EQUITY LINE OF CREDIT AGREEMENT
THIS EQUITY LINE OF CREDIT AGREEMENT dated as of the 21st day of May
2001, (the "Agreement") between Cornell Capital Partners, L.P., a
limited partnership (the "Investor") and Global Foods Online Inc, a
corporation organized and existing under the laws of the State of Nevada
(the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Investor, from time to time as provided herein, and the Investor shall
purchase up to Three Million ($3,000,000) Dollars of the Company's
common stock, par value $0.001 per share (the "Common Stock"), for a
total purchase price of Three Million ($3,000,000) Dollars; and
WHEREAS, such investments will be made in reliance upon the provisions
of Regulation D ("Regulation D") of the Securities Act of 1933, as
amended, and the regulations promulgated there under (the "Securities
Act"), and or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to
any or all of the investments to be made hereunder; and
WHEREAS, the Investor is a limited partnership and the business affairs
of the Investor are managed by Yorkville Advisors Management, LLC, a
Delaware Corporation.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Advance" shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.
Section 1.2 "Advance Date" shall mean the date Xxxxxx Xxxxxxxx LLP/First
Union Escrow Account is in receipt of the funds from the Investor and
Xxxxxx Xxxxxxxx LLP, as the Investor's Counsel, is in possession of
free trading shares from the Company and therefore an Advance by the
Investor to the Company can be made and Xxxxxx Xxxxxxxx LLP can release
the free trading shares to the Investor. No Advance Date shall be less
than eleven (11) Trading Days after an Advance Notice Date.
Section 1.3 "Advance Notice" shall mean a written notice to the Investor
setting forth the Advance amount that the Company requests from the
Investor and the Advance Date.
Section 1.4 "Advance Notice Date" shall mean each date the Company
delivers to the Investor an Advance Notice requiring the Investor to
advance funds to the Company, subject to the terms of this Agreement.
No Advance Notice Date shall be less than eleven (11) Trading Days after
the prior Advance Notice Date.
Section 1.5 "Advance Notice Withdrawal" shall mean that the Company
shall automatically withdraw that portion of the Advance Notice that
does not meet the Minimum Acceptable Price.
Section 1.6 "Bid Price" shall mean, on any date, the closing bid price
(as reported by Bloomberg L.P.) of the Common Stock on the Principal
Market or if the Common Stock is not traded on a Principal Market, the
highest reported bid price for the Common Stock, as furnished by the
National Association of Securities Dealers, Inc.
Section 1.7 "Closing" shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.1.
Section 1.8 "Commitment Amount" shall mean the aggregate amount of up to
$3,000,000 which the Investor has agreed to provide to the Company in
order to purchase the Company's Common Stock pursuant to the terms and
conditions of this Agreement.
Section 1.9 "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the Effective Date, or (ii) such earlier date as
the Company and the Investor may mutually agree in writing, and expiring
on the earliest to occur of (x) the date on which the Investor shall
have made payment of Advances pursuant to this Agreement in the
aggregate amount of $3,000,000, (y) the date this Agreement is
terminated pursuant to Section 2.6, or (z) the date occurring twenty
four (24) months from the date hereof.
Section 1.10 "Common Stock" shall mean the Company's common stock, par
value $0.001 per share.
Section 1.11 "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2.
Section 1.12 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney's
fees and disbursements and costs and expenses of expert witnesses and
investigation).
Section 1.13 "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of
the Registrable Securities as set forth in Section 7.2(a).
Section 1.14 "Escrow Agreement" shall mean the escrow agreement among
the Company, First Union National Bank and the Investor dated the date
hereof.
Section 1.15 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated there under.
Section 1.16 "Material Adverse Effect" shall mean any condition,
circumstance, or situation that would prohibit or otherwise materially
interfere with the ability of the Company to enter into and perform any
of its obligations under this Agreement or the Registration Rights
Agreement in any material respect.
Section 1.17 "Market Price" shall mean the average of the three (3)
lowest closing Bid Prices of the Common Stock during the Pricing Period
.
Section 1.18 "Maximum Advance Amount" shall be equal to one hundred and
fifty percent (150%) of the average daily volume of the Company's
Common Stock over the forty (40) Trading Days prior to the Advance
Notice Date multiplied by the Purchase Price.
Section 1.19 "Minimum Acceptable Price" shall mean seventy five percent
(75%) of the lowest Closing Bid Price of the Company's Common Stock for
the fifteen (15) Trading Days prior to a relevant Advance Notice Date.
Section 1.20 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.21 "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
Section 1.22 "Pricing Period" shall mean the ten (10) Trading Day period
beginning on the first Trading Day after an Advance Notice Date and
ending on the Trading Day prior to the relevant Advance Date.
Section 1.23 "Principal Market" shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market, the American Stock Exchange or the New York
Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock.
Section 1.24 "Purchase Price" shall be set at eighty two percent (82%)
of the Market Price during the Pricing Period
Section 1.25 "Registrable Securities" shall mean the shares of Common
Stock (i) in respect of which the Registration Statement has not been
declared effective by the SEC, (ii) which have not been sold under
circumstances meeting all of the applicable conditions of Rule 144 (or
any similar provision then in force) under the Securities Act ("Rule
144") or (iii) which have not been otherwise
transferred to a holder who may trade such shares without restriction
under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not
bearing a restrictive legend.
