EX-10.3
20
reg_103.htm
FORM OF
CONVERTIBLE REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT BETWEEN MAGNETECH INDUSTRIAL SERVICES, INC. AND THE PURCHASERS SCHEDULED THEREIN
Exhibit
10.3
THIS
CONVERTIBLE REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”)
is
made and entered into as of February __, 2004, between Magnetech Industrial
Services, Inc, a corporation organized and existing under the laws of the State
of
Indiana (the “Company”),
and
the purchaser listed on Schedule 1
hereto
(the “Purchaser”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement, the Company
desires to issue and sell to the Purchaser and the Purchaser desires to acquire
from the Company [
]
shares
of the Company’s Series A Convertible Redeemable Preferred Stock, (the
“Series A
Preferred Stock”),
with
a Stated Value of one dollar ($1) per share, which is part of a sale of Series
A
Preferred Stock with an aggregate Stated Value of seven hundred and fifty
thousand dollars ($750,000).
IN
CONSIDERATION of the mutual covenants contained in this Agreement, the Company
and each Purchaser agree as follows:
SECTION
I
CERTAIN
DEFINITIONS
1.1 Certain
Definitions.
As used
in this Agreement, and unless the context requires a different meaning, the
following terms have the meanings indicated:
“Affiliate”
means,
with respect to any Person, any Person that, directly or indirectly, controls,
is controlled by or is under common control with such Person. For the purposes
of this definition, “control”
(including, with correlative meanings, the terms “controlled
by”
and
“under
common control with”)
shall
mean the possession, directly or indirectly, of the power to direct or cause
the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
“Agreement”
shall
have the meaning set forth in the introductory paragraph of this
Agreement.
“Articles
of Amendment”
means
the Amendment of the Company’s Articles of Incorporation that authorizes the
Series A Preferred Stock annexed as Exhibit
A
hereto.
“Business
Day”
means
any day except Saturday, Sunday and any day which shall be a legal holiday
or a
day on which banking institutions in the State of New York are authorized or
required by law or other government actions to close.
“Change
of Control”
means
the acquisition, directly or indirectly, by any Person of ownership of, or
the
power to direct the exercise of voting power with respect to, a majority of
the
issued and outstanding voting securities of the Company.
“Closing”
shall
have the meaning set forth in Section
2.2(a).
1
“Closing
Date”
shall
have the meaning set forth in Section
2.2(a).
“Common
Stock”
means
shares now or hereafter authorized of the class of common stock, no par value,
of the Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
“Company”
shall
have the meaning set forth in the introductory paragraph.
“Control
Person”
shall
have the meaning set forth in Section
4.7 (a)
hereof.
“Conversion
Date”
shall
have the meaning set forth in the Articles of Amendment.
“Conversion
Price”
shall
have the meaning set forth in the Articles of Amendment.
“Default”
means
any event or condition which constitutes an Event of Default or which with
the
giving of notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
“Disclosure
Documents”
means
the documents and materials set forth on Schedule
1.1
hereto
provided to the Purchaser and/or its representatives in connection with the
Company and this offering.
“Event
of Default”
shall
have the meaning set forth in Section 5.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Indemnified
Party”
shall
have the meaning set forth in Section
4.7(b)
hereof.
“Indemnifying
Party”
shall
have the meaning set forth in Section
4.7(b)
hereof.
“Losses”
shall
have the meaning set forth in Section
4.7(a)
hereof.
“Material”
shall
mean having a financial consequence in excess of $25,000.
“Material
Adverse Effect”
shall
have the meaning set forth in Section
3.1(a).
“NEWCO”
shall
mean the to-be-formed parent entity of the Company.
“Person”
means
an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
2
“Purchase
Price”
shall
have the meaning set forth in Section
2.1(b).
“Purchaser”
shall
have the meaning set forth in the introductory paragraph.
“Redemption
Price”
shall
mean an amount equal to the Stated Value of the Shares outstanding that are
subject to redemption.
“Reporting
Issuer”
means a
company that is subject to the reporting requirements of Section 13 or 15(d)
of
the Exchange Act.
“Required
Approvals”
shall
have the meaning set forth in Section
3.1(f).
“SEC”
means
the Securities and Exchange Commission.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Series A
Preferred Stock”
shall
have the meaning set forth in the recital.
“Shares”
shall
have the meaning set forth in Section
2.1(a).
“Stated
Value”
means
the sum of One dollar ($1) per Share or seven hundred and fifty thousand dollars
($750,000) for all of the Shares.
“Subsidiaries”
shall
have the meaning set forth in Section
3.1(a).
“Transaction
Documents”
means
this Agreement and all exhibits and schedules hereto and all other documents,
instruments and writings required pursuant to this Agreement.
SECTION
II
PURCHASE
AND SALE OF CONVERTIBLE PREFERRED SHARES
2.1 Purchase
and Sale; Purchase Price.
(a) Subject
to the terms and conditions set forth herein, the Company shall issue and sell
and the Purchaser shall purchase [ ] shares of the Company’s Series A
Preferred Stock (the “Shares”). The Series A Preferred Stock shall have the
respective rights, preferences and privileges as set forth in the Articles
of
Amendment to be filed by the Company with the Secretary of State of
Indiana
prior to the Closing Date.
(b) The
purchase price for each Share shall be One Dollar ($1) (the “Per Share
Consideration”). The Per Share Consideration multiplied by the number of Shares
to be purchased by the Purchaser is referred to as the “Purchase
Price.”
3
2.2 Execution
and Delivery of Documents; The Closing.
(a) The
Closing of the purchase and sale of the Shares (the “Closing”) shall take place
simultaneously with the execution and delivery of this Agreement (the “Closing
Date”). On the Closing Date,
(i) the
Company shall execute and deliver to the Purchaser the certificates representing
the Shares, which Shares shall have the respective rights, preferences and
privileges as set forth in the Articles of Amendment annexed as Exhibit A
hereto;
and
(ii) the
Purchaser shall deliver to the Company the Purchase Price, payable in cash
or
other immediately available funds, for the Shares.
SECTION
III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations,
Warranties and Agreements of the Company.
The
Company hereby makes the following representations and warranties to the
Purchaser as of the date of this Agreement, all of which shall survive the
Closing:
(a) Organization
and Qualification.
The
Company is a corporation, duly incorporated, validly existing and in good
standing under the laws of the State of
Indiana, with the requisite corporate
power and authority to own and use its properties and assets and to carry on
its
business as currently conducted. The Company has no subsidiaries other than
as
set forth on Schedule
3.1(a)
attached
hereto (collectively, the “Subsidiaries”).
Each
of the Subsidiaries is a corporation or limited liability company, duly
incorporated or organized, validly existing and in good standing under the
laws
of the jurisdiction of its incorporation or organization, as the case may be,
with the full corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each of the Company
and the Subsidiaries is duly qualified to do business and is in good standing
as
a foreign corporation or limited liability company in each jurisdiction in
which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in
good
standing, as the case may be, would not, individually or in the aggregate,
have
a material adverse effect on the results of operations, assets, prospects,
or
financial condition of the Company and the Subsidiaries, taken as a whole (a
“Material
Adverse Effect”).
