Attached files
| file | filename |
|---|---|
| EX-3 - CERTIFICATE OF DESIGNATION OF PREFERENCES, RIGHTS AND LIMITATIONS OF SERIES A CO - MobileSmith, Inc. | pref-a_certifcate.htm |
| 8-K - DEBT EXCHANGE. SECOND CLOSING - MobileSmith, Inc. | most_8k.htm |
Exhibit 10.1
SERIES
A EXCHANGE AGREEMENT
THIS
SERIES A EXCHANGE AGREEMENT (this “Agreement”), dated as of
December 23, 2020 (the “Closing Date”), is
entered into by and between MobileSmith, Inc., a Delaware
corporation (the “Company”), and the
parties identified as “Holder(s)” on the signature page
hereto (the “Holder(s)”).
BACKGROUND
WHEREAS, the
Company and the Holders have entered into various convertible and
non-convertible promissory note agreements (the “Note Agreements”) whereby
the Company has issued to the Holders various convertible and
non-convertible promissory notes (the “Notes”);
WHEREAS, the
outstanding Note Agreements and the Notes held by Holders,
including all amendments thereto, are set forth on Exhibit A that is attached
hereto and incorporated herein by reference, which include certain
documents related to the Note Agreements and the Notes including
but not limited to certain security agreements relating to a
secured interest in all of the Company’s assets
(collectively, the “Note Transaction
Documents”); and
WHEREAS, pursuant
and subject to the terms herein, the Company and Holders have
agreed to exchange the Notes (including all outstanding but unpaid
principal and interest) for new securities of the
Company.
AGREEMENT
NOW,
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the
Holder hereby agrees as follows:
1. Incorporation
of Preliminary Statements and Acknowledgement; Definitions.
The preliminary statements set forth above by this reference hereto
are hereby incorporated into this Agreement. Terms used as defined
terms herein and not otherwise defined shall have the meanings
provided therefor in the Purchase Agreement. In addition, the
following terms shall have the following meanings:
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“Common Stock” means the
Company’s common stock, par value $0.001 per share, and stock
of any other class of securities into which such securities may
hereafter be reclassified or changed.
“Exchange
Act” means the Securities
Exchange Act of 1934, as amended.
“Exchange Transaction
Documents” means this Agreement and the Certificate of
Designation (as defined in Section 2 below).
“Lien”
means a lien, charge pledge, security interest, encumbrance, right
of first refusal, preemptive right or other
restriction.
“Material Adverse Effect”
shall have the meaning assigned to such term in Section
4(a).
“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any
kind.
“Proceeding”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
“Securities” means the
Series A Preferred Stock (as defined in Section 2 below) and the
Underlying Shares.
“Securities
Act” means the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
“Trading Day” means a day
on which the principal Trading Market is open for
trading.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE MKT,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange, the OTC Bulletin
Board, the OTCQB or the OTCQX (or any successors to any of the
foregoing).
1
“Underlying Shares” means
the shares of Common Stock issued and issuable upon conversion of
the Series A Preferred Stock.
2. Exchange. Subject to the
conversion election set forth in this Section 2, the Company agrees
to issue to the Holder 695,728 shares of Series A Convertible
Preferred Stock of the Company (the “Series A Preferred
Stock”) with the terms set forth in the certificate of
designation of preferences, rights and limitations (the
“Certificate of
Designation”) that is attached hereto as Exhibit B and incorporated
herein by reference, in exchange for the Notes (including all
outstanding but unpaid principal and interest). On the Closing
Date, the Company shall file the Certificate of Designation with
the State of Delaware and shall deliver to the Agent (as defined in
the Certificate of Designation) evidence of such filing and the
acceptance thereof by the State of Delaware, which shall be
reasonably satisfactory to the Agent, and shall deliver to the
Holder an original Series A Preferred Stock certificate dated as of
the Closing Date in the name and denomination of shares of Series A
Preferred Stock set forth on the signature page hereto within ten
Trading Days from the Closing Date. Provided, however, a Holder may
within two Trading Days after the Closing Date provide a written
notice to the Company that such Holder is electing to convert all
or part of the Note(s) held by such Holder pursuant to the terms of
such Note. In the event a Holder elects to convert all or a portion
of such Holder’s Notes, such Holder shall not be entitled to
any shares of Series A Preferred Stock with respect to the portion
of the Notes so converted and this Agreement shall be deemed null,
void and of no further force or effect with respect to the portion
of the Notes so converted.
