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EXHIBIT 10.1
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SECURITIES PURCHASE AGREEMENT
DATED AS OF MAY 17, 2000
BY AND BETWEEN
AUGUSTA/L.O.F., LLC
AND
US TRUCKING, INC.
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF DEBENTURE AND WARRANT...........................1
SECTION 1.1 PURCHASE OF DEBENTURE AND WARRANT................................1
SECTION 1.2 CLOSING DATE.....................................................2
SECTION 1.3 FORM OF PAYMENT..................................................2
ARTICLE II BUYER'S REPRESENTATIONS AND WARRANTIES..............................2
SECTION 2.1 INVESTMENT PURPOSE...............................................2
SECTION 2.2 ACCREDITED INVESTOR STATUS.......................................2
SECTION 2.3 RELIANCE ON EXEMPTIONS...........................................3
SECTION 2.4 INFORMATION......................................................3
SECTION 2.5 NO GOVERNMENTAL REVIEW...........................................3
SECTION 2.6 TRANSFER OR RESALE...............................................3
SECTION 2.7 LEGENDS..........................................................4
SECTION 2.8 VALIDITY; ENFORCEMENT............................................4
SECTION 2.9 RESIDENCY........................................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................5
SECTION 3.1 ORGANIZATION AND QUALIFICATION...................................5
SECTION 3.2 AUTHORIZATION; ENFORCEMENT; VALIDITY.............................5
SECTION 3.3 CAPITALIZATION...................................................5
SECTION 3.4 ISSUANCE OF SECURITIES...........................................6
SECTION 3.5 NO CONFLICTS.....................................................7
SECTION 3.6 FINANCIAL STATEMENTS.............................................7
SECTION 3.7 ABSENCE OF CERTAIN CHANGES.......................................8
SECTION 3.8 ABSENCE OF LITIGATION............................................8
SECTION 3.9 ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES..........8
SECTION 3.10 NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES....................................................8
SECTION 3.11 NO GENERAL SOLICITATION..........................................9
SECTION 3.12 NO INTEGRATED OFFERING...........................................9
SECTION 3.13 DILUTIVE EFFECT..................................................9
SECTION 3.14 EMPLOYEE RELATIONS...............................................9
SECTION 3.15 INTELLECTUAL PROPERTY RIGHTS....................................10
SECTION 3.16 ENVIRONMENTAL LAWS..............................................10
SECTION 3.17 TITLE; LIENS....................................................10
SECTION 3.18 INSURANCE.......................................................11
SECTION 3.19 REGULATORY PERMITS..............................................11
SECTION 3.20 INTERNAL ACCOUNTING CONTROLS....................................11
SECTION 3.21 NO MATERIALLY ADVERSE CONTRACTS, ETC............................11
SECTION 3.22 TAX STATUS......................................................11
SECTION 3.23 TRANSACTIONS WITH AFFILIATES....................................12
SECTION 3.24 APPLICATION OF TAKEOVER PROTECTIONS.............................12
SECTION 3.25 RIGHTS AGREEMENT................................................12
SECTION 3.26 FOREIGN CORRUPT PRACTICES.......................................12
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SECTION 3.27 YEAR 2000 COMPLIANCE............................................13
ARTICLE IV COVENANTS..........................................................13
SECTION 4.1 BEST EFFORTS...................................................13
SECTION 4.2 FORM D AND BLUE SKY............................................13
SECTION 4.3 REGISTRATION STATEMENT.........................................13
SECTION 4.4 REPORTING STATUS...............................................13
SECTION 4.5 USE OF PROCEEDS................................................14
SECTION 4.6 FINANCIAL INFORMATION..........................................14
SECTION 4.7 RESERVATION OF SHARES..........................................14
SECTION 4.8 ADDITIONAL FINANCING; RIGHT OF FIRST REFUSAL...................14
SECTION 4.9 LISTING........................................................15
SECTION 4.10 EXPENSES.......................................................15
SECTION 4.11 TRANSACTIONS WITH AFFILIATES...................................15
SECTION 4.12 LIMITATION ON FILING REGISTRATION STATEMENTS...................16
SECTION 4.13 LETTERS OF CREDIT..............................................16
SECTION 4.14 SECURING OF NASDAQ LISTING. ...................................16
ARTICLE V TRANSFER AGENT INSTRUCTIONS.........................................17
ARTICLE VI CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.....................17
SECTION 6.1 DELIVERY OF DOCUMENTS...........................................18
SECTION 6.2 PURCHASE PRICE..................................................18
SECTION 6.3 REPRESENTATIONS AND WARRANTIES..................................18
ARTICLE VII CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE......................18
SECTION 7.1 DELIVERY OF DOCUMENTS...........................................18
SECTION 7.2 TRADING OF COMMON STOCK.........................................18
SECTION 7.3 REPRESENTATIONS AND WARRANTIES..................................18
SECTION 7.4 OPINION.........................................................19
SECTION 7.5 DEBENTURE/WARRANT...............................................19
SECTION 7.6 BOARD APPROVAL..................................................19
SECTION 7.7 RESERVATION OF SHARES...........................................19
SECTION 7.8 TRANSFER AGENT..................................................19
SECTION 7.9 GOOD STANDING...................................................19
SECTION 7.10 OFFICER'S CERTIFICATE...........................................19
SECTION 7.11 SECURITIES LAWS.................................................19
SECTION 7.12 OTHER...........................................................20
ARTICLE VIII INDEMNIFICATION..................................................20
ARTICLE IX GOVERNING LAW; MISCELLANEOUS.......................................22
SECTION 9.1 GOVERNING LAW; JURISDICTION; JURY TRIAL........................22
SECTION 9.2 COUNTERPARTS...................................................23
SECTION 9.3 HEADINGS.......................................................23
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SECTION 9.4 SEVERABILITY...................................................23
SECTION 9.5 ENTIRE AGREEMENT; AMENDMENTS...................................23
SECTION 9.6 NOTICES........................................................23
SECTION 9.7 SUCCESSORS AND ASSIGNS.........................................25
SECTION 9.8 NO THIRD PARTY BENEFICIARIES...................................25
SECTION 9.9 SURVIVAL.......................................................25
SECTION 9.10 PUBLICITY......................................................25
SECTION 9.11 FURTHER ASSURANCES.............................................25
SECTION 9.12 TERMINATION....................................................26
SECTION 9.13 KNOWLEDGE......................................................26
SECTION 9.14 NO STRICT CONSTRUCTION.........................................26
SECTION 9.15 REMEDIES.......................................................26
SECTION 9.16 PAYMENT SET ASIDE..............................................26
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SCHEDULES
SCHEDULE 3.1 Subsidiaries
SCHEDULE 3.3 Capitalization
SCHEDULE 3.3(i) Preemptive Rights
SCHEDULE 3.3(ii) Debt Securities
SCHEDULE 3.3(iii) Convertible Securities and Warrants Outstanding
SCHEDULE 3.3(iv) Registration Rights
SCHEDULE 3.3(v) Securities Subject to Redemption
