Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of June
25, 2003, by and among PICK-UPS PLUS INC., a Delaware corporation, with
headquarters located at 0000 Xxxxxxxx Xxxxx - Xxxxx 000 Xxxxxxxxxx, Xxxx 00000
(the "COMPANY"), and the Buyers listed on Schedule I attached hereto
(individually, a "BUYER" or collectively "BUYERS").
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("REGULATION D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall (i) purchase up to One Hundred Eighty
Thousand Dollars ($180,000) of secured convertible debentures (the "CONVERTIBLE
DEBENTURES"), which shall be convertible into shares of the Company's common
stock, par value $.001 (the "COMMON STOCK") (as converted, the "CONVERSION
SHARES"), of which Twenty Thousand Dollars ($20,000) shall be funded upon the
receipt of the Restricted Pledged Shares (as defined herein) (the "FIRST
CLOSING"), Eighty Thousand Dollars ($80,000) shall be funded on the business day
following the date the Company obtains the necessary Board of Directors Approval
to increase the authorized shares of the Company's Common Stock to two hundred
fifty million (250,000,000) million shares and to issue all of the shares the
Company's Common Stock upon conversion of the Convertible Debentures (the
"SECOND CLOSING") and Eighty Thousand Dollars ($80,000) shall be funded upon the
tenth (10th) the business day following the date the Company obtains the
necessary Stockholder Approval to increase the authorized shares of the
Company's Common Stock to two hundred fifty million (250,000,000) million shares
and to issue all of the shares the Company's Common Stock upon conversion of the
Convertible Debentures, the Company files an information statement increasing
the authorized shares of the Company to two hundred fifty million (250,000,000)
shares and upon the Company increasing the authorized shares of the Company's
Common Stock to two hundred fifty million (250,000,000) shares and the filing of
the registration statement filed pursuant to the Registration Rights Agreement
(the "Third CLOSING"), for a total purchase price of up to One Hundred Eighty
Thousand Dollars ($180,000), (the "PURCHASE PRICE") in the respective amounts
set forth opposite each Buyer(s) name on Schedule I ( the "SUBSCRIPTION
AMOUNT");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement Xxxxxx Xxxxxx is executing a pledge agreement in the form attached
hereto as EXHIBIT A (THE "PLEDGE AGREEMENT"), in order to guarantee the
repayment of the Convertible Debenture, pursuant to which Xxxxxx Xxxxxx shall
pledge, three million (3,000,000) free trading shares of the Company's Common
Stock (the "FREE TRADING PLEDGED SHARES" and/or the "PLEDGED SHARES") in the
event of default of the Company's obligations herein, contained in the
Convertible
Debenture, contained in the Registration Rights Agreement, and contain in the
Irrevocable Transfer Agent Instructions.
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Xxxxxx Xxxxx and Xxxxxx Xxxxxxxxxx are executing and delivering a
security agreement (the "SECURITY AGREEMENT") in the form attached hereto as
EXHIBIT B PURSUANT TO WHICH XXXXXX XXXXX AND XXXXXX XXXXXXXXXX AGREE TO PROVIDE
THE BUYER A SECURITY INTEREST IN four million (4,000,000) restricted shares of
the Company's Common Stock and two million (2,000,000), restricted shares of the
Company's Common Stock, respectively owned by Xxxxxx Xxxxx and Xxxxxx Xxxxxxxxxx
and subsequently transferred into the Buyer's name, (the "RESTRICTED PLEDGED
SHARES") (collectively referred to as the "PLEDGED COLLATERAL") in the event of
default of the Company's obligations herein, contained in the Convertible
Debenture, contained in the Registration Rights Agreement, and contain in the
Irrevocable Transfer Agent Instructions.
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as EXHIBIT C (the "INVESTOR
REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated there under, and applicable state securities laws; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Irrevocable
Transfer Agent Instruction substantially in the form attached hereto as EXHIBIT
D (the "IRREVOCABLE TRANSFER AGENT INSTRUCTION"); and
WHEREAS, the aggregate proceeds of the sale of the Convertible
Debentures contemplated hereby shall be held in escrow pursuant to the terms of
an escrow agreement substantially in the form of the Escrow Agreement attached
hereto as EXHIBIT E.