3. Cancellation of the Notes. The
Company and the Holder agree that, upon issuance of the Series A
Preferred Stock, the Note Transaction Documents shall be cancelled
in full and of no further force or effect and will destroy all
certificates and/or documents with the Company’s original
signature evidencing the Note Transaction Documents. The Holder
agrees that, upon issuance and delivery by the Company of the
Series A Preferred Stock, all executory and other provisions of the
Note Transaction Documents (including all agreements and documents
relating to any amendments and exchanges thereto) shall be deemed
cancelled in full and of no further force or effect with respect to
the Company or the Holder. Additionally, simultaneously with the
issuance and delivery by the Company of the Series A Preferred
Stock, the Holder, or in the alternative the Company, shall cause
the filing of UCC-3’s to terminate all of the UCC-1’s
filed pursuant to the Note Transaction Documents.
4. Representations and Warranties.
Except as otherwise described in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2019 (and any
amendments thereto filed at least two (2) Trading Days prior to the
Closing Date), the Company’s Quarterly Reports on Form 10-Q
for the quarters ended September 30, 2020, June 30, 2020 and March
31, 2007 (and any amendments thereto filed at least two (2) Trading
Days prior to the Closing Date),, and any of the Company’s
Current Reports on Form 8-K filed since January 1, 2020 (and any
amendments thereto filed at least two (2) Trading Days prior to the
Closing Date) (all collectively, the “SEC Reports”), the
Company hereby represents and warrants to, and covenants with, each
Holders as of the date hereof and the applicable Closing Date, as
follows:
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company are set forth on
Schedule 4.1(a)
(individually, a “Subsidiary” and
collectively, the “Subsidiaries”). The
Company owns, directly or indirectly, all of the capital stock or
other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.
(b) Organization and Qualification.
The Company and each of the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use
its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of any Exchange
Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its
obligations under any Exchange Transaction Document (any of (i),
(ii) or (iii), a “Material Adverse Effect”)
and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
(c) Authorization; Enforcement. The
Company has all requisite power and authority to execute, deliver
and perform its obligations under the Transaction Agreements. The
execution and delivery of the Exchange Transaction Documents, and
the consummation by the Company of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action
and no further action on the part of the Company or its Board of
Directors or stockholders is required. The Exchange Transaction
Documents have been validly executed and delivered by the Company
and constitute legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their terms,
except to the extent (i) rights to indemnity and contribution may
be limited by state or federal securities laws or the public policy
underlying such laws, (ii) such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ and contracting
parties’ rights generally and (iii) such enforceability may
be subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
(d) No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Exchange Transaction Documents to which it is a party, the
issuance and sale of the Securities and the consummation by it of
the transactions contemplated hereby and thereby do not and will
not: (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles
of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the
properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or
by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to
which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or
asset of the Company or a Subsidiary is bound or affected; except
in the case of each of clauses (ii) and (iii), such as could not
have or reasonably be expected to result in a Material Adverse
Effect.
2
(e) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Exchange Transaction Documents, will
be duly and validly issued, fully paid and nonassessable, free and
clear of all Liens imposed by the Company other than restrictions
on transfer provided for in the Exchange Transaction Documents. The
Underlying Shares, when issued in accordance with the terms of the
Exchange Transaction Documents, will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the
Exchange Transaction Documents.
(f) Capitalization. The outstanding
capital stock of the Company is as described in the SEC
Reports.
