Purchase Order Financing Agreement (the “Agreement”)
Exhibit
10.1
(the
“Agreement”)
|
LINE
AMOUNT
|
$2,000,000
|
|
ISSUANCE
DATE
|
August
24, 2007
|
|
MATURITY
DATE
|
August
24, 2009
|
FOR
VALUE
RECEIVED, LOGISTICAL
SUPPORT, LLC.,
a
California limited liability company (the “Company”), as a duly authorized and
wholly owned subsidiary of Logistical Support, Inc., a Utah corporation (OTC
BB:
LGSL) (“Parent”) hereby promises to pay DUTCHESS
PRIVATE EQUITIES FUND, LTD.
(the
“Holder”)
on
August 24, 2009 (the “Maturity Date”), or earlier, the Line Amount of Two
Million Dollars ($2,000,000) U.S., plus accrued and unpaid interest thereon,
in
such amounts, at such times and on such terms and conditions as are specified
herein. The Company, Parent and the Holder are sometimes hereinafter
collectively referred to as the “Parties”
and
each a “Party”
to
this
Agreement.
WHEREAS,
the Company desires to finance, from the Holder, certain of its Orders (as
hereinafter defined) now existing, or hereinafter received, which represent
amounts due from bona fide contracts for the sale and delivery of goods, in
the
ordinary course of the Company’s business; and,
WHEREAS,
the Holder desires to finance those Orders of the Company that it deems
acceptable upon the terms and conditions set forth in the this
Agreement.
WHEREAS,
the Parent hereby agrees to fully secure all obligation entered into herein
by
the Company through the Continuing Unconditional Guaranty of even date herewith
between the Holder and the Parent.
WHEREAS,
the Holder shall fund the Line Amount in an escrow account with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
LLP.
In
consideration of the above recitals, the terms and covenants of this Agreement
and other good and valuable consideration, including the payment of money from
Holder to Company, the receipt of which is hereby acknowledged, and intending
to
be bound hereby, the Parties agree as follows:
Article
1 Payment;
Repayment; Interest
Section
1.1 Interest
a. The
Company shall pay interest on the unused portion of the Line Amount
(“Line
Amount Interest”)
at the
rate of three percent (3%) per annum, at such times and in such amounts as
outlined in this Article
1.
The
Company shall make mandatory monthly payments of interest (the “Line
Amount Interest Payments”),
in an
amount equal to the interest accrued on the unused balance of the Line Amount
from the last Line Amount Interest Payment until such time as the current Line
Amount Interest Payment is due and payable. The Line Amount Interest Payments
shall commence on the first month following the Issuance Date and shall continue
until the Maturity Date. The Line Amount Interest Payments shall be paid on
the
first day of each such month.
b. The
Company shall pay interest on each Advance Amount (as hereinafter defined)
(“Advance
Interest”)
at the
rate of two percent (2%) per month, at such times and in such amounts as
outlined in this Article
1.
The
Company shall make mandatory monthly payments of interest (the “Advance
Interest Payments”),
in an
amount equal to the interest accrued on the balance of the Advance Amount from
the last Advance Interest Payment until such time as the current Advance
Interest Payment is due and payable. The Advance Interest Payments shall
commence on the first month immediately following the Advance Request (as
defined herein) and shall continue until the Maturity Date. The Advance Interest
Payments shall be paid on the first day of each such month.
c. The
Company shall have the right, but not the obligation, to make the Line Amount
Interest Payments or the Advance Interest Payments (collectively, hereinafter
referred to as “Interest
Payments”)
from
the Line Amount. In the event the Company chooses to make Interest Payments
from
the Line Amount, the Holder shall treat any such funds drawn for an Interest
Payment as an Advance on the Line Amount and such interest shall thereafter
accrue interest at the rate applicable on Advance Amounts
hereunder.
Section
1.2 Payment
for Orders.
At
such
time as the Company desires to request funds from the Line Amount for an Order
or for Interest Payments as outlined in this Article 1 (each, an “Advance”),
the
Company shall submit to the Holder, a duly authorized request for an Advance
(“Advance
Request”),
in
the form attached as Exhibit A hereto and incorporated by reference, specifying
the amount requested for such Advance (each, an “Advance
Amount”
or
collectively, the “Advance
Amounts”),
and,
subject to the satisfaction of the Holder, the Company and the Holder shall
sign
a release for the requested funds to be transferred directly from the escrow
account with ▇▇▇▇▇▇▇ Savage (“Escrow
Account”)
to the
Company’s account.
Notwithstanding
anything to the contrary contained herein, in no event shall the outstanding
Advances exceed the Line Amount. If at any time the aggregate amount of
outstanding Advances exceeds the Line Amount, the Company shall immediately
pay
to Holder, in cash, the amount of such excess. The Holder shall have the right
to terminate its obligation to make any Advance under this Agreement immediately
and without notice upon the occurrence and during the continuance of an Event
of
Default.
Section
1.3 Repayment
The
Company shall make mandatory payments to the Holder on each Advance
(“Payment”
or
collectively, the “Payments”)
as
funds are paid to and received by the Company from the contract of orders in
Exhibit B (“Collateral
Orders”
or
“Orders”)
(attached hereto and incorporated herein by reference). Immediately upon, and
in
any event not later than one (1) business day of Company’s receipt of all or any
portion of funds from Collateral Orders or from the Company’s Factoring Line
(defined below) for the proceeds related specifically to the Collateral Orders,
the Company shall pay to the Holder such portion of funds received by the
Company via wire transfer in immediately available funds. Notwithstanding
anything to the contrary contained herein, the Company shall immediately make
Payment to the Holder on ANY funds received from the customer listed on Exhibit
B.
2
The
Company shall use all commercially reasonable best efforts to maintain and
use
the current factoring line of credit with ▇▇▇▇▇ Fargo Bank, NA (“Factoring
Line”)
in
order to ensure the Holder full payment on the Advance Amount. Intercreditor
Agreement s/b entered into w/ ▇▇▇▇▇.
The
Company may make additional payments (“Prepayment”)
without any penalties provided the Company has paid all Interest Payments then
required to be paid.
Article
2 Collateral;
Sale; Purchase Price; Assignment and Transfer of Ownership.
