrant or part thereof, the Company shall,
at its own cost and expense, take all necessary action (including the issuance
of an opinion of counsel reasonably acceptable to the Purchaser following a
request by the Purchaser) to assure that the Company's transfer agent shall
issue shares of the Company's Common Stock in the name of the Purchaser (or its
nominee) or such other persons as designated by the Purchaser in accordance with
Section 9.1(b) hereof and in such denominations to be specified representing the
number of Warrant Shares issuable upon such exercise; and (ii) the Company
warrants that no instructions other than these instructions have been or will be
given to the transfer agent of the Company's Common Stock and that after the
Effectiveness Date (as defined in the Registration Rights Agreement) the Warrant
Shares issued will be freely transferable and will not contain a legend
restricting the resale or transferability of the Warrant Shares, subject to the
provisions of this Agreement and upon receiving reasonably requested
representations from Purchaser, including with regard to compliance with the
plan of distribution set forth in the related prospectus and applicable
prospectus delivery requirements.
(b) The Purchaser will give notice of its decision to exercise its right to
exercise the Warrant or part thereof by telecopying or otherwise delivering an
executed and completed notice of the number of shares to be subscribed to the
Company (the "Form of Subscription") together with payment of the full exercise
price for such shares. The Purchaser will not be required to surrender the
Warrant until the Purchaser receives a credit to the account of the Purchaser's
prime broker through the DWAC system (as defined below), representing the
Warrant Shares or until the Warrant has been fully exercised. Each date on
which a Form of Subscription is telecopied or delivered to the Company in
accordance with the provisions hereof, together with payment of the full
exercise price for such shares, shall be deemed a "Exercise Date." Pursuant to
the terms of the Form of Subscription, the Company will issue instructions to
the transfer agent accompanied by an opinion of counsel within one (1) business
day of the date of the delivery to the Company of the Form of Subscription
together with payment of the full exercise price for the shares and shall, if
the transfer agent is DTC/DWAC (as defined below) capable, cause the transfer
agent to transmit the certificates representing the Warrant Shares set forth in
the applicable Form of Subscription to the Holder by crediting the account of
the Purchaser's prime broker with the Depository Trust Company ("DTC") through
its Deposit Withdrawal Agent Commission ("DWAC") system within three (3)
business days after receipt by the Company of the Form of Subscription together
with payment of the full exercise price for such shares (the "Delivery Date").
In the event that such transfer agent is not DTC/DWAC capable, then the Company
shall cause the transfer agent to deliver, within three (3) business days
(also, a "Delivery Date"), one or more physical stock certificates representing
the shares to an address designated by the Purchaser.
(c) The Company understands that a delay in the delivery of the Warrant
Shares in the form required pursuant to Section 9 hereof beyond the applicable
Delivery Date could result in economic loss to the Purchaser. In the event that
the Company fails to direct its transfer agent to deliver the Warrant Shares to
the Purchaser within the time frame set forth in Section 9.1(b) above and the
Warrant Shares are not delivered to the Purchaser by the applicable Delivery
Date, as compensation to the Purchaser for such loss, the Company agrees to pay
late payments to the Purchaser for late issuance of the Warrant Shares in the
form required pursuant to Section 9 hereof upon exercise of the Warrant in the
amount equal to the greater of: (i) $500 per business day after the applicable
Delivery Date; or (ii) the Purchaser's actual damages from such delayed
delivery. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand and, in the case of actual damages,
accompanied by reasonable documentation of the amount of such damages. Such
documentation shall show the number of shares of Common Stock the Purchaser is
forced to purchase (in an open market transaction) which the Purchaser
anticipated receiving upon such exercise, and shall be calculated as the amount
by which (x) the Purchaser's total purchase price (including customary brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
aggregate amount of the Exercise Price for the Warrants, for which such Form of
Subscription was not timely honored.
10. Registration Rights.
10.1 Registration Rights Granted. The Company hereby grants registration
rights to the Purchaser pursuant to the Registration Rights Agreement.