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s)hereby agree
as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) PURCHASE OF CONVERTIBLE DEBENTURES. Subject to the
satisfaction (or waiver) of the terms and conditions of this Agreement, each
Buyer agrees, severally and not jointly, to purchase at Closing (as defined
herein below) and the Company agrees to sell and issue to each Buyer, severally
and not jointly, at Closing, Convertible Debentures in amounts corresponding
with the Subscription Amount set forth opposite each Buyer's name on Schedule I
hereto. Upon execution hereof by a Buyer, the Buyer shall wire transfer the
Subscription Amount set forth opposite his name on Schedule I in same-day funds
or a check payable to Xxxxxx Xxxxxxxx LLP, as Escrow Agent for Pick-Ups Plus
Inc. / Cornell Capital Partners, LP ", which Subscription Amount shall be held
in escrow pursuant to the terms of the Escrow Agreement (as hereinafter defined)
and disbursed in accordance therewith. Notwithstanding the foregoing, a Buyer
may withdraw his Subscription Amount and terminate this Agreement as to such
Buyer at any time after the execution hereof and prior to Closing (as
hereinafter defined).
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(b) CLOSING DATES. The First Closing of the purchase and sale of
the Convertible Debentures shall take place at 10:00 a.m. Eastern Standard Time
upon receipt by Xxxxxx Xxxxxxxx LLP of the Restricted Pledged Shares (the "FIRST
CLOSING DATE"), the Second Closing of the purchase and sale of the Convertible
Debentures shall take place at 10:00 a.m. Eastern Standard Time on the business
day following the business day following the date the Company obtains the
necessary Board of Directors Approval to increase the authorized shares of the
Company's Common Stock to two hundred fifty million (250,000,000) million shares
and to issue all of the shares the Company's Common Stock upon conversion of the
Convertible Debentures (the "SECOND CLOSING DATE"), the Third Closing of the
purchase and sale of the Convertible Debentures shall take place at 10:00 a.m.
Eastern Standard Time on the tenth (10th) business day following the date the
Company obtains the necessary Stockholder Approval to increase the authorized
shares of the Company's Common Stock to two hundred fifty million (250,000,000)
million shares and to issue all of the shares the Company's Common Stock upon
conversion of the Convertible Debentures, the Company files an information
statement increasing the authorized shares of the Company to two hundred fifty
million (250,000,000) shares and upon the Company actually increasing the
authorized shares of the Company's Common Stock to two hundred fifty million
(250,000,000) shares and the filing of the registration statement filed pursuant
to the Registration Rights Agreement (the "Third CLOSING DATE") (collectively
referred to as the "CLOSING DATES"), subject to notification of satisfaction (or
waiver) of the conditions to closing set forth in Sections 6 and 7 below (or
such later date as is mutually agreed to by the Company and the Buyer(s)). The
closings shall occur on the Closing Dates at the offices of Xxxxxx Xxxxxxxx,
LLP, 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0, Xxxxx, XX 00000 (or such other place as is
mutually agreed to by the Company and the Buyer(s)).
(c) ESCROW ARRANGEMENTS; FORM OF PAYMENT. Upon execution hereof
by Buyer(s) and pending the Closing Dates, the aggregate proceeds of the sale of
the Convertible Debentures to Buyer(s) pursuant hereto shall be deposited in a
non-interest bearing escrow account with Xxxxxx Xxxxxxxx LLP, as escrow agent
(the "ESCROW AGENT"), pursuant to the terms of an escrow agreement between the
Company, the Buyer(s) and the Escrow Agent in the form attached hereto as
EXHIBIT B (the "ESCROW AGREEMENT"). Subject to the satisfaction of the terms and
conditions of this Agreement, on the Closing Date, (i) the Escrow Agent shall
deliver to the Company in accordance with the terms of the Escrow Agreement such
aggregate proceeds for the Convertible Debentures to be issued and sold to such
Buyer(s) at the closings minus the fees and expenses of Xxxxxx Xxxxxxxx LLP of
Ten Thousand Dollars ($10,000) as outlined in the Equity Line of Credit
Agreement dated the date hereof, by wire transfer of immediately available funds
in accordance with the Company's written wire instructions, and (ii) the Company
shall deliver to each Buyer, Convertible Debentures which such Buyer(s) is
purchasing in amounts indicated opposite such Buyer's name on Schedule I, duly
executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
(a) INVESTMENT PURPOSE. Each Buyer is acquiring the Convertible
Debentures and, upon conversion of Convertible Debentures, the Buyer will
acquire the Conversion Shares then issuable, for its own account for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution thereof, except pursuant
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to sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer reserves the right to dispose of
the Conversion Shares at any time in accordance with or pursuant to an effective
registration statement covering such Conversion Shares or an available exemption
under the 1933 Act.