2.1 Collateral.
As
security for all outstanding Advances, Interest Payments and other amounts
owing
from the Company to the Holder under this Agreement or any other document
executed in connection herewith, the Company shall grant in favor of the Holder
a security interest in parts and supplies for the Orders (“Raw
Materials”)
and
all finished goods created from the Raw Materials as are listed on the Schedules
of Orders (collectively with the Raw Materials and all other property provided
as collateral security under or in connection with this Agreement or the
Security Agreement, the “Collateral”)
pursuant to a Security Agreement dated of even date herewith from the Company
in
favor of the Holder (the “Security
Agreement,”)
and
the Continuing Unconditional Guaranty dated of even date herewith from the
Parent in favor of the Holder (the “Guaranty” and together with the Security
Agreement and this Agreement and all other documents executed in connection
herewith, the “Transaction
Documents”).
2.2 Offer
of
Orders for Sale; Acceptance by Holder.
a. Company
shall offer to sell to Holder as absolute owner, with full recourse, all of
Company’s right, title and interest in such Raw Materials and all finished goods
created from the Raw Materials as are listed on the Schedules of Orders. The
current version of the Schedule of Orders is attached hereto as Exhibit B and
may be periodically revised by Holder.
b. Each
Schedule of Orders shall be accompanied by such documentation supporting and
evidencing the Order, as Holder shall from time-to-time request, as outlined
on
Exhibit B or this Agreement, including, without limitation, Section 24 of this
Agreement.
2.3 Assignment
and Sale
For
those
Orders that Holder agrees to finance for the Company, the Company shall assign
and transfer over to Holder as absolute owner with full recourse all of
Company’s right, title and interest in the parts and supplies being used to
fulfill such Order. The Company agrees to execute the Assignment of Order
substantially in the form attached hereto as Exhibit C for Orders being sold
to
Holder.
3
2.4 Threshold
Amount
If
at any
time during the term of this Agreement, the Company raises any funds from a
third-party, whether involving the issuance of debt or equity, in excess of
one
dollar ($1.00) (a “Financing”),
then
the Company shall pay to the Holder one hundred percent (100%) of the net
proceeds therefrom as prepayment of the Line Amount and all accrued and unpaid
interest thereon and all penalties, if any, then due. A Financing will also
include the sale by the Company of any of its assets which are deemed to be
material to the Company (excluding assets sold in the normal course of
business). All prepayments described in this Section
2.4
shall be
made to the Holder within three (3) business day of the Company’s receipt of
proceeds from the Financing. Failure to comply with this Section
2.4
shall
constitute an Event of Default (as described in Article
4
hereof).
Article
3 Term;
Renewal; Unpaid Amounts
a. The
term
of this Agreement shall be for twenty-four (24) months. All amounts outstanding
under the Line Amount and all accrued and unpaid interest thereon shall become
immediately due and payable to the Holder, if not earlier in accordance with
the
terms of this Agreement, on the Maturity Date.
b. So
long
as no Event of Default has occurred and is continuing, the Company shall have
the option to renew the Line Amount for an additional twenty-four (24) months
upon the Maturity Date. At such time, the Company shall pay to the Holder three
percent (3%) of the Line Amount as a renewal fee.
c. In
the
event that on the Maturity Date, there is an outstanding balance on the Line
Amount, the Holder can exercise its right to increase the Advance Amounts by
ten
percent (10%) as an initial penalty and increase the interest rates applicable
under this Agreement by an additional two and one-half percent (2.5%) per month,
compounded daily, until the Line Amount and all accrued and unpaid interest
thereon is paid in full. The Company shall also continue to pay interest on
the
Advance Amounts in accordance with the interest rates outlined in this
Agreement. The foregoing shall constitute an Event of Default under this
Agreement and entitle the Holder, in its discretion, to exercise any and all
remedies available to the Holder including those remedies described in Article
4
of this Agreement.
Article
4 Defaults
and Remedies
Section
4.1 Events
of Default.
Each of
the following shall constitute an “Event
of Default”
under
this Agreement:
(a) the
Company fails to make any Payment on the Line Amount of this Agreement within
two (2) business days of the Payment being due, as outlined herein, or on the
Maturity Date, as applicable, upon receipt of Collateral Orders or otherwise;
or
(b) the
Company, pursuant to or within the meaning of any Bankruptcy Law (as hereinafter
defined): (i) commences a voluntary case; (ii) consents to the entry of an
order
for relief against it in an involuntary case or if such an involuntary case
is
commenced against the Company and is not dismissed or stayed within thirty
(30)
calendar days (and the Holder shall not be obligated to make Advances during
such 30 calendar day period); (iii) consents to the appointment of a Custodian
(as hereinafter defined) of it or for all or substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors; or (v) a
court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that: (A) is for relief against the Company in an involuntary case; (B) appoints
a Custodian of the Company or for all or substantially all of its property;
or
(C) orders the liquidation of the Company, and the order or decree remains
unstayed and in effect for sixty (60) calendar days; or
4
(c) any
of
the Company’s representations or warranties contained in this Agreement or any
other Transaction Document were false when made; or,
(d) the
Company breaches any covenant or condition of this Agreement or any other
Transaction Document, and such breach, if subject to cure, continues for a
period of five (5) business days.
(f) the
Company’s failure to pay any taxes when due unless such taxes are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been provided on the Company’s books; provided, however,
that in the event that such failure is curable, the Company shall have ten
(10)
business days to cure such failure; or,
(g) an
attachment or levy is made upon the Company’s assets having an aggregate value
in excess of twenty-five thousand dollars ($25,000) or a judgment is rendered
against the Company or the Company’s property involving a liability of more than
twenty-five thousand dollars ($25,000) which shall not have been vacated,
discharged, stayed or bonded pending appeal within ninety (90) days from the
entry hereof; or,
(h) any
change in the Company’s condition or affairs (financial or otherwise) which in
the Holder’s reasonable, good faith opinion, would have a Material Adverse
Effect; provided, however, that in the event that such failure is curable,
the
Company shall have ten (10) business days to cure such failure; or,
(i) any
lien
in the Collateral in favor of the Holder, except for liens permitted under
the
Security Agreement, created hereunder or under any of the Transaction Documents
for any reason ceases to be or is not a valid and perfected lien in such
Collateral having a first priority interest in favor of the Holder;
or,
(j) If
there
is a default or other failure to perform in any agreement to which the Company
is a party with a third party or parties, including the Factoring Line,
resulting in a right by such third party or parties, whether or not exercised,
to accelerate the maturity of any Indebtedness in an amount in excess of
$25,000; or
(k) the
indictment or threatened indictment of the Company, any officer of the Company
under any criminal statute, or commencement or threatened commencement of
criminal or civil proceeding against the Company or any officer of the Company
pursuant to which statute or proceeding penalties or remedies sought or
available include forfeiture of any of the property of the company.