Section 1.26 "Registration Rights Agreement" shall mean the Registration
Rights Agreement dated the date hereof, regarding the filing of the
Registration Statement for the resale of the Registrable Securities,
entered into between the Company and the Investor.
Section 1.27 "Registration Statement" shall mean a registration
statement on Form S-1 or Form S-3 (if use of such form is then available
to the Company pursuant to the rules of the SEC and, if not, on such
other form promulgated by the SEC for which the Company then qualifies
and which counsel for the Company shall deem appropriate, and which form
shall be available for the resale of the Registrable Securities to be
registered there under in accordance with the provisions of this
Agreement and the Registration Rights Agreement, and in accordance with
the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities
under the Securities Act.
Section 1.28 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.29 "SEC" shall mean the Securities and Exchange Commission.
Section 1.30 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.31 "SEC Documents" shall mean Annual Reports on Form 10-KSB,
Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and Proxy
Statements of the Company as supplemented to the date hereof, filed by
the Company for a period of at least twelve (12) months immediately
preceding the date hereof or the Advance Date, as the case may be, until
such time as the Company no longer has an obligation to maintain the
effectiveness of a Registration Statement as set forth in the
Registration Rights Agreement.
Section 1.32 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
ARTICLE II
Advances
Section 2.1 Investments.
(a) Advances. Upon the terms and conditions set forth herein (including
without limitation the provisions of Article VII hereof), on any Advance
Notice Date the Company may request an Advance by the Investor by the
delivery of an Advance Notice. The number of shares of Common Stock
that the Investor shall receive for each Advance shall be determined by
dividing the amount of the Advance by the Purchase Price. No fractional
shares shall be issued. Fractional shares shall be rounded to the next
higher whole number of shares. The aggregate maximum amount of all
Advances that the Investor shall be obligated to make under this
Agreement shall not exceed the Commitment Amount.
Section 2.2 Mechanics.
(a) Advance Notice. At any time during the Commitment Period, the
Company may deliver an Advance Notice to the Investor, subject to the
conditions set forth in Section 2.6 and Section 7.2; provided, however,
the amount for each Advance as designated by the Company in the
applicable Advance Notice shall not be more than the Maximum Advance
Amount. The aggregate amount of the Advances pursuant to this Agreement
shall not exceed the Commitment Amount, unless otherwise agreed by the
Investor in the Investor's sole and absolute discretion. There will be
a minimum of eleven (11) Trading Days between each Advance Notice Date.
(b) Date of Delivery of Advance Notice. An Advance Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00 noon
Eastern Time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 12:00 noon Eastern Time on a
Trading Day or at any time on a day which is not a Trading Day. No
Advance Notice may be deemed delivered, on a day that is not a Trading
Day.
(c) Withdrawal of Advance Notice. The Company shall automatically
withdraw that portion of the Advance Notice that does not meet the
Minimum Acceptable Price.
For example if the lowest closing bid price of the stock for the fifteen
(15) Trading Days prior to
the Advance Notice Date is $0.20, then the Minimum Acceptable Price
would be $0.15 (75% x $0.20) For every day of the ten (10) Trading
Days after the Advance Notice Date that the Closing Bid Price of the
stock is below $0.15 the Advance would be automatically reduced by ten
percent (10%). If the number of shares to be issued in connection
with the Advance (not taking into account this Section) is one hundred
thousand (100,000) shares and the stock' s Closing Bid Price is below
the Minimum Acceptable Price for two (2) of the ten (10) Trading Days
following the Advance Notice Date, then the Advance would be reduced
by twenty percent (20%) (2 x 10%) or 20,000 shares. The Advance and the
number of shares to be issued under the Advance would be reduced to
eighty percent (80%) of the original.
Section 2.3 Closings. On each Advance Date, which shall be eleven (11)
Trading Days after an Advance Notice Date, (i) the Company shall deliver
to the Investor's counsel, as defined pursuant to the Escrow Agreement,
shares of the Company's Common Stock, representing the amount of the
Advance by the Investor pursuant to Section 2.1 herein, registered in
the name of the Investor which shall be delivered to the Investor, or
otherwise in accordance with the Escrow Agreement and (ii) the Investor
shall deliver to the Escrow Agent the amount of the Advance specified in
the Advance Notice by wire transfer of immediately available funds which
shall be delivered to the Company, or otherwise in accordance with the
Escrow Agreement. In addition, on or prior to the Advance Date, each of
the Company and the Investor shall deliver to the other through the
Investor's counsel all documents, instruments and writings required to
be delivered or reasonably requested by either of them pursuant to this
Agreement in order to implement and effect the transactions contemplated
herein. Payment of funds to the Company and delivery of the Company's
Common Stock to the Investor shall occur in accordance with the
conditions set forth above and those contained in the Escrow Agreement;
provided, however, that to the extent the Company has not paid the fees,
expenses, and disbursements of the Investor's counsel and Yorkville
Advisors in accordance with Section 12.4, the amount of such fees,
expenses, and disbursements may be deducted by the Investor (and shall
be paid to the relevant party) from the amount of the Advance with no
reduction in the amount of shares of the Company's Common Stock to be
delivered on such Advance Date.
Section 2.4 Termination of Investment. The obligation of the Investor
to make an Advance to the Company pursuant to this Agreement shall
terminate permanently (including with respect to an Advance Date that
has not yet occurred) in the event that (i) there shall occur any stop
order or suspension of the effectiveness of the Registration Statement
for an aggregate of fifty (50) Trading Days, other than due to the acts
of the Investor, during the Commitment Period, or (ii) the Company shall
at any time fail materially to comply with the requirements of Section
6.3, 6.4 or 6.7; provided, however, that this termination provision
shall not apply to any period commencing upon the filing of a post-
effective amendment to such Registration Statement and ending upon the
date on which such post effective amendment is declared effective by the
SEC.