10.2 Offering Restrictions. Except as previously disclosed in the SEC
Reports or in the Exchange Act Filings, or stock or stock options granted to
employees or directors of the Company (these exceptions hereinafter referred to
as the "Excepted Issuances"), and except as expressly permitted in Section
6.16(c), neither the Company nor any of its Subsidiaries will, prior to the full
repayment of the Note (together with all accrued and unpaid interest and fees
related thereto), (a) enter into any equity line of credit agreement or similar
agreement or (b) issue, or enter into any agreement to issue, any securities
with a variable/floating conversion and/or pricing feature which are or could be
(by conversion or registration) free-trading securities (i.e., common stock
subject to a registration statement).
11. Miscellaneous.
11.1 Governing Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY,
ON THE ONE HAND, AND THE PURCHASER, ON THE OTHER HAND, PERTAINING TO THIS
AGREEMENT OR ANY OF THE RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT
THE PURCHASER AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF
NEW YORK; AND FURTHER PROVIDED, THAT, NOTHING IN THIS AGREEMENT SHALL BE DEEMED
OR OPERATE TO PRECLUDE THE PURCHASER FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION REASONABLY NECESSARY TO COLLECT THE
OBLIGATIONS, TO REALIZE ON THE COLLATERAL (AS DEFINED IN THE MASTER SECURITY
AGREEMENT (AS DEFINED IN THE REAFFIRMATION)) OR ANY OTHER SECURITY FOR THE
OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY AGREEMENT (AS DEFINED IN THE
REAFFIRMATION)), OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
PURCHASER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY
HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT
THE ADDRESS SET FORTH IN SECTION 11.9 AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3)
DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
(c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE
PURCHASER AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
THERETO.
11.2 Severability. Wherever possible each provision of this Agreement and
the Related Agreements shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement or any
Related Agreement shall be prohibited by or invalid or illegal under applicable
law such provision shall be ineffective to the extent of such prohibition or
invalidity or illegality, without invalidating the remainder of such provision
or the remaining provisions thereof which shall not in any way be affected or
impaired thereby.
11.3 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchaser and the
closing of the transactions contemplated hereby to the extent provided therein.
All statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument. All indemnities set forth herein shall survive
the execution, delivery and termination of this Agreement and the Note and the
making and repayment of the obligations arising hereunder, under the Note and
under the other Related Agreements.
11.4 Successors. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person or entity which shall
be a holder of the Securities from time to time, other than the holders of
Common Stock which has been sold by the Purchaser pursuant to Rule 144 or an
effective registration statement. The Purchaser shall not be permitted to
assign its rights hereunder or under any Related Agreement to a competitor of
the Company unless an Event of Default (as defined in the Note) has occurred and
is continuing.
11.5 Entire Agreement; Maximum Interest. This Agreement, the Related
Agreements, the exhibits and schedules hereto and thereto and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and no
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein. Nothing contained in this Agreement, any Related
Agreement or in any document referred to herein or delivered in connection
herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum rate permitted by applicable
law. In the event that the rate of interest or dividends required to be paid or
other charges hereunder exceed the maximum rate permitted by such law, any
payments in excess of such maximum shall be credited against amounts owed by the
Company to the Purchaser and thus refunded to the Company.
11.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the written consent
of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the Purchaser under
this Agreement may be waived only with the written consent of the Purchaser.
(c) The obligations of the Purchaser and the rights of the Company under
this Agreement may be waived only with the written consent of the Company.
11.7 Delays or Omissions. It is agreed that no delay or omission to exercise
any right, power or remedy accruing to any party, upon any breach, default or
noncompliance by another party under this Agreement or the Related Agreements,
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of or in any similar breach, default or noncompliance thereafter
occurring. All remedies, either under this Agreement or the Related Agreements,
by law or otherwise afforded to any party, shall be cumulative and not
alternative.
11.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal business hours of
the recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt.
All communications shall be sent as follows:
If to the Company, to:
RPM Technologies, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Purchaser, to:
Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
▇.▇. ▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
South Church Street
Grand Cayman, Cayman Islands
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: 212-541-4410
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
11.9 Attorneys' Fees. In the event that any suit or action is instituted to
enforce any provision in this Agreement or any Related Agreement, the prevailing
party in such dispute shall be entitled to recover from the losing party all
fees, costs and expenses of enforcing any right of such prevailing party under
or with respect to this Agreement and/or such Related Agreement, including,
without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
11.10 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
11.11 Facsimile Signatures; Counterparts. This Agreement may be executed by
facsimile signatures and in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one agreement.