5
As
used
in this Section 4.1, the term “Bankruptcy
Law”
means
Title 11 of the United States Code or any similar federal or state law for
the
relief of debtors. The term “Custodian”
means
any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
Section
4.2 Remedies.
Upon
the occurrence of an Event of Default, in addition to the rights and remedies
contained herein and in the other Transaction Documents, the Holder may enforce
its rights and remedies against any Collateral
For
each
Event
of
Default, as outlined in this Agreement, the Holder can exercise its right to
increase the Advance Amounts ten percent (10%) as an initial penalty. In
addition, the Holder may elect to increase the Advance Amounts by two and
one-half percent (2.5%) per month paid as a penalty for Liquidated Damages
in
addition to the current Interest being paid on the Line Amount and Advance
Amounts. The Liquated Damages will be compounded daily. It is the intention
and
acknowledgement of both parties that the Liquidated Damages not be deemed as
interest.
In
the
event of an Event of Default hereunder remains uncured for a period of five
(5)
days, the Holder shall be unilaterally entitled to request the Escrow Agent,
as
defined herein, to transfer any Remaining Escrow Funds (as defined in the Escrow
Agreement between the Company and the Escrow Agent of even date herewith) to
be
transferred immediately back to the Holder. All Advance Amounts shall also
become immediately due and payable to the Holder.
In
the
event of an Event of Default hereunder remains uncured for sixty (60) days,
the
Holder shall have the right, but not the obligation, to switch the Advance
Amounts to a three-year (“Convertible Maturity Date”) fifteen percent (15%)
interest bearing convertible debenture at the terms described in Section 4.2
(the “Convertible Debenture”) the Parent. At such time of an Event of Default,
the Convertible Debenture shall be considered issued (“Convertible Closing
Date”). If the Holder chooses to convert the Advance Amounts to a Convertible
Debenture (“Residual Amount”), the Parent shall have forty-five (45) business
days after notice of the same (the “Notice of Convertible Debenture”) to file a
registration statement covering an amount of shares equal to three hundred
percent (300%) of the Residual Amount. The Parent shall use its best efforts
to
require such registration statement shall be declared effective under the
Securities Act of 1933, as amended (the “Securities Act”), by the Securities and
Exchange Commission (the “Commission”) within ninety (90) business days of the
date the Parent files such Registration Statement. In the event the Parent
does
not file such registration statement within twenty (20) business days of the
Holder’s request, or such registration statement is not declared by the
Commission to be effective under the Securities Act within the time period
described above , the Residual Amount shall increase by five thousand dollars
($5,000) per day. In the event the Parent is given the option for accelerated
effectiveness of the registration statement, it agrees that it shall cause
such
registration statement to be declared effective as soon as reasonably
practicable. In the event that the Parent is given the option for accelerated
effectiveness of the registration statement, but chooses not to cause such
registration statement to be declared effective on such accelerated basis,
the
Residual Amount shall increase by five thousand dollars ($5,000) per day
commencing on the earliest date as of which such registration statement would
have been declared to be effective if subject to accelerated
effectiveness.
6
Section
4.3 Conversion
Privilege
(a) The
Holder shall have the right to convert the Convertible Debenture into shares
of
Common Stock at any time following the Convertible Closing Date and which is
before the close of business on the Convertible Maturity Date. The number of
shares of Common Stock issuable upon the conversion of the Convertible Debenture
shall be determined pursuant to Article 4, but the number of shares issuable
shall be rounded up or down, as the case may be, to the nearest whole share.
(b) The
Convertible Debenture may be converted, whether in whole or in part, at any
time
and from time to time.
(c) In
the
event all or any portion of the Convertible Debenture remains outstanding on
the
Convertible Maturity Date (the “Debenture Residual Amount”), the unconverted
portion of such Convertible Debenture will automatically be converted into
shares of Common Stock on such date in the manner set forth in Section
4.3.
Section
4.4 Conversion
Procedure
(a) The
Residual Amount may be converted, in whole or in part any time and from time
to
time, following the Convertible Closing Date. Such conversion shall be
effectuated by surrendering to the Parent, or its attorney, the Convertible
Debenture to be converted together with a facsimile or original of the signed
notice of conversion (the “Notice of Conversion”). The date on which the Notice
of Conversion is effective (“Conversion Date”) shall be deemed to be the date on
which the Holder has delivered to the Parent a facsimile or original of the
signed Notice of Conversion, as long as the original Convertible Debenture(s)
to
be converted are received by the Parent within five (5) business days
thereafter. At such time that the original Convertible Debenture has been
received by the Parent, the Holder can elect to whether a reissuance of the
Convertible Debenture is warranted, or whether the Parent can retain the
Convertible Debenture as to a continual conversion by the Holder.
Notwithstanding the above, any Notice of Conversion received after 4:00 P.M.
EST
shall be deemed to have been received the following business day (receipt being
via a confirmation of the time such facsimile to the Parent is received).
(b) Common
Stock to be Issued.
Upon
the conversion of any Convertible Debentures and upon receipt by the Parent
or
its attorney of a facsimile or original of the Holder’s signed Notice of
Conversion, the Parent shall instruct its transfer agent to issue stock
certificates without restrictive legends or stop transfer instructions, if
at
that time the aforementioned registration statement described in Section 4.1
has
been declared effective (or with proper restrictive legends if the registration
statement has not as yet been declared effective), in such denominations to
be
specified at conversion representing the number of shares of Common Stock
issuable upon such conversion, as applicable. In the event that the Debenture
is
aged one year and deemed sellable under Rule 144, the Parent shall, upon a
Notice of Conversion, instruct the transfer agent to issue free trading
certificates without restrictive legends, subject to other applicable securities
laws. The Parent is responsible to provide all costs associated with the
issuance of the shares, including but not limited to the opinion letter, FedEx
of the certificates and any other costs that arise. The Parent shall act as
registrar and shall maintain an appropriate ledger containing the necessary
information with respect to each Convertible Debenture. The Parent warrants
that
no instructions, other than these instructions, have been given or will be
given
to the transfer agent and that the Common Stock shall otherwise be freely
resold, except as may be set forth herein or subject to applicable
law.