(b) Authorization,
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated hereby and by each other Transaction
Document and to otherwise carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement and each of the other Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby has been duly authorized by all necessary action
on the part of the Company. Each of this Agreement and each of the other
Transaction Documents has been or will be duly executed by the Company and
when
delivered in accordance with the terms hereof or thereof will constitute the
valid and binding obligation of the Company enforceable against the
4
Company
in accordance with its terms, except as such enforceability may be limited
by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
(c) Capitalization.
The
authorized, issued and outstanding capital stock of the Company is set forth
on
Schedule
3.1(c).
No
shares of the Series A Preferred Stock have been issued as of the date
hereof. No shares of Common Stock or any other class of the Company’s securities
are entitled to preemptive or similar rights, nor is any holder of the Common
Stock entitled to preemptive or similar rights arising out of any agreement
or
understanding with the Company by virtue of this Agreement.
(d) Issuance
of Securities.
The
Shares have been duly and validly authorized for issuance, offer and sale
pursuant to this Agreement and, when issued and delivered as provided hereunder
against payment in accordance with the terms hereof, shall be valid and binding
obligations of the Company enforceable in accordance with their respective
terms. The Company covenants that it will cause NEWCO at the time of its
incorporation to reserve out of its authorized and unissued common stock solely
for the purpose of issuance upon conversion of Series A Preferred Stock
as
provided in the Articles of Amendment, free from preemptive rights or any other
actual contingent purchase rights of persons other than the Holders of
Series A Preferred Stock, such number of shares of NEWCO common stock
as
shall be issuable upon the conversion of the aggregate Stated Value of all
outstanding Series A Preferred Stock. When issued in accordance with
the
terms hereof, the Shares will be duly authorized, validly issued, fully paid
and
non-assessable. The Company has no equity or equity equivalent security
outstanding that is convertible into shares of common stock of
NEWCO.
(e) No
Conflicts.
The
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (i) conflict with
or
violate any provision of its Articles of Incorporation or bylaws (each as
amended through the date hereof) or (ii) be subject to obtaining any
consents except those referred to in Section 3.1(f), conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company is a party, or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or
its
Subsidiaries is subject (including, but not limited to, those of other countries
and the federal and state securities laws and regulations), or by which any
property or asset of the Company or its Subsidiaries is bound or affected,
except in the case of clauses (ii) or (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted in violation
of any law, ordinance or regulation of any governmental authority, the result
of
which would, individually or in the aggregate, have a Material Adverse Effect.
(f) Consents
and Approvals.
Except
as specifically set forth in
Schedule 3.1(f),
neither
the Company nor any Subsidiary is required to obtain any consent,
5
waiver,
authorization or order of, or make any filing or registration with, any court
or
other federal, state, local or other governmental authority or other Person,
in
connection with the execution, delivery and performance by the Company of this
Agreement and each of the other Transaction Documents, except for the filing
of
the Articles of Amendment with respect to the Series A Preferred Stock,
which filing will be made with the Secretary of State of the State of
Indiana
prior to the Closing Date (together with the consents, waivers, authorizations,
orders, notices and filings referred to in Schedule 3.1(f),
the
“Required
Approvals”).
(g) Litigation;
Proceedings.
Except
as specifically disclosed in
Schedule 3.1(g),
there
is no action, suit, notice of violation, proceeding or investigation pending
or,
to the best knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective properties before
or by any court, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) which (i) relates to or challenges
the legality, validity or enforceability of any of the Transaction Documents
or
the Shares, (ii) could, individually or in the aggregate, have a Material
Adverse Effect or (iii) could, individually or in the aggregate, materially
impair the ability of the Company to perform fully on a timely basis its
obligations under the Transaction Documents.
(h) No
Default or Violation.
Except
as set forth in Schedule 3.1(h)
hereto,
neither the Company nor any Subsidiary (i) is in default under or in vio-lation
of any indenture, loan or credit agreement or any other agreement or instrument
to which it is a party or by which it or any of its properties is bound, except
such conflicts or defaults as do not have a Material Adverse Effect, (ii) is
in
violation of any order of any court, arbitrator or governmental body, except
for
such violations as do not have a Material Adverse Effect, or (iii) is in
violation of any statute, rule or regu-lation of any governmental authority
which could (individually or in the aggregate) (x) adversely affect the
legality, validity or enforceability of this Agree-ment, (y) have a Material
Adverse Effect, or (z) adversely impair the Company’s ability or obligation to
perform fully on a timely basis its obligations under this
Agreement.
(i) Disclosure
Documents.
The
Disclosure Documents are accurate in all material respects and do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(j) Non-Registered
Offering.
Neither
the Company nor any Person acting on its behalf has taken or will take any
action (including, without limitation, any offering of any securities of the
Company under circumstances which would require the integration of such offering
with the offering of the Securities under the Securities Act) which might
subject the offering, issuance or sale of the Shares to the registration
requirements of Section 5 of the Securities Act.
3.2 Representations
and Warranties of the Purchaser.
The
Purchaser hereby represents and warrants to the Company as follows:
(a) Authority.
The
Purchaser has the requisite power and authority to enter into and to consummate
the transactions contemplated hereby and by the other Transaction Documents
and
to otherwise carry out his obligations hereunder and thereunder. The execution
6
and
delivery of this Agreement and the acquisition of the Shares by the Purchaser
(i) have been duly authorized by all necessary action on the part of the
Purchaser, and (ii) in cases where Purchaser is not an individual, such
execution, delivery and acquisition will not violate the provisions of the
organizational documents of Purchaser or any agreement, obligation, law, rule,
regulation or order to which Purchaser is a party or by which it is bound.
If
Purchaser is an individual, the Purchaser represents that he is at least
twenty-one (21) years of age and has the legal capacity to enter into this
Agreement, the address set forth Schedule
1
is
Purchaser’s true and correct principal residence, and Purchaser has no present
intention of relocating such principal residence to any other state or
jurisdiction. This Agreement has been duly executed and delivered by the
Purchaser and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against him in accordance with its terms, except as
such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to, or affecting generally
the enforcement of, creditors rights and remedies or by other general principles
of equity.
(b) Investment
Intent.
The
Purchaser (i) is acquiring the Shares to be purchased hereunder, and will
acquire the Shares for his own account for investment purposes only and not
with
a view to or for distributing or reselling such Shares, or any part thereof
or
interest therein, without prejudice, however, to such Purchaser’s right, subject
to the provisions of this Agreement, at all times to sell or otherwise dispose
of all or any part of such Shares pursuant to a registration under federal
and
applicable state securities laws, or an exemption therefrom based on an opinion
of legal counsel acceptable to the Company that an exemption is available;
and
(ii) has not attempted to sell or offered for sale any of the Shares. The
Purchaser is not purchasing the Shares with the funds of any other Person nor
acting as an underwriter or a conduit for the sale of the Shares to the public
or to others. The Purchaser is not a member of the National Association of
Securities Dealers, Inc. (“NASD”) and for a period of 12 months prior to the
date of this Agreement, has not been affiliated or associated with any company,
firm, or other entity that is a member of the NASD.