(b) ACCREDITED INVESTOR STATUS. Each Buyer is an "ACCREDITED
INVESTOR" as that term is defined in Rule 501(a)(3) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Each Buyer understands that the
Convertible Debentures are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire such securities.
(d) INFORMATION. Each Buyer 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 he deemed
material to making an informed investment decision regarding his purchase of the
Convertible Debentures and the Conversion Shares, which have been requested by
such Buyer. Each Buyer 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 Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Each Buyer understands that its investment in the
Convertible Debentures and the Conversion Shares involves a high degree of risk.
Each Buyer is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables such Buyer
to obtain information from the Company in order to evaluate the merits and risks
of this investment. Each Buyer has sought such accounting, legal and tax advice,
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Convertible Debentures and the Conversion
Shares.
(e) NO GOVERNMENTAL REVIEW. Each Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Convertible
Debentures or the Conversion Shares, or the fairness or suitability of the
investment in the Convertible Debentures or the Conversion Shares, nor have such
authorities passed upon or endorsed the merits of the offering of the
Convertible Debentures or the Conversion Shares.
(f) TRANSFER OR RESALE. Each Buyer understands that except as
provided in the Investor Registration Rights Agreement: (i) the Convertible
Debentures have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered there under, or (B) such Buyer
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration requirements; (ii) any sale of such
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securities made in reliance on Rule 144 under the 1933 Act (or a successor rule
thereto) ("RULE 144") may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC there under; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption there under. The Company reserves the right to place stop transfer
instructions against the shares and certificates for the Conversion Shares.
(g) LEGENDS. Each Buyer understands that the certificates or
other instruments representing the Convertible Debentures and or the Conversion
Shares shall bear a restrictive legend in substantially the following form (and
a stop transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided the
Conversion Shares are registered under the 1933 Act or (ii) in connection with a
sale transaction, after such holder provides the Company with an opinion of
counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the 1933 Act.
(h) AUTHORIZATION, ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
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(i) RECEIPT OF DOCUMENTS. Each Buyer and his or its counsel has
received and read in their entirety: (i) this Agreement and each representation,
warranty and covenant set forth herein, the Investor Registration Rights
Agreement, the Escrow Agreement, the Irrevocable Transfer Agent Instruction, the
Pledge Agreement and the Security Agreements; (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 fiscal year ended December 31, 2002; (iv) the Company's Form 10-QSB for the
fiscal quarter ended March 31, 2003 and (v) answers to all questions each Buyer
submitted to the Company regarding an investment in the Company; and each Buyer
has relied on the information contained therein and has not been furnished any
other documents, literature, memorandum or prospectus.
(j) DUE FORMATION OF CORPORATE AND OTHER BUYERS. If the Buyer(s)
is a corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Convertible Debentures and is not prohibited
from doing so.
(k) NO LEGAL ADVICE FROM THE COMPANY. Each Buyer 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. Each Buyer 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.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that, except
as set forth in the SEC Documents (as defined herein):
(a) ORGANIZATION AND QUALIFICATION. The Company and its
subsidiaries are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite 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.