7
(c) Conversion
Rate.
Holder
is entitled to convert the Debenture Residual Amount, plus accrued interest,
anytime following the Convertible Maturity Date, at eighty percent (80%) of
the
lowest closing bid price during the twenty (20) trading immediately preceding
the Convertible Maturity Date (“Conversion Price”). No fractional shares or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded up or down, as the case may be,
to
the nearest whole share.
(d) Nothing
contained in the Convertible Debenture shall be deemed to establish or require
the payment of interest to the Holder at a rate in excess of the maximum rate
permitted by governing law. In the event that the rate of interest required
to
be paid exceeds the maximum rate permitted by governing law, the rate of
interest required to be paid thereunder shall be automatically reduced to the
maximum rate permitted under the governing law and such excess shall be returned
with reasonable promptness by the Holder to the Parent.
(e) It
shall
be the Parent’s responsibility to take all necessary actions and to bear all
such costs to issue the Common Stock as provided herein, including the
responsibility and cost for delivery of an opinion letter to the transfer agent,
if so required. Holder shall be treated as a shareholder of record on the date
Common Stock is issued to the Holder. If the Holder shall designate another
person as the entity in the name of which the stock certificates issuable upon
conversion of the Convertible Debenture are to be issued prior to the issuance
of such certificates, the Holder shall provide to the Parent evidence that
either no tax shall be due and payable as a result of such transfer or that
the
applicable tax has been paid by the Holder or such person. Upon surrender of
any
Convertible Debentures that are to be converted in part, the Parent shall issue
to the Holder a new Convertible Debenture equal to the unconverted amount,
if so
requested in writing by the Holder.
(f) Within
five (5) business days after receipt of the documentation referred to above
in
Section 4.2, the Parent shall deliver a certificate, for the number of shares
of
Common Stock issuable upon the conversion. In the event the Parent does not
make
delivery of the Common Stock as instructed by Holder within five (5) business
days after the Conversion Date, then in such event the Parent shall pay to
the
Holder one percent (1%) in cash of the dollar value of the Debenture Residual
Amount remaining after said conversion, compounded daily, per each day after
the
fifth (5th) business day following the Conversion Date that the Common Stock
is
not delivered to the Holder.
(g) The
Parent acknowledges that its failure to deliver the Common Stock within five
(5)
business days after the Conversion Date will cause the Holder to suffer damages
in an amount that will be difficult to ascertain. Accordingly, the parties
agree
that it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties’ good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Parent from its obligations to deliver
the Common Stock pursuant to the terms of this Convertible
Debenture.
8
(h) The
Parent shall at all times reserve (or make alternative written arrangements
for
reservation or contribution of shares) and have available all Common Stock
necessary to meet conversion of the Convertible Debentures by the Holder of
the
entire amount of Convertible Debentures then outstanding. If, at any time the
Holder submits a Notice of Conversion and the Parent does not have sufficient
authorized but unissued shares of Common Stock (or alternative shares of Common
Stock as may be contributed by stockholders of the Parent) available to effect,
in full, a conversion of the Convertible Debentures (a “Conversion Default,” the
date of such default being referred to herein as the “Conversion Default Date”),
the Parent shall issue to the Holder all of the shares of Common Stock which
are
available, and the Notice of Conversion as to any Convertible Debentures
requested to be converted but not converted (the “Unconverted Convertible
Debentures”), may be deemed null and void upon written notice sent by the Holder
to the Parent. The Parent shall provide notice of such Conversion Default
(“Notice of Conversion Default”) to the Holder, by facsimile within three (3)
business days of such default (with the original delivered by overnight mail
or
two day courier), and the Holder shall give notice to the Parent by facsimile
within five (5) business days of receipt of the original Notice of Conversion
Default (with the original delivered by overnight mail or two day courier)
of
its election to either nullify or confirm the Notice of Conversion.
(i) The
Parent agrees to pay the Holder payments for a Conversion Default (“Conversion
Default Payments”) in the amount of (N/365) multiplied by .24 multiplied by the
initial issuance price of the outstanding or tendered but not converted
Convertible Debentures held by the Holder where N = the number of days from
the
Conversion Default Date to the date (the “Authorization Date”) that the Parent
authorizes a sufficient number of shares of Common Stock to effect conversion
of
all remaining Convertible Debentures. The Parent shall send notice
(“Authorization Notice”) to the Holder that additional shares of Common Stock
have been authorized, the Authorization Date, and the amount of Holder’s accrued
Conversion Default Payments. The accrued Conversion Default shall be paid in
cash or shall be convertible into Common Stock at the conversion rate set forth
in the first sentence of this paragraph, upon written notice sent by the Holder
to the Parent, which Conversion Default shall be payable as follows: (i) in
the
event the Holder elects to take such payment in cash, cash payments shall be
made to the Holder by the fifth (5th) day of the following calendar month,
or
(ii) in the event Holder elects to take such payment in stock, the Holder may
convert such payment amount into Common Stock at the conversion rate set forth
in the first sentence of this paragraph at any time after the fifth (5th) day
of
the calendar month following the month in which the Authorization Notice was
received, until the expiration of the mandatory three (3) year conversion
period.
(j) The
Parent acknowledges that its failure to maintain a sufficient number of
authorized but unissued shares of Common Stock to effect in full a conversion
of
the Convertible Debentures will cause the Holder to suffer damages in an amount
that will be difficult to ascertain. Accordingly, the parties agree that it
is
appropriate to include in this Agreement a provision for liquidated damages.
The
parties acknowledge and agree that the liquidated damages provision set forth
in
this section represents the parties’ good faith effort to quantify such damages
and, as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Parent from its obligations to deliver the Common Stock
pursuant to the terms of this Convertible Debenture.
