SECURED PROMISSORY NOTE AND WARRANT
PURCHASE AGREEMENT
THIS SECURED
PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT (this "
Agreement ") is made as of October 9, 2008, by and among
EV TRANSPORTATION, INC. , a Nevada corporation (the "
Parent "), EV RENTAL CARS, LLC , a California limited
liability company and a wholly owned subsidiary of the Company (the
" Subsidiary ") (Parent and Subsidiary, collectively, the "
Company ") and PLETHORA PARTNERS, LLC , a California
limited liability company (the " Purchaser ").
RECITALS
WHEREAS, on
the terms and subject to the conditions set forth herein, the
Purchaser is willing to purchase from Subsidiary, and Subsidiary is
willing to sell to the Purchaser, a secured promissory note in the
principal amount of $300,000;
WHEREAS, on
the terms and subject to the conditions set forth herein, the
Purchaser is willing to purchase from Parent, and Parent is willing
to sell to the Purchaser, warrants to acquire up to 30,227,500
shares of Parent’s common stock, par value $0.001 per share
(the " Common Stock "); and
WHEREAS,
capitalized terms not defined when first used shall have the
meaning provided in list of definitions attached hereto as
Exhibit A .
AGREEMENT
NOW
THEREFORE, in consideration of the foregoing, and the
representations, warranties and conditions set forth below, the
parties hereto, intending to be legally bound, hereby agree as
follows:
1. The
Note and Warrants .
a. Issuance of Note and Warrants. At the Closing, Subsidiary
will issue and sell to the Purchaser, and, subject to all of the
terms and conditions hereof, the Purchaser will purchase from
Subsidiary, a secured promissory note in the form attached hereto
as Exhibit B (the " Note ") in the principal amount
of $300,000 (the " Purchase Price "). In conjunction with
the sale of the Note, at the Closing, Parent also agrees to issue
warrants for the purchase of 30,227,500 shares of Common Stock, in
the form attached hereto as Exhibit C (the " Warrants
"). Further, at the Closing, (i) the Purchaser and Subsidiary shall
enter into that certain Security Agreement, dated as of the date
hereof, the form of which is attached hereto as Exhibit D
(the " Security Agreement ") and the parties shall have the
rights and obligations hereunder and thereunder, and (ii) Parent
shall execute and deliver a guaranty agreement of the Subsidiary,
in the form attached hereto as Exhibit E (the " Guaranty
Agreement ").
b. Delivery of Note and Warrants . The sale and purchase of
the Note and Warrants shall take place at a closing (the "
Closing ") to be held on October 9, 2008 (the " Closing
Date ") at
such time and place to be mutually agreed upon
by the Company and the Purchaser. At the Closing, the Company will
deliver the Note and Warrants to the Purchaser. The Note and
Warrants will be registered in such Purchaser’s name in the
Company’s records.
c. Payments . Subsidiary will make all cash payments due
under the Note in immediately available funds on the date such
payment is due in the manner and at the address for such purpose
specified in the Note, or at such other address as a Purchaser or
other registered holder of a Note may from time to time direct in
writing.
d. Transaction Fee. In addition to the principal and
interest payable on the Note, the Subsidiary will pay Purchaser a
loan transaction fee (the " Transaction Fee ") of $36,000,
relating to Purchaser’s fees and costs associated with making
the loan, which shall be due and payable on Maturity Date (or, if
applicable, the Extended Maturity Date) of the Note. If the
Transaction Fee is not paid when due, all unpaid amounts will
accrue interest at a rate equal to ten percent (10%) per annum.
e. Section 1272 Acknowledgment . The Company and the
Purchaser acknowledge that the Note and the Warrants are an
"investment unit" within the meaning of Section 1273(c)(2) of the
Internal Revenue Code of 1986, as amended (the " Code "),
that the portion of the Purchase Price payable for the Note is $995
per $1,000 principal amount, that such amount shall be the "issue
price" (within the meaning of Section 1273(b) of the Code) of the
Note per $1,000 principal amount. The Company and the Purchaser
agree that such issue price shall be used to determine the amount
of "original issue discount," if any, accruing and to be reported
on the Note pursuant to Section 1272 of the Code and the
regulations promulgated thereunder. The balance of the Purchase
Price is payable for the Warrants.
2.
Representations and Warranties of the Company .