(b) AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Investor Registration Rights
Agreement, the Escrow Agreement, the Irrevocable Transfer Agent Instructions and
any related agreements, and to issue the Convertible Debentures and the
Conversion Shares in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Investor Registration Rights
Agreement, the Escrow Agreement, the Irrevocable Transfer Agent Instructions (as
defined herein) and any related agreements by the Company and the consummation
by it of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Convertible Debentures the
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Conversion Shares and the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion or exercise thereof, 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, the Investor Registration Rights Agreement,
the Escrow Agreement, the Irrevocable Transfer Agent Instructions and any
related agreements have been duly executed and delivered by the Company, (iv)
this Agreement, the Investor Registration Rights Agreement, the Escrow
Agreement, the Irrevocable Transfer Agent Instructions 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. The authorized officer of the Company executing this Agreement, the
Investor Registration Rights Agreement, the Escrow Agreement, the Irrevocable
Transfer Agent Instructions and any related agreements knows of no reason why
the Company cannot file the registration statement as required under the
Investor Registration Rights Agreement or perform any of the Company's other
obligations under such documents.
(c) ACTIONS, PROCEEDINGS, AND/OR INVESTIGATIONS. There are no SEC
or any other federal or state regulatory or enforcement agency actions,
proceedings or investigations pending against the Company.
(d) ORDER, WRIT OR INJUNCTIONS. The Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
(e) CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, par value $.001 per share and
5,000,000 shares of Preferred Stock, par value $.001. As of the date hereof the
Company has 83,743,997 shares of Common Stock and no shares of Preferred Stock
issued and outstanding. 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 3(f)), 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 of this Agreement, (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, (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 1933 Act (except pursuant to the Registration Rights
Agreement) and (iv) there are no outstanding registration statements and there
are no outstanding comment letters from the SEC or any other regulatory agency.
There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered
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by the issuance of the Convertible Debentures as described in this Agreement.
The Company has furnished to the Buyer 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"), and the terms of all securities convertible
into or exercisable for Common Stock and the material rights of the holders
thereof in respect thereto other than stock options issued to employees and
consultants.
(f) ISSUANCE OF SECURITIES. The Convertible Debentures are duly
authorized and, upon issuance in accordance with the terms hereof, shall be duly
issued, fully paid and nonassessable, are free from all taxes, liens and charges
with respect to the issue thereof. The Conversion Shares issuable upon
conversion of the Convertible Debentures have been duly authorized and reserved
for issuance. The issuance of the Conversion Shares will not violate the
applicable listing agreement between the Company the OTCBB. Upon conversion or
exercise in accordance with the Convertible Debentures the Conversion Shares
will be duly issued, fully paid and nonassessable.
(g) NO CONFLICTS. Except as disclosed in the SEC Documents, the
execution, delivery and performance of this Agreement, the Investors
Registration Rights Agreement and the Escrow 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 the
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 National Association of
Securities Dealers Inc.'s OTC Bulletin Board on which the Common Stock is
quoted) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected. 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, and shall not be conducted
in violation of any material law, ordinance, or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required
under the 1933 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. Except as disclosed in the SEC Documents, 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
facts or circumstance, which might give rise to any of the foregoing.
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(h) SEC DOCUMENTS: FINANCIAL STATEMENTS. Since March 31, 2000,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC under of the Securities
Exchange Act of 1934, as amended (the "1934 ACT") (all of the foregoing filed
prior to the date hereof or amended after 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 Buyers or their 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). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in this Agreement, 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.
(i) 10(B)-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.
(j) ABSENCE OF LITIGATION. Except as disclosed 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.
(k) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE CONVERTIBLE
DEBENTURES. The Company acknowledges and agrees that the Buyer(s) is acting
solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that the Buyer(s) is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Buyer(s) or any
of their respective representatives or agents in connection with this Agreement
and the
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transactions contemplated hereby is merely incidental to such Buyer's purchase
of the Convertible Debentures or the Conversion Shares. The Company further
represents to the Buyer that the Company's decision to enter into this Agreement
has been based solely on the independent evaluation by the Company and its
representatives.
(l) 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 0000 Xxx) in connection with the offer or sale of the
Convertible Debentures or the Conversion Shares.