SCHEDULE 3.3(vi) Anti-Dilution Triggered
SCHEDULE 3.3(vii) SAR and Phantom Stock Rights
SCHEDULE 3.5 Conflicts
SCHEDULE 3.7 Material Changes
SCHEDULE 3.8 Litigation
SCHEDULE 3.15 Intellectual Property
SCHEDULE 3.17 Title; Liens
SCHEDULE 3.23 Transactions with Affiliates
SCHEDULE 4.8 Additional Financing; Right of First Refusal
SCHEDULE 4.11 Transactions With Affiliates
EXHIBITS
EXHIBIT A Form of Debenture
EXHIBIT B Form of Warrant
EXHIBIT C Form of Registration Rights Agreement
EXHIBIT D Form of Letter of Credit
EXHIBIT E Form of Officer's Certificate
EXHIBIT F Form of Company Counsel Opinion
EXHIBIT G Form of Irrevocable Transfer Agent Instructions
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GLOSSARY OF DEFINED TERMS
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1933 Act....................................................................1
Affiliate..................................................................16
Agreement...................................................................1
Business Day................................................................2
Buyer Indemnified Parties..................................................20
Buyer Losses...............................................................20
By-laws.....................................................................6
Certificate of Incorporation................................................6
Closing.....................................................................1
Closing Date................................................................2
Common Stock................................................................1
Company Indemnified Parties................................................20
Company Losses.............................................................21
Control....................................................................16
Conversion Shares...........................................................1
Debenture...................................................................1
Environmental Laws.........................................................10
Financial Statements........................................................7
GAAP........................................................................7
Indemnified Parties........................................................20
Indemnifying Party.........................................................21
Irrevocable Transfer Agent Instructions....................................17
knowledge..................................................................26
Losses.....................................................................21
Material Adverse Effect.....................................................5
Principal Market...........................................................15
Purchase Price..............................................................2
Registration Period........................................................14
Registration Rights Agreement...............................................1
Regulation D................................................................1
Related Party..............................................................15
Rule 144....................................................................3
SEC.........................................................................1
Securities..................................................................2
Subsidiaries................................................................5
Transaction Documents.......................................................5
Warrant.....................................................................1
Warrant Shares..............................................................1
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May 17,
2000, by and between AUGUSTA/L.O.F., LLC, A Cayman Islands limited liability
company (the "Buyer") and US TRUCKING, INC., a Colorado corporation, with its
principal executive office located at 10602 Timberwood Circle #9 Louisville, KY
40223, (the "Company").
RECITALS
WHEREAS, the Company and Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended and the rules and regulations of the SEC promulgated thereunder (the
"1933 Act");
WHEREAS, the Company has authorized the issuance of a $6,000,000 11.5%
Subordinated Convertible Debenture, which shall be convertible into shares of
the Company's common stock, no par value per share (the "Common Stock") (as
converted, the "Conversion Shares"), in accordance with the terms of the
Subordinated Convertible Debenture, substantially in the form attached hereto as
EXHIBIT A (the "Debenture");
WHEREAS, the Company has authorized the issuance of stock purchase
warrants, in substantially the form attached hereto as EXHIBIT B (the
"Warrant"), to purchase an aggregate of up to 580,000 shares of Common Stock at
certain exercise prices as described therein (as exercised, collectively, the
"Warrant Shares"); and
WHEREAS, Buyer desires to purchase, and the Company desires to issue
and deliver to Buyer, the Debenture and the Warrant, all upon the terms and
conditions stated in this Agreement;
WHEREAS, upon the closing of the transactions contemplated by this
Agreement, the parties hereto will execute and deliver a Registration Rights
Agreement, in substantially the form attached hereto as EXHIBIT C (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and applicable state
securities laws.
NOW THEREFORE, in consideration of the mutual covenants of the parties
set forth in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and Buyer
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF DEBENTURE AND WARRANT
SECTION 1.1 PURCHASE OF DEBENTURE AND WARRANT.
Subject to the satisfaction (or waiver) of the conditions set forth in
Article 6 and Article 7 below, the Company shall issue and sell to Buyer, and
Buyer agrees to purchase from the Company, the Debenture and the Warrant at the
Closing (the "Closing"). The aggregate
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purchase price (the "Purchase Price") for the Debenture and the Warrant at the
Closing shall be $6,000,000.
SECTION 1.2 CLOSING DATE.
The date and time of the Closing (the "Closing Date") shall occur,
subject to notification of satisfaction (or waiver) of the conditions to the
Closing set forth in Article 6 and Article 7 hereof, on March 20, 2000 or such
other date as is mutually agreed to by the Company and the Buyer. The Closing
shall occur on the Closing Date at the offices of [US Trucking in Louisville,
KY].
SECTION 1.3 FORM OF PAYMENT.
On the Closing Date, (i) Buyer shall pay the Purchase Price to the
Company for the Debenture and the Warrant, less costs and expenses as described
in SECTION 4.10, by wire transfer of immediately available funds in accordance
with the Company's written wire instructions, as delivered to the Buyer within
two Business Days prior to the Closing, and (ii) the Company shall deliver to
Buyer, the Debenture and the Warrant hereunder, duly executed on behalf of the
Company and registered in the name of Buyer or its designee. "Business Day"
shall mean any day other than a Saturday or Sunday or a day on which commercial
banks in the City of Chicago, Illinois are authorized or required by law or
executive order to remain closed.
ARTICLE II
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer hereby represents and warrants to the Company that:
SECTION 2.1 INVESTMENT PURPOSE.
Buyer (i) is acquiring the Debenture and the Warrant, (ii) upon
conversion of the Debenture, will acquire the Conversion Shares then issuable,
and (iii) upon exercise of the Warrant, will acquire the Warrant Shares issuable
upon exercise thereof (the Debenture, the Conversion Shares, the Warrant and the
Warrant Shares collectively are referred to herein as the "Securities"), 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 to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
SECTION 2.2 ACCREDITED INVESTOR STATUS.
Buyer is an "accredited investor" as that term is defined in Rule
501(a) of Regulation D.