Except as otherwise set forth in the SEC Documents (as defined
below), the Company represents and warrants to the Purchaser
that:
a. Corporate Existence and Power . The Company (a) is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, (b) is duly
qualified to do business in each additional jurisdiction where the
failure to so qualify would have a Material Adverse Effect, and (c)
has all requisite corporate power to own its respective properties
and to carry on its respective businesses as now being conducted
and as proposed to be conducted. The Company has all requisite
corporate power to execute, deliver and perform its Obligations
under the Note Documents.
b. Binding Effect . This Agreement and each of the other
Note Documents to which the Company is a party have been duly
executed and delivered by the Company and are, and the Note and
Warrants when issued, executed and delivered as contemplated herein
will be, the legal, valid and binding obligations of the Company,
in each case enforceable against the Company in accordance with
their respective terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors’ rights generally and by
general principles of equity.
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c. Liens and Security Interests . The security interests now
or hereafter created pursuant to the Security Agreement constitute
and will constitute legal, valid and (assuming that all actions
shall have been taken in respect of the perfection of such Liens
and security interests contemplated by this Agreement and the
Security Agreement) perfected second priority Liens and security
interests in all of the Collateral purported to be covered thereby,
subject only to the Lien held by Toyota.
d. No Conflicts with Agreements, Etc . Neither the execution
and delivery by the Company of this Agreement or any of the other
Note Documents to which it is a party, nor the offering, issuance
or sale of the Note, nor the fulfillment of or compliance with the
terms and provisions hereof or thereof, will conflict with, or
result in a breach or violation of the terms, conditions or
provisions of, or constitute a default under, or result in the
creation of any Lien (other than Liens created pursuant to the
Security Agreement) on any properties or assets of the Company
pursuant to the Organizational Documents of the Company or any
contract, agreement, mortgage, indenture, lease or instrument to
which it is a party or by which it is bound or to which its assets
are subject, or any Requirement of Law to which it or its assets
are subject, which conflict, breach, violation, default or Lien
could reasonably be expected to have a Material Adverse Effect.
d. Consents, Etc . To the Company’s Knowledge, no
consent, approval or authorization of or declaration, registration
or filing with any Governmental Authority or any nongovernmental
Person, including any creditor or stockholder of the Company, is
required in connection with the execution or delivery by the
Company of this Agreement or the other Note Documents to which the
Company is a party, or the performance by the Company of its
Obligations hereunder and thereunder, or as a condition to the
legality, validity or enforceability of this Agreement or any other
Note Document.
e. Material Contracts . The Company is not in breach or
violation of any of the terms, conditions or provisions of any of
its material contracts, and to the best knowledge of the Company no
third party to any of such material contracts is in breach or
violation of any of the terms, conditions or provisions thereof,
which breach could reasonably be expected to have a Material
Adverse Effect. The Company has not transferred or subordinated any
of its rights or interests in any of its material contracts, and
such rights and interests are subject to no Liens except Permitted
Liens.
f. Litigation .
(i) There are no actions, suits, or proceedings pending, or, to the
Company’s Knowledge, threatened against or affecting the
Company or any properties or rights of any of them which, if
adversely determined, individually or in the aggregate would have a
Material Adverse Effect.
(ii) There are no actions, suits or proceedings pending, or, to the
Company’s Knowledge, threatened in writing against the
Company which seek to enjoin, or otherwise prevent the consummation
of, the transactions contemplated herein or to recover any
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damages or obtain any relief as a result of any
of the transactions contemplated herein in any court or before any
arbitrator of any kind or before or by any Governmental
Authority.
g. Compliance With Laws; No Default .
(i) To the Company’s Knowledge, the Company is not now, or
will be after or as a result of giving effect to the transactions
contemplated herein, in default under or in violation of any Order
of any court, arbitrator or Governmental Authority or of any
federal, state, local or foreign Requirement of Law, which default
or violation could reasonably be expected to have a Material
Adverse Effect.
(ii) To the Company’s Knowledge, the Company is not in
default under or with respect to any provision of any security
issued by any such Person, of any of their respective
Organizational Documents, or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument,
document or agreement to which any such Person is a party or by
which it or any of its property is bound which, individually or
together with all such defaults, could reasonably be expected to
have a Material Adverse Effect.
h. Possession of Franchises, Licenses, Etc . To the
Company’s Knowledge, the Company possess all material
franchises, certificates, licenses, permits, registrations, and
other authorizations from Governmental Authorities, that are
necessary for the ownership, maintenance and operation of their
respective properties and assets, and for the conduct of its
businesses as now conducted, and the Company is not in violation of
any thereof in any material respect.