(m) NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Convertible Debentures or the Conversion Shares under the 1933 Act or cause this
offering of the Convertible Debentures or the Conversion Shares to be integrated
with prior offerings by the Company for purposes of the 1933 Act.
(n) 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.
(o) INTELLECTUAL PROPERTY RIGHTS. The Company and its
subsidiaries own or possess adequate rights or licenses to use all 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.
(p) ENVIRONMENTAL LAWS. The Company and its subsidiaries are (i)
in compliance with any and all applicable 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.
10
(q) TITLE. 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.
(r) 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.
(s) 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.
(t) 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, and (iii) the recorded amounts for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(u) 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. Except as set forth in the SEC Documents,
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.
(v) TAX STATUS. Except as disclosed in the SEC Documents, the
Company and each of its subsidiaries has made and 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
11
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.
(w) CERTAIN TRANSACTIONS. Except as set forth in the SEC
Documents, and except for arm's length transactions pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than the
grant of stock options disclosed 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.
(x) FEES AND RIGHTS OF FIRST REFUSAL. 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.
4. COVENANTS.
(a) BEST EFFORTS. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
(b) FORM D. The Company agrees to file a Form D with respect to
the Conversion Shares as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Conversion Shares, or obtain an exemption
for the Conversion Shares for sale to the Buyers at the Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date.
(c) REPORTING STATUS. Until the earlier of (i) the date as of
which the Buyer(s) may sell all of the Conversion Shares without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Buyer(s) shall have sold all the Conversion
Shares and (B) none of the Convertible Debentures are outstanding (the
"REGISTRATION PERIOD"), the Company shall file in a timely manner all reports
required to be filed with the SEC pursuant to the 1934 Act and the regulations
of the SEC there under, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations there under would otherwise permit such termination.
12
(d) USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Convertible Debentures for general corporate and working capital
purposes.
(e) RESERVATION OF SHARES. The Company shall take all action
reasonably necessary to at all times have authorized, and reserved for the
purpose of issuance, such number of shares of Common Stock as shall be necessary
to effect the issuance of the Conversion Shares. If at any time the Company does
not have available such shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of the Conversion Shares of the
Company shall call and hold a special meeting of the shareholders within thirty
(30) days of such occurrence, for the sole purpose of increasing the number of
shares authorized. The Company's management shall recommend to the shareholders
to vote in favor of increasing the number of shares of Common Stock authorized.
Management shall also vote all of its shares in favor of increasing the number
of authorized shares of Common Stock.
(f) LISTINGS OR QUOTATION. The Company shall promptly secure the
listing or quotation of the Conversion Shares upon the Over The Counter Bulletin
Board ("OTCBB") or other market, if any, upon which shares of Common Stock are
then listed or quoted (subject to official notice of issuance) and shall use its
best efforts to maintain, so long as any other shares of Common Stock shall be
so listed, such listing of all Conversion Shares from time to time issuable
under the terms of this Agreement. The Company shall maintain the Common Stock's
authorization for quotation on the OTCBB.
(g) PRIOR APPROVAL. The Company shall have obtained all approvals
necessary under the rules and regulations established and maintained by the
OTCBB for the issuance of the shares of Common Stock to the Buyer(s) upon
conversion of the Convertible Dentures.
(h) FEES AND EXPENSES. Each of the Company and the Buyer(s) shall
pay all costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of this
Agreement, the Escrow Agreement, the Investor Registration Rights Agreement and
the Irrevocable Transfer Agent Instructions. The Buyer(s) shall be entitled to a
ten percent (10%) discount on the Purchase Price.
(i) The costs and expenses of the Buyer(s) and Xxxxxx Xxxxxxxx,
LLP, which shall be Ten Thousand Dollars ($10,000), as outlined in the Equity
Line of Credit Agreement dated the date hereof, shall be paid for by the Company
at the First Closing directly from the gross proceeds held in escrow.
