EQUITY LINE OF CREDIT AGREEMENT
AGREEMENT dated as of the 29th day of March 2001, (the "Agreement") between
Cornell Capital Partners, L.P., a limited partnership (the "Investor") and
Pick-Ups Plus, Inc., a corporation organized and existing under the laws of the
State of Delaware (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 Five
Million ($5,000,000) Dollars of the Company's common stock, par value $0.001 per
share (the "Common Stock"), for a total purchase price of Five Million
($5,000,000) 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 ("Yorkville
Advisors"), 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 thirteen (13) 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 fifteen (15) 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 "Average Daily Volume" shall be computed using the forty (40)
trading days prior to the Advance Date
Section 1.7 "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 1.8 "Closing" shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.3.
Section 1.9 "Commitment Amount" shall mean the aggregate amount of up to
$5,000,000 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 $5,000,000,
(y) the date this Agreement is terminated pursuant to Section 2.5, 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 "Consultant" shall mean Yorkville Advisors Management, LLC.
Section 1.13 "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 1.14 "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).
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Section 1.15 "Escrow Agreement" shall mean the escrow agreement among the
Company, the Investor, and First Union National Bank dated the date hereof.
Section 1.16 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated there under.
Section 1.17 "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 1.18 "Market Price" shall mean the lowest closing Bid Price of the
Common Stock during the Pricing Period.
Section 1.19 "Maximum Advance Amount" shall be equal to one hundred and
fifty percent (150%) of the Average Daily Volume of the Company's Common Stock
multiplied by the Purchase Price.
Section 1.20 "Minimum Acceptable Price" shall mean seventy five percent
(75%) of the lowest Closing Bid Price of the Company's Common Stock for the
twenty (20) Trading Days prior to a relevant Advance Notice Date.
Section 1.21 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.22 "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 1.23 "Pricing Period" shall mean the ten (10) consecutive Trading
Day period beginning on the first Trading Day after an Advance Notice Date and
ending on the ninth (9th) Trading Day thereafter. The Pricing Period shall be
equal to a total of ten (10) Trading Days.
Section 1.24 "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 1.25 "Purchase Price" shall be set at 91% of the Market Price
during the Pricing Period.
Section 1.26 "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
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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 1.27 "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 1.28 "Registration Statement" shall mean a registration statement
on Form SB-2 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 1.29 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.30 "SEC" shall mean the Securities and Exchange Commission.
Section 1.31 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.32 "SEC Documents" shall mean Annual Reports on Form 10-KSB,
Quarterly Reports on Form 10-QSB, Current Reports on Form 8-KSB 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 1.33 "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
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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 2.7 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 fifteen (15) 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 an Advance that does not meet the Minimum Acceptable
Price. For example if the lowest closing bid price of the common stock for the
twenty (20) trading days prior to the Advance Notice Date is $0.20, then the
Minimum Acceptable Price would be $0.15 (75% x $.20). For every day of the ten
(10) Trading Days after the Advance Notice Date that the Closing Bid Price of
the common stock is below $0.15 the Advance would be automatically reduced by
10%. If the number of shares to be issued in connection with the Advance (not
taking into account this section) is 100,000 shares and the common stock' s
Closing Bid Price is below the Minimum Acceptable Price for two (2) of the ten
(10) Trading Days following the Advance Notice 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 Advance..
Section 2.3 Closings. On each Advance Date, which shall be thirteen (13)
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
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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 (as defined herein) 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 Suspension of Registration Statement. If subsequent to any
Closing, the Registration Statement is suspended, other than due to the acts of
the Investor or the Placement Agent, for any period exceeding twenty trading
days (20) days, the Company shall pay an amount equal to one and one half
percent (1/2 %) of the Purchase Price of all Common Stock held by the Investor,
purchased pursuant to this Agreement for each twenty trading day (20) day period
or portion thereof; provided, however, that the Company shall not be required to
pay such amount to the Investor in connection with 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 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 2.6 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;
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(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
(vii) the conditions set forth in Section 7.2 shall have been
satisfied.
Section 2.7 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.
Provided however this section shall exclude up to Five Hundred Thousand Dollars
($500,000) in Convertible Debentures which the Company may issue on the date
hereof and shall exclude a warrant for one hundred thousand (100,000) shares
issuable to May Xxxxx or its designees.
(b) On the date hereof, the Company shall obtain from each
officer and director , 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. .
Section 2.8 Shareholder Approval. The Company's obligations under this
Agreement are subject to approval of the shareholders of the Company of the
increase in the authorized shares of the Company's Common Stock pursuant to
Delaware corporate law.