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SECTION 2.3 RELIANCE ON EXEMPTIONS.
Buyer understands that the Securities 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 Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
Buyer set forth herein in order to determine the availability of such exemptions
and the eligibility of Buyer to acquire such Securities.
SECTION 2.4 INFORMATION.
Buyer and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities which have been requested by
Buyer. Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by Buyer or its advisors, if any, or its
representatives shall modify, amend or affect Buyer's right to rely on the
Company's representations and warranties as set forth herein. Buyer understands
that its investment in the Securities involves a high degree of risk. 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
Securities.
SECTION 2.5 NO GOVERNMENTAL REVIEW.
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 Securities or the fairness or suitability of the
investment in the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Securities.
SECTION 2.6 TRANSFER OR RESALE.
Buyer understands that except as provided in the Registration Rights
Agreement: (i) the Securities 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 thereunder, (B)
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, or (C) Buyer provides the Company with reasonable assurance
that such Securities can be sold, assigned or transferred pursuant to Rule 144
promulgated under the 1933 Act, as amended (or a successor rule thereto) ("Rule
144"); (ii) any sale of the Securities made in reliance on 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 the 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 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
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 thereunder.
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SECTION 2.7 LEGENDS.
Buyer understands that the certificates or other instruments
representing the Debenture and the Warrant and, until such time as the sale of
the Conversion Shares and the Warrant Shares have been registered under the 1933
Act as contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth
below, 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 FOR INVESTMENT 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 OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144.
SECTION 2.8 VALIDITY; ENFORCEMENT.
This Agreement has been duly and validly authorized, executed and
delivered on behalf of Buyer and is a valid and binding agreement of Buyer
enforceable against Buyer in accordance with its terms, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
SECTION 2.9 RESIDENCY.
Buyer is a resident of Cayman Islands.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION.
The Company and each of its "Subsidiaries" (which for purposes of this
Agreement means any entity in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest) 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 and authorization 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 its ownership of property or 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. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, properties, assets,
operations, results or operations, financial condition or prospects of the
Company and any of its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents (as defined below). The Company
has no Subsidiaries except as set forth on SCHEDULE 3.1.
SECTION 3.2 AUTHORIZATION; ENFORCEMENT; VALIDITY.
(i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Debenture, the Warrant, the
Registration Rights Agreement, its obligations pursuant to the Irrevocable
Transfer Agent Instructions (as defined in Article 5), and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents"), and to issue the Securities in accordance with the terms hereof and
thereof; (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including, without limitation the issuance of the Debenture and the
Warrant, and the reservation for issuance and the issuance of the Conversion
Shares and the Warrant 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) the Transaction Documents have been duly executed and
delivered by the Company; and (iv) the Transaction Documents constitute the
valid and binding obligation 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 3.3 CAPITALIZATION.
As of the date hereof, the authorized capital stock of the Company
consists of (i) 75,000,000 shares of Common Stock, of which as of the date
hereof, 17,280,058 shares are issued
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and outstanding, 7,997,297 shares of which are contingently issued in connection
with loans, 2,500,000 shares are reserved for issuance pursuant to the Company's
stock option and purchase plans and (ii) 10,000,000 shares of preferred stock,
of which as of the date hereof, 999,000 shares designated as Series A Preferred,
2,000 Series B Preferred, 50,000 shares Series C Preferred, 950 shares Series D
Preferred, and 2,300 shares Series E Preferred. All of such outstanding shares
have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed on SCHEDULE 3.3, (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company, (ii)
there are no outstanding debt securities, (iii) 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, (iv) 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 the Registration
Rights Agreement), (v) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries, (vi) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in this
Agreement, and (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or 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 amended and
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 rights of the holders
thereof in respect thereto.
SECTION 3.4 ISSUANCE OF SECURITIES.
Upon issuance, the Debenture and the Warrant will be, and upon
conversion or exercise in accordance with the Debenture or the Warrant, as the
case may be, the Conversion Shares and the Warrant Shares will be, validly
issued, fully paid and non-assessable and free from all taxes, liens and charges
with respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. At least 3,853,000 shares of Common Stock
(subject to adjustment pursuant to the Company's covenant set forth in SECTION
4.6 below) have been duly authorized and reserved for issuance upon conversion
of the Debenture and upon exercise of the Warrant. Provided that the
representations and warranties of the Buyer set forth in Sections 2.1 and 2.2
are true and correct when made and as of the Closing, issuance by the Company of
the Securities will be and is exempt from registration under the provisions of
Rule 506 as promulgated under the 1933 Act.
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SECTION 3.5 NO CONFLICTS.
Except as disclosed on SCHEDULE 3.5, the execution, delivery and
performance of the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby (including,
without limitation, the reservation for issuance and issuance of the Conversion
Shares and the Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation 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 material 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) 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 on SCHEDULE 3.5,
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 organizational
charter. Except as disclosed on SCHEDULE 3.5, neither the Company nor any of its
Subsidiaries is in violation of any material term of or in default under any
material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to
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 law,
ordinance, regulation of any governmental entity except where such violation
would not have a Material Adverse Effect. Except as specifically contemplated by
this Agreement and as required under the 1933 Act or 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 or
any regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by this Agreement or any
other of the Transaction Documents, in each case in accordance with the terms
hereof or thereof. Except as disclosed on SCHEDULE 3.5, 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 circumstances which might give rise to any of the foregoing.
SECTION 3.6 FINANCIAL STATEMENTS.
The Company's balance sheet and statements of income and cash flows for
the fiscal years ended December 31, 1999 and 1998, and the Company's balance
sheet as of December 31, 1999 and the related statement of income for the period
then ended (all such financial statements being hereinafter referred to as the
"Financial Statements") each of which has been previously delivered to the
Buyer, have been prepared in accordance with United States generally accepted
accounting principles, consistently applied ("GAAP"), 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, may be condensed or summary statements or
may be subject to normal year-end adjustments or accruals consistent with past
practice) 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 or accruals consistent with past practice).
No other
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information provided by or on behalf of the Company to the Buyer which is not
included in the Financial Statements, including, without limitation, information
referred to in SECTION 2.4 of 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 circumstance under which they are or
were made, not misleading.
SECTION 3.7 ABSENCE OF CERTAIN CHANGES.
Except as disclosed on SCHEDULE 3.7, since December 31, 1999 there has
been no Material Adverse change and no Material Adverse development in the
business, properties, operations, financial condition, results of operations or
prospects of the Company or its Subsidiaries. The Board of Directors of the
Company has not discussed, and the Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
SECTION 3.8 ABSENCE OF LITIGATION.