The Company has not made any material issuances of capital stock
since December 10, 2020, other than pursuant to the purchase of
shares under the Company’s employee stock equity plans and
the exercise of outstanding warrants or stock options, in each
case as disclosed in the SEC Reports, as well as the issuance of
restricted shares to certain of its directors as part of its
director compensation program and the issuance of restricted shares
to certain of the Company’s employees and consultants under
the Company’s employee stock equity plans. There are not (i)
any outstanding preemptive rights, or (ii) any rights, warrants or
options to acquire, or instruments convertible into or exchangeable
for, any unissued shares of capital stock or other equity interest
in the Company not disclosed in the SEC Reports, or (iii) any
contract, commitment, agreement, understanding or arrangement of
any kind to which the Company is a party that would provide for the
issuance or sale of any capital stock of the Company, any such
convertible or exchangeable securities or any such rights, warrants
or options not disclosed in the SEC Reports. There are no
shareholders agreements, voting agreements or other similar
agreements with respect to the Common Stock to which the Company is
a party.
(g) Financial Statements. The
financial statements of the Company and the related notes contained
in the SEC Reports present fairly and accurately in all material
respects the financial position of the Company as of the dates
therein indicated, and the results of its operations, cash flows
and the changes in shareholders’ equity for the periods
therein specified, subject, in the case of unaudited financial
statements for interim periods, to normal year-end audit
adjustments. Such financial statements (including the related
notes) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis at the times
and throughout the periods therein specified, except that unaudited
financial statements may not contain all footnotes required by
generally accepted accounting principles.
(h) Material Changes; Undisclosed Events,
Liabilities or Developments. Except as disclosed in the SEC
Reports or in any press releases issued by the Company at
least two (2) Business Days prior to the Closing Date, there has
not been (i) an event, circumstance or change that has had or
is reasonably likely to have a Material Adverse Effect upon the
Company, (ii) any obligation incurred by the Company that is
material to the Company, (iii) any dividend or distribution of
any kind declared, paid or made on the capital stock of the
Company, or (iv) any loss or damage (whether or not insured) to the
physical property of the Company which has had a Material Adverse
Effect.
(i) Litigation. There is no
material legal or governmental proceeding pending, or to the
knowledge of the Company, threatened, to which the Company is a
party or of which the business or property of the Company is
subject that is required to be disclosed and that is not so
disclosed in the SEC Reports or in the supplemental written
disclosure on material legal proceedings provided to the Holders.
Other than the information disclosed in the SEC Reports, the
Company is not subject to any injunction, judgment, decree or order
of any court, regulatory body, administrative agency or other
government body.
(j) No Violations. To the knowledge
of the Company, it is
not in violation of its Certificate of Incorporation, bylaws or
other organizational documents, as amended. To the knowledge of the
Company, it is not in violation of any law, administrative
regulation, ordinance or order of any court or governmental agency,
arbitration panel or authority applicable to the Company, which
violation, individually or in the aggregate, is reasonably likely
to have a Material Adverse Effect. The Company is not in default
(and there exists no condition which, with the passage of time or
otherwise, would constitute a default) in the performance of any
bond, debenture, note or any other evidence of indebtedness or any
indenture, mortgage, deed of trust or any other material agreement
or instrument to which the Company is a party or by which the
Company is bound, which such default would have a Material Adverse
Effect upon the Company.
(k) Governmental and Regulatory
Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary
to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such permits could not
reasonably be expected to result in a Material Adverse Effect
(“Material
Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation
or modification of any Material Permit.
3
(l) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for (i) Liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company and the Subsidiaries and (ii) Liens for the payment of
federal, state or other taxes, for which appropriate reserves have
been made therefor in accordance with GAAP and, the payment of
which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are
in compliance.
(m) Intellectual
Property.
(i) Except for matters which are
not reasonably likely to have a Material Adverse Effect, (i) each
of the Company has ownership of, or a license or other legal right
to use, all patents, copyrights, trade secrets, trademarks,
customer lists, designs, manufacturing or other processes, computer
software, systems, data compilation, research results or other
proprietary rights used in the business of the Company
(collectively, “Intellectual Property”)
and (ii) all of the Intellectual Property owned by the Company
consisting of patents, registered trademarks and registered
copyrights have been duly registered in, filed in or issued by the
United States Patent and Trademark Office, the United States
Register of Copyrights or the corresponding offices of other
jurisdictions and have been maintained and renewed in accordance
with all applicable provisions of law and administrative
regulations in the United States and/or such other
jurisdictions.