i. SEC Documents . For purposes of this Agreement, the term
" SEC Documents " shall mean the Current Report on Form 8-K,
as filed with the SEC on July 25, 2008, the Current Report on Form
8-K, as filed with the SEC on August 13, 2008, the Quarterly Report
on Form 10-Q for the period ended June 30, 2008, as filed with the
SEC on August 19, 2008 and the Current Report on Form 8-K/A
(Amendment No. 1), as filed with the SEC on August 28, 2008. As of
their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the
SEC Documents. None of the SEC Documents, at the time they were
filed with the SEC or were delivered to the Purchaser, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. Since the filing of the SEC
Documents, no event has occurred that would require an amendment or
supplement to any of the SEC Documents to the extent such SEC
Documents have not already been amended or supplemented as of the
date hereof (including through delivery to the Purchaser).
Except for
correspondence with respect to (i) written requests by the Company,
from time to time, for confidential treatment of specified
information in agreements required to be filed as exhibits to SEC
Documents and (ii) correspondence with the SEC staff regarding the
filing of delinquent reports, copies (or written summaries of oral
communications) of which have been previously provided to the
Purchaser, the Company has not received any written or oral
comments from the SEC staff that have not been resolved to the
satisfaction of the SEC staff. As of their
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respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect
thereto. Except as permitted with respect to foreign acquired
entities, such financial statements have been prepared in
accordance with United States GAAP, consistently applied, during
the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the
Company as of the dates thereof and the results of their operations
and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments that are
not material individually or in the aggregate). None of the Company
or, to the Company’s knowledge, any stockholder, officer,
director or Affiliate of the Company has made any other filing with
the SEC, issued any press release or made any other public
statement or communication on behalf of the Company or otherwise
relating to the Company or any of its Subsidiaries that contains
any untrue statement of a material fact or omits any statement of
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading or has provided any other information to the Purchaser
that contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. There is no transaction, arrangement or other
relationship between the Company and an unconsolidated or other
off-balance-sheet entity that is required to be disclosed by the
Company in its reports pursuant to the Exchange Act that has not
been so disclosed in the SEC Documents. Since July 25, 2008,
neither the Company nor, to the knowledge of the Company, any
director, officer or employee, of the Company, has received or
otherwise had or obtained knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding
the accounting or auditing practices, procedures, methodologies or
methods of the Company or its internal accounting controls,
including any complaint, allegation, assertion or claim that the
Company has engaged in questionable accounting or auditing
practices. No attorney representing the Company since July 25,
2008, whether or not employed by the Company, has reported evidence
of a material violation of securities laws, breach of fiduciary
duty or similar violation by the Company or any of its officers,
directors, employees or agents to the Board of Directors or any
committee thereof or to any director or officer of the Company
pursuant to Section 307 of the Sarbanes-Oxley Act of 2002, and the
SEC’s rules and regulations promulgated thereunder. Since
July 25, 2008, there have been no internal or SEC investigations
regarding accounting or revenue recognition discussed with,
reviewed by or initiated at the direction of the chief executive
officer, principal financial officer, the Board of Directors or any
committee thereof.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances . Except for the issuance of the Note and
Warrants contemplated by this Agreement, 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, credit
worthiness, prospects, operations or financial condition, that
would be required to be disclosed by the Company under applicable
securities laws at the time this representation is made on a
registration statement on Form S-1 filed with the SEC relating to
an issuance and sale by the Company of Common Stock and that
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has not been disclosed in an SEC Document filed
with the SEC at least five (5) days prior to the date of this
Agreement.
k. No General Solicitation . Neither the Company, nor any of
its Affiliates, nor any Person acting on its or their behalf, has
engaged or will engage 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.
l. 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
Securities Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the
Securities Act or any applicable stockholder approval provisions of
any authority, nor will the Company take any action or steps that
would require registration of the issuance of any of the Securities
under the Securities Act or cause the offering of the Securities to
be integrated with other offerings for purposes of the Securities
Act.
m. Dilutive Effect . The Company understands and
acknowledges the number of Warrant Shares issuable upon exercise of
the Warrants. The Company further acknowledges that any obligation
to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants is absolute and
unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the
Company. Taking the foregoing into account, the Board of Directors
has determined in its good faith business judgment that the
issuance of the Note and the Warrants and the consummation of the
other transactions contemplated hereby are in the best interests of
the Company and its stockholders.