(c) Experience
of Purchaser.
The
Purchaser, either alone or together with his representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of an investment in the Shares
to be acquired by Purchaser hereunder, and has obtained, in his or her own
judgment, sufficient information from the Company to evaluate such merits and
risks. The Purchaser is knowledgeable about and experienced in investments
in
the equity securities of non-publicly traded companies. The Purchaser represents
that he is an “accredited investor” as such term is defined in Rule 501 of
Regulation D of the Securities Act.
(d) Ability
of Purchaser to Bear Risk of Investment.
The
Purchaser understands that there is no assurance as to the viability or future
performance of the Company. The Purchaser recognizes that an investment in
the
Shares is speculative and involves a high degree of risk including, but not
limited to, the risk of economic losses from operations of the Company and
the
potential loss of investment. The Purchaser understands that no market for
the
Shares exists and none may develop in the future. The Purchaser is able to
bear
the economic risk of an investment in the Shares to be acquired by him or her
hereunder and, at the pre-sent time, is able to afford a complete loss of such
investment. The commitment of the Purchaser to investments which are not readily
marketable or transferable is not disproportionate to the net
7
worth
of
the Purchaser, and investment in the Shares will not cause such commitment
to
become excessive. The Purchaser has no need for liquidity with respect to the
Shares.
(e) Access
to Information.
The
Purchaser acknowledges that he has been afforded (i) the opportunity to ask
such
questions as Purchaser has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the Shares
offered hereunder; (ii) access to information about the Company and the
Company’s financial condition, results of operations, business, properties,
management and prospects sufficient to enable Purchaser to evaluate an
investment in the Shares; and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision
with
respect to the investment and to verify the accuracy and completeness of the
information that Purchaser has received about the Company. The Purchaser
represents that all of his questions concerning the Company and the Shares
have
been answered to his full satisfaction.
(f) Investment
Decision.
Except
for the Disclosure Documents, the Purchaser has not received or relied on any
representation or warranty from the Company or any of its officers, directors,
employees, agents, attorneys or other representatives (including, but not
limited to, any representations or warranties from Strasbourger ▇▇▇▇▇▇▇ Tulcin
▇▇▇▇▇ Inc.) in respect of Purchaser’s investment in the Shares, and has relied
upon his own investigation in evaluating the risks and merits of making a
decision to purchase the Shares. The Purchaser has had the opportunity to
discuss the consequences of his investment decision with his legal and tax
advisors. Without limiting the generality of the foregoing, and notwithstanding
any other representation or warranty made by the Company, Purchaser acknowledges
that the Company has not made any representation or warranty with respect to
any
projections, estimates, or budgets of future revenues, expenses, or expenditures
or future results of operations.
(g) Transferability
of Shares.
Purchaser acknowledges that the transferability of the Shares is severely
limited and that the Purchaser must continue to bear the economic risk of this
investment for an indefinite period as these Securities have not been registered
under the Securities Act of 1933, as amended, or any state securities law in
reliance on an exemption therefrom for transactions not involving a public
offering and, therefore, cannot be offered or sold without an effective
registration statement for such Shares under the Securities Act of 1933, as
amended, and applicable state securities laws or an opinion of counsel for
the
Corporation that registration is not required under the Securities Act of 1933,
as amended, and applicable state securities laws. Further, the Purchaser
acknowledges that the Purchaser has no right to compel registration and the
Company has no intention of registering the Securities or to take the action
required to make Rule 144 under the Securities Act of 1933, as amended,
available for resale of the Shares.
(h) Legend
on Shares.
The
Purchaser acknowledges that a restrictive legend will be placed on the
certificate for the Shares, substantially in the following form:
“The
shares represented by this certificate have not been registered under the
federal Securities Act of 1933, as amended, or the securities law of any state.
These shares may not be sold or offered for sale unless they have first been
so
8
registered
or unless the Company receives a written opinion from legal counsel acceptable
to the Company that such registration is not required.”
(i) Reliance.
The
Purchaser understands and acknowledges that (i) the Shares being offered and
sold to Purchaser hereunder are being offered and sold without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act under Rule 506 of Regulation
D and
without registration under the securities laws of any states, and (ii) the
availability of such exemption depends in part on, and that the Company will
rely upon the accuracy and truthfulness of, the representations made by
Purchaser in this Agreement as well as any additional information that Purchaser
has furnished regarding his or her own financial position, business experience
or any matters, and such Purchaser hereby consents to such
reliance.
The
Company acknowledges and agrees that the Purchaser makes no representations
or
warranties with respect to the transactions contemplated hereby other than
those
specifically set forth in this Section
3.2.
SECTION
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1 Manner
of Offering.
The
Shares are being issued pursuant to Rule 506 of Regulation D of the Securities
Act.
4.2 Notice
of Certain Events.
The
Company shall, on a continuing basis prior to Closing, advise the Purchaser
promptly after obtaining knowledge of, and, if requested by the Purchaser,
confirm such advice in writing, of any event that makes any statement
of a
material fact made by the Company in Section
3.1
or in
the Disclosure Documents untrue or that requires the making of any additions
to
or changes in Section
3.1
or in
the Disclosure Documents in order to make the statements therein, in the light
of the circumstances under which they are made, not misleading.
4.3 Modification
to Disclosure Documents.
If any
event shall occur prior to Closing as a result of which, in the reasonable
judgment of the Company or the Purchaser, it becomes necessary or advisable
to
amend or supplement any of the Disclosure Documents in order to make the
statements therein, in the light of the circumstances at the time such
Disclosure Documents were delivered to the Purchaser, not misleading, or if
it
becomes necessary to amend or supplement any of the Disclosure Documents to
comply with applicable law, the Company shall promptly prepare an appropriate
amendment or supplement to each such document in form and substance reasonably
satisfactory to both the Purchaser and Company so that, as so amended or
supplemented, each such document will not include an untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time
it is
delivered to the Purchaser, not misleading.
4.4 Blue
Sky Laws.
The
Company shall cooperate with the Purchaser in connection with the exemption
from
registration of the Shares under the securities or Blue Sky laws of such
jurisdictions as the Purchasers may request; provided,
however,
that
neither the Company nor its
9
Subsidiaries
shall be required in connection therewith to qualify as a foreign corporation
where they are not now so qualified. The Company agrees that it will execute
all
necessary documents and pay all necessary state filing or notice fees to enable
the Company to qualify for an exemption from registration of the Shares and
sell
the Shares to the Purchasers.
4.5 Integration.
The
Company shall not and shall use its best efforts to ensure that no Affiliate
shall sell, offer for sale or solicit offers to buy or otherwise negotiate
in
respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Shares in a manner that would
require the registration under the Securities Act of the sale of the Shares
to
the Purchaser.
4.6 Solicitation
Materials.