9
(k) If,
by
the third (3rd) business day after the Conversion Date of any portion of the
Convertible Debentures to be converted (the “Delivery Date”), the transfer agent
fails for any reason to deliver the Common Stock upon conversion by the Holder
and after such Delivery Date, the Holder purchases, in an open market
transaction or otherwise, shares of Common Stock (the “Covering Shares”) solely
in order to make delivery in satisfaction of a sale of Common Stock by the
Holder (the “Sold Shares”), which delivery such Holder anticipated to make using
the Common Stock issuable upon conversion (a “Buy-In”), the Parent shall pay to
the Holder, in addition to any other amounts due to Holder pursuant to this
Convertible Debenture, and not in lieu thereof, the Buy-In Adjustment Amount
(as
defined below). The “Buy In Adjustment Amount” is the amount equal to the
excess, if any, of (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the Covering Shares over (y) the net proceeds (after
brokerage commissions, if any) received by the Holder from the sale of the
Sold
Shares. The Parent shall pay the Buy-In Adjustment Amount to the Holder in
immediately available funds within five (5) business days of written demand
by
the Holder. By way of illustration and not in limitation of the foregoing,
if
the Holder purchases shares of Common Stock having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect
to
shares of Common Stock it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount which the Parent will be required to pay to the Holder will
be
$1,000.
(l) The
Parent shall defend, protect, indemnify and hold harmless the Holder and all
of
its shareholders, officers, directors, employees, counsel, and direct or
indirect investors and any of the foregoing person’s agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
“Section
16 Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Section 16 Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Section
16 Indemnified Liabilities”),
incurred by any Section 16 Indemnitee as a result of, or arising out of, or
relating to (i) any misrepresentation or breach of any representation or
warranty made by the Parent in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
breach of any covenant, agreement, or obligation of the Parent or Company
contained in the Transaction Documents or any other certificate, instrument,
or
document contemplated hereby or thereby, (iii) any cause of action, suit, or
claim brought or made against such Section 16 Indemnitee by a third 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, (iv) any transaction financed or
to
be financed in whole or in part, directly or indirectly, with the proceeds
of
the issuance of the Common Stock underlying the Convertible Debenture
(“Securities”), or (v) the status of the Holder or holder of the Securities as
an investor in the Parent, except insofar as any such misrepresentation, breach
or any untrue statement, alleged untrue statement, omission, or alleged omission
is made in reliance upon and in conformity with written information furnished
to
the Parent by the Holder or the Investor which is specifically intended by
the
Holder or the Investor to be relied upon by the Parent, including for use in
the
preparation of any such registration statement, preliminary prospectus, or
prospectus, or is based on illegal trading of the Common Stock by the Holder
or
the Investor. To the extent that the foregoing undertaking by the Parent may
be
unenforceable for any reason, the Parent shall make the maximum contribution
to
the payment and satisfaction of each of the Indemnified Liabilities that is
permissible under applicable law. The indemnity provisions contained herein
shall be in addition to any cause of action or similar rights the Holder may
have, and any liabilities the Holder may be subject to.
10
Article
5 Additional
Financing and Registration Statements
Section
5.1 The
Company and the Parent will not enter into any additional financing agreements,
debt or equity, without prior expressed written consent from the Holder, which
shall not be unreasonably withheld. Failure to do so will result in an Event
of
Default and the Holder may elect to take the action outlined in Article 4.
Section
5.2 The
Holder shall also reserve the right to switch to the terms of the new financing.
If at any time while the Line Amount is outstanding, if the Company or Parent
issues or agree to issue any common stock or securities convertible into or
exercisable for shares of commons stock (or modify any of the foregoing which
may be outstanding) to any person or entity. Additionally, if the Company or
Parent shall, issue or agree to issue any of the aforementioned securities
to
any person, firm or corporation at terms deemed by the Holder to be more
favorable to the other investor than the terms or conditions of this Agreement,
then the Holder is granted the right to modify any such term or condition of
the
Agreement to be the same as any such term or condition of any subsequent
offering. The rights of the Holder in this Section 5 are in addition to any
other right the Holder has pursuant to this Agreement and the Security Agreement
of even date between the Holder and the Company.
The
Company and Parent agree that it shall cause its Chief Executive Officer, ▇▇▇▇▇
▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇”), and any entity under the control of ▇▇▇▇▇▇▇, to refrain
from selling any Stock, while there is an outstanding balance owed to the Holder
by the Company on this Agreement (“Lock-Up Period”).
Article
6 Notice.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided a confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall
be:
|
If
to the Company:
Logistical
Support, LLC.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Phone:
▇▇▇-▇▇▇-▇▇▇▇
|
11
|
If
to the Holder:
Dutchess
Capital Management
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Phone:
▇▇▇-▇▇▇-▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
|
Each
party shall provide five (5) business days prior notice to the other party
of
any change in address, phone number or facsimile number.
Article
7 Time
Where
this Agreement authorizes or requires the payment of money or the performance
of
a condition or obligation on a Saturday or Sunday or a public holiday, or
authorizes or requires the payment of money or the performance of a condition
or
obligation within, before or after a period of time computed from a certain
date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Agreement. A “business day” shall
mean a day on which the banks in New York are not required or allowed to be
closed.
Article
8 No
Assignment
This
Agreement and the terms and conditions herein, shall not be
assignable.
Article
9 Rules
of Construction.
In
this
Agreement, unless the context otherwise requires, words in the singular number
include the plural, and in the plural include the singular, and words of the
masculine gender include the feminine and the neuter, and when the sense so
indicates, words of the neuter gender may refer to any gender. The numbers
and
titles of sections contained in the Agreement are inserted for convenience
of
reference only, and they neither form a part of this Agreement nor are they
to
be used in the construction or interpretation hereof. Wherever, in this
Agreement, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Parent and if it is made in good faith, it shall be conclusive and binding
upon
the Company and the Holder of this Agreement.
Article
10 Governing
Law
The
validity, terms, performance and enforcement of this Agreement shall be governed
and construed by the provisions hereof and in accordance with the laws of the
Commonwealth of Massachusetts applicable to agreements that are negotiated,
executed, delivered and performed solely in the Commonwealth of Massachusetts.