Section 2.5 Agreement to Advance Funds.
(a) The Investor agrees to advance the amount specified in the Advance
Notice to the Company after the completion of each of the following
conditions and the other conditions set forth in this Agreement:
(i) the execution and delivery by the Company, and the Investor, of this
Agreement, and the Exhibits hereto;
(ii) Investor's counsel shall have received the shares of Common Stock
applicable to the Advance;
(iii) the Company's Registration Statement with respect to the resale of
the Registrable Securities in accordance with the terms of the
Registration Rights Agreement shall have been declared effective by the
SEC;
(iv) the Company shall have obtained all material permits and
qualifications required by any applicable state for the offer and sale
of the Registrable Securities, or shall have the availability of
exemptions there from. The sale and issuance of the Registrable
Securities shall be legally permitted by all laws and regulations to
which the Company is subject;
(v) the Company shall have filed with the Commission in a timely manner
all reports, notices and other documents required of a "reporting
company" under the Exchange Act and applicable Commission regulations;
(vi) the fees as set forth in Section 12.4 below shall have been paid or
can be withheld as provided in Section 2.3; and
the conditions set forth in Section 7.2 shall have been satisfied.
Investor shall received an opinion letter from counsel to the Company
(updated where applicable) on the date hereof and updated annually for
the life of the this Agreement.
Section 2.6 Lock Up Period. (a) During the terms of this Agreement, the
Company shall not, without the prior consent of the Investor, issue or
sell (i) any Common Stock without consideration or for a consideration
per share less than the Bid Price on the date of issuance or (ii) issue
or sell any warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock
without consideration or for a consideration per share less than the Bid
Price on the date of issuance.
(b) On the date hereof, the Company shall obtain from each officer,
director and Affiliate, as defined below, a lock-up agreement, as
defined below, in the form annexed hereto as Schedule 2.7(a) agreeing to
only sell in compliance with the volume limitation of Rule 144.
"Affiliate" for purposes hereof means, with respect to any person or
entity, another person or entity that, directly or indirectly, (i) has a
five percent (5%) or more equity interest in that person or entity, (ii)
has five percent (5%) or more common ownership with that person or
entity, (iii) controls that person or entity, or (iv) shares common
control with that person or entity. "Control" or "controls" for
purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.
ARTICLE III
Representations and Warranties of Investor
Investor hereby represents and warrants to, and agrees with, the Company
that the following are true and as of the date hereof and as of each
Advance Date:
Section 3.1 Organization and Authorization. Investor is duly
incorporated or organized and validly existing in the jurisdiction of
its incorporation or organization and has all requisite power and
authority to purchase and hold the securities issuable hereunder. The
decision to invest and the execution and delivery of this Agreement by
such Investor, the performance by such Investor of its obligations
hereunder and the consummation by such Investor of the transactions
contemplated hereby have been duly authorized and requires no other
proceedings on the part of the Investor. The undersigned has the right,
power and authority to execute and deliver this Agreement and all other
instruments ( including, without limitations, the Registration Rights
Agreement), on behalf of the Investor. This Agreement has been duly
executed and delivered by the Investor and, assuming the execution and
delivery hereof and acceptance thereof by the Company, will constitute
the legal, valid and binding obligations of the Investor, enforceable
against the Investor in accordance with its terms.
Section 3.2 Evaluation of Risks. The Investor has such knowledge and
experience in financial tax and business matters as to be capable of
evaluating the merits and risks of, and bearing the economic risks
entailed by, an investment in the Company and of protecting its
interests in connection with this transaction. It recognizes that its
investment in the Company involves a high degree of risk.
Section 3.3. No Legal Advice From the Company. The Investor
acknowledges that it had the opportunity to review this Agreement and
the transactions contemplated by this Agreement with his or its own
legal counsel and investment and tax advisors. The Investor is relying
solely on such counsel and advisors and not on any statements or
representations of the Company or any of its representatives or agents
for legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of
any jurisdiction.
Section 3.4 Investment Purpose. The securities are being purchased by
the Investor for its own account, for investment and without any view to
the distribution, assignment or resale to others or fractionalization in
whole or in part. The Investor agrees not to assign or in any way
transfer the Investor's rights to the securities or any interest therein
and acknowledges that the Company will not recognize any purported
assignment or transfer except in accordance with applicable Federal and
state securities laws. No other person has or will have a direct or
indirect beneficial interest in the securities. The Investor agrees not
to sell, hypothecate or otherwise transfer the Investor's securities
unless the securities are registered under Federal and applicable state
securities laws or unless, in the opinion of counsel satisfactory to the
Company, an exemption from such laws is available.
Section 3.5 Accredited Investor. Investor is an "accredited investor"
as that term is defined in Rule 501(a)(3) of Regulation D of the
Securities Act.