There is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Common Stock or any of the
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, except as set forth in
SCHEDULE 3.8.
SECTION 3.9 ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES.
The Company acknowledges and agrees that the Buyer is acting solely in
the capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby and thereby. The Company further
acknowledges that Buyer is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and any advice given by
Buyer or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to Buyer's purchase of the Securities. The Company further represents
to Buyer that the Company's decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives.
SECTION 3.10 NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES.
No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
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SECTION 3.11 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 1933 Act) in
connection with the offer or sale of the Securities.
SECTION 3.12 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 any of the Securities under the 1933 Act or
cause this offering of the Securities to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated, nor will the Company or any of its
Subsidiaries take any action or steps that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings that would require such registration.
SECTION 3.13 DILUTIVE EFFECT.
The Company understands and acknowledges that the number of Conversion
Shares issuable upon conversion of the Debenture or Warrant Shares issuable upon
exercise of the Warrant will increase in certain circumstances. The Company
further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Debenture in accordance with this Agreement and the Debenture
and its obligation to issue the Warrant Shares upon exercise of the Warrant in
accordance with this Agreement and the Warrant, is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.
SECTION 3.14 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, neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and the Company
and its Subsidiaries believe that their relations with their employees are good.
No executive officer (as defined in Rule 501(f) of the 1933 Act) has notified
the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company. No executive officer, to
the best knowledge of the Company and its Subsidiaries, is, or is now expected
to be, in violation of any term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing matters.
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SECTION 3.15 INTELLECTUAL PROPERTY RIGHTS.
To the knowledge of the Company and its Subsidiaries, the Company and
its Subsidiaries own or possess adequate rights or licenses to use all material
trademarks, trade names, service names, service marks, service mark
registrations, service names, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights necessary to
conduct their respective businesses as now conducted except as set forth on
SCHEDULE 3.15. Except as set forth on SCHEDULE 3.15, none of the Company's
material trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate within two years from the date of this Agreement. 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 mark
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on SCHEDULE 3.15, 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 mark 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 3.16 ENVIRONMENTAL LAWS.
The Company and its Subsidiaries (i) are 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 where, in each of the three foregoing cases, the failure to so comply
would have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.17 TITLE; LIENS.
The Company and its Subsidiaries have good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in SCHEDULE 3.17 or such as do not have a
Material Adverse effect on the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. The Company and its Subsidiaries do not own any real property.
Any real property and facilities held under lease by the Company and any of 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.
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SECTION 3.18 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 have a
Material Adverse effect on the condition, financial or otherwise, or the
earnings, business or operations of the Company and its Subsidiaries, taken as a
whole.
SECTION 3.19 REGULATORY PERMITS.
The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
SECTION 3.20 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 GAAP 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 3.21 NO MATERIALLY ADVERSE CONTRACTS, ETC.
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. Neither the Company
nor any of its Subsidiaries is a party to any contract or agreement which in the
judgment of the Company's officers has or is expected to have a Material Adverse
Effect.
SECTION 3.22 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 (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books reserves
reasonably adequate for the payment of all unpaid and unreported taxes) and 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
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those being contested in good faith and has set aside on its books reserves
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 3.23 TRANSACTIONS WITH AFFILIATES.
Except as set forth on SCHEDULE 3.23 and other than the grant of stock
options disclosed on SCHEDULE 3.3, none of the officers, directors, or employees
of the Company is presently a party to any transaction with the Company or any
of its Subsidiaries (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 the 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 3.24 APPLICATION OF TAKEOVER PROTECTIONS.
The Company and its Board of Directors have taken all necessary action,
if any, in order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the state of the Company's incorporation and such other state, to
the extent allowed under such state law, if any, where the Company conducts its
principal operation which is or could become applicable to the Buyer as a result
of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and Buyer's ownership of
the Securities.
SECTION 3.25 RIGHTS AGREEMENT.
The Company has not adopted a shareholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock or
a change in control of the Company.
SECTION 3.26 FOREIGN CORRUPT PRACTICES.
Neither the Company, nor any of its Subsidiaries, nor any director,
officer, agent, employee or other person acting on behalf of the Company or any
of its Subsidiaries has, in the course of its actions for, or on behalf of, the
Company or any of its Subsidiaries used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
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SECTION 3.27 YEAR 2000 COMPLIANCE.
The Company has initiated a review and assessment of all areas within
its and each Subsidiaries' business and operations that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Company or any of the Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to, and any date after, December 31, 1999). Based on the foregoing, the
Company believes that all of its and its Subsidiaries' computer applications are
reasonably expected to be able to perform properly date-sensitive functions for
all dates before and after January 1, 2000, except to the extent that a failure
to do so would not reasonably be expected to have a Material Adverse Effect.
ARTICLE IV
COVENANTS
SECTION 4.1 BEST EFFORTS.
Each party to this Agreement shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Article 6
and Article 7 of this Agreement.
SECTION 4.2 FORM D AND BLUE SKY.
The Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to 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 in order
to obtain an exemption for or to qualify the Securities for sale to the Buyer 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 Buyer on or prior to the Closing Date. The Company shall
make all filings and reports relating the offer and sale of the Securities
required under applicable securities or "Blue Sky" laws of the states of the
United States following the Closing Date.
SECTION 4.3 REGISTRATION STATEMENT.
As soon as practicable but in no event later than sixty (60) days after
the Closing Date, the Company shall prepare, and file with the SEC a
Registration Statement or Registration Statements (as is necessary) on Form SB-2
covering the resale of the conversion Shares and the Warrant Shares.
SECTION 4.4 REPORTING STATUS.
Until the earlier of (i) the date which is one year after the date as
of which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares and the Warrant Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold all the
Conversion Shares and the Warrant Shares and (B) no amounts under the Debenture
are due and owing and no Warrants are outstanding (the "Registration Period"),
the Company shall file all reports required to be filed with the SEC pursuant to
the 1934 Act, and the Company
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shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act would otherwise permit such termination.
SECTION 4.5 USE OF PROCEEDS.
The Company will use the proceeds from the sale of the Debenture and
the related Warrant for repayment of certain indebtedness to [GE CAPTIAL], and
the balance for general corporate purposes, as determined by the Company.
SECTION 4.6 FINANCIAL INFORMATION.