The
Company shall not (i) distribute any offering materials in connection with
the
offering and sale of the Shares other than the Disclosure Documents and any
amendments and supplements thereto prepared in compliance herewith or (ii)
solicit any offer to buy or sell the Shares by means of any form of general
solicitation or advertising.
4.7 Indemnification.
(a) Indemnification
(i) The
Company shall, notwithstanding termination of this Agreement and without
limitation as to time, indemnify and hold harmless the Purchaser and its
officers, directors, agents, employees and affiliates, each Person who controls
the Purchaser (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) (each such Person, a “Control
Person”)
and
the officers, directors, agents, employees and affiliates of each such Control
Person, to the fullest extent permitted by applicable law, from and against
any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys’ fees) and expenses
(collectively, “Losses”),
as
incurred, arising out of, or relating to, a breach or breaches of any
representation, warranty, covenant or agreement by the Company under this
Agreement or any other Transaction Document.
(ii) The
Purchaser shall, notwithstanding termination of this Agreement and without
limitation as to time, indemnify and hold harmless the Company, its officers,
directors, agents and employees, each Control Person and the officers,
directors, agents and employees of each Control Person, to the fullest extent
permitted by application law, from and against any and all Losses, as incurred,
arising out of, or relating to, a breach or breaches of any representation,
warranty, covenant or agreement by the Purchaser under this Agreement or the
other Transaction Documents.
(b) Conduct
of Indemnification Proceedings.
If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an “Indemnified
Party”),
such
Indemnified Party promptly shall notify the Person from whom indemnity is sought
(the “Indemnifying
Party”)
in
writing, and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party
and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the
10
failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced
the
Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed to pay such fees and expenses;
or
(2) the Indemnifying Party shall have failed promptly to assume the defense
of
such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified
Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing
that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense of the
claim against the Indemnified Party but will retain the right to control the
overall Proceedings out of which the claim arose and such counsel employed
by
the Indemnified Party shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of
the
Indemnified Party, effect any settlement of any pending Proceeding in respect
of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All
fees
and expenses of the Indemnified Party to which the Indemnified Party is entitled
hereunder (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a manner
not inconsistent with this Section) shall be paid to the Indemnified Party,
as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party.
No
right
of indemnification under this Section shall be available as to a particular
Indemnified Party if there is a non-appealable final judicial determination
that
such Losses arise solely out of the negligence or bad faith of such Indemnified
Party in performing the obligations of such Indemnified Party under this
Agreement or a breach by such Indemnified Party of its obligations under this
Agreement.
(c) Non-Exclusivity.
The
indemnity and contribution agreements contained in this Section are in addition
to any obligation or liability that the Indemnifying Parties may have to the
Indemnified Parties.
4.8 Notice
and Consultation Before Securities Issuances..
Until
such time as Purchaser shall have converted all of the Shares in a Private
Placement Offering of NEWCO common stock in the aggregate amount of no less
than
three million dollars ($3,000,000), by NEWCO, the Company shall not offer or
issue any equity, equity equivalent security or debt
11
with
a
floating conversion price, or any equity lines of credit (the “New Securities”),
without first giving thirty (30) days notice thereof to the Purchaser and
thereafter consulting in good faith with the Purchaser concerning such issuance.
After such consultation between the Company and the Purchaser, the Company
may
offer or sell the New Securities on such terms and conditions as the Company
deems appropriate.
4.9 No
Violation of Applicable Law.
Notwithstanding any provision of this Agreement to the contrary, if the
redemption of the Shares otherwise required under this Agreement or the Articles
of Amendment, would be prohibited by the relevant provisions of
Indiana law,
such redemption shall be effected as soon as it is permitted under such law.
4.10 Redemption
Restrictions.
Notwithstanding any provision of this Agreement to the contrary, if any
redemption of the Shares otherwise required under this Agreement or the Articles
of Amendment, would be prohibited in the absence of consent from any lender
to
the Company or any of the Subsidiaries, or by the holders of any class of
securities of the Company, the Company shall use its best efforts to obtain
such
consent as promptly as practicable after any such redemption is required.
Nothing contained in this Section 4.10 shall be construed as a waiver by the
Purchaser of any rights they may have by virtue of any breach of any
representation or warranty of the Company herein as to the absence of any
requirement to obtain any such consent.
4.11 Conversion
Procedures.
The
Articles of Amendment sets forth the procedures, including the forms of Notice
of Conversion to be provided upon conversion and such other information and
instructions as may be reasonably necessary to enable the Purchaser or its
permitted transferee(s) to exercise the right of conversion smoothly and
expeditiously.
SECTION
V
EVENT
OF DEFAULT, LEGAL FEES AND DEFAULT INTEREST RATE
(a) In
the
event any party hereto commences legal action to enforce its rights under this
Agreement or any other Transaction Document, the non-prevailing party shall
pay
all reasonable costs and expenses (including but not limited to reasonable
attorney’s fees, accountant’s fees, appraiser’s fees and investigative fees)
incurred by the other party in enforcing such rights. In the event of an uncured
Event of Default by any party hereunder, interest shall accrue on all unpaid
amounts due the aggrieved party at the rate of ten percent (10%) per annum,
compounded annually.
(b) Whenever
the Company is obligated to purchase or redeem the Purchaser’s Shares under any
provision of this Agreement or the Articles of Amendment, and the Redemption
Price is not paid to the Purchaser by the tenth (10th)
day
after the Redemption Price is due and payable to the Purchaser, the Company
shall thereafter pay interest to the Purchaser on the unpaid portion of the
Redemption Price at the rate of ten percent (10%) per annum, until the
Redemption Price is paid in full.
12
(c) “Event
of
Default”, wherever used herein, means the occurrence of any one of the following
events prior to the conversion of Purchaser’s Shares into shares of common stock
of NEWCO:
(i) the
Company shall fail to observe or perform any material covenant, agreement or
warranty contained in Articles of Amendment, and such failure shall not have
been remedied within ten (10) Business Days after the date on which written
notice of such failure shall have been given by Purchaser;
(ii) the
occurrence of any material breach or event of default by the Company under
the
Purchase Agreement or any other Transaction Document (as defined in the Purchase
Agreement) and such failure or breach shall not have been remedied within the
applicable cure period provided for therein, if any;
(iii) the
Company or any of its subsidiaries shall commence a voluntary case under the
United States Bankruptcy Code as now or hereafter in effect or any successor
thereto (the “Bankruptcy Code”); or an involuntary case is commenced against the
Company under the Bankruptcy Code and the Company fails to pursue dismissal
of
the case within sixty (60) days after commencement of the case; or the Company
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Company or there is commenced against the Company any such proceeding and the
Company fails to pursue dismissal of the case within sixty (60) days after
commencement of the case; or the Company suffers any appointment of any
custodian or the like for it or any substantial part of its property and the
Company fails to pursue dismissal of the custodian within sixty (60) days after
the appointment; or the Company makes a general assignment for the benefit
of
creditors; or any corporate or other action is taken by the Company for the
purpose of effecting any of the foregoing.
SECTION
VI
MISCELLANEOUS
6.1 Fees
and Expenses.