Section 3.6 Information. Such Investor and its advisors (and his or
its counsel), if any, have been furnished with all materials relating to
the business, finances and operations of the Company and information it
deemed material to making an informed investment decision. Such
Investor and its advisors, if any, have been afforded the opportunity to
ask questions of the Company and its management. Neither such inquiries
nor any other due diligence investigations conducted by such Investor or
its advisors, if any, or its representatives shall modify, amend or
affect the Investor's right to rely on the Company's representations and
warranties contained in this Agreement. Such Investor understands that
its investment involves a high degree of risk. Such Investor is in a
position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables each
Investor to obtain information from the Company in order to evaluate the
merits and risks of this investment. Such Investor has sought such
accounting, legal and tax advice, as it has considered necessary to make
an informed investment decision with respect to this transaction.
Section 3.7 Receipt of Documents. Such Investor and his or its counsel
has received and read in their entirety: (i) this Agreement and the
Exhibits annexed hereto; (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company's Form 10-
KSB for the year ended year ended January 31, 2000 and Form 10-QSB for
the periods ended, April 2000, July 2000, and October 2000; and (v)
answers to all questions the Investor submitted to the Company regarding
an investment in the Company; and the Investor has relied on the
information contained therein and has not been furnished any other
documents, literature, memorandum or prospectus.
Section 3.8 Registration Rights Agreement and Escrow Agreement. The
parties have entered into the Registration Rights Agreement and the
Escrow Agreement, each dated the date hereof.
Section 3.9 No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the shares of Common Stock offered
hereby.
Section 3.10 Not an Affiliate. The Investor is not an officer,
director or a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control
with the Company or any Affiliate of the Company as that term is
defined in Rule 405 of the Securities Act) of the Company). The Investor
agrees that it will not, and that it will cause its Affiliates not to,
engage in any short sales of or hedging transactions with respect to the
Common Stock.
ARTICLE IV
Representations and Warranties of the Company
Except as stated below or on the disclosure schedules attached hereto,
the Company hereby represents and warrants to, and covenants with, the
Investor that the following are true and correct as of the date hereof.
Section 4.1 Organization and Qualification. The Company is duly
incorporated or organized and validly existing in the jurisdiction of
its incorporation or organization and has all requisite power and
authority corporate power to own their properties and to carry on their
business as now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of the
business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
Section 4.2. Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration
Rights Agreement and any related agreements, in accordance with the
terms hereof and thereof, (ii) the execution and delivery of this
Agreement, the Registration Rights Agreement, the Escrow Agreement and
any related agreements by the Company and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized
by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement, Registration Rights Agreement, the
Escrow Agreement and any related agreements have been duly executed and
delivered by the Company, (iv) this Agreement, the Registration Rights
Agreement, Escrow Agreement and any related agreements constitute the
valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability
may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
Section 4.3 Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of ____________ shares of Common
Stock, par value $0._____1 per share, of which _____________ shares
were issued and outstanding, and ___________ shares of preferred stock
of which none are outstanding. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. Except as
disclosed in the SEC Documents, no shares of Common Stock are subject to
preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. Except as disclosed
in the SEC Documents, as of the date hereof, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Company or
any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may
become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, except for those set
forth in that certain consulting agreement dated February 1, 2001,
between the Company and National Financial Communications Corp., (ii)
there are no outstanding debt securities and (iii) there are no
agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their
securities under the Securities Act (except pursuant to the Registration
Rights Agreement). There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by this
Agreement or any related agreement or the consummation of the
transactions described herein or therein. The Company has furnished to
the Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the
"Certificate of Incorporation"), and the Company's By-laws, as in effect
on the date hereof (the "By-laws.
Section 4.4 No Conflict. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a violation of
the Certificate of Incorporation, any certificate of designations of any
outstanding series of preferred stock of the Company or By-laws or (ii)
conflict with or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of
its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the
Principal Market on which the Common Stock is quoted) applicable to the
Company or any of its subsidiaries or by which any material property or
asset of the Company or any of its subsidiaries is bound or affected and
which could cause a Material Adverse Effect. Except as disclosed in the
SEC Documents, neither the Company nor its subsidiaries is in violation
of any term of or in default under its Certificate of Incorporation or
By-laws or their organizational charter or by-laws, respectively, or any
material contract, agreement, mortgage, indebtedness, indenture,
instrument, judgment, decree or order or any statute, rule or regulation
applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted in violation of any
material law, ordinance, regulation of any governmental entity. Except
as specifically contemplated by this Agreement and as required under the
Securities Act and any applicable state securities laws, the Company is
not required to obtain any consent, authorization or order of, or make
any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under
or contemplated by this Agreement or the Registration Rights Agreement
in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained
or effected on or prior to the date hereof. The Company and its
subsidiaries are unaware of any fact or circumstance which might give
rise to any of the foregoing.
Section 4.5 SEC Documents; Financial Statements. The Company has filed
all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC under of the Exchange Act (all of the
foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the
"SEC Documents"). The Company has delivered to the Investor or its
representatives, or made available through the SEC's website at
xxxx://xxx.xxx.xxx, true and complete copies of the SEC Documents. As
of their respective dates, the financial statements of the Company
disclosed in the SEC Documents (the "Financial Statements") complied as
to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto.
Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes
or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
Section 4.6. 10b-5. The SEC Documents do not include any untrue
statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in
light of the circumstances under which they were made, not misleading.
Section 4.7 No Default. Except as disclosed Section 4.4 the Company is
not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it is or its property is bound and
neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or
any of the exhibits or attachments hereto will conflict with or result
in the breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any lien
or charge on any assets or properties of the Company under its
Certificate of Incorporation, By-Laws, any material indenture, mortgage,
deed of trust or other material agreement applicable to the Company or
instrument to which the Company is a party or by which it is bound, or
any statute, or any decree, judgment, order, rules or regulation of any
court or governmental agency or body having jurisdiction over the
Company or its properties, in each case which default, lien or charge is
likely to cause a Material Adverse Effect on the Company's business or
financial condition.