(j) CORPORATE EXISTENCE. So long as any of the Convertible
Debentures remain outstanding, the Company shall not directly or indirectly
consummate any merger, reorganization, restructuring, reverse stock split
consolidation, sale of all or substantially all of the Company's assets or any
similar transaction or related transactions (each such transaction, an
"ORGANIZATIONAL CHANGE") unless, prior to the consummation of an Organizational
Change, the Company obtains the written consent of each Buyer. In any such case,
the Company will make appropriate provision with respect to such holders' rights
and interests to insure that the provisions of this Section 4(h) will thereafter
be applicable to the Convertible Debentures.
13
(k) TRANSACTIONS WITH AFFILIATES. So long as any Convertible
Debentures are outstanding, the Company shall not, and shall cause each of its
subsidiaries not to, enter into, amend, modify or supplement, or permit any
subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment, or arrangement with any of its or any subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two (2) years, stockholders who beneficially own five percent (5%)
or more of the Common Stock, or Affiliates (as defined below) or with any
individual related by blood, marriage, or adoption to any such individual or
with any entity in which any such entity or individual owns a five percent (5%)
or more beneficial interest (each a "RELATED PARTY"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
investment in an Affiliate of the Company, (c) any agreement, transaction,
commitment, or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, (d) any agreement transaction, commitment, or arrangement which
is approved by a majority of the disinterested directors of the Company, for
purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement. "AFFILIATE" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) 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.
(l) TRANSFER AGENT. The Company covenants and agrees that, in the
event that the Company's agency relationship with the transfer agent should be
terminated for any reason prior to a date which is two (2) years after the
Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the transfer agent execute and agree to be bound by the terms
of the Irrevocable Transfer Agent Instructions (as defined herein) to Transfer
Agent.
(m) RESTRICTION ON ISSUANCE OF CAPITAL STOCK OR GRANTING
SECURITY. So long as any Convertible Debentures are outstanding, the Company
shall not, without the prior written consent of the Buyer(s), issue or sell
shares of Common Stock or Preferred Stock (i) without consideration or for a
consideration per share less than the Bid Price of the Common Stock determined
immediately prior to its issuance, (ii) any warrant, option, right, contract,
call, or other security instrument granting the holder thereof, the right to
acquire Common Stock without consideration or for a consideration less than such
Common Stock's Bid Price value determined immediately prior to it's issuance,
(iii) enter into any security instrument granting the holder a security interest
in any and all assets of the Company or (iv) file any registration statement on
Form S-8.
(n) STOCKHOLDER APPROVAL. The Company shall obtain stockholder
approval increasing the Company's authorized shares of the common stock to two
hundred fifty million (250,000,000) shares in accordance with Delaware law
through an increase in the authorized Capital (the "STOCKHOLDER APPROVAL"). The
Company shall file an information statement with the SEC no later than June 26,
2003 increasing the Company's authorized shares
14
of the common stock to two hundred fifty million (250,000,000) shares in
accordance with Delaware law through an increase in the authorized Capital. The
Company shall use its best efforts to increase the authorized shares of the
Company's Common Stock to two hundred fifty million no later than July 26, 2003.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue Irrevocable Transfer Agent Instructions
in the form attached hereto as EXHIBIT D to its transfer agent irrevocably
appointing Xxxxxx Xxxxxxxx LLP as its agent for purpose of having certificates
issued, registered in the name of the Buyer(s) or its respective nominee(s), for
the Conversion Shares representing such amounts of Convertible Debentures as
specified from time to time by the Buyer(s) to the Company upon conversion of
the Convertible Debentures, for interest owed pursuant to the Convertible
Debenture, and for any and all Liquidated Damages (as this term is defined in
the Registration Rights Agreement) that may be owed pursuant to the Registration
Rights Agreement. Xxxxxx Xxxxxxxx LLP shall be paid a cash fee of Fifty Dollars
($50) for every occasion they act pursuant to the Irrevocable Transfer Agent
Instructions. The Company shall not change its transfer agent without the
express written consent of the Buyer(s), which may be withheld by the Buyer(s)
in its sole discretion. Prior to registration of the Conversion Shares under the
1933 Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5,
and stop transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares prior to registration of such shares under the
0000 Xxx) will be given by the Company to its transfer agent and that the
Conversion Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Investor Registration Rights Agreement. Nothing in this Section 5 shall affect
in any way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of Conversion Shares. If the Buyer(s) provides the
Company with an opinion of counsel, in form, scope and substance customary for
opinions of counsel in comparable transactions to the effect that registration
of a resale by the Buyer(s) of any of the Conversion Shares is not required
under the 1933 Act, the Company shall within two (2) business days instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by the Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section
5, that the Buyer(s) shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Convertible Debentures to the Buyer(s) at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of
15
the following conditions, provided that these conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion:
(a) Each Buyer shall have executed this Agreement, the Escrow
Agreement and the Investor Registration Rights Agreement and delivered the same
to the Company.