(ii) Except for matters which are
not reasonably likely to have a Material Adverse Effect, all
material licenses or other material agreements under which (i) the
Company employs rights in Intellectual Property, or (ii) the
Company has granted rights to others in Intellectual Property owned
or licensed by the Company are in full force and effect, and there
is no default by the Company with respect thereto.
(iii) The Company believes that it
has taken all steps reasonably required in accordance with sound
business practice and business judgment to establish and preserve
the ownership of the Company’s material Intellectual
Property.
(iv) Except for matters which are
not reasonably likely to have a Material Adverse Effect, to the
knowledge of the Company, (i) the present business, activities and
products of the Company do not infringe any intellectual property
of any other person; (ii) neither the Company is making
unauthorized use of any confidential information or trade secrets
of any person; and (iii) the activities of any of the employees of
the Company, acting on behalf of the Company, do not materially
violate any agreements or arrangements related to confidential
information or trade secrets of third parties.
(v) Except for matters which are
not reasonably likely to have a Material Adverse Effect, and except
as disclosed in the SEC Reports, no proceedings are pending, or to
the knowledge of the Company, threatened, which challenge the
rights of the Company to the use the Company’s Intellectual
Property.
(n) Insurance. The Company
maintains insurance of the types and in the amounts that the
Company reasonably believes is adequate for its businesses,
including, but not limited to, insurance covering real and personal
property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily
insured against by similarly situated companies, all of which
insurance is in full force and effect.
(o) Transactions With Related
Parties. Other than described in the SEC Reports, to the
knowledge of the Company, no transaction has occurred between or
among the Company or any of its Affiliates, officers or directors
or any Affiliate or Affiliates of any such officer or director that
with the passage of time are reasonably likely be required to be
disclosed pursuant to Section 13, 14 or 15(d) of the Exchange
Act.
(p) Private Placement. Assuming the
accuracy of the Holder’s representations and warranties set
forth in Section 5, no registration under the Securities Act is
required for the exchange, offer and sale of the Securities by the
Company to the Holder as contemplated hereby. The issuance and sale
of the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(q) Investment Company. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“investment company” subject to registration under the
Investment Company Act of 1940, as amended.
(r) Listing and Maintenance
Requirements. The Company’s Common Stock is listed on
the OTCQB maintained by the OTC Markets Group, Inc. under the
symbol TAPM. The Company has not, in the 12 months preceding the
date hereof, received notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
(s) Tax
Status. Except
for matters that would not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect,
the Company and its Subsidiaries each (i) has made or filed all
United States federal, state and local income and all foreign
income and franchise tax returns, reports and declarations required
by any jurisdiction to which it is subject, or has properly filed
extensions with respect thereto, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and
declarations except for taxes due for which appropriate extensions
have been filed, and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.
(t) Contracts. Except for matters
which are not reasonably likely to have a Material Adverse Effect
and those contracts that are substantially or fully performed or
expired by their terms, the contracts listed as exhibits to or
described in the SEC Reports that are material to the Company and
all amendments thereto, are in full force and effect on the date
hereof, and neither the Company nor, to the Company’s
knowledge, any other party to such contracts is in breach of or
default under any of such contracts.
(u) Offering Prohibitions. Neither
the Company nor any person acting on its behalf or at its direction
has in the past or will in the future take any action to sell,
offer for sale or solicit offers to buy any securities of the
Company which would bring the offer or sale of the Series A
Preferred Stock as contemplated by this Agreement or the issuance
of the Conversion Shares as contemplated by the Series A Preferred
Stock within the provisions of Section 5 of the Securities
Act.
(v) Books and Records. The books,
records and accounts of the Company accurately and fairly reflect,
in reasonable detail, the transactions in, and dispositions of, the
assets of, and the operations of, the Company. The Company
maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in
accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
(w) Survival. The foregoing
representations and warranties shall survive the Closing
Date.