o. Employee Relations . Neither the Company nor any of its
Subsidiaries is involved in any labor union dispute nor, to the
knowledge of the Company or any of its Subsidiaries, is any such
dispute threatened. Except as set forth on Schedule 2(o), none of
the employees of the Company or any of its Subsidiaries is a member
of a union that relates to such employee’s relationship with
the Company or such Subsidiary, and neither the Company nor any of
its Subsidiaries is a party to a collective bargaining agreement,
and the Company and its Subsidiaries believe that the
Company’s relations with its employees and the relations of
its Subsidiaries with their respective employees are good. Except
as previously disclosed in the SEC Documents filed with the SEC or
delivered to the Purchaser at least five (5) Business Days prior to
the date hereof, no executive officer (as defined in Rule 3b-7
under the Exchange Act), nor any other Person whose termination
would be required to be disclosed pursuant to Item 5.02 of Form
8-K, has notified the Company that such Person intends to leave the
Company or otherwise terminate such Person’s employment with
the Company. To the knowledge of the Company or its Subsidiaries,
no executive officer is, or is now expected to be, in violation of
any material 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, to the Company’s knowledge, the continued
employment of each such executive officer does not subject the
Company or its Subsidiaries to any liability with respect to any of
the foregoing matters. The Company and its Subsidiaries are in
compliance with all federal, state, local and foreign laws and
regulations relating
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to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance would not result, either individually
or in the aggregate, in a Material Adverse Effect.
p. Tax Status . Since July 25, 2008, the Company and each of
its Subsidiaries (i) has made or filed all material foreign,
federal, state and local income and other tax returns, reports and
declarations required by any jurisdiction in which it is subject to
tax, (ii) has paid all taxes and other governmental assessments and
charges that are material in amount and due, whether shown to be
due on such returns, reports and declarations or otherwise, except
those being contested in good faith and for which the Company has
made appropriate reserves on its books, and (iii) has set aside on
its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns,
reports or declarations (referred to in clause (i) above) apply.
There are no unpaid taxes in any material amount claimed in writing
to be due by the taxing authority of any jurisdiction, and, to the
Company’s knowledge, there is no basis for any such
claim.
r. Transactions With Affiliates . Except as set forth in the
SEC Documents filed at least five (5) Business Days prior to the
date of this Agreement, no Related Party of the Company or any of
its Subsidiaries, or any of their respective Affiliates, is
presently, or has been within the past two years, a party to any
transaction, contract, agreement, instrument, commitment,
understanding or other arrangement or relationship with the Company
(other than directly for services as an employee, officer and/or
director), whether for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments or consideration to or from any such
Related Party. Except as set forth in the SEC Documents, no Related
Party of the Company or any of its Subsidiaries, or any of their
respective Affiliates, has any direct or indirect ownership
interest in any Person (other than ownership of less than 1% of the
outstanding common stock of a publicly traded corporation) in which
the Company or any of its Subsidiaries has any direct or indirect
ownership interest or with which the Company or any of its
Subsidiaries competes or has a business relationship.
s. Application of Takeover Protections . The Company and the
Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition,
business combination or other similar anti-takeover provision under
the Articles of Incorporation or the laws of the State of Nevada
that is or could become applicable to the Purchaser as a result of
the transactions contemplated by this Agreement, including the
Company’s issuance of the Securities and the
Purchaser’s ownership of the Securities.
t. Communication with Governmental Authorities . The Company
has no knowledge of any pending communication from any United
States or foreign regulating authority or body that would cause the
Company to revise its strategy for marketing and selling its
products and services.
u. Brokers’ Fees . Except for the fees and expenses
payable by the Company to Plethora Partners LLC, there are no
brokerage commissions, finder’s fees, or similar fees or
commissions payable by the Company or any of its Subsidiaries in
connection with the transactions contemplated hereby or by the
other Note Documents based on any agreement, arrangement or
understanding with the Company or any of its Subsidiaries.
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v. Investment Company . The Company is not, and upon the
Closing will not be, an "investment company," a company controlled
by an "investment company," or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company,"
as such terms are defined in the Investment Company Act of 1940, as
amended.
w. Shares Registered with the SEC . Parent does not have,
and has not at any time since July 25, 2008 had, a class of voting
shares registered with the SEC under Section 12 of the Exchange
Act.
x. Nevada Revised Statutes Provisions . Parent’s
Articles of Incorporation and Bylaws do not provide that the Nevada
Revised Statutes sections 78.411 to 78.444, inclusive shall apply
to Parent, and the provisions of Nevada Revised Statutes sections
78.378 to 78.3793, inclusive, will not in the future apply to the
Note or Warrants or any transaction contemplated by the Note
Documents, including the issuance of th
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