SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 1, 2004
REMOTE DYNAMICS, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-26140 51-0352879
- ------------------------------------------- ---------------------------------- -------------------------------------
(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation or Organization) Number) Identification Number)
1155 Kas Drive, Suite 100, Richardson, Texas 75081
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (972) 301-2000
(Former Name or Former Address, if Changed Since Last Report)
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.
Securities Purchase Agreement - Sale of Series A Preferred Stock
On October 4, 2004, Remote Dynamics, Inc. (the "Company") announced
that it had closed the sale of 5,000 shares of Series A Convertible Preferred
Stock ("Series A Preferred Stock"), with each preferred share having a face
value of $1,000, for a total purchase price of $5,000,000, on October 1, 2004
(the "Closing"). The Series A Preferred Stock is convertible into shares of the
Company's common stock ("Common Stock") at a conversion price ("Conversion
Price") of $2.00 per share. The Company sold the Series A Preferred Stock to an
investor pursuant to that certain Securities Purchase Agreement, October 1,
2004, by and between the Company and SDS Capital Group SPC, Ltd., which
agreement is attached hereto as Exhibit 10.1. The Series A Preferred Stock was
issued to the investor pursuant to the exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act")
provided by Regulation D promulgated thereunder.
In addition to the above pricing and number of the securities sold,
the Securities Purchase Agreement also provides that the Company shall use the
proceeds from this offering only for general corporate purposes and working
capital. The Company further agreed to (i) timely file the with SEC all reports
required to be filed by it under the Securities Exchange Act of 1934, (ii)
reserve 5,000,000 shares of Common Stock for issuance upon conversion of the
Series A Preferred Stock and upon exercise of the warrants described below,
(iii) use commercially reasonable efforts to maintain the listing of the Common
Stock on the Nasdaq SmallCap Market, and (iv) not redeem, repurchase or declare
or pay and cash dividend on any shares of capital stock. The Company further
granted the investor the right to participate in the future issuance of equity
or equity-linked securities of the Company for a period of 12 months after the
closing of the Series A Preferred Stock issuance. The Company also agreed to
indemnify the investor from damages it incurs (A) as a result of any breach of
the representations, warranties and covenants contained in the Securities
Purchase Agreement or in the related transaction documents by the Company or
(B) as a result of a cause of action brought by a third-party resulting from
(1) the execution of the transaction documents, (2) any transaction financed by
the use of proceeds or (3) the status of the investor as a holder of the
Company's securities.
The terms of the Series A Preferred Stock are set forth in the
Certificate of Designation, Preferences and Rights attached hereto as Exhibit
4.1. The Series A Preferred Stock bears a dividend for the first two years it
remains outstanding at a rate of 8% per year.
The holders of shares of Series A Preferred Stock shall have the right
to cause the Company to redeem any or all of its shares at a price equal to
115% of face value, plus accrued but unpaid dividends in the following events:
- - the Common Stock is suspended from trading or is not listed for
trading on at least one of, the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market for an
aggregate of 10 or more trading days in any twelve-month period;
- - the initial registration statement required to be filed by the Company
pursuant to the Registration Rights Agreement has not been declared effective
by the one hundred twentieth (120th) day following the Closing or such
registration statement, after being declared effective, cannot be utilized by
the holders of Series A Preferred Stock for the resale of all of their
registrable securities for an aggregate of more than 15 days in the aggregate;
- - the Company fails to remove any restrictive legend on any certificate
or any shares of Common Stock issued to the holders of Series A Preferred Stock
upon conversion of the Series A Preferred Stock as and when required and such
failure continues uncured for five business days;
- - the Company provides written notice (or otherwise indicates) to any
holder of Series A Preferred Stock, or states by way of public announcement
distributed via a press release, at any time, of its intention not to issue, or
otherwise refuses to issue, shares of Common Stock to any holder of Series A
Preferred Stock upon conversion in accordance with the terms of this
Certificate of Designation;
- - the Company or any subsidiary of the Company shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business;
- - bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings for the relief of debtors shall be instituted by or against
the Company or any subsidiary which shall not be dismissed within 60 days of
their initiation;
- - the Company shall:
- sell, convey or dispose of all or substantially all of its
assets;
- merge or consolidate with or into, or engage in any other
business combination with, any other person or entity, in any case
which results in either (i) the holders of the voting securities of
the Company immediately prior to such transaction holding or having
the right to direct the voting of fifty percent (50%) or less of the
total outstanding voting securities of the Company or such other
surviving or acquiring person or entity immediately following such
transaction or (ii) the members of the board of directors or other
governing body of the Company comprising fifty percent (50%) of less
of the members of the board of directors or other governing body of
the Corporation or such other surviving or acquiring person or entity
immediately following such transaction;
- either (i) fail to pay, when due, or within any applicable
grace period, any payment with respect to any indebtedness of the
Company in excess of $250,000 due to any third party, other than
payments contested by the Company in good faith, or (ii) suffer to
exist any other default under any agreement binding the Company which
default or event of default would or is likely to have a material
adverse effect on the business, operations, properties, prospects or
financial condition of the Company;
- have fifty percent (50%) or more of the voting power of its
capital stock owned beneficially by one person, entity or "group";
- experience any other change of control not otherwise
addressed above; or
- - the Company otherwise shall breach any material term hereunder or
under the transaction documents, and if such breach is curable, shall fail to
cure such breach within ten business days after the Company has been notified
thereof in writing by the holder;
So long as any shares of Series A Preferred Stock are outstanding, the
Company shall not take any of the following corporate actions (whether by
merger, consolidation or otherwise) without first obtaining the approval of the
majority holders of Series A Preferred Stock:
- alter or change the rights, preferences or privileges of the
Series A Preferred Stock, or increase the authorized number of shares
of Series A Preferred Stock;
- - amend its certificate of incorporation or bylaws;
- - issue any shares of Series A Preferred Stock other than pursuant to
the Securities Purchase Agreement;
- - redeem, repurchase or otherwise acquire, or declare or pay any cash
dividend or distribution on, any junior securities;
- - increase the par value of the Common Stock;
- - sell all or substantially all of its assets or stock, or consolidate
or merge with another entity;
- - enter into or permit to occur any change of control transaction;
- - sell, transfer or encumber technology, other than licenses granted in
the ordinary course of business;
- - liquidate, dissolve, recapitalize or reorganize;
- - authorize, reserve, or issue Common Stock with respect to any plan or
agreement that provides for the issuance of equity securities to employees,
officers, directors or consultants of the Corporation in excess of 250,000
shares of Common Stock;
- - change its principal business;
- - issue shares of Common Stock, other than as contemplated herein or by
the Warrants;
- - increase the number of members of the Board to more than 7 members,
or, if no Series A director has been elected, increase the number of members of
the Board to more than 6 members;
- - alter or change the rights, preferences or privileges of any capital
stock of the Corporation so as to affect adversely the Series A Preferred
Stock;
- - create or issue any Senior Securities or Pari Passu Securities;
- - except for the issuance of debt securities to, or incurrence of
indebtedness from, a recognized financial institution in an aggregate amount
not exceeding $5,000,000 (or such additional amount as the Board and the
Majority Holders agree is reasonably necessary for the Corporation to perform
its obligations under a contract with SBC Communications, Inc. in the form
contemplated by part (A) of the flush language of this Article XII) and which,
in the case of debt securities, are not Convertible Securities or Purchase
Rights, issue any debt securities or incur any indebtedness that would have any
preferences over the Series A Preferred Stock upon liquidation of the
Corporation, or redeem, repurchase, prepay or otherwise acquire any outstanding
debt securities or indebtedness of the Corporation, except as expressly
required by the terms of such securities or indebtedness;
- - make any dilutive issuance;
- - enter into any agreement, commitment, understanding or other
arrangement to take any of the foregoing actions; or
- - cause or authorize any subsidiary of the Corporation to engage in any
of the foregoing actions.