Section 4.8 Absence of Events of Default. Except for matters described
in the SEC Documents and/or this Agreement, no Event of Default, as
defined in the respective agreement to which the Company is a party, and
no event which, with the giving of notice or the passage of time or
both, would become an Event of Default (as so defined), has occurred and
is continuing, which would have a Material Adverse Effect on the
Company's business, properties, prospects, financial condition or
results of operations.
Section 4.9 Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all
material trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as
now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service xxxx
registrations, trade secret or other similar rights of others, and, to
the knowledge of the Company, there is no claim, action or proceeding
being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding trademark,
trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service xxxx registrations, trade secret
or other infringement; and the Company and its subsidiaries are unaware
of any facts or circumstances which might give rise to any of the
foregoing.
Section 4.10 Employee Relations Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of
the Company or any of its subsidiaries, is any such dispute threatened.
None of the Company's or its subsidiaries' employees is a member of a
union and the Company and its subsidiaries believe that their relations
with their employees are good.
Section 4.11 Environmental Laws. The Company and its subsidiaries are
(i) in compliance with any and all applicable material foreign, federal,
state and local laws and regulations relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such
permit, license or approval.
Section 4.12 Title. Except as set forth in the SEC Documents, the
Company has good and marketable title to its properties and material
assets owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Company. Any real property and
facilities held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company
and its subsidiaries.
Section 4.13 Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the
Company and its subsidiaries are engaged. Neither the Company nor any
such subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such subsidiary has any
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or
operations of the Company and its subsidiaries, taken as a whole.
Section 4.14 Regulatory Permits. The Company and its subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary
to conduct their respective businesses, and neither the Company nor any
such subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit.
Section 4.15 Internal Accounting Controls. The Company and each of
its subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance 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 conformity 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.
Section 4.16 No Material Adverse Breaches, etc. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is
subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a Material
Adverse Effect on the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries. Neither the Company nor any of its subsidiaries is in
breach of any contract or agreement which breach, in the judgment of the
Company's officers, has or is expected to have a Material Adverse Effect
on the business, properties, operations, financial condition, results of
operations or prospects of the Company or its subsidiaries.
Section 4.17 Absence of Litigation. Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the
Company, the Common Stock or any of the Company's subsidiaries, wherein
an unfavorable decision, ruling or finding would (i) have a Material
Adverse Effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of
the Company to perform its obligations under, this Agreement or any of
the documents contemplated herein, or (iii) except as expressly
disclosed in the SEC Documents, have a Material Adverse Effect on the
business, operations, properties, financial condition or results of
operation of the Company and its subsidiaries taken as a whole.
Section 4.18 Subsidiaries. Except as disclosed in the SEC Documents,
the Company does not presently own or control, directly or indirectly,
any interest in any other corporation, partnership, association or other
business entity.
Section 4.19 Other Outstanding Securities/Financing Restrictions. As of
the date hereof, other than warrants and options to acquire shares of
Common Stock as disclosed in Schedule 4.3, there are no other warrants
and options registered with the SEC, which are available for sale as
unrestricted ("free trading") stock.
Section 4.20 Tax Status. The Company and each of its subsidiaries has
made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is
subject and (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably
adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and
has set aside on its books provision reasonably adequate for the payment
of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any
such claim.
Section 4.21 Certain Transactions. Except as set forth in the SEC
Documents, none of the officers, directors, or employees of the Company
is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services
to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or
any such employee has a substantial interest or is an officer, director,
trustee or partner.
Section 4.22 Fees and Rights of First Refusal. Except as set forth in
the SEC Documents, the Company is not obligated to offer the securities
offered hereunder on a right of first refusal basis or otherwise to any
third parties including, but not limited to, current or former
shareholders of the Company, underwriters, brokers, agents or other
third parties.
Section 4.23 Use of Proceeds. The Company represents that the net
proceeds from this offering will be used for working capital purposes
and to reduce indebtedness . However, in no event shall the net
proceeds from this offering be used by the Company for the payment (or
loaned to any such person for the payment) of any judgment, or other
liability, incurred by any executive officer, officer, director, or
employee of the Company.
Section 4.24 Further Representation and Warranties of the Company. For
so long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees
that it will use commercially reasonable efforts to maintain the listing
of its Common Stock on NASD Bulletin Board.
Section 4.25 Opinion of Counsel. Investor shall receive an opinion
letter from counsel to the Company (updated where applicable) on the
date hereof and updated annually for the life of the this Agreement .
Section 4.26 Opinion of Counsel. The Company will obtain for the
Investor, at the Company's expense, any and all opinions of counsel
which may be reasonably required in order to sell the securities
issuable hereunder without restriction.
Section 4.27 Dilution. The Company is aware and acknowledges that
issuance of shares of the Company's Common Stock could cause dilution to
existing shareholders and could significantly increase the outstanding
number of shares of Common Stock.