(b) The Buyer(s) shall have delivered to the Escrow Agent the
Purchase Price for Convertible Debentures in respective amounts as set forth
next to each Buyer as outlined on Schedule I attached hereto and the Escrow
Agent shall have delivered the net proceeds to the Company by wire transfer of
immediately available U.S. funds pursuant to the wire instructions provided by
the Company.
(c) The representations and warranties of the Buyer(s) shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer(s) shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer(s) at or prior to the Closing Dates.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer(s) hereunder to purchase the Convertible
Debentures at the Closing is subject to the satisfaction, at or before the
Closing Dates, of each of the following conditions, provided that these
conditions are for the Buyer's sole benefit and may be waived by the Buyer(s) at
any time in its sole discretion:
(a) The Company shall have executed this Agreement, the
Convertible Debenture, the Escrow Agreement, the Irrevocable Transfer
Instructions and the Investor Registration Rights Agreement, and delivered the
same to the Buyer(s).
(b) The Company shall have delivered to Xxxxxx Xxxxxxxx LLP the
Restricted Pledged Shares as well as the Free Trading Pledged Shares.
(c) The Common Stock shall be authorized for quotation on the
OTCBB, trading in the Common Stock shall not have been suspended for any reason
and all of the Conversion Shares issuable upon conversion of the Convertible
Debentures shall be approved for listing or quotation on the OTCBB.
(d) The Buyer shall have received the Pledge Agreement executed
by Xxxxxx Xxxxxx, medallion guaranteed stock/bond power and medallion guaranteed
shares of common stock pledged pursuant to the Pledge Agreement.
(e) The Buyer shall have received the Security Agreements
executed by Xxxxxx Xxxxx and Xxxxxx Xxxxxxxxxx.
(f) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any of such
representations and
16
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Dates as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Dates. If requested by the Buyer, the Buyer
shall have received a certificate, executed by the President of the Company,
dated as of the Closing Dates, to the foregoing effect and as to such other
matters as may be reasonably requested by the Buyer including, without
limitation an update as of the Closing Dates regarding the representation
contained in Section 3(c) above.
(g) The Company shall have executed and delivered to the Buyer(s)
the Convertible Debentures in the respective amounts set forth opposite each
Buyer(s) name on Schedule I attached hereto.
(h) The Buyer(s) shall have received an opinion of counsel from
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP in a form satisfactory to the Buyer(s).
(i) The Company shall have provided to the Buyer(s) a certificate
of good standing from the secretary of state from the state in which the company
is incorporated.
(j) As of the Third Closing Date, the Company shall have obtained
the necessary Stockholder Approval to increase its authorized shares to two
hundred fifty million (250,000,000), filed an information statement to
increasing its authorized shares to two hundred fifty million (250,000,000),
increased its authorized shares to two hundred fifty million (250,000,000), and
filed a registration statement pursuant to the Registration Rights Agreement.
(k) As of the Third Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Convertible Debentures, shares of Common Stock
to effect the conversion of all of the Conversion Shares then outstanding or
shall call a meeting of its stockholders within thirty (30) days of the date
hereof in order to fulfill its obligations under this Section 7(i).
(l) The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(m) The Company shall have provided the Buyer with duly executed
Board Resolutions accepting and ratifying the transactions herein.
(n) The Company shall have provided to the Investor an
acknowledgement, to the satisfaction of the Investor, from the Company's
accountants, as to its ability to provide all consents required in order to file
a registration statement in connection with this transaction.