11.12 Broker's Fees. Except as set forth on Schedule 11.12 hereof, each party
hereto represents and warrants that no agent, broker, investment banker, person
or firm acting on behalf of or under the authority of such party hereto is or
will be entitled to any broker's or finder's fee or any other commission
directly or indirectly in connection with the transactions contemplated herein.
Each party hereto further agrees to indemnify each other party for any claims,
losses or expenses incurred by such other party as a result of the
representation in this Section 11.12 being untrue.
11.13 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Agreement or any Related Agreement to favor any party
against the other.
[Signatures appear on the following page.]
IN WITNESS WHEREOF, the parties hereto have executed this SECURITIES PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
RPM TECHNOLOGIES, INC. LAURUS MASTER FUND, LTD.
By: /s/ ▇▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇▇ GRIN
---------------------- -------------------------
Name: ▇▇▇▇▇ ▇▇▇▇ Name: ▇▇▇▇▇▇ Grin
Title: CEO Title: Director
EXHIBIT A
FORM OF SECURED TERM NOTE
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
FORM OF ESCROW AGREEMENT
SCHEDULE 4.3
Name Date of Option Expiration Date Number of Shares Exercise Price
RPM Technologies, Inc.
▇▇▇▇▇ ▇▇▇▇ 6/30/2004 9/1/2007 2,500,000 $0.50
▇▇▇▇▇▇▇ ▇▇▇▇▇ 6/30/2004 9/1/2007 2,500,000 $0.50
(Options for restricted common stock for cash or accrued compensation)
Total 5,000,000
Warrants
Laurus Master Fund 7/9/2004 7/9/2007 375,000 $0.30
Laurus Master Fund 7/9/2004 7/9/2007 375,000 $0.36
Laurus Master Fund 7/9/2004 7/9/2007 375,000 $0.42
Laurus Master Fund 6/23/2006 6/23/2016 3,750,000 $0.001
Total 4,875,000
RPM further reserves the right to issue up to 5.0 million shares of restricted
common stock without any registration rights for the term the Laurus Note is
outstanding. Additionally RPM reserves 2.5 million shares of restricted stock
for issuance to the members of the Board of Directors or any advisory board that
maybe formed.
SCHEDULE 4.6
None.
SCHEDULE 4.7
Accrued deferred officer compensation in the approximate amount set forth in the
Subordination Agreement dated as of the date of the June 2006 Agreement between
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and Purchaser.
SCHEDULE 4.9
None.
SCHEDULE 4.10
The Company licenses certain rights with respect to the manufacture and sale of
its roofing products pursuant to a certain License and Royalty Agreement by and
among the Company and ▇▇▇▇▇▇ ▇▇▇▇▇ dated June 1, 2006 (Copy provided).
SCHEDULE 4.12
ERP v. RPM (Vendor dispute $36,000) Case no. 06AR924 Will County Judicial Court
12th District, Illinois. Case is in the discovery stage now after non binding
arbitration hearing and is scheduled for a hearing on July 23, 2007. No
insurance is applicable. Maximum liability is estimated at $36,000.
RPM v. ▇▇▇▇▇ ▇▇▇▇▇▇▇ (Customer failure to pay invoice to RPM) RPM has a
Judgment against the defendant for $70,388 in Volusia, Florida, 9th Judicial
District. Case no. 2006-11494 CIDL entered on 2-12-07 by Judge ▇▇▇▇▇▇. Defendant
is paying RPM $2,000 per week until paid. No liability is expected to RPM. No
insurance applicable.
SCHEDULE 4.13
None.
SCHEDULE 4.14
None.
SCHEDULE 4.15
None.
SCHEDULE 4.17
None.
SCHEDULE 4.21
None.
SCHEDULE 6.12(E)
Accrued deferred officer compensation in the approximate amount set forth in the
Subordination Agreement dated as of the date of the Agreement between ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and Purchaser, plus any additional amounts for deferred
officer compensation that may accrue in the future.
SCHEDULE 11.12
None.