ARTICLE V
Indemnification
The Investor and the Company represent to the other the following with
respect to itself:
Section 5.1 Indemnification. (a) In consideration of the Investor's
execution and delivery of this Agreement, and in addition to all of the
Company's other obligations under this Agreement, the Company shall
defend, protect, indemnify and hold harmless the Investor(s), and all of
its officers, directors, partners, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Investor
Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages,
and expenses in connection therewith (irrespective of whether any such
Investor Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and
disbursements (the "Indemnified Liabilities"), incurred by the Investor
Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in this Agreement or the Registration
Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement or
the Registration Rights Agreement or any other certificate, instrument
or document contemplated hereby or thereby, or (c) any cause of action,
suit or claim brought or made against such Investor Indemnitee not
arising out of any action or inaction of an Investor Indemnitee, and
arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document or
agreement executed pursuant hereto by any of the Investor Indemnitees.
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Investor's other obligations
under this Agreement, the Investor shall defend, protect, indemnify and
hold harmless the Company and all of its officers, directors, employees
and agents (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Company Indemnitees") from and against any and all Indemnified
Liabilities incurred by the Company Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation
or breach of any representation or warranty made by the Investor(s) in
this Agreement, the Registration Rights Agreement or any instrument or
document contemplated hereby or thereby executed by the Investor, (b)
any breach of any covenant, agreement or obligation of the Investor(s)
contained in this Agreement, the Registration Rights Agreement or any
other certificate, instrument or document contemplated hereby or thereby
executed by the Investor, or (c) any cause of action, suit or claim
brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach by the Investor and
arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document or
agreement executed pursuant hereto by any of the Company Indemnitees.
To the extent that the foregoing undertaking by the Investor may be
unenforceable for any reason, the Investor shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the
Company shall comply in all material respects with the terms thereof.
Section 6.2 Listing of Common Stock. The Company shall maintain the
Common Stock's authorization for quotation on the NASD ______________.
Section 6.3 Exchange Act Registration. The Company will cause its
Common Stock to continue to be registered under Section 12(g) of the
Exchange Act, will file in a timely manner all reports and other
documents required of it as a reporting company under the Exchange Act
and will not take any action or file any document (whether or not
permitted by Exchange Act or the rules thereunder to terminate or
suspend such registration or to terminate or suspend its reporting and
filing obligations under said Exchange Act.
Section 6.4 Transfer Agent Instructions. Upon each Closing and the
effectiveness of the Registration Statement and re-sale by the Investor,
the Company will deliver instructions to its transfer agent to issue
shares of Common Stock free of restrictive legends.
Section 6.5 Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the
Company.
Section 6.6 Notice of Certain Events Affecting Registration; Suspension
of Right to Make an Advance. The Company will immediately notify the
Investor upon its becoming aware of the occurrence of any of the
following events in respect of a registration statement or related
prospectus relating to an offering of Registrable Securities: (i)
receipt of any request for additional information by the SEC or any
other Federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or
supplements to the registration statement or related prospectus; (ii)
the issuance by the SEC or any other Federal or state governmental
authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that
purpose; (iii) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any
of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the
happening of any event that makes any statement made in the Registration
Statement or related prospectus of any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in the Registration
Statement, related prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and (v) the Company's reasonable determination that a
post-effective amendment to the Registration Statement would be
appropriate; and the Company will promptly make available to the
Investor any such supplement or amendment to the related prospectus.
The Company shall not deliver to the Investor any Advance Notice during
the continuation of any of the foregoing events.
Section 6.7 Expectations Regarding Advance Notices. Within ten (10)
days after the commencement of each calendar quarter occurring
subsequent to the commencement of the Commitment Period, the Company
must notify the Investor, in writing, as to its reasonable expectations
as to the dollar amount it intends to raise during such calendar
quarter, if any, through the issuance of Advance Notices. Such
notification shall constitute only the Company's good faith estimate and
shall in no way obligate the Company to raise such amount, or any
amount, or otherwise limit its ability to deliver Advance Notices. The
failure by the Company to comply with this provision can be cured by the
Company's notifying the Investor, in writing, at any time as to its
reasonable expectations with respect to the current calendar quarter.
Section 6.8 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company
with or into, or a transfer of all or substantially all the assets of
the Company to another entity (a "Consolidation Event") unless the
resulting successor or acquiring entity (if not the Company) assumes by
written instrument the obligation to deliver to the Investor such shares
of stock and/or securities as the Investor is entitled to receive
pursuant to this Agreement.
Section 6.9 Issuance of the Company's Common Stock. The sale of the
shares of Common Stock shall be made in accordance with the provisions
and requirements of Regulation D and any applicable state securities
law.
ARTICLE VII
Conditions for Advance and Conditions to Closing
Section 7.1 Conditions Precedent to the Obligations of the Company. The
obligation hereunder of the Company to issue and sell the shares of
Common Stock to the Investor incident to each Closing is subject to
the satisfaction, or waiver by the Company, at or before each such
Closing, of each of the conditions set forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor shall be true and correct
in all material respects.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Investor at
or prior to such Closing.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver
an Advance Notice and the Obligation of the Investor to Purchase Shares
of Common Stock. The right of the Company to deliver an Advance Notice
and the obligation of the Investor hereunder to acquire and pay for
shares of the Company's Common Stock incident to a Closing is subject to
the satisfaction or waiver by the Investor, on (i) the date of delivery
of such Advance Notice and (ii) the applicable Advance Date (each a
"Condition Satisfaction Date"), of each of the following conditions:
(a) Registration of the Common Stock with the SEC. The Company shall
have filed with the SEC a Registration Statement with respect to the
resale of the Registrable Securities in accordance with the terms of the
Registration Rights Agreement. As set forth in the Registration Rights
Agreement, the Registration Statement shall have previously become
effective and shall remain effective on each Condition Satisfaction Date
and (i) neither the Company nor the Investor shall have received notice
that the SEC has issued or intends to issue a stop order with respect to
the Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so
(unless the SEC's concerns have been addressed and the Investor is
reasonably satisfied that the SEC no longer is considering or intends to
take such action), and (ii) no other suspension of the use or withdrawal
of the effectiveness of the Registration Statement or related prospectus
shall exist. The Registration Statement must have been declared
effective by the SEC prior to the first Advance Notice Date.
