EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
LAURUS MASTER FUND, LTD.
and
RPM Technologies, Inc.
Dated: June 19, 2006
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 Purchaser 14
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 27
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 Opinion Exhibit C
Form of Escrow Agreement Exhibit D
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of June 19, 2006, 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 Three Million Dollars ($3,000,000) 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 3,750,000 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 3,750,000 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 four percent (4.00%) of the aggregate principal amount of the
Note. The foregoing fee is referred to herein as the "Closing Payment."
(c) The Company shall reimburse the Purchaser for its reasonable expenses
(including legal fees and expenses) incurred in connection with the preparation
and negotiation of this Agreement and the Related Agreements (as hereinafter
defined), and expenses incurred in connection with the Purchaser's due
diligence review of the Company and its Subsidiaries (as defined in Section
4.2) and all related matters. Amounts required to be paid under this Section
2(c) will be paid on the Closing Date and shall be $15,000 for all such
expenses referred to in this Section 2(c).
(d) The Closing Payment and the expenses referred to in the preceding clause
(c) (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) and a
disbursement letter (the "Disbursement Letter").
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. 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 (1) execute and deliver (i) this Agreement, (ii) the Note and the
Warrant to be issued in connection with this Agreement, (iii) the Master
Security Agreement dated as of the date hereof between the Company, certain
Subsidiaries of the Company and the Purchaser (as amended, modified and/or
supplemented from time to time, the "Master Security Agreement"), (iv) the
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"), (v) 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 D hereto, (as amended, modified and or supplemented from time to
time, the "Escrow Agreement") and (vi) all other documents, instruments and
agreements entered into in connection with the transactions contemplated hereby
and thereby (the preceding clauses (ii) through (vi), collectively, the
"Related Agreements"); (2) issue and sell the Note; (3) issue and sell the
Warrant and the Warrant Shares pursuant to the terms of the Warrant; and (4)
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 (i) 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 (ii) 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, 33,447,541 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 and the 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 Company's 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) 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, 2005 (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 (x) any term of its Charter or
Bylaws, or (y) 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 (y), 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 Securities ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, as amended (the "Exchange Act"). The
Company has made available to the Purchaser copies of: (i) its Annual Report
on Form 10-KSB for its fiscal year ended December 31, 2005; and (ii) its
Quarterly Report on Form 10-QSB for its fiscal quarter ended March 31, 2006,
and the Form 8-K filings which it has made during the fiscal year ending 2006
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 (as hereafter defined) 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: (i) 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 (ii) 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 (ii) above.
4.27 ERISA. Based upon the Employee Retirement Income Security Act of 1974
("ERISA"), and the regulations and published interpretations thereunder: (i)
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")); (ii) 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; (iii) 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); (iv) 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
(v) 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 of 1933, as amended (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: (i) an
effective registration statement under the Securities Act; or (ii) 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, (i) in the case of Sections 6.1 through 6.4, 6.13, until the Warrant
Shares are disposed of by the Purchaser, (ii) in the case of Sections 6.5
through 6.10, 6.15 and 6.16, until the Note is repaid in full, (iii) 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) 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 (i) the validity thereof shall currently and diligently be
contested in good faith by appropriate proceedings, (ii) 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 (iii) if 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 (i)
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; (ii) 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; (iii) maintain public and product liability insurance against
claims for personal injury, death or property damage suffered by others; (iv)
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 (v) furnish the Purchaser
with (x) copies of all policies and evidence of the maintenance of such
policies at least thirty (30) days before any expiration date, (y) 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 (z) 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 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 th e 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. (I) 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:
(a) (i) directly or indirectly declare or pay any dividends, other than
dividends paid to the Company or any of its wholly-owned Subsidiaries, (ii)
issue any preferred stock that is manditorily redeemable prior to the one year
anniversary of the Maturity Date (as defined in the Note) or (iii) redeem any
of its preferred stock or other equity interests;
(b) 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);
(c) 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;
(d) materially alter or change the scope of the business of the Company and its
Subsidiaries taken as a whole; or
(e) (i) 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 (x) the
Company's obligations owed to the Purchaser, (y) 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 (z) 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; (ii) cancel any indebtedness owing to it in excess of $50,000 in
the aggregate during any twelve (12) month period; (iii) 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 (e); and
(II) 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 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 StockThe 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 (the "Stock Acquisition Limitation").
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: (i) 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
(ii) 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: (i) any
misrepresentation by the Purchaser or breach of any warranty by the Purchaser
in this Agreement or any Related Agreement; or (ii) 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 (A) the Purchaser's total purchase price (including
customary brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) 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), (x) enter into any equity line of credit agreement or similar
agreement or (y) 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) OR ANY OTHER SECURITY FOR THE OBLIGATIONS (AS DEFINED IN
THE MASTER SECURITY AGREEMENT), 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: ▇▇▇-▇▇▇-▇▇▇▇
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.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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 OPINION
EXHIBIT D
FORM OF ESCROW AGREEMENT