The Company agrees to send the following to each Buyer (and their
permitted transferees, if any) during the Registration Period: (i) within two
(2) days after the filing thereof with the SEC, a notice of filing its Annual
Report on Form 10-KSB (or other required form), its Quarterly Reports on Form
10-QSB (or other required form), any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act; provided, that if any such report is not filed with the SEC
through EDGAR then the Company shall deliver a copy of such report to Buyer by
facsimile within two days after such report is filed with the SEC; and (ii)
copies of any notices and other information made available or given to the
stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.
SECTION 4.7 RESERVATION OF SHARES.
At the Closing, the Company shall take all action necessary to have
authorized, and reserved for the purpose of issuance, no less than 150% of the
number of shares of Common Stock needed to provide for the issuance of the
shares of Common Stock upon conversion of the Debenture and 100% of the number
of shares of Common Stock needed to provide for the issuance of the shares of
Common Stock upon exercise of the entire Warrant. Following the Closing Date,
the Company shall take all actions necessary to at all times have authorized,
and reserved for the purpose of issuance, no less than 130% of the number of
shares of Common Stock needed to provide for the issuance of the shares of
Common Stock upon conversion of the Debenture and 100% of the shares of Common
Stock needed to provide for the issuance of the shares of Common Stock upon
exercise of the entire Warrant.
SECTION 4.8 ADDITIONAL FINANCING; RIGHT OF FIRST REFUSAL.
(a) Except for the debentures issued to Thomson Kernaghan & Co.,
Ltd, as nominee, under a letter agreement dated May 9, 1999, any debt secured by
receivables, and any debt incurred with an acquisition or merger, the Company
agrees that during the period beginning on the date hereof and ending on the
date that no amounts are due and owing under the Debenture, neither the Company
nor its Subsidiaries will authorize, create, issue, negotiate or contract with
any party to issue (i) any variable-priced debt financing with an equity
component, or (ii) any form of variable priced securities convertible into or
exchangeable for or having option rights to purchase, any shares of stock of the
Company or any Subsidiary.
(b) While there is a principal amount outstanding on the
Debenture, Company shall not create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur,
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assume or suffer to exist, any debt other than (i) the Debenture, (ii) debt
secured by purchase money encumbrances and (iii) additional debt not to exceed
$500,000 in the aggregate.
(c) The Holder shall have a right of first refusal for a period 24
months from the purchase of the Debenture, to participate, in whole or in part,
in all financings of the Company, through wither equity or debt, excluding any
underwritten offering conducted by [OPCO].
(d) The Buyer has the unilateral right, and any time, to provide
the funds necessary to prepay the DeepHaven Private Placement Trading Co.'s
Promissory Note dated October 20, 1999 according and subject to its terms, by
purchasing a new debenture on terms substantially similar to those of this
Debenture.
SECTION 4.9 LISTING.
The Company shall use its best efforts to promptly secure the listing
of all of the Registrable Securities (as defined in the Registration Rights
Agreement) on the NASDAQ Small Cap Market or other comparable national exchange
or trading market (the "Principal Market") (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall
promptly solicit stockholder approval of the Company's issuance of all of the
Securities described in this Agreement, if such approval will facilitate prompt
listing of the Registrable Securities on the Principal Market. Upon such listing
on the Principal Market neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market. The Company shall
promptly, and in no event later than the following Business Day, provide to
Buyer copies of any notices it receives from the Principal Market regarding any
continued eligibility of the Common Stock for listing on such automated
quotation system or securities exchange. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this SECTION 4.9.
SECTION 4.10 EXPENSES.
At the Closing, the Company shall pay to JE Matthew, LLC, a fee equal
to $75,000, net of any previous deposits made by Company.
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
So long as any amounts under the Debenture are outstanding (but no
later than such time as all amounts have become convertible), 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, persons who were officers or
directors at any time during the previous two years, stockholders who
beneficially own 5% or more of the Common Stock, or affiliates 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 5% or more beneficial
interest (each a "Related Party"), except for (a) customary employment
arrangements and benefit programs on reasonable terms; (b) any agreement,
transaction, commitment or arrangement on an arms-length basis on terms no less
favorable than terms
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which would have been obtainable from a person other than such Related Party;
(c) any agreement, transaction, commitment or arrangement which is approved by a
majority of the disinterested directors of the Company; (d) existing agreements
identified on SCHEDULE 4.11 or (e) transactions involving payments or amounts
individually not in excess of $100,000 or in the aggregate in excess of $500,000
in any one-year period. 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" or "affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "Control" or
"controls" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
SECTION 4.12 LIMITATION ON FILING REGISTRATION STATEMENTS.
Except in connection with existing registration obligations set forth
on SCHEDULE 3.3(iv), registration obligations set forth herein or in the
Registration Rights Agreement, or with respect to any private common equity or
warrants offerings conducted by [OPCO], the Company shall not file a
registration statement (other than the Registration Statement (as defined in the
Registration Rights Agreement) or a registration statement on Form S-4 or Form
S-8) covering the sale or resale of shares of Common Stock with the SEC during
the term of the Debenture.
SECTION 4.13 LETTERS OF CREDIT.
The Company covenants and agrees that so long as any amounts are
outstanding under the Debenture, it will procure an irrevocable Letter of Credit
in an amount equal to $3,000,000 and maintain an irrevocable Letter of Credit in
an amount equal to the lesser of $3,000,000 or 50% of the outstanding principal
balance of the Debenture, as calculated from time to time, for the benefit of
Buyer, and which Letter of Credit has been issued by a bank satisfactory to
Buyer in its sole discretion and in the form attached hereto as EXHIBIT D. The
Letter of Credit shall be maintained thereafter in an amount equal to 50% of the
principal balance of the Debenture. The Company further covenants and agrees
that upon any Event of Default (as defined in the Debenture) under the
Debenture, Buyer shall be permitted to pursue any and all remedies available to
Buyer as the beneficiary of such Letter of Credit, without regard to amounts and
penalties which may otherwise be due and owing to Buyer under the terms of such
Debenture, or any other remedies available to Buyer as a result of such Event of
Default, whether pursuant to such Debenture, this Agreement or otherwise. In the
event of a Prepayment under the Debenture, the Company shall be entitled to
apply the balance under the Letter of Credit.
SECTION 4.14 SECURING OF NASDAQ LISTING
The Company shall be required to qualify for and obtain a listing of
its Common Stock on the NASDAQ Small Cap Market within 180 days of the purchase
of the Debenture. If the Company is unsuccessful in obtaining such a listing
within the stated period, the Hoder shall immediately receive an additional
100,000 warrants (the "Penalty Warrants") a form of which is included in
Exhibit B.