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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. The 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. The Investor and its advisors (and his or its
counsel), if any, have been furnished with or have had access to all materials
relating to the business, finances and operations of the Company and information
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it deemed material to making an informed investment decision. The 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. The
Investor understands that its investment involves a high degree of risk. The
Investor is in a position regarding the Company, enabled and enables such
Investor to obtain information from the Company in order to evaluate the merits
and risks of this investment. The 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. The 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) Form 10-QSB for the periods ended, March 2000, June 2000, and September
2000; and (iv) 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) . 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
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being conducted. Each of the Company and its subsidiaries is or will 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) except as disclosed in Section 4.3, this Agreement, the
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, the Escrow Agreement and assuming the execution
and delivery thereof and acceptance by the Investor 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 50,000,000 shares of Common Stock, par value
$0.001 per share, of which 12,826,182 shares were issued and outstanding and
5,000,000 shares of preferred stock of which none are outstanding. To the best
of the Company's knowledge all of such outstanding shares have been validly
issued and are fully paid and nonassessable. Except as disclosed in the SEC
Documents (as defined in Section 4.5 hereof), 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, that certain Securities Purchase Agreement dated March 29, 2001,
and that certain Warrant issued to the May Xxxxx Group on March 29, 2001 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, (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 or made available via it's public filings true and correct copies
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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"), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
Section 4.4 No Conflict. Subject to Section 2.8, the execution, delivery
and performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby to the best of the Company's
knowledge 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 would cause a
Material Adverse Effect. To the best of the Company's knowledge 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. Since May 1999, 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 amendments thereto 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,
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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). No other information provided by or on behalf of the Company to
the Investor which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
Section 4.6 10b-5. To the best of the Company's knowledge 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. To the best of the Company's knowledge 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
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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.
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Section 4.14 Regulatory Permits. The Company and its subsidiaries possess
all material 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, or otherwise disclosed to the Investor, there is no action, suit,
proceeding, formal inquiry or formal 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.
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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. 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 the Principal Market
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 on
each Advance Date substantially in the form of acceptable to the Investor
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.
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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, and all of it's 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, shareholders, employees, counsel
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 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
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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 misrepresentations or due to a
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 Nasdaq OTC Bulletin Board.
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 there under
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 resale of the Common Stock 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
-17-
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, to
the best of the Company's knowledge, 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.
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(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) Fundamental Changes. There shall not exist any funadamental
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.
(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.
-19-
(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
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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.
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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
Company 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: Pick-Ups, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxx, Xxxx 00000
Attention: Xxxx Xxxxxxxxxx
President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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With a copy to: Xxxx Xxxxxxx, P.C.
000-00 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx., Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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, 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 the 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. The Company hereby agrees 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
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contemplated hereby, except that the Company will pay the sum of Fifteen
Thousand Dollars ($15,000), to Xxxxxx Xxxxxxxx LLP for legal, administrative,
and escrow fees, upon the closing of the first traunche of the sale of
convertible debentures pursuant to the Securities Purchase Agreement dated March
29, 2001. Subsequently on each advance date, the Company will pay Xxxxxx
Xxxxxxxx LLP, the sum of Five Hundred ($500) Dollars for legal, administrative
and escrow fees.
(b) Consulting Fees. On the initial Advance Date and all
subsequent Advance Dates the Company shall pay Yorkville Advisors as cash
compensation, an amount equal to two percent (2%) of the gross proceeds of the
Advance. Yorkville Advisors may at their discretion apply the two percent (2%)
cash compensation to the Advance Amount. Furthermore upon Closing the Company
shall issue to the Yorkville Advisors or its assignee, upon the execution of
this Agreement, such number of shares of common stock of Company (the
"Consultant's Common Stock") with "piggy-back" registration rights equal to One
Hundred and Fifty Thousand Dollars ($150,000) divided by the Closing Bid Price
of the Common Stock on the date of the execution of this Agreement.
In addition to the foregoing compensation, the Company shall issue to the
Consultant or its assignees a warrant to purchase one hundred thousand (100,000)
shares of the Company's Common Stock at an exercise price of one hundred and ten
percent (100%) of the closing bid price of the Company's Common Stock on the
date of closing; each warrant shall be exercisable in whole or in part at any
time by the Consultant, as applicable, at its discretion for a period of sixty
(60) months from the date hereof (collectively referred to as "Consultant's
Warrants") and shall have "piggy-back" registration.
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 INTENTIONALLY LEFT BLANK]
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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.
COMPANY:
PICK-UPS PLUS, INC.
By: /s/ XXXX XXXXXXXXXX
---------------------
Name: Xxxx Xxxxxxxxxx
Title: President
INVESTOR:
CORNELL CAPITAL PARTNER, L.P.
By: Yorkville Advisors, LLC
It's: General Partner
By: /s/ XXXX X. XXXXXX
---------------------
Name: Xxxx X. Xxxxxx
Title: Fund Manager
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EXHIBIT A
SCHEDULE OF INVESTORS
Cornell Capital Partners, L.P.
c/o Yorkville Advisors , LLC
000 Xxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
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EXHIBIT B
ADVANCE NOTICE/COMPLIANCE CERTIFICATE
PICK-UPS PLUS, INC.
The undersigned, ________________________________ hereby certifies,
with respect to the sale of shares of Common Stock of Pick-Ups Plus, 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
_________________.
PICK-UPS PLUS, INC.
By:
-------------------------
Name:
Title:
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SCHEDULE 2.7(a)
PICK-UPS PLUS, INC.
The undersigned hereby agrees that for a period commencing on the date
hereof and expiring on the termination of the Agreement dated ________________
between Pick-Ups Plus, 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 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").
Dated: _______________, 2001
Signature
------------------------------
Address:
City, State, Zip Code:
------------------------------
Print Social Security Number
or Taxpayer I.D. Number
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