12
Article
11 Litigation
The
parties to this agreement will submit all disputes arising under this agreement
to arbitration in Boston, Massachusetts before a single arbitrator of the
American Arbitration Association (“AAA”). The arbitrator shall be selected by
application of the rules of the AAA, or by mutual agreement of the parties,
except that such arbitrator shall be an attorney admitted to practice law in
the
Commonwealth of Massachusetts. No party to this agreement will challenge the
jurisdiction or venue provisions as provided in this section. Nothing in this
section shall limit the Holder’s right to obtain an injunction for a breach of
this Agreement from a court of law.
Article
12 Conditions
to Closing
The
Company shall have delivered this Agreement and the Security Agreement duly
executed by the Company to the Holder before Closing and shall have paid to
the
Holder all fees and expenses owing to the Holder pursuant to this Agreement.
Article
13 Fees
& Expenses
Section
13.1 Administration
Fee. The Company agrees to pay for related expenses associated with the proposed
transaction of thirty-five thousand dollars ($35,000) of which, seventeen
thousand five hundred dollars ($17,500) has been paid. This amount shall cover,
but is not limited to, the following: due diligence expenses, document creation
expenses, closing costs, and transaction administration expenses. This shall
be
deducted from the first closing and funding.
Section
13.1 Misdirected
Payment Fee. Fifteen percent (15%) of the amount of any payment (but in no
event
less than $1,000) on account of a Collateral Order which has been received
by
Company and not delivered in kind to Holder on the next business day following
the date of receipt by Company, or thirty percent (30%) of the amount of any
such payment which has been received by Company as a result of any action taken
by Company to cause such payment to be made to Company.
Section
13.2 Out-of-Pocket
Expenses. The out-of-pocket expenses directly incurred by Holder in the
administration of this Agreement such as wire transfer fees, postage and audit
fees shall be the responsibility of the Company.
Section
13.3 Advance
Fee. The Company agrees to pay one percent (1%) of the Advance Amount at the
time of each Advance. The Company, at its sole option, may elect to pay the
Advance Fee from the Line Amount. In the event the Company chooses to pay the
Advance Fee from the Line Amount, the Company agrees to deliver all necessary
paperwork to ▇▇▇▇▇▇▇ Savage, LLP along with the Request for
Advance.
Article
16 Indemnification
In
consideration of the Holder’s execution and delivery of this Agreement and the
acquisition and funding by the Holder hereunder and in addition to all of the
Company’s other obligations under the documents contemplated hereby, the Company
shall defend, protect, indemnify and hold harmless the Holder and all of their
shareholders, officers, directors, employees, counsel, and direct or indirect
investors and any of the foregoing person’s agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “INDEMNITEES”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “INDEMNIFIED LIABILITIES’), incurred by
any Indemnitee as a result of, or arising out of, or relating to (i) any
misrepresentation or breach of any representation or warranty made by the
Company in the Agreement, or any other certificate, instrument or document
contemplated hereby or thereby (ii) any breach of any covenant, agreement or
obligation of the Company contained in the Agreement or any other certificate,
instrument or document contemplated hereby or thereby, except insofar as any
such misrepresentation, breach or any untrue statement, alleged untrue
statement, omission or alleged omission is made in reliance upon and in
conformity with written information furnished to the Company by, or on behalf
of, the Holder or based on illegal or alleged illegal trading of the Shares
by
the Holder. To the extent that the foregoing undertaking by the Company may
be
unenforceable for any reason, the Company shall make the maximum contribution
to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The indemnity provisions contained herein
shall be in addition to any cause of action or similar rights the Holder may
have, and any liabilities the Holder may be subject to.
13
Article
17 Waiver
The
Holder’s delay or failure at any time or times hereafter to require strict
performance by Company of any undertakings, agreements or covenants shall not
waiver, affect, or diminish any right of the Holder under this Agreement to
demand strict compliance and performance herewith. Any waiver by the Holder
of
any Event of Default shall not waive or affect any other Event of Default,
whether such Event of Default is prior or subsequent thereto and whether of
the
same or a different type. None of the undertakings, agreements and covenants
of
the Company contained in this Agreement, and no Event of Default, shall be
deemed to have been waived by the Holder, nor may this Agreement be amended,
changed or modified, unless such waiver, amendment, change or modification
is
evidenced by an instrument in writing specifying such waiver, amendment, change
or modification and signed by the Holder.
Article
18 Senior
Obligation
The
Company shall cause this Agreement to be senior in right of payment to all
other
Indebtedness of the Company for the Collateral.
Article
19 Transactions
With Affiliates
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, shareholders who
beneficially own five percent (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
five
percent (5%) or more beneficial interest (each a “Related Party”) during the
Lock Up Period.
14
Article
20 Security
As
security for the Line Amount, the Company grants to the Holder a continuing
first priority in the Raw Materials and other Collateral as more particularly
described in Section 2.1 hereof. The Company agrees to execute all documents
appropriate and necessary in order to perfect Holder’s security interest in the
Collateral Orders, the Raw Materials and the other Collateral.
Article
21 Investor
Shares; Date of Consideration
a. The
Parent shall issue to the Holder five hundred thousand (500,000) shares of
unregistered, restricted Common Stock (the “Incentive
Shares”)
as an
incentive for the Holder entering into this Agreement with the Company. The
Incentive Shares shall be issued and delivered to the Holder upon Closing.
The
Parent’s failure to issue the Incentive Shares shall constitute an Event of
Default and the Holder may elect to enforce the remedies outlined in
Article
4
hereof.
The Parent’s obligation to provide the Holder with the Incentive Shares, as set
forth herein, shall survive the termination of this Note and any default on
this
obligation shall provide the Holder with all rights, remedies and default
provisions set forth in this Note or otherwise available by law. The Incentive
Shares shall carry piggy back registration rights until such time as the Holder
can freely sell the Incentive Shares promulgated under Rule 144 without
restrictions for volume limitations thereunder. The Parent shall notify the
Holder within ten (10) business days of its intention to file a registration
statement, and the Holder shall have the option to request the Incentive Shares
to be included in the registration statement. In the event the Holder requests
the Parent includes the Incentive Shares and the Parent files a registration
statement that does not include the Incentive Shares, the Parent shall pay
to
the Holder five hundred thousand (500,000) additional shares. The Parent shall
not be obligated to pay the five hundred thousand (500,000) additional shares
in
the event the United States Securities and Exchange Commission deems the
Incentives Shares in excess of those allowed to be registered under Rule 415.