(b)Authority. The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the shares of
Common Stock, or shall have the availability of exemptions there from.
The sale and issuance of the shares of Common Stock shall be legally
permitted by all laws and regulations to which the Company is subject.
(c) No Fundamental Changes. There shall no exist any fundamental change
to the information set forth in the Registration Statement which would
require the Company to file a post-effective amendment to the
Registration Statement.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the
Registration Rights Agreement to be performed, satisfied or complied
with by the Company at or prior to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction that prohibits or directly and adversely affects
any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced that may have the effect of
prohibiting or adversely affecting any of the transactions contemplated
by this Agreement.
(f) No Suspension of Trading in or Delisting of Common Stock. The
trading of the Common Stock is not suspended by the SEC or the Principal
Market (if the Common Stock is traded on a Principal Market). The
issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements
of the Principal Market (if the Common Stock is traded on a Principal
market). The Company shall not have received any notice threatening the
continued listing of the Common Stock on the Principal Market (if the
Common Stock is traded on a Principal Market).
(g) Maximum Advance Amount. The amount of the advance requested by the
Company does not exceed the Maximum Advance Amount.
(h) No Knowledge. The Company has no knowledge of any event more likely
than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective.
(i) Other. On each Condition Satisfaction Date, the Investor shall have
received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by the Investor in
order for the Investor to confirm the Company's satisfaction of the
conditions set forth in this Section 7.2, including, without limitation,
a certificate executed by an executive officer of the Company and to the
effect that all the conditions to such Closing shall have been satisfied
as at the date of each such certificate substantially in the form
annexed hereto on Schedule B.
ARTICLE VIII
Due Diligence Review; Non-Disclosure of Non-Public Information
Section 8.1 Due Diligence Review. Prior to the filing of the
Registration Statement the Company shall make available for inspection
and review by the Investor, advisors to and representatives of the
Investor, any underwriter participating in any disposition of the
Registrable Securities on behalf of the Investor pursuant to the
Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial
and other records, all SEC Documents and other filings with the SEC, and
all other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees to supply all such
information reasonably requested by the Investor or any such
representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to
all questions and other inquiries reasonably made or submitted by any of
them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the
Investor and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the
Registration Statement.
Section 8.2 Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information
as being non-public information and provides the Investor, such advisors
and representatives with the opportunity to accept or refuse to accept
such non-public information for review. The Company may, as a condition
to disclosing any non-public information hereunder, require the
Investor's advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and the
Investor.
(b) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the
Company represents that it does not disseminate non-public information
to any investors who purchase stock in the Company in a public offering,
to money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and
representatives of the Investor and, if any, underwriters, of any event
or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware,
constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by
such persons or entities), which, if not disclosed in the prospectus
included in the Registration Statement would cause such prospectus to
include a material misstatement or to omit a material fact required to
be stated therein in order to make the statements, therein, in light of
the circumstances in which they were made, not misleading. Nothing
contained in this Section 8.2 shall be construed to mean that such
persons or entities other than the Investor (without the written consent
of the Investor prior to disclosure of such information) may not obtain
non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall
prevent any such persons or entities from notifying the Company of their
opinion that based on such due diligence by such persons or entities,
that the Registration Statement contains an untrue statement of material
fact or omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading.
ARTICLE IX
Choice of Law/Jurisdiction
Section 9.1 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without
regard to the principles of conflict of laws. The parties further agree
that any action between them shall be heard in New York City, New
York, and expressly consent to the jurisdiction and venue of the Supreme
Court of New York and the United States District Court for the Southern
District of New York for the adjudication of any civil action asserted
pursuant to this paragraph.
ARTICLE X
Assignment; Termination
Section 10.1 Assignment. Neither this Agreement nor any rights of the
Investor hereunder may be assigned to any other Person.
Section 10.2 Termination. The obligations of the Investor to make
Advances under Article II hereof shall terminate 24 months after the
date hereof.
ARTICLE XI
Notices
Section 11.1 Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered
(i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile, provided a copy is mailed by U.S. certified mail,
return receipt requested; (iii) three (3) days after being sent by U.S.
certified mail, return receipt requested, or (iv) one (1) day after
deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
If to the Company, to: Global Foods Online Inc.
000 Xxxxx Xxxxx Xxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Chairman
Xxxx Xxxxxxxx, President
Telephone: (000) 000-0000
Facsimile:
With a copy to:
If to the Investor(s), to its address and facsimile number on Exhibit A,
with copies to the Investor's Counsel as set forth on Exhibit A. Each
party shall provide five (5) days' prior written notice to the other
party of any change in address or facsimile number.
ARTICLE XII
Miscellaneous
Section 12.1 Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party. In the
event any signature page is delivered by facsimile transmission, the
party using such means of delivery shall cause four (4) additional
original executed signature pages to be physically delivered to the
other party within five (5) days of the execution and delivery hereof
Section 12.2 Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Investor(s), the
Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the
instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company
nor any Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.