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ARTICLE V
TRANSFER AGENT INSTRUCTIONS
The Company shall issue irrevocable instructions to its transfer agent,
and any subsequent transfer agent, to issue certificates, registered in the name
of Buyer or its respective nominee(s), for the Conversion Shares and the Warrant
Shares in such amounts as specified from time to time by the Buyer to the
Company upon conversion of amounts outstanding under the Debenture or exercise
of the Warrant (the "Irrevocable Transfer Agent Instructions"). Prior to
registration of the Conversion Shares and the Warrant Shares under the 1933 Act,
all such certificates shall bear the restrictive legend specified in SECTION 2.7
of this Agreement. Upon such registration of the Common Shares and the Warrant
Shares under the 1933 Act, the Company shall promptly notify the transfer agent
that any Common Shares and Warrant Shares issued and subject to resale pursuant
to the Registration Statement after the effective date of such Registration
Statement shall be issued without such restrictive legend. The Company warrants
that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Article 5, and stop transfer instructions to give effect to
SECTION 2.6 hereof (in the case of the Conversion Shares and the Warrant Shares,
prior to registration of the Conversion Shares and the Warrant Shares under the
1933 Act) will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Article 5 shall affect in any way the Buyer's
obligations and agreements set forth in SECTION 2.7 to comply with all
applicable prospectus delivery requirements, if any, upon resale of the
Securities. If the Buyer provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act
or the Buyer provides the Company with reasonable assurances that the Securities
can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Conversion Shares and the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by Buyer and without any restrictive legend. 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 Article 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Article 5, that the Buyer shall be entitled,
in addition to all other available remedies, to an order and/or 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.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligation of the Company hereunder to issue and sell the Debenture
and the Warrant to the Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of 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 by providing Buyer with prior written
notice thereof:
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SECTION 6.1 DELIVERY OF DOCUMENTS.
The Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company.
SECTION 6.2 PURCHASE PRICE.
The Buyer shall have delivered to the Company the Purchase Price for
the Debenture and the Warrant being purchased by the Buyer at the Closing by
wire transfer of immediately available funds pursuant to the wire instructions
provided by the Company.
SECTION 6.3 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Buyer 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 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 on or prior to the Closing Date.
ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE
The obligation of the Buyer hereunder to purchase the Debenture and the
Warrant at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for Buyer's sole benefit and may be waived by the Buyer at any time in its sole
discretion by providing the Company with prior written notice thereof:
SECTION 7.1 DELIVERY OF DOCUMENTS.
The Company shall have executed each of the Transaction Documents and
delivered the same to the Buyer.
SECTION 7.2 TRADING OF COMMON STOCK.
The Common Stock shall be quoted on the OTC Bulletin Board.
SECTION 7.3 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and
correct 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 Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company on or prior to the Closing
Date. The Buyer shall have received a certificate, executed by each of the Chief
Executive Officer and the Chief Financial Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by the
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<PAGE> 24
Buyer including, without limitation, an update as of the Closing Date regarding
the representation contained in SECTION 3.3 above, in the form attached hereto
as EXHIBIT E.
SECTION 7.4 OPINION.
The Buyer shall have received the opinion of the Company's counsel
dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the form of EXHIBIT F attached
hereto.
SECTION 7.5 DEBENTURE/WARRANT.
The Company shall have executed and delivered to the Buyer the
Debenture and the Warrant being purchased by the Buyer at the Closing.
SECTION 7.6 BOARD APPROVAL.
The Board of Directors of the Company shall have adopted resolutions
consistent with SECTION 3.2 above and in a form reasonably acceptable to the
Buyer.
SECTION 7.7 RESERVATION OF SHARES.
As of the 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 Debenture and the exercise of the Warrant, at least 3,853,000
shares of Common Stock.
SECTION 7.8 TRANSFER AGENT.
The Irrevocable Transfer Agent Instructions, in the form of EXHIBIT G
attached hereto, shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
SECTION 7.9 GOOD STANDING.
The Company shall have delivered to the Buyer a certified copy of the
Certificate of Incorporation and a certificate of good standing of the Company
and each Subsidiary, in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within 10 days of
the Closing Date.
SECTION 7.10 OFFICER'S CERTIFICATE.
The Company shall have delivered to the Buyer a secretary's
certificate, dated as the Closing Date, as to (i) the resolutions described in
SECTION 7.6, and (ii) the Bylaws, each as in effect at the Closing.
SECTION 7.11 SECURITIES LAWS.
The Company shall have made all filings under all applicable federal
and state securities laws necessary to consummate the issuance of the Securities
pursuant to this Agreement in compliance with such laws.
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<PAGE> 25
SECTION 7.12 OTHER.
The Company shall have delivered to the Buyer such other documents
relating to the transactions contemplated by this Agreement as the Buyer or its
counsel may reasonably request.
ARTICLE VIII
INDEMNIFICATION
(a) In consideration of the Buyer's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, and in
addition to any other rights the Buyer may have at law or in equity, the Company
shall defend, protect, indemnify and hold harmless the Buyer each subsequent
holder of the Securities, and their respective affiliates, stockholders,
officers, directors, employees, direct or indirect investors and any of the
foregoing persons' agents, representatives, successors and permitted assigns
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement (collectively, the "Buyer
Indemnified Parties")from and against any and all actions, causes of action,
suits, claims, losses (including, without limitation, diminutions in value),
costs, penalties, deficiencies, fees, liabilities, expenses and damages, and
expenses in connection therewith (irrespective of whether any such Buyer
Indemnified Party is a party to the action for which indemnification hereunder
is sought), and including reasonable attorneys' fees and disbursements (the
"Buyer Losses"), incurred by any Buyer Indemnified Party 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 the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) without duplication of clause (a), any misrepresentation in or omission from
any of the representations or warranties contained in the Transaction Documents,
or any of the Schedules thereto, or any of the certificates or other documents
furnished to the Buyer by the Company and contemplated by the Transaction
Documents; (c) any nonfulfillment or breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby; (c) any
action, demand, proceeding, investigation or claim by any third party
(including, without limitation, governmental agencies) against or affecting the
Company and/or its Affiliates or Subsidiaries which, if successful, would give
rise to or evidence the existence of or relate to a breach of (A) any of the
representations or warranties at the time made or (B) covenants of the Company;
(d) any cause of action, suit or claim brought or made against such Indemnified
Party and arising out of or resulting from the execution, delivery, performance
or enforcement of the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby; (e) any transaction financed or to
be financed, in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities or (f) the status of the Buyer or such other
holder of the Securities as an investor in the Company.