Except
as set forth in this Agreement, each party shall pay the fees and expenses
of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay
all
stamp and other taxes and duties levied in connection with the issuance of
the
Shares pursuant hereto. The Purchaser shall be responsible for any taxes payable
by the Purchaser that may arise as a result of the investment hereunder or
the
transactions contemplated by this Agreement or any other Transaction Document.
The Company shall pay all costs, expenses, fees and all taxes incident to and
in
connection with: (A) the issuance and delivery of the Shares, (B) the
exemption from registration of the Shares for offer and sale to the Purchaser
under the securities or Blue Sky laws of the applicable jurisdictions, and
(C) the preparation of certificates for the Shares (including,
13
without
limitation, printing and engraving thereof), and (D) all fees and expenses
of counsel and accountants of the Company.
6.2 Entire
Agreement.
This
Agreement, together with all of the Exhibits and Schedules annexed hereto,
and
any other Transaction Document contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, with respect to such matters. This
Agreement shall be deemed to have been drafted and negotiated by both parties
hereto and no presumptions as to interpretation, construction or enforceability
shall be made by or against either party in such regard.
6.3 Notices.
Any
notice or other communication required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given upon facsimile
transmission (with written transmission confirmation report) at the number
designated below (if delivered on a Business Day during normal business hours
where such notice is to be received), or the first Business Day following such
delivery (if delivered other than on a Business Day during normal business
hours
where such notice is to be received) whichever shall first occur. The addresses
for such communications shall be:
| |
If
to the Company:
|
Magnetech
Industrial Services, Inc
|
| | |
▇▇▇▇
▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
|
| | |
▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
| | |
Attn:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and CEO
|
| | |
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
|
| | |
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
| | | |
| |
With
copies to:
|
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇▇
|
| | |
600
1st
Source Bank Building
|
| | |
▇▇▇
▇. ▇▇▇▇▇▇▇▇ ▇▇.
|
| | |
▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
| | |
Attn:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
|
| | |
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
|
| | |
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
| | | |
| |
If
to the Purchaser
|
See
Schedule
1
attached hereto
|
or
such
other address as may be designated hereafter by notice given pursuant to the
terms of this Section 6.3.
6.4 Amendments;
Waivers.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by both the Company and the
Purchaser, or, in the case of a waiver, by the party against whom enforce-ment
of any such waiver is sought. No waiver of any default with respect to any
provision, condition or require-ment of this Agreement shall be deemed to be
a
continuing waiver in the future or a waiver of any other provision, condition
or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
14
6.5 Headings.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
6.6 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. The assignment by a party
of
this Agreement or any rights hereunder shall not affect the obligations of
such
party under this Agreement.
6.7 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.
6.8 Governing
Law; Venue; Service of Process.
The
parties hereto acknowledge that the transactions contemplated by this Agreement
and the exhibits hereto bear a reasonable relation to the State of
Indiana.
The
parties hereto agree that the internal laws of the State of
Indiana shall govern
this Agreement and the exhibits hereto, including, but not limited to, all
issues related to usury. Any action to enforce the terms of this Agreement
or
any of its exhibits, or any other Transaction Document shall be brought
exclusively in the state courts of St. ▇▇▇▇▇▇ County,
Indiana or the federal
courts situate in the Northern District of
Indiana. Service of process in any
action by the Purchaser to enforce the terms of this Agreement may be made
by
serving a copy of the summons and complaint, in addition to any other relevant
documents, by commercial overnight courier to the Company at its principal
address set forth in this Agreement.
6.9 Survival.
The
representa-tions and warranties of the Company and the Purchaser contained
in
Section III and the agreements and covenants of the parties contained
in
Section IV and this Section VI shall survive the Closing.
6.10 Counterpart
Signatures.
This
Agreement may be executed in two or more counterparts, all of which when taken
together 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, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature page were an original
thereof.
6.11 Severability.
In case
any one or more of the provisions of this Agreement shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision which shall be a reasonable substitute therefore, and
upon
so agreeing, shall incorporate such substitute provision in this
Agreement.
6.12 Limitation
of Remedies.
Notwithstanding anything to the contrary contained in this Agreement, with
respect to claims by the Company or any person acting by or through the Company,
or by the Purchaser or any person acting through the Purchaser, for remedies
at
law or at equity relating to or arising out of a breach of this Agreement,
liability, if any, shall, in no
15
event,
include loss of profits or incidental, indirect, exemplary, punitive, special
or
consequential damages of any kind.
[
SIGNATURE
PAGE FOLLOWS ]
16
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first indicated above.
| |
Company:
|
| | | |
| |
Magnetech
Industrial Services, Inc
|
| | | |
| |
By:
| /s/
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
| |
Name:
| ▇▇▇▇
▇. ▇▇▇▇▇▇▇ |
| |
Title:
| President
&
CEO |
| | | |
| | | |
| | | |
| |
Purchaser:
|
| | |
| |
By:
| |
| |
Name:
| |
| |
Title:
| |
17
Exhibit
A
ARTICLES
OF AMENDMENT
TO
THE ARTICLES OF INCORPORATION
OF
MAGNETECH
INDUSTRIAL SERVICES, INC.
1. NAME.
The
name of the corporation is MAGNETECH INDUSTRIAL SERVICES, INC. (the
"Corporation").
2. TEXT
OF AMENDMENT.
Article
VI of the Articles of Incorporation of the Corporation is hereby amended
and
restated in its entirety to read as follows:
ARTICLE
VI
Authorized
Shares of Stock
Section
1. Number
of Shares.
The
Corporation is authorized to issue a total of 1,010,000 shares of stock,
divided
into the following classes: (a) 10,000 shares of Common Stock, with no
par
value; and (b) 1,000,000 shares of Preferred Stock.
Section
2. Terms
of Common Stock.
The
Common Stock shall have the following rights, restrictions, limitations
and
preferences:
(a). No
Preference.
None of
the shares of Common Stock shall be entitled to any preference, and each
share
of Common Stock shall be equal to every other share of Common Stock in
every
respect.
(b). Dividends.
After
payment or declaration of all dividends on any shares having a priority
over the
Common Stock as to dividends, dividends on the shares of Common Stock may
be
declared and paid, but only when and as determined by the Board of Directors.
Shares of Common Stock shall share equally as to any dividends
declared.
(c). Rights
on Liquidation.
On any
liquidation, dissolution or winding up of the Corporation, after there
shall
have paid to or set aside for the holders of any shares having priority
over the
Common Stock the full preferential amounts, if any, to which they are
respectively entitled, the holders of the Common Stock shall be entitled
to
receive pro rata all the remaining assets of the Corporation available
for
distribution to holders of its capital stock in accordance with Section
4(f)(ii).
(d). Voting.
Each
shareholder of Common Stock shall have the right to one (1) vote for each
share
of Common Stock standing in his or her name on the books of the Corporation
on
each matter submitted to a vote at any meeting of the shareholders.
Section
3. Terms
of Preferred Stock.