Section 12.3 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading
volume of the Common Stock on any given Trading Day for the purposes of
this Agreement shall be Bloomberg, L.P. or any successor thereto. The
written mutual consent of the Investor and the Company shall be required
to employ any other reporting entity.
Section 12.4 Fees and Expenses. As set forth in the Consulting Services
Agreement entered into by the Company in connection herewith, the
Company has agreed to pay the following fees:
(a) Legal Fees. Each of the parties shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except upon the execution of this
Agreement the Company will pay the sum of Fifteen Thousand ($15,000)
Dollars, to the Investor's counsel, Xxxxxx Xxxxxxxx LLP, for legal fees.
Subsequently on each Advance Date, the Company will pay Xxxxxx Xxxxxxxx
LLP the sum of Two Hundred and Fifty Dollars ($250) Dollars for escrow
fees.
(b) Consulting Fees. On each Advance Date the Company shall pay
Yorkville Advisor's Management, LLC ("Yorkville Advisors") an amount
equal to eight and 2/5 percent (8.4%) of the amount of the Advance. The
Company hereby agrees that if such payment, as is described above, is
not made by the Company on the Advance Date, such payment will be made
at the direction of the Investor as outlined and mandated by Section 2.3
of this Agreement. Furthermore upon the execution of this Agreement
that Company shall issue and deliver within seven (7) days to Yorkville
Advisors Management, LLC, four hundred thousand (400,000) restricted
shares of the Company's Common Stock. Such restricted shares will have
demand and piggy-back registration rights.
Section 12.5 Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder
or broker who will demand payment of any fee or commission from the
other party, other than Yorkville Advisors . The Company on the one
hand, and the Investor, on the other hand, agree to indemnify the other
against and hold the other harmless from any and all liabilities to any
person claiming brokerage commissions or finder's fees on account of
services purported to have been rendered on behalf of the indemnifying
party in connection with this Agreement or the transactions contemplated
hereby.
Section 12.6 Confidentiality. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties
hereto shall keep confidential any information obtained from any other
party (except information publicly available or in such party's domain
prior to the date hereof, and except as required by court order) and
shall promptly return to the other parties all schedules, documents,
instruments, work papers or other written information without retaining
copies thereof, previously furnished by it as a result of this Agreement
or in connection herein.
[REMAINDER OF PAGE INTENIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Line of Credit
Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
GLOBAL FOODS ONLINE INC.
By:
Name: Xxxx Xxxxxxxx
Title: President
By: /s/ Xxxxx Xxxxxx
_________________________________
Name: Xxxxx Xxxxxx
Title: Chairman
CORNELL CAPITAL PARTNERS, L.P.
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/Xxxx X. Xxxxxx
_________________________________
Name: Xxxx X. Xxxxxx
Title: Fund Manager
EXHIBIT A
SCHEDULE OF INVESTORS
Cornell Capital Partners, L.P.
c/o Yorkville Advisors, LLC
000 Xxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
EXHIBIT B
ADVANCE NOTICE/COMPLIANCE CERTIFICATE
GLOBAL FOODS ONLINE, INC.
The undersigned, ________________________________ hereby certifies, with
respect to the sale of shares of Common Stock of Global Foods Online,
Inc., ( the "Company") issuable in connection with this Advance Notice
and Compliance Certificate dated ___________________ (the "Notice"),
delivered pursuant to the Equity Line of Credit Agreement (the
"Agreement"), as follows:
1. The undersigned is the duly elected Chief Executive Officer of the
Company.
2. There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post -
effective amendment to the Registration Statement
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Advance
Date related to the Notice and has complied in all material respects
with all obligations and conditions contained in the Agreement.
4. The Advance requested is _____________________.
The undersigned has executed this Certificate this ____ day of
_________________.
GLOBAL FOODS ONLINE, INC.
By:______________________________
Name:
Title:
SCHEDULE 2.6(a)
GLOBAL FOODS ONLINE, INC.
The undersigned hereby agrees that for a period commencing on the date
hereof and expiring on the termination of the Equity Line of Credit
Agreement dated ________________ between Global Foods Online, Inc., (the
"Company") and Cornell Capital Partners, L.P., (the "Investor") (the
"Lock-up Period"), he, she or it will not, directly or indirectly,
without the prior written consent of the Investor, issue, offer, agree
or offer to sell, sell, grant an option for the purchase or sale of,
transfer, pledge, assign, hypothecate, distribute or otherwise encumber
or dispose of except pursuant to o Rule 144 of the General Rules and
Regulations under the Securities Act of 1933, any securities of the
Company, including common stock or options, rights, warrants or other
securities underlying, convertible into, exchangeable or exercisable for
or evidencing any right to purchase or subscribe for any common stock
(whether or not beneficially owned by the undersigned), or any
beneficial interest therein (collectively, the "Securities").
In order to enable the aforesaid covenants to be enforced, the
undersigned hereby consents to the placing of legends and/or stop-
transfer orders with the transfer agent of the Company's securities with
respect to any of the Securities registered in the name of the
undersigned or beneficially owned by the undersigned, and the
undersigned hereby confirms the undersigned's investment in the Company.
Dated: _______________, 2001
Signature
______________________________
Address:
City, State, Zip Code:
______________________________
Print Social Security Number
or Taxpayer I.D. Number
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