(b) The Buyer shall defend, protect, indemnify and hold harmless
the Company and its Subsidiaries (collectively, the "Company Indemnified
Parties" and together with the Buyer Indemnified Parties, the "Indemnified
Parties")from and against any and all actions, causes of action, suits, claims,
losses (including, without limitation, diminutions in value), costs,
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<PAGE> 26
penalties, deficiencies, fees, liabilities, expenses and damages, and expenses
in connection therewith (irrespective of whether any such Company Indemnified
Party is a party to the action for which indemnification hereunder is sought),
and including reasonable attorneys' fees and disbursements (the "Company
Losses", and together with the Buyer Losses, the "Losses"), incurred by any
Company Indemnified Party 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 in ARTICLE II hereof, or (b) any nonfulfillment or breach of any covenant,
agreement or obligation of the Buyer contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(c) Notwithstanding the foregoing, and subject to the following
sentence, upon judicial determination, which is final and no longer appealable,
that the act or omission giving rise to the indemnification hereinabove provided
resulted primarily out of or was based primarily upon an Indemnified Party's
gross negligence, fraud or willful misconduct (unless such action was based upon
such Indemnified Party's reliance in good faith upon any of the representations,
warranties, covenants or promises made by the other party herein) by such
Indemnified Party, the party being required to indemnify the Indemnified Party
(such indemnifying party, the "Indemnifying Party") shall not be responsible for
any Indemnified Liabilities sought to be indemnified in connection therewith,
and the Indemnifying Party shall be entitled to recover from the Indemnified
Party all amounts previously paid in full or partial satisfaction of such
indemnity, together with all costs and expenses of the Indemnifying Party
reasonably incurred in effecting such recovery, if any.
(d) All indemnification rights hereunder shall survive the
execution and delivery of the Transaction Documents and the consummation of the
transactions contemplated herein and therein indefinitely, regardless of any
investigation, inquiry or examination made for or on behalf of, or any knowledge
of the Buyer and/or any of the other Indemnified Parties or the acceptance by
the Buyer of any certificate or opinion.
(e) If for any reason the indemnity provided for in this ARTICLE
VIII is unavailable to any Indemnified Party or is insufficient to hold each
such Indemnified Party harmless from all such Indemnified Liabilities arising
with respect to the transactions contemplated by the Transaction Documents, then
the Indemnifying Party and the Indemnified Party shall each contribute to the
amount paid or payable by such Indemnified Liability in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and such Indemnified Party on the other but
also the relative fault of the Indemnifying Party and the Indemnified Party as
well as any relevant equitable considerations. In addition, the Indemnifying
Party agrees to reimburse any Indemnified Party upon demand for all reasonable
expenses (including legal counsel fees) incurred by such Indemnified Party or
any such other person in connection with investigating, preparing or defending
any such action or claim. The indemnity, contribution and expense reimbursement
obligations that the Indemnifying Party has under this ARTICLE VIII shall be in
addition to any liability that the Indemnifying Party may otherwise have. The
parties further agree that the indemnification and reimbursement commitments set
forth in this Agreement shall apply whether or not the Indemnified Party is a
formal party to any such lawsuits, claims or other proceedings.
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<PAGE> 27
(f) Any indemnification of any Indemnified Party pursuant to this
ARTICLE VIII shall be effected by wire transfer of immediately available funds
from the Indemnifying Party to an account designated by the Indemnified Party
within [fifteen (15)] days after the determination thereof.
(g) An Indemnifying Party shall be liable to the Indemnified Party
for any Losses only if the Indemnified Party delivers to the Indemnifying Party
written notice, setting forth in reasonable detail the identity, nature and
amount of Losses related to such claim or claims no later than [ninety (90)]
days after any such Loss has arisen, in which case the Indemnifying Party shall
be obligated to indemnify the Indemnified Party. An Indemnified Party's failure
to provide the detail required by the preceding sentence shall not constitute
either a breach of this Agreement by the Indemnified Party or any basis for the
Indemnifying Party to assert that the Indemnified Party did not comply with the
terms of this ARTICLE VIII sufficient to cause the Indemnified Party to have
waived its rights under this ARTICLE VIII, unless the Indemnifying Party
demonstrates that its ability to defend against any claims with respect thereto
has been materially adversely affected.
ARTICLE IX
GOVERNING LAW; MISCELLANEOUS
SECTION 9.1 GOVERNING LAW; JURISDICTION; JURY TRIAL.
All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
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SECTION 9.2 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; provided that a facsimile signature shall be considered due
execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original, not a facsimile signature.
SECTION 9.3 HEADINGS.
The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
SECTION 9.4 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.
SECTION 9.5 ENTIRE AGREEMENT; AMENDMENTS.
This Agreement supersedes all other prior oral or written agreements
between the Buyer, 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 Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Company and the Buyer, and no provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought.
SECTION 9.6 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 actual receipt, when delivered
personally; (ii) upon actual receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business 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:
US TRUCKING, INC.
10602 Timberwood Circle, #9
Louisville, KY 40223
Telephone: 502.334.4000
Facsimile: 502.412.8200
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Attention: Anthony Huff
With a copy to:
Jud Wagenseller
2107 Bainbridge Row Dr.
Louisville, KY 40207
Telephone: 502.899.5108
Facsimile: 502.899 5109
Attention: Jud Wagenseller
If to the Transfer Agent:
Corporate Stock Transfer
3200 Cherry Creek Dr. South
Suite 430, Burton, CO 80209
Telephone: 303.282.4800
Facsimile: 303.282.5800
Attention: Carylyn Bell
If to the Buyer:
Augusta/L.O.F., LLC
600 Central Avenue
Suite 214
Highland Park, Illinois 60035
Telephone: (847)681-8600
Facsimile: (847)681-1541
Attention: Howard Spivack
With a copy to:
Pedersen & Houpt
161 N Clark St
Suite 3100
Chicago, IL 60601-3224
Telephone: (312) 261-2112
Facsimile: (312) 641-6895
Attention: John Muehlstein, Esq.
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party five days prior to the effectiveness of such change.
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<PAGE> 30
SECTION 9.7 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Buyer (if Buyer has not assigned all of its rights
hereunder) and Buyer's permitted assigns, if any, including by merger,
consolidation or reorganization, except pursuant to a Special Event, merger,
consolidation or reorganization (as defined in SECTION 2(b)(ii) of the
Debenture) with respect to which the Company has satisfied its obligations under
SECTION 2 of the Debenture. Buyer may assign all or any part of its rights
hereunder to any affiliate of Buyer or to any lender used by Buyer to finance
the transactions contemplated hereby, without the consent of the Company;
provided, however, that any such assignment shall not release the Buyer from its
obligations hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption. Notwithstanding
anything to the contrary contained in the Transaction Documents, Buyer shall be
entitled to pledge the Securities in connection with a bona fide margin account
or to any lender used by Buyer to finance the transactions contemplated hereby.