The Holder shall have retain the full right to waive any such piggyback
registration rights.
b. The
Parent hereby acknowledges that the date of consideration for the Incentive
Shares is August 24, 2007 and shall use all commercially reasonable best efforts
to facilitate sales under Rule 144 of the Securities Act. The Parent shall
provide an opinion letter from counsel within two (2) business days of written
request by the Holder stating that the date of consideration for the Incentives
Shares is August 24, 2007 and submission of proper Rule 144 support
documentation consisting of a Form 144, a broker’s representation letter and a
seller’s representation letter. In the event the Parent does not deliver the
opinion letter within two business days, the Parent shall be in default as
outlined in Article 4. In the event that counsel to the Parent fails or refuses
to render an opinion as required to issue the Incentive Shares in accordance
with this paragraph (either with or without restrictive legends, as applicable),
then the Parent irrevocably and expressly authorizes counsel to the Holder
to
render such opinion and shall authorize the Transfer Agent to accept and to
rely
on such opinion for the purposes of issuing the Shares (which is attached as
Exhibit D hereto). Any costs incurred by Holder for such opinion letter shall
be
added to the current outstanding Advance Amounts.
15
Article
22 Disputes
on Collateral Orders
Company
shall notify Holder promptly of and, if requested by Holder, will settle all
disputes concerning any Collateral Order at Company’s sole cost and expense.
Holder may, but is not required to, attempt to settle, compromise, or litigate
(collectively, “Resolve”) the dispute upon such terms, as Holder in its sole
discretion deems advisable, for Company’s account and risk and at Company’s sole
expense. Upon the occurrence of an Event of Default, Holder may resolve such
issues with respect to any Account of Company and any expenses incurred by
Holder in connection therewith shall be added to the obligations owing
hereunder.
Article
23 Escrow
The
delivery and execution of this Agreement is done in conjunction with the Escrow
Agreement between the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, LLP (“Escrow Agent’) of even
date herewith.
Article
24 Representations
and Warranties of the Company
a. It
is
fully authorized to enter into this Agreement and to perform hereunder.
b. This
Agreement constitutes its legal, valid and binding obligation.
c. Company
is in good standing in the jurisdiction of its organization and in the
Utah.
d. The
Collateral Orders are and will remain:
i. Bona
fide
existing obligations created by the sale and delivery of goods or the rendition
of services in the ordinary course of Company’s business and are valid, fully
collectible obligations form the vendors and/or payors to the Company for the
Collateral Orders (“Account Debtors”).
ii. Unconditionally
owed and to the best knowledge of Company will be paid to the Holder without
defenses, disputes, offsets, counterclaims, or rights of return or
cancellation.
iii. Not
sales
to any entity that is affiliated with Company or in any way not an “arm’s
length” transaction.
e. No
person
has a lien or ownership interest in, or claim against, the Collateral
Orders.
f. The
Raw
Materials for the Collateral Orders have not been previously financed by
Company.
16
g. The
Account Debtors have not paid to Company, or Company’s representatives, or
otherwise for Company’s benefit, any part or all of the Line Amount of the
Collateral Orders except as reflected in the Schedule of Orders covering that
Collateral Orders.
h. There
exist no circumstances, to the Company’s best knowledge, that would entitle the
Account Debtors to refuse to pay the amounts due on the Collateral Orders,
or to
reduce the amounts due on the Collateral Orders from those amounts shown in
the
Schedule of Orders.
i. Company
has not received notice or otherwise learned of actual or imminent bankruptcy,
insolvency, or material impairment of the financial condition of any applicable
Account Debtor regarding the Collateral Orders.
j. The
financial statements, Purchase Order / Invoices, orders, proofs of delivery,
account ledgers and all other documents submitted by Company to Holder
concerning the Collateral Orders or otherwise required under this Agreement
are
true, accurate and genuine.
Article
25 Miscellaneous
a. All
pronouns and any variations thereof used herein shall be deemed to refer to
the
masculine, feminine, impersonal, singular or plural, as the identity of the
person or persons may require.
b. Neither
this Agreement nor any provision hereof shall be waived, modified, changed,
discharged, terminated, revoked or canceled, except by an instrument in writing
signed by the party effecting the same against whom any change, discharge or
termination is sought.
c. Notices
required or permitted to be given hereunder shall be in writing and shall be
deemed to be sufficiently given when personally delivered or sent by facsimile
transmission: (i) if to the Company, at its executive offices or (ii) if to
the
Holder, at the address for correspondence set forth in the Article 6, or at
such
other address as may have been specified by written notice given in accordance
with this paragraph.
d. This
Agreement may be executed in two or more counterparts, all of which taken
together shall constitute one instrument. Execution and delivery of this
Agreement by exchange of facsimile copies bearing the facsimile signature of
a
party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
e. This
Written Agreement represent the FINAL AGREEMENT between the Company and the
Holder and may not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements of the parties, there are no unwritten oral
agreements among the parties.
17
f. The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
will not (i) result in a violation of the Articles of Incorporation, any
Certificate of Designations, Preferences and Rights of any outstanding series
of
preferred stock of the Company or the By-laws or (ii) conflict with, or
constitute a material default (or an event which with notice or lapse of time
or
both would become a material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
contract, indenture mortgage, indebtedness 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 United States federal and
state
securities laws and regulations and the rules and regulations of the principal
securities exchange or trading market on which the Common Stock is traded or
listed (the “Principal Market”), 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. Neither the Company nor its Subsidiaries
is
in violation of any term of, or in default under, the Articles of Incorporation,
any Certificate of Designations, Preferences and Rights of any outstanding
series of preferred stock of the Company or the By-laws or their organizational
charter or by-laws, respectively, or any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except for
possible conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations that would not individually or in the aggregate
have a Material Adverse Effect. The business of the Company and its Subsidiaries
is not being conducted, and shall not be conducted, in violation of any law,
statute, ordinance, rule, order or regulation of any governmental authority
or
agency, regulatory or self-regulatory agency, or court, except for possible
violations the sanctions for which either individually or in the aggregate
would
not have a Material Adverse Effect. The Company is not required to obtain any
consent, authorization, permit or order of, or make any filing or registration
(except the filing of a registration statement) with, any court, governmental
authority or agency, regulatory or self-regulatory agency or other third party
in order for it to execute, deliver or perform any of its obligations under,
or
contemplated by, this Agreement in accordance with the terms hereof or thereof.