Notwithstanding the foregoing, after such time as the SBC Condition (as defined
below) is satisfied, no such approval of the majority holders shall generally
be required with respect to subparagraphs (i) - (xiii), and (xviii) - (xix) if
such action is approved by the affirmative vote of at least two-thirds of the
board.
If, at any time after the first anniversary of the Closing and before
the fourth anniversary of the Closing, during a period of at least twenty (20)
consecutive trading days (a) the closing trading price of the Common Stock is
at least 200% of the conversion price then in effect and (b) the trading volume
and trading price of the Common Stock result in a value of at least $350,000 of
Common Stock traded on each trading day, then the Company shall have the right
to redeem all shares of Series A Preferred Stock then outstanding at price per
share of Series A Preferred Stock equal to the product of two multiplied by the
sum of the Face Amount plus all accrued and unpaid Dividends thereon through
the closing date of such redemption.
In no event shall a holder of shares of Series A Preferred Stock (or warrants
discussed below) have the right to convert shares of Series A Preferred Stock
into shares of Common Stock or to dispose of any shares of Series A Preferred
Stock to the extent that such right to effect such conversion or disposition
would result in the holder and its affiliates together beneficially owning or
having the power to vote more than 4.99% of the outstanding shares of Common
Stock.
Issuance of two Warrants to Purchase Common Stock
In connection with the issuance of shares of Series A Preferred Stock,
the Company also issued to the investor two warrants to purchase Common Stock.
Attached hereto as Exhibit 10.2 is the structured Warrant, dated October 1,
2004, to purchase 1,000,000 shares of the Company's Common Stock issued to SDS
Capital Group SPC, Ltd., and attached hereto as Exhibit 10.3 is
the incentive Warrant, dated October 1, 2004, to purchase 1,000,000 shares of
the Company's Common Stock issued to SDS Capital Group SPC, Ltd.
With respect to the structured warrant, the investor has the right to
purchase up to 1,000,000 shares of the Company's Common Stock at an exercise
price equal to $0.909 per share (the "Exercise Price"). The exercise price per
share may be adjusted if SBC Services, Inc. and/or its affiliates do not award
the Company a contract pursuant to its Request for Quotation for the provision
of VTS equipment and service by November 15, 2004, with (a) a minimum term of
one (1) year through which the Company will receive a minimum of $10,000,000 in
annual gross revenues (determined in accordance with U.S. generally accepted
accounting principles, consistently applied ("GAAP") and which contract
contemplates the renewal by SBC for at least one (1) additional year, or (b) a
minimum term of two (2) years through which the Company will receive a minimum
of $10,000,000 in annual gross revenues (determined in accordance with GAAP)
(collectively, the "SBC Condition"), then the Exercise Price shall be equal to
..75 multiplied by the average trading price for the Common Stock for the ten
trading day period immediately preceding November 15, 2004; provided, further,
that if SBC Condition is not satisfied by January 15, 2005, then the Exercise
Price shall be again be adjusted so that it is equal to .75 multiplied by the
average trading price for the Common Stock for the ten trading day period
immediately preceding January 15, 2005. The warrant may be exercised at anytime
until October 1, 2009. The warrant contains certain anti-dilution price
protections (in addition to anti-dilution protections for stock splits and
other similar pro rata events), but these protections only apply if the Company
obtains stockholder approval of these provisions. The Company is obligated to
call and hold a special meeting of its stockholders for the purpose of voting
to approve the anti-dilution provisions in the warrants.