SECTION 9.8 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.
SECTION 9.9 SURVIVAL.
Unless this Agreement is terminated under SECTION 9.12, the
representations and warranties of the Company and the Buyer contained in
Articles 2 and 3, the agreements and covenants set forth in Article 9, and the
indemnification provisions set forth in Article 8 shall survive the Closing for
the period that the Debenture remains outstanding, and the agreements and
covenants set forth in Articles 4 and 5 shall survive the Closing for the longer
of the period that Buyer holds any Securities, or such time as such agreements
and covenants are no longer enforceable under applicable statutes of
limitations.
SECTION 9.10 PUBLICITY.
Each of the parties hereto shall have the right to approve before
issuance any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the parties shall each
be entitled, without the prior approval of the other, to make any press release
or other public disclosure with respect to such transactions as is required by
applicable law and regulations (although such party shall consult the other in
connection with any such press release or other public disclosure prior to its
release and shall be provided with a copy thereof).
SECTION 9.11 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,
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<PAGE> 31
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.
SECTION 9.12 TERMINATION.
In the event that the Closing shall not have occurred on or before ten
(10) business days from the date hereof due to the Company's or the Buyer's
failure to satisfy the conditions set forth in Articles 6 and 7 above (and the
nonbreaching party's failure to waive such unsatisfied condition(s)), the
nonbreaching 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 pursuant to this SECTION 9.12, the Company shall remain
obligated to reimburse the nonbreaching Buyer for the expenses described in
SECTION 4.9 above.
SECTION 9.13 KNOWLEDGE.
As used herein "knowledge" shall mean, with respect to a person,
information that is possessed, or should have been possessed after due inquiry,
by such person.
SECTION 9.14 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.
SECTION 9.15 REMEDIES.
The Buyer and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and the Debenture and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
SECTION 9.16 PAYMENT SET ASIDE.
To the extent that the Company makes a payment or payments to the Buyer
hereunder or pursuant to the Debenture or Warrant or the Buyer enforces or
exercises its rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
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<PAGE> 32
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPANY:
US TRUCKING, INC.
By:
-------------------------------
[Name]
[Title]
BUYER:
AUGUSTA/L.O.F., LLC
By:
-------------------------------
an authorized signatory
<PAGE> 33
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPANY:
US TRUCKING, INC.
By:
-------------------------------
[Name]
[Title]
BUYER:
AUGUSTA/L.O.F., LLC
By:
-------------------------------
an authorized signatory
<PAGE> 34
EXHIBIT A
FORM OF DEBENTURE
<PAGE> 35
EXHIBIT B
FORM OF WARRANT
<PAGE> 36
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 37
EXHIBIT D
FORM OF LETTER OF CREDIT
<PAGE> 38
EXHIBIT E
FORM OF OFFICER'S CERTIFICATE
<PAGE> 39
EXHIBIT F
FORM OF COMPANY COUNSEL OPINION
<PAGE> 40
EXHIBIT G
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
<PAGE> 41
U. S. TRUCKING, INC.
10602 TIMBERWOOD CIRCLE, SUITE 9
LOUISVILLE, KENTUCKY 40223
August 10, 2000.
Thomson Kernaghan & Co. Limited
365 Bay Street, Tenth Floor
Toronto, Ontario M5H 2V2, Canada
Attention: Ms. Michelle McKinnon
Reference: U.S. Trucking, Inc. 10% Convertible Debentures Due May 31, 2002
Ladies and gentlemen:
This letter shall constitute an amendment to the engagement letter dated May 13,
1999 (the "Engagement Letter") between U.S. Trucking, Inc. (the "Company") and
Thomson Kernaghan & Co. Limited as the Company's placement agent (the "Agent")
for the issuance and sale of up to an aggregate of US$5 Million of the Company's
10% Convertible Debentures Due May 31, 2002 (the "Debentures").
The Company hereby acknowledges its obligation to comply with the registration
requirements set forth in paragraph 5 of the Engagement Letter, and its
obligation to pay liquidated damages for its failure to comply with those
requirements. The Company hereby undertakes to comply with those requirements as
soon as possible.
The Company shall issue Debenture No. 7 in the principal amount of US$550,000.
The Company acknowledges and confirms that, in consideration of the Agent's
agreement to place Debenture No. 7, the Company and the Agent have agreed that
the $1.50 minimum conversion price per share of Common Stock shall not apply to
the conversion of all Debentures, including previously issued Debentures
numbered 1 through 6, as well as to all subsequently issued Debentures. To
further evidence that agreement, the Company and the Agent have agreed that the
last sentence of paragraph 4 of Debentures numbered 1 through 6, which reads:
<PAGE> 42
Thomson Kernaghan & Co. Limited
August 10, 2000
Page 2
Reference: U.S. Trucking, Inc. 10% Convertible Debentures Due May 31, 2002
"The price per share of Common Stock into which this Debenture is
convertible (the `Conversion Price') shall be the higher of (i) US$1.50, or
(ii) the lower of 80% of the average closing bid price of the Common Stock
quoted on the OTC Bulletin Board for the three trading days preceding (x)
the Initial Closing Date, or (y) the conversion date; i.e., in no event
shall the Conversion Price be less that US$1.50 per share of Common Stock."
is hereby amended to read:
"The price per share of Common Stock into which this Debenture is
convertible (the `Conversion Price') shall be the lower of 80% of the
average closing bid price of the Common Stock quoted on the OTC Bulletin
Board for the three trading days preceding (x) the Initial Closing Date
(80% of which equals $2.37), or (y) the conversion date."
Except as may be modified by this letter, all of the terms and conditions of the
Engagement Letter (as modified by previous letter agreements between us) are and
shall remain in full force and effect.
Please indicate your acceptance of the terms set forth in this letter by
executing a copy hereof in the space provided below, and returning an executed
copy to us.
Sincerely yours,
U. S. TRUCKING, INC. Accepted and agreed:
THOMSON KERNAGHAN & CO. LIMITED
By
-------------------------------
W. Anthony Huff, Executive Vice
President and Chairman By
--------------------------------
Name
------------------------------
Title
-----------------------------
Date signed
-----------------------