17
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of
this Agreement and acquiring the Convertible Debentures and the Conversion
Shares hereunder, and in addition to all of the Company's other obligations
under this Agreement, the Company shall defend, protect, indemnify and hold
harmless the Buyer(s) and each other holder of the Convertible Debentures and
the Conversion Shares, and all of their officers, directors, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "BUYER
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 Buyer 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 Buyer 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, the
Convertible Debentures or the Investor 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 Investor 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 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 Indemnities, any transaction financed or
to be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Convertible Debentures or the status of the Buyer or holder
of the Convertible Debentures the Conversion Shares, as a Buyer of Convertible
Debentures in the Company. 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 Buyer's other obligations under
this Agreement, the Buyer 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 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
Buyer(s) in this Agreement, , instrument or document contemplated hereby or
thereby executed by the Buyer, (b) any breach of any covenant, agreement or
obligation of the Buyer(s) contained in this Agreement, the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Buyer, 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 and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement, the Investor Registration Rights Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Company
Indemnities. To the extent that the foregoing undertaking by each Buyer may be
unenforceable for any reason, each Buyer shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
18
9. GOVERNING LAW: MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws. The parties further agree that any action
between them shall be heard in Xxxxxx County, New Jersey, and expressly consent
to the jurisdiction and venue of the Superior Court of New Jersey, sitting in
Xxxxxx County and the United States District Court for the District of New
Jersey sitting in Newark, New Jersey for the adjudication of any civil action
asserted pursuant to this Paragraph.
(b) 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.
(c) HEADINGS. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) ENTIRE AGREEMENT, AMENDMENTS. This Agreement supersedes all
other prior oral or written agreements between the Buyer(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 Buyer 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.
(f) 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 confirmation of receipt, when sent
by facsimile; (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:
19
If to the Company, to: Pick Ups Plus Inc.
0000 Xxxxxxxx Xxxxx - Xxxxx 000
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
With a copy to: 1065 Avenue of the Americas - 21st Floor
New York, New York 10018
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer, to: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx - Xxxxx 0
Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer(s), to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
party hereto.
(h) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) SURVIVAL. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyer(s)
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closing for a period of one (1) year following the date on
20
which the Convertible Debentures are converted in full. The Buyer(s) shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
(j) PUBLICITY. The Company and the Buyer(s) shall have the right
to approve, before issuance any press release or any other public statement with
respect to the transactions contemplated hereby made by any party; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyer(s), to issue any press release or other public disclosure with respect to
such transactions required under applicable securities or other laws or
regulations (the Company shall use its best efforts to consult the Buyer(s) in
connection with any such press release or other public disclosure prior to its
release and Buyer(s) shall be provided with a copy thereof upon release
thereof).
(k) FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) TERMINATION. In the event that the Closing shall not have
occurred with respect to the Buyers on or before five (5) business days from the
date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated by the
Company pursuant to this Section 9(l), the Company shall remain obligated to
reimburse the Buyer(s) for the fees and expenses of Xxxxxx Xxxxxxxx LLP
described in Section 4(g) above.
(m) NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
21
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
PICK-UPS PLUS INC.
By:
----------------------------------
Name: Xxxxxx Xxxxx
Title: Chief Financial Officer
22
EXHIBIT A
FORM OF PLEDGE AGREEMENT
EXHIBIT B
FORM SECURITY AGREEMENT
EXHIBIT C
FORM OF INVESTOR REGISTRATION RIGHTS AGREEMENT
2
EXHIBIT D
FORM IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
EXHIBIT E
FORM OF ESCROW AGREEMENT
2
SCHEDULE I
SCHEDULE OF BUYERS
ADDRESS/FACSIMILE AMOUNT OF
NAME SIGNATURE NUMBER OF BUYER SUBSCRIPTION
------------------------- -------------------------------- ------------------------- -----------------
Cornell Capital Partners, LP By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000 $ 180,000
Its: General Partner Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
By:
--------------------------------
Name: Xxxx X. Xxxxxx
Its: Portfolio Manager
3