All consents, authorizations, permits, 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 and are in full force and
effect as of the date hereof. The Company and its Subsidiaries are unaware
of
any facts or circumstances which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of
the
Principal Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to delisting
of
the Common Stock by the Principal Market in the foreseeable future.
g. The
Company and 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 respective jurisdictions of
their incorporation, and have the requisite corporate or limited liability
company power and authorization to own their properties and to carry on their
business as now being conducted. Both the Company and its Subsidiaries are
duly
qualified to do business and are in good standing in every jurisdiction in
which
their ownership of property or the nature of the business conducted by them
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 of operations,
financial condition or prospects of the Company and its Subsidiaries, if any,
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
Agreement.
18
h. Authorization;
Enforcement; Compliance with Other Instruments. (i) The Company has the
requisite corporate or limited liability company power and authority to enter
into and perform this Agreement, and to issue the Agreement in accordance with
the terms hereof and thereof, (ii) the execution and delivery of the Agreement
by the Company and the consummation by it of the transactions contemplated
hereby and thereby, have been duly and validly 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 shareholders, (iii) the Agreement has been duly
and validly executed and delivered by the Company, and (iv) the Agreement
constitutes the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may
be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and
remedies.
i. The
execution and delivery of this Agreement shall not alter any prior written
agreements between the Company and the Holder.
j.
There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants, auditors
and
lawyers formerly or presently employed by the Company, including but not limited
to disputes or conflicts over payment owed to such accountants, auditors or
lawyers.
k. All
representations made by or relating to the Company of a historical nature and
all undertaking described herein shall relate and refer to the Company, its
predecessors, and the Subsidiaries.
l. The
only
officer, director, employee and consultant stock option or stock incentive
plan
currently in effect or contemplated by the Company has been submitted to the
Holder or is described with Reports. No other plan will be adopted nor may
any
options.
m.
The
Company hereby represent and warrants to the Holder that: (i) it has voluntarily
entered into this Agreement of its own freewill, (ii) it is not entering into
this Agreement under economic duress with this Agreement and anticipated
continued financing, (iii) the terms of this Agreement are reasonable and fair
to the Company, and (iv) the Company has had independent legal counsel of its
own choosing review this Agreement, advise the Company with respect to this
Agreement, and represent the Company in connection with its entering into this
Agreement.
[SIGNATURE
PAGE TO FOLLOW]
19
IN
WITNESS WHEREOF, the Company has duly executed this Debenture as of the date
first written above.
| LOGISTICAL SUPPORT, INC. | ||
| |
|
|
|
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
||
| Title: Chief Executive Officer | ||
| DUTCHESS PRIVATE EQUITIES FUND, LTD. | ||
|
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ |
||
|
Title: Director
|
||
20
EXHIBIT
A
REQUEST
FOR ADVANCE
AS
OF
____________
FOR
LOGISTICAL SUPPORT, INC (“COMPANY”) and
Dutchess
Private Equities Fund, Ltd. (“HOLDER”)
Date:
____________________
Dear
▇▇.
▇▇▇▇▇▇▇▇,
Pursuant
to the terms and conditions of the Purchase Order Financing Agreement dated
August 24, 2007, the Company is hereby requesting an Advance of $__________
for
fulfillment of the attached orders.
The
Company is hereby executing this request in conjunction with the Assignment
of
Orders.
Sincerely,
_____________________________
▇▇▇▇▇
▇▇▇▇▇▇▇
Chief
Executive Officer
Accepted:
______________________________
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Director
21
EXHIBIT
B
SCHEDULE
OF ORDERS
22
EXHIBIT
C
ASSIGNMENT
OF ORDERS
AS
OF
____________
FOR
LOGISTICAL SUPPORT, INC (“COMPANY”) and
Dutchess
Private Equities Fund, Ltd. (“HOLDER”)
FOR
VALUE
RECEIVED, Company unconditionally and irrevocably sells, bargains, transfers
and
assigns to Holder, with full recourse in Holder, as of the date shown above,
all
of Company’s right, title and interest in and to the Raw Materials Orders
enumerated in Exhibit “A” attached hereto (hereinafter “Collateral Orders”),
together with any security or guarantees associated with those Collateral
Orders, including the proceeds of credit insurance due and payable in connection
with the Collateral Orders.
Holder
shall have the rights to the Collateral Orders set forth in that certain Project
Order Financing Agreement dated August 24, 2007 and to which Company and Holder
are Parties including, but not limited to, (i) in Holder’s own name and for
Holder’s own benefit, to make and effect collections from the Account Debtors of
the Collateral Orders; and, (ii) to receive, take possession of, endorse and
deposit in Holder’s own bank account(s) any and all payments, commercial paper,
notes or acceptances or other things of value received in payment of the
Collateral Orders.
By
signing below, Holder accepts the assignment of the Orders set out in the
attached Exhibit “A”.
The
terms
“Account Debtors”, “Orders”, “Parties” and “Collateral Orders” shall have the
same meaning as defined in the Purchase Order Financing Agreement dated August
24, 2007 and entered into by the Parties.
|
COMPANY
___________________________________
Name: ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Title: Chief
Executive Officer
|
DUTCHESS
PRIVATE EQUITIES FUND, LTD.
______________________________________
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
Title: Director
|
|
PARENT
___________________________________
Name: ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Title: Chief
Executive Officer
|
23
EXHIBIT
D
Interwest
Transfer Company
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telephone
(▇▇▇) ▇▇▇-▇▇▇▇
RE:
Issuance of Common Stock
To
Whom
It May Concern:
Please
use this letter as authorization to have the attached request for the issuance
of free trading shares, pursuant to paragraph Rule 144 of the Securities Act,
to
Dutchess Private Equities Fund, Ltd which acquired the fully paid,
non-assessable securities.
The
Company does hereby instruct Interwest Transfer Company to rely on the opinion
for resale of shares from ▇▇▇▇▇▇▇ Business Law or ▇▇▇▇▇▇▇ Savage,
LLP.
The
Company represents that Dutchess is not recognized as an affiliate of the
company.
Regards,
▇▇▇▇▇
▇.
▇▇▇▇▇▇▇
Chief
Executive Officer
24