4
5. Representations and Warranties of the
Holder. The Holder hereby represents and warrants as of the
date hereof to the Company as follows (unless as of a specific date
therein):
(a) Organization; Authority. The
Holder is an entity duly incorporated or formed, validly existing
and in good standing under the laws of the jurisdiction of its
incorporated or formed with full right, corporate, partnership,
limited liability company or similar power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and
performance by the Holder of the transactions contemplated herein
have been duly authorized by all necessary corporate, partnership,
limited liability company or similar action, as applicable, on the
part of the Holder. This Agreement has been duly executed by the
Holder, and when delivered by the Holder in accordance with the
terms hereof, will constitute the valid and legally binding
obligation of the Holder, enforceable against it in accordance with
its terms, except: (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.
(b) Experience of
Holder. Each
Holder, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated
the merits and risks of such investment. Each Holder is able
to bear the economic risk of an investment in the Securities and,
at the present time, is able to afford a complete loss of such
investment.
(c) Communication of Offer. No
Holder is purchasing the Securities as a result of any
“general solicitation” or “general
advertising,” as such terms are defined in Regulation D,
which includes, but is not limited to, any advertisement, article,
notice or other communication regarding the Securities published in
any newspaper, magazine or similar media or on the internet or
broadcast over television, radio or the internet or presented at
any seminar or any other general solicitation or general
advertisement.
(d) Information on Company. Each
Holder has been furnished with or has had access to the SEC Reports
during the period from the date that is two years preceding the
date hereof through the tenth Trading Day preceding the Closing
Date in which such Holder purchases Securities. Holders are not
deemed to have any knowledge of any information not included in the
SEC Reports unless such information is delivered in the manner
described in the next sentence. In addition, such Holder
may have received in writing from the Company such other
information concerning its operations, financial condition and
other matters as such Holder has requested under a confidentiality
agreement (such other information is collectively, the
“Other Written
Information”), and considered all factors such Holder
deems material in deciding on the advisability of investing in the
Securities. Such Holder was afforded (i) the opportunity
to ask such questions as such Holder deemed necessary of, and to
receive answers from, representatives of the Company concerning the
merits and risks of acquiring the Securities; (ii) the right of
access to information about the Company and its financial
condition, results of operations, business, properties, management
and prospects sufficient to enable such Holder to evaluate the
Securities; and (iii) the opportunity to obtain such additional
information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an
informed investment decision with respect to acquiring the
Securities.
(e) Securities Act Representations.
The Holder understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law. The Holder acknowledges it is contemplating
selling certain of the Series A Preferred Stock immediately
subsequent to the execution of this Agreement but that such
transfer shall be accomplished in full compliance with the
provisions of the Securities Act.
(f) Holder Status. At the time the
Holder was offered the Securities, it was, and as of the date
hereof it is, and on each date on which it converts the Series A
Preferred Stock it will be, an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act.
(g) Survival. The foregoing
representations and warranties shall survive the Closing
Date.
The
Company acknowledges and agrees that the representations contained
in Section 5 shall not modify, amend or affect the Holder’s
right to rely on the Company’s representations and warranties
contained in this Agreement or any other document or instrument
executed and/or delivered in connection with this Agreement or the
consummation of the transaction contemplated hereby.
6. Covenants
in Favor of the Holders. The Company covenants and agrees
with the Holders that, so long as any shares of the Series A
Preferred Stock shall be outstanding, unless waived by the Agent
(as defined in the Certificate of Designation) will perform the
obligations set forth in this Section 6:
(a) Taxes and Levies. The Company
will promptly pay and discharge all taxes, assessments, and
governmental charges or levies imposed upon the Company or upon its
income and profits, or upon any of its property, before the same
shall become delinquent, as well as all claims for labor, materials
and supplies which, if unpaid, might become a lien or charge upon
such properties or any part thereof; provided, however, that the
Company shall not be required to pay and discharge any such tax,
assessment, charge, levy or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings and the
Company shall set aside on its books adequate reserves in
accordance with GAAP with respect to any such tax, assessment,
charge, levy or claim so contested.