The
Preferred Stock authorized by these Articles of Incorporation (“Articles”) may
be issued from time to time in one or more series. Seven Hundred Fifty
Thousand
(750,000) shares of the
1
Preferred
Stock shall be designated as Series A Convertible Redeemable Preferred
Stock
(the “Series A Preferred Stock”) and the stated value of the Series A
Preferred Stock shall be U.S. $1 per share (the “Stated Value”). The rights,
preferences, privileges and restrictions granted to and imposed on the
Series A
Preferred Stock are set forth in Section 4 of this Article VI. Subject
to
compliance with any applicable protective voting rights that have been
or may be
granted to the Preferred Stock or series thereof in these Articles, as
the same
may be amended from time to time (“Protective
Provisions”),
the
Board of Directors is authorized to provide for the issuance of additional
shares of Preferred Stock in series by filing an amendment to the Articles
pursuant to the applicable law, to establish from time to time the number
of
shares to be included in each such series, and to fix the designation,
powers,
preferences and rights of the shares of each such series and the qualifications,
limitations or restrictions thereof.
Section
4. Terms
of Series A Preferred Stock.
The
Series A Preferred Stock shall have the rights, restrictions, limitations
and
preferences set forth in this Section 4.
(a). Certain
Definitions.
For
purposes of this Section 4, the
following terms have the meanings specified or referred to in this Section
4(a):
(i). “Change
of Control”
means
the acquisition, directly or indirectly, by any Person of ownership of,
or the
power to direct the exercise of voting power with respect to, a majority
of the
issued and outstanding Common Stock f the Corporation.
(ii). “NewCo
Common Stock”
means
the common stock of NewCo.
(iii). “Issuance
Date”
means
the date of the Closing under the Convertible Preferred Stock Purchase
Agreement
with respect to the initial issuance of the Series A Preferred
Stock.
(iv). “NewCo”means
an
entity
to be formed by the Corporation or the holders of the Common Stock of the
Corporation to acquire all of the issued and outstanding Common Stock of
the
Corporation.
(v). “Person”
means an
individual or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity
of
any kind.
(vi). “Purchase
Agreement”
means
the
Convertible Redeemable Preferred Stock Purchase Agreement dated February
__,
2004, by and between the Corporation and the purchasers set forth in
Schedule 1 thereto (the “Purchaser”).
2
(b). Dividends.
The
holder or holders of the shares of Series A Preferred Stock as they
appear
on the stock records of the Corporation (“Holder” or “Holders”) shall not be
entitled to receive any dividends.
(c). Conversion.
(i). The
entire amount of issued and outstanding shares of Series A Preferred
Stock
shall be convertible into shares of NewCo Common Stock upon the completion
of a
Private Placement Offering by NewCo of NewCo Common Stock in the aggregate
amount of no less than three million dollars ($3,000,000) (the “PPO”). Any
conversion under this Section 3(c)(i) shall entitle a Holder to
receive
6.333333
shares
of
NewCo Common Stock for each share of Series A Preferred Stock (the
“Conversion Price”). Upon the entire conversion of the Series A Preferred
Stock, the Series A Preferred Stock shall be returned to the Corporation
for cancellation.
(ii). The
Conversion Date shall be the date of completion of the PPO, as advised
to the
Corporation by the placement agent. Within 10 business days of the Conversion
Date, the Holders of Series A Preferred Stock agree to convert their shares
of
Series A Preferred Stock into shares of NewCo Common Stock. Each Holder
shall
surrender the certificate or certificates for the shares of Series A Preferred
Stock owned by such Holder at the office of the Corporation’s transfer agent (or
at the principal office of the Corporation if the Corporation serves as
its own
transfer agent), together with written acceptance that such Holder agrees
to
convert all of his or her shares of the Series A Preferred Stock represented
by
such certificate or certificates. The Holder shall effect conversion by
sending
the form of conversion notice attached hereto as Appendix
I
(the
“Notice of Conversion”). If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his, her, or its attorney duly
authorized in writing. The Corporation, as soon as practicable after the
Conversion Date, shall cause to be issued and delivered at such office
to such
Holder, a certificate or certificates for the number of shares of NewCo
Common
Stock to which such Holder shall be entitled. No fractional shares of NewCo
Common Stock shall be issuable upon a conversion hereunder and the number
of
shares to be issued shall be rounded up to the nearest whole share. If
a
fractional share interest arises upon any conversion hereunder, the Corporation
shall cause the elimination of such fractional share interest by causing
to be
issued to Holder an additional full share of NewCo Common Stock.
Not
later
than ten (10) business days after the Corporation’s receipt of the Notice of
Conversion, the Corporation will cause NewCo to deliver to the Holder a
certificate or certificates representing the number of shares of
3
NewCo
Common Stock being acquired upon the conversion of the Series A
Preferred
Stock provided,
however,
that
the Corporation shall not be obligated to issue certificates evidencing
the
shares of NewCo Common Stock issuable upon conversion of any Series A
Preferred Stock until the shares or the Series A Preferred Stock
are either
delivered for conversion to the Corporation or any transfer agent for the
Series A Preferred Stock or NewCo Common Stock, or the Holder notifies
the
Corporation that such Series A Preferred Stock have been lost, stolen
or
destroyed and provides an agreement reasonably acceptable to the Corporation
to
indemnify the Corporation and NewCo from any loss incurred by it in connection
therewith.
(iii). In
case
of any reclassification of the Common Stock that would modify or invalidate
the
rights and preferences of the Series A Preferred Stock as provided in this
Section 4, any consolidation or merger of the Corporation with or into
another
person, the sale or transfer of all or substantially all of the assets
of the
Corporation or any compulsory share exchange pursuant to which the Common
Stock
is converted into other securities, cash or property, all of the issued
and
outstanding shares of Series A Preferred Stock shall be converted
into an
amount of shares of Common Stock of the Corporation equal to four and
three-fourths percent (4.75%) of the total issued and outstanding Common
Stock
of the Corporation after such conversion. The conversion of the Series
A
Preferred Stock shall be deemed to occur immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange.
Upon
the conversion of the Series A Preferred Stock, the Holders shall
return
all of the Series A Preferred Stock to the Corporation for
cancellation.
(iv). If
at any
time conditions shall arise by reason of action or inaction taken by the
Corporation which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially and adversely
affect the rights of the Holders of Series A Preferred Stock (different
than or distinguished from the effect generally on rights of holders of
any
class of the Corporation’s capital stock), the Corporation shall, at least
thirty (30) calendar days prior to the effective date of such action, mail
a
written notice to each Holder of Series A Preferred Stock briefly
describing the action contemplated and the material adverse effects of
such
action on the rights of such Holders, and an appraiser selected by the
Holders
of majority of the outstanding Series A Preferred Stock shall give
its
opinion as to the adjustment, if any (not inconsistent with the standards
established in this Article VI), of the Conversion Price (including, if
necessary, any adjustment as to the securities into which Series A
Preferred Stock may thereafter be convertible) and any distribution which
is or
would be required to preserve, without diluting, the rights of the Holders
of
Series A Preferred Stock; provided,
however,
that
the Corporation, after receipt of the
4
determination
by such appraiser, shall have the right to select an additional appraiser,
in
which case the adjustment shall be equal to the average of the adjustments
recommended by each such appraiser. The Board of Directors shall make the
adjustment recommended forthwith upon the receipt of such opinion or opinions
or
the taking of any such action contemplated, as the case may be; provided,
however,
that no
such adjustment of the Conversion Price shall be made which in the opinion
of
the appraiser(s) giving the aforesaid opinion or opinions would result
in an
increase of the Conversion Price.