The incentive warrant to purchase 625,000 shares was issued to the
investor was issued at the same exercise price and adjustment terms as the
warrant described above, and the incentive warrant's remaining terms are
identical except: (i) the warrant is only exercisable from September 1, 2005
through September 1, 2010, and (ii) the Company has the right to repurchase the
warrant in full for a total price of $10.00 provided that (A) the trading price
of the Common Stock exceeds $7.50 (subject to adjustment for stock splits,
etc.) for 10 consecutive trading days at anytime during the period beginning
January 1, 2005 and ending June 30, 2005, and (B) the Company's gross revenue
exceeds $9,999,999 at anytime during the six-month period ending June 30, 2005.
Both the structured warrants and the incentive warrants were issued in reliance
upon the exemption from Securities Act registration provided by Regulation D
promulgated thereunder.
Registration Rights Agreement
In connection with the above issuance of Series A Preferred Stock and
Warrants, the Company entered into a Registration Rights Agreement, dated
October 1, 2004, with SDS Capital Group SPC, Ltd. whereby the Company granted
certain rights to the investor. Within 30 days of the Closing, the Company is
obligated to file a registration statement on Form S-3 covering 5,000,000
shares of Common Stock that the investor may acquire upon conversion of the
Series A Preferred Stock or exercise of the warrants. The Company could face a
liquidated damages claim by the investor if (i) the initial registration
statement is not declared effective by the SEC on or prior to the 120th day
after the Closing, (ii) after the effectiveness of the registration statement,
sales of Common Stock cannot be made by the investor due to a stop
order by the SEC or the Company's need to update the registration statement, or
(iii) the Common Stock is not listed on Nasdaq, the New York Stock Exchange or
the American Stock Market. The liquidated damages for the first 30 days equal
3% of the purchase price of the Series A Preferred Stock and equal 1.5% for
each 30 days thereafter of non-compliance. In addition to the liquidated
damaged provision discussed above, the investor can require the redemption of
its Series A Preferred Stock in certain default events.
The investor also has the right to piggy-back on to the registration
statements filed by the Company registering Common Stock (other than Form S-8
and Form S-4 registration statements filed by the Company), subject to cut-back
by the underwriters (if an underwritten public offering) but at least 25% of
the shares requested for inclusion in the registration statement shall be
included in such underwritten public offering.
A copy of the press release announcing the closing of the above
transactions is attached hereto as Exhibit 99.1.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The following exhibits are filed with this document:
EXHIBIT NO. DESCRIPTION
4.1 Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock.
4.2 Registration Rights Agreement, dated October 1, 2004, by and between the Company and SDS
Capital Group SPC, Ltd.
10.1 Securities Purchase Agreement, dated October 1, 2004, by and between the Company and SDS
Capital Group SPC, Ltd.
10.2 Warrant, dated October 1, 2004, to Purchase 1,000,000 shares of the Company's Common Stock
issued to SDS Capital Group SPC, Ltd.
10.3 Warrant, dated October 1, 2004, to Purchase 625,000 shares of the Company's Common Stock
issued to SDS Capital Group SPC, Ltd.
99.1 Press Release, dated October 4, 2004, announcing the closing of the Series A Preferred
Stock transaction.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REMOTE DYNAMICS, Inc.
/s/ W. Michael Smith
---------------------------------------
W. Michael Smith
Executive Vice President and Chief
Financial Officer
Date: October 4, 2004
EXHIBIT NO. DESCRIPTION
4.1 Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock.
4.2 Registration Rights Agreement, dated October 1, 2004, by and between the Company and SDS
Capital Group SPC, Ltd.
10.1 Securities Purchase Agreement, dated October 1, 2004, by and between the Company and SDS
Capital Group SPC, Ltd.
10.2 Warrant, dated October 1, 2004, to Purchase 1,000,000 shares of the Company's Common Stock
issued to SDS Capital Group SPC, Ltd.
10.3 Warrant, dated October 1, 2004, to Purchase 625,000 shares of the Company's Common Stock
issued to SDS Capital Group SPC, Ltd.
99.1 Press Release, dated October 4, 2004, announcing the closing of the Series A Preferred
Stock transaction.