(b) Maintenance of Existence. The
Company will do or cause to be done all things reasonably necessary
to preserve and keep in full force and effect its corporate
existence, rights and franchises and comply with all laws
applicable to the Company, except where the failure to comply would
not have a Material Adverse Effect.
(c) Maintenance of Property. The
Company will at all times maintain, preserve, protect and keep its
property used or useful in the conduct of its business in good
repair, working order and condition, and from time to time make all
needful and proper repairs, renewals, replacements and improvements
thereto as shall be reasonably required in the conduct of its
business.
(d) Insurance. The Company will, to
the extent necessary for the operation of its business, keep
adequately insured by financially sound reputable insurers, all
property of a character usually insured by similarly situated
corporations and carry such other insurance as is usually carried
by similar corporations.
(e) Books and Records. The Company
will maintain a system of accounting sufficient to enable the
Company to prepare financial statements in accordance with GAAP and
will furnish to the Holders such books, records and accounts
reflecting all of the business affairs and transactions of the
Company as the Holders may reasonably request.
(f) Notice of Certain Events. The
Company will give prompt written notice (with a description in
reasonable detail) to the Holders upon becoming aware of the
occurrence of any Event of Default (as hereinafter defined) or any
event which, with the giving of notice or the lapse of time, would
constitute an Event of Default.
5
(g) Matters Requiring Agent
Approval. So long as any of shares of the Series A Preferred
Stock remain outstanding, the Company will not, without the
approval of the Agent:
(i) make any loan or advance to, or
own any stock or other securities of, any subsidiary or other
corporation, partnership, or other entity unless it is wholly owned
by the Company;
(ii) make any loan or advance to any
person, except advances and similar expenditures in the ordinary
course of business or under the terms of an employee stock or
option plan approved by the Company’s Board of
Directors;
(iii)
guarantee any
indebtedness except for trade accounts of the Company or any
subsidiary arising in the ordinary course of business;
(iv)
make any investment
other than investments in prime commercial paper, money market
funds, certificates of deposit in any United States bank having a
net worth in excess of $100,000,000 or obligations issued or
guaranteed by the United States of America, in each case having a
maturity not in excess of two years;
(v)
incur any
indebtedness in excess of $25,000 individually or in the aggregate,
other than trade credit incurred in the ordinary course of
business;
(vi)
increase or approve
the compensation of the named executive officers, including
benefits, bonuses and issuances of equity compensation; provided,
however, that approval by the Agent of a pool of compensation
benefits to be allocated by the Company will constitute approval of
each specific allocation of such benefits by the
Company;
(vii)
change the
principal business of the Company, enter new lines of business, or
exit the current line of business;
(viii)
sell, transfer,
exclusively license, pledge or encumber any material Intellectual
Property of the Company, except in the ordinary course of
business;
(ix)
create or authorize
the creation of or issue any other security convertible into or
exercisable for any equity security of the Company, other than
issuances to officers, directors, employees, consultants or
advisors pursuant to equity compensation plans approved by the
Company’s Board of Directors;
(x)
purchase or redeem
or pay any dividend on any capital stock, other than stock
repurchased from former employees or consultants in connection with
the cessation of their employment or consulting services, at the
lower of fair market value or cost; or
(xi)
increase the
number of shares authorized for issuance to officers, directors,
employees, consultants and advisors pursuant to equity incentive
plans or other similar compensatory agreements or
arrangement.
7.
Miscellaneous.
(a) Waivers
and Amendments. Any provision of this Agreement may be
amended, waived or modified only upon the written consent of the
Company and Holders the written consent or approval of at least a
majority of the then outstanding Series A Preferred Stock
(“Requisite
Percentage”).
(b) Governing
Law. This Agreement and all actions arising out of or in
connection with this Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without
regard to the conflicts of law provisions of the State of Delaware
or of any other state.
(c) Survival.
The representations, warranties, covenants and agreements made
herein shall survive the execution and delivery of this
Agreement.