(v). The
Corporation covenants that it will cause NewCo, at the time of its
incorporation, to reserve and keep available out of the authorized and
unissued
NewCo Common Stock, solely for the purpose of issuance upon conversion
of
Series A Preferred Stock as herein provided, free from preemptive
rights or
any other actual contingent purchase rights of persons other than the Holders
of
Series A Preferred Stock, such number of shares of NewCo Common
Stock as
shall be issuable upon the conversion of the aggregate Stated Value of
all
outstanding Series A Preferred Stock.
The
Corporation covenants that all shares of NewCo Common Stock that shall
be so
issuable shall, upon issue, be duly and validly authorized, issued and
fully
paid and nonassessable.
(vi). The
issuance of certificates for shares of NewCo Common Stock on conversion
of
Series A Preferred Stock shall be made without charge to the Holder
for any
documentary stamp or similar taxes that may be payable in respect of the
issue
or delivery of such certificate, provided that neither the Corporation
nor NewCo
shall be required to pay any tax that may be payable in respect of any
transfer
involved in the issuance and delivery of any such certificate upon conversion
in
a name other than that of the Holder, and neither the Corporation nor NewCo
shall be required to issue or deliver such certificates unless or until
the
Person or Persons requesting the issuance thereof shall have paid to the
Corporation the amount of such tax or shall have established to the satisfaction
of the Corporation that such tax has been paid.
(d). Mandatory
Redemption.
(i). If
the
Corporation has not completed a PPO within one (1) year from the Issuance
Date
of the Series A Preferred Stock, the Corporation shall redeem all of the
Series
A Preferred Stock owned by each Holder at a price equal pay to the Stated
Value
per share for any and all shares of such Series A Preferred Stock, plus
interest
on such amount at an annual rate of five and three eighths percent (5.3/8%)
from
the Issuance Date to the date of the redemption of the such Series A Preferred
Stock under this Section 4(d)(i), and (b) convert each Holder’s portion of the
Series A Preferred Stock into NewCo Common Stock at a rate of
5
1.333333
shares of NewCo Common Stock for each share of Series A Preferred
Stock
(the “Redemption Price”). The balance of Series A Preferred Stock not
converted into NewCo Common Stock under this Section 4(d)(i) shall be returned
to the Corporation for cancellation by NewCo. The Corporation is not obligated
to provide for redemption of the Series A Preferred Stock through
a sinking
fund.
(ii). Shares
of
Series A Preferred Stock which have been redeemed or converted shall
be
deemed retired and shall thereafter resume the status of authorized and
unissued
shares of Preferred Stock, undesignated as to series, and may be redesignated
and reissued as part of any new series of Preferred Stock other than
Series A Preferred Stock.
(iii). No
redemption shall be made and no sum set aside for such redemption at any
time
that the terms or provisions of any indenture or agreement of the Corporation,
including any agreement relating to indebtedness, specifically prohibits
such
redemption or setting aside or provides that such redemption or setting
aside
would constitute a breach or default thereunder (after notice or lapse
of time
or both), except with the written consent of the lender or other parties
to said
agreement as the case may be.
(iv). If
any
redemption shall at any time be prohibited by any applicable law, the same
shall
be deferred until such time as the redemption can occur in full compliance
with
such law.
(v). In
the
event the Corporation shall redeem shares of Series A Preferred
Stock as
provided herein, notice of such redemption shall be given by first class
mail,
postage prepaid, or by confirmed facsimile transmission, not less than
thirty
(30) business days prior to the date fixed by the Board for redemption
to each
holder of Series A Preferred Stock at the address that appears on
the
Corporation’s stock record books; provided,
however,
that no
failure to provide such notice nor any defect therein shall affect the
validity
of the redemption proceeding except as to the Holder to whom the Corporation
has
failed to send such notice or whose notice was defective. Each notice shall
state (i) the redemption date, (ii) the number of shares
of
Series A Preferred Stock to be redeemed; (iii) the Redemption
Price;
and (iv) the place or places where certificates for shares of Series A
Preferred Stock are to be surrendered for payment. When notice has been
provided
as aforesaid then from and after the redemption date (unless default shall
be
made by the Corporation in providing money for the payment of the Redemption
Price of the shares called for redemption) said shares shall no longer
be deemed
to be outstanding and all rights of the holders thereof shall cease (other
than
the right to receive the Redemption Price or NewCo Common Stock with respect
to
converted Series A Preferred Stock). Upon surrender of the certificates
for
Series A Preferred Stock accompanied by appropriate
6
stock
powers, the shares shall be redeemed by the Corporation at the Redemption
Price.
(vi). Whenever
the Corporation is obligated to redeem a Holder’s Series A Preferred Stock, and
the Redemption Price is not paid to the Holder by the tenth (10th)
business day after the Redemption Price is due and payable to such Holder,
the
Corporation shall thereafter pay interest to such Holder on the unpaid
portion
of the Redemption Price at the rate of ten percent (10%) per annum, until
the
Redemption Price is paid in full.
(vii). If
any
shares of Series A Preferred Stock are converted pursuant to this
Article
VI, the shares so converted shall be canceled, shall return to the status
of
authorized, but unissued preferred stock of no designated series, and shall
not
be issuable by the Corporation as Series A Preferred Stock.
(viii). Upon
receipt by the Corporation of (i) evidence of the loss, theft, destruction
or mutilation of any Series A Preferred Stock certificate(s) and
(ii) (y) in the case of loss, theft or destruction, of indemnity
(without any bond or other security) reasonably satisfactory to the Corporation,
or (z) in the case of mutilation, upon surrender and cancellation
of the
Series A Preferred Stock certificate(s), the Corporation shall execute
and
deliver new Series A Preferred Stock certificate(s) of like tenor and date.
However, the Corporation shall not be obligated to reissue such lost or
stolen
Series A Preferred Stock certificate(s) if the Holder contemporaneously
requests
the Corporation to convert such Series A Preferred Stock.
(ix). The
remedies provided in this Section 4 shall be cumulative and in addition
to all
other remedies available under these Articles, at law or in equity (including
a
decree of specific performance and/or other injunctive relief), and nothing
herein shall limit a Holder’s right to pursue actual damages for any failure by
the Corporation to comply with the terms of this Section 4. The Corporation
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holders of Series A Preferred Stock and
that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, that the
Holders
of Series A Preferred Stock shall be entitled, in addition to all
other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security
being
required.
(e). Rank.
The
Series A Preferred Stock shall, as to redemptions, and the distribution
of
assets upon liquidation, dissolution or winding up of the Corporation,
rank
(i) prior to the Corporation’s Common Stock;
7
(ii) prior
to any class or series of capital stock of the Corporation hereafter created
that, by its terms, ranks junior to the Series A Preferred Stock
(“Junior
Securities”); (iii) junior to any class or series of capital stock of the
Corporation hereafter created (with the consent of the holders of a majority
of
the outstanding Series A Preferred Stock) which by its terms ranks
senior
to the Series A Preferred Stock (“Senior Securities”); and (iv) pari
passu with any other series of preferred stock of the Corporation hereafter
created (with the consent of the holders of a majority of the outstanding
Series A Preferred Stock) which by its terms ranks on a parity (“Pari Passu
Securities”) with the Series A Preferred Stock.
(f). Liquidation
Preference.
(i). In
the
event of any voluntary or involuntary liquidation, dissolution or winding
up of
the Corporation, the holders of shares of Series A Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its shareholders, after and subject to the
payment
in full of all amounts required to be distributed to the holders of any
class or
series of stock of the Corporation ranking on liquidation prior and in
preference to the Series A Preferred Stock, but before any payment shall
be made
to the holders of Common Stock or any other Junior Shares, an amount equal
to $1
per share of Series A Preferred Stock (subject to appropriate adjustment
in the
event of any stock dividend, stock split, combination or other similar
recapitalization affecting such shares). If upon any such liquidation,
dissolution or winding up of the Corporation, the remaining assets of the
Corporation available for distribution to its shareholders shall be insufficient
to pay the holders of shares of Series A Preferred Stock the full amount
to
which they shall be entitled, the holders of shares of Series A Preferred
Stock
and any other class or series of stock ranking on liquidation on a parity
with
the Series A Preferred Stock shall share ratably in any distribution of
the
remaining assets and funds of the Corporation in proportion to the respective
amounts which would otherwise be payable in respect of the shares held
by them
upon such distribution if all amounts payable on or with respect to such
shares
were paid in full. The Common Stock shall constitute Junior Shares
hereunder.
(ii). After
the
payment of all preferential amounts required to be paid to the holders
of any
class or series of stock of the Corporation ranking on liquidation prior
and in
preference to the Series A Preferred Stock and any other class or series
of
stock of the Corporation ranking on liquidation on a parity with the Series
A
Preferred Stock, upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of Common Stock or any other Junior
Shares
then outstanding shall be entitled to receive the remaining assets and
funds of
the Corporation available for distribution to its shareholders.
8
(g). Voting
Rights.
The
Holders of the Series A Preferred Stock have no voting power whatsoever.
To
the extent that under
Indiana law, the vote of the Holders of the Series A
Preferred Stock, voting separately as a class or series, as applicable,
is
required to authorize a given action of the Corporation, the affirmative
vote or
consent of the Holders of at least a majority of the then outstanding shares
of
the Series A Preferred Stock represented at a duly held meeting
at which a
quorum is present or by written consent of the Holders of at least a majority
of
the then outstanding shares of Series A Preferred Stock (except
as
otherwise may be required under Indiana law) shall constitute the approval
of
such action by the class. Prompt notice of any such action without a meeting
by
less than unanimous written consent shall be given to those shareholder
who did
not consent in writing and who would have been entitled to notice of a
meeting
if the record date for the meeting was the date on which the first shareholder’s
signed consent was delivered to the Corporation. Except to the extent required
by Indiana law, no prior notice of a proposed action by less than unanimous
written consent must be provided.
3. BOARD
ACTION.
The
Board of Directors of the Corporation unanimously approved these Articles
of
Amendment pursuant to unanimous written consent resolutions executed on
February 18, 2004 and directed that the Articles of Amendment be
submitted
to a vote of the shareholders of the Corporation.
4. SHAREHOLDER
ACTION.
On
February 18, 2004, these Articles of Amendment were approved by
the
unanimous written consent of the sole shareholder of the
Corporation.
IN
WITNESS WHEREOF, the undersigned executes these Articles of Amendment to
the
Articles of Incorporation of the Corporation and certifies to the truth
of the
facts herein stated this 18th
day of
February, 2004.
| |
MAGNETECH
INDUSTRIAL SERVICES, INC.
|
| | | |
| | | |
| | | |
| |
By:
| |
| | |
▇▇▇▇
▇. ▇▇▇▇▇▇▇, President
|
9
APPENDIX
I
NOTICE
OF CONVERSION
AT
THE ELECTION OF THE HOLDER
(To
be
Executed by the Registered Holder in order to Convert the Series A Preferred
Stock of Magnetech Industrial Services, Inc.)
The
undersigned hereby irrevocably elects to convert the Series A Preferred
Stock
into shares of NewCo Common Stock, as of the date written below. If shares
are
to be issued in the name of a person other than undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the
Company
in accordance therewith.
|
Conversion
calculations:
| |
| |
Date
to Effect Conversion
|
| |
|
| |
Number
of Series A Preferred shares to be Converted
|
| | |
| | |
| |
Number
of NewCo Common Stock Shares to be Issued Upon
Conversion
|
| |
|
| |
Signature
|
| |
|
| |
Name
|
| |
|
| |
Address
|
10
Schedule
1
Purchaser(s)
MAGNETECH
INDUSTRIAL SERVICES, INC.
Private
Placement of Convertible Redeemable Preferred Stock
|
Name
|
Issue
Date
|
No.
of Shares
|
| |
| |
|
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
|
2/26/2004
|
50,000
|
|
▇▇▇▇
▇▇▇▇▇▇
|
2/26/2004
|
75,000
|
|
▇▇▇▇▇
▇. ▇▇▇▇▇
|
2/26/2004
|
100,000
|
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
2/26/2004
|
50,000
|
|
▇▇.
▇▇▇▇▇ ▇▇▇▇, III
|
2/26/2004
|
50,000
|
|
▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ JTWROS
|
2/26/2004
|
50,000
|
|
RS
& VS Ltd.
|
2/26/2004
|
100,000
|
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
2/26/2004
|
50,000
|
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
2/26/2004
|
25,000
|
|
▇▇▇▇▇
▇▇▇▇▇▇▇
|
2/26/2004
|
50,000
|
|
Greenfield
Plumbing & Heating
|
2/26/2004
|
25,000
|
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, III
|
2/26/2004
|
50,000
|
|
▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
2/26/2004
|
50,000
|
|
▇▇▇▇▇
▇▇▇▇▇▇
|
2/26/2004
|
25,000
|
| | | |
|
TOTAL
| |
750,000
|
Schedule
1.1
Disclosure
Documents
None,
other than this Agreement.
Schedule
3.1(a)
Subsidiaries
▇▇▇▇▇▇▇
Electric LLC
Schedule
3.1(c)
Capitalization
and Registration Rights
As
of the
date hereof, the Company is authorized to issues one thousand (1,000) shares
of
common stock with no par value.
Schedule
3.1(e)
Conflicts
None.
Schedule
3.1(f)
Consents
and Approvals
None.
Schedule
3.1(g)
Litigation
None.
Schedule
3.1(h)
Defaults
and Violations
None.