(d) Successors
and Assigns. Subject to the restrictions on transfer
described in Sections 9(e) below, the rights and obligations
of the Company and the Holders shall be binding upon and benefit
the successors, assigns, heirs, administrators and transferees of
the parties.
(e) Assignment
by the Company. The rights, interests or obligations
hereunder may not be assigned, by operation of law or otherwise, in
whole or in part, by the Company without the prior written consent
of Holders holding a Requisite Percentage.
(f) Entire
Agreement. This Agreement together with the other
Transaction Agreements constitute and contain the entire agreement
among the Company and Holders and supersede any and all prior
agreements, negotiations, correspondence, understandings and
communications among the parties, whether written or oral,
respecting the subject matter hereof.
(g) Notices.
Except as set forth in Section 1(c), all notices, requests,
demands, consents, instructions or other communications required or
permitted hereunder shall in writing and faxed, mailed or delivered
to each party as follows: (i) if to a Holder, at such
Holder’s address or facsimile number set forth in the
Schedule of Holders attached as Schedule I, or at such other
address as such Holder shall have furnished the Company in writing,
or (ii) if to the Company, at 5400 Trinity Road, Suite 208,
Raleigh, North Carolina 27607
Attention: Legal Department, email address
legal@mobilesmith.com, with a copy to Quick Law Group PC, 1035
Pearl Street, Suite 403, Boulder, CO 80302, Attn: Jeffrey M. Quick,
Esq., fax: (303) 845-7315, email: jquick@quicklawgroup.com or at
such other address or facsimile number as the Company shall have
furnished to the Holders in writing. All such notices and
communications will be deemed effectively given the earlier of
(i) when received, (ii) when delivered personally,
(iii) one Trading Day after being delivered by facsimile (with
receipt of appropriate confirmation), (iv) one Trading Day
after being deposited with an overnight courier service of
recognized standing or (v) two days after being deposited in
the U.S. mail, first class with postage prepaid.
(h) Expenses.
Each of the parties hereto shall bear its own expenses in
connection with the preparation, execution and delivery of this
Agreement and the other Transaction Agreements.
(i) Separability
of Agreements; Severability of this Agreement. The
Company’s agreement with each of the Holders is a separate
agreement and the sale of the Series A Preferred Stock to each of
the Holders is a separate sale. Unless otherwise expressly provided
herein, the rights of each Holder hereunder are several rights, not
rights jointly held with any of the other Holders. Any invalidity,
illegality or limitation on the enforceability of the Agreement or
any part thereof, by any Holder whether arising by reason of the
law of the respective Holder’s domicile or otherwise, shall
in no way affect or impair the validity, legality or enforceability
of this Agreement with respect to other Holders. If any provision
of this Agreement shall be judicially determined to be invalid,
illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or
impaired thereby.
(j) Counterparts.
This Agreement may be executed in one or more counterparts, each of
which will be deemed an original, but all of which together will
constitute one and the same agreement. Facsimile copies of signed
signature pages will be deemed binding originals.
(Signature Pages Follow)
6
IN
WITNESS WHEREOF, this Series A Exchange Agreement is executed as of
the date first set forth above.
MOBILESMITH,
INC.
By:
__/s/ Jerry
Lepore________________
Name:
Jerry Lepore
Title:
Chief Executive
Officer
[signature page of Holder to follow]
7
[HOLDER
SIGNATURE PAGE TO MOBILESMITH, INC.
SERIES
A EXCHANGE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Series A Exchange
Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Holder:
Address of Holder:
Signature of
Authorized Signatory of Holder: _____________________________________________
Name of
Authorized Signatory: _________________________________________________________
Title
of Authorized Signatory: __________________________________________________________
Address
for Delivery of Securities to Holder (if not same as address for
notice): _________________
_________________________________________________________________________________
__________________________________________________________________________________
Number
of Series A Preferred Stock Shares:
8
EXHIBIT A
SCHEDULE OF NOTE PURCHASE AGREEMENTS AND NOTES
9
SCHEDULE B
CERTIFICATE OF DESIGNATION
10