EXHIBIT 4
SERIES B CONVERTIBLE PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
THIS SERIES B CONVERTIBLE PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this
"Agreement") is made and entered into effective as of March 4, 2004, by and
among TRANS-INDUSTRIES, INC., a Delaware corporation (the "Company"), and the
purchaser or purchasers listed on Annex I attached hereto (each, a "Purchaser,"
and collectively, the "Purchasers").
WHEREAS, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to purchase from the Company, (i) newly issued shares of the
Company's Series B Convertible Preferred Stock, par value $1.00 per share (the
"Series B Convertible Preferred Stock"), the powers, preferences and relative,
participating and other special rights and the qualifications, limitations and
restrictions of which are set forth in the Certificate of Designation (as
defined below), a copy of which is attached to this Agreement as Exhibit A, and
(ii) the Company's warrants to purchase shares of Common Stock, par value $0.10
per share (the "Common Stock"), of the Company in the form attached to this
Agreement as Exhibit B (the "Warrants"), at the price per share and upon and
subject to the other terms and conditions set forth in this Agreement;
ACCORDINGLY, the Company and the Purchasers hereby agree as follows:
AUTHORIZATION OF SALE OF THE SERIES B PREFERRED STOCK AND WARRANTS
The Company has authorized the issuance and sale to the Purchasers of (a)
up to 193,798.45 shares of Series B Convertible Preferred Stock and (b) Warrants
to purchase in the aggregate up to 145,348.84 shares of Common Stock, all upon
and subject to the terms and conditions set forth in this Agreement.
AGREEMENT TO SELL AND PURCHASE THE SERIES B PREFERRED STOCK AND WARRANTS
PURCHASE AND SALE
Upon the terms and subject to the terms and conditions set forth in this
Agreement, at the Closing (as defined below), the Company shall issue and sell
to each Purchaser, and each Purchaser shall purchase from the Company, (a) that
number of shares of Series B Convertible Preferred Stock which is set forth
opposite such Purchaser's name on Annex I hereto, and (b) a Warrant or Warrants
to purchase in the aggregate up to that number of shares of Common Stock which
is set forth opposite such Purchaser's name on Annex I hereto. The shares of
Series B Convertible Preferred Stock and the Warrants to be issued and sold by
the Company to the Purchasers hereunder are referred to herein collectively as
the "Purchased Shares" and the "Purchased Warrants," respectively.
PURCHASE PRICE
The total purchase price payable to the Company by each Purchaser for all
of the Purchased Shares and Purchased Warrants to be issued and sold to such
Purchaser hereunder shall be an amount equal to $7.74 multiplied by the number
of Purchased Shares set forth
opposite such Purchaser's name on Annex I hereto. The aggregate purchase price
payable to the Company for all of the Purchased Shares and Purchased Warrants to
be issued and sold by the Company hereunder (collectively, the "Purchased
Securities") shall be $1,500,000 (the "Purchase Price"). Such purchase price
shall be deemed to include the consideration payable to the Company for both
such Purchased Shares and such Purchased Warrants, to be allocated $1,498,546.51
to the Purchased Shares and $1,453.49 to the Purchased Warrants.
USE OF PROCEEDS
The Company shall use the proceeds of the sale of the Purchased Shares to
pay the fees and expenses incurred by the Company in connection with the
transactions contemplated by this Agreement and for working-capital and other
general corporate purposes, including the payment of accounts payable,
delinquent taxes and indebtedness to banks (including up to $250,000 to Comerica
Bank).
OPTION TO PURCHASE SERIES B-1 CONVERTIBLE PREFERRED STOCK AND
WARRANTS
(a) Effective as of the Closing, and subject to the approval of the
shareholders of the Company as may be required under certain National
Association of Securities Dealers, Inc. ("NASD") rules providing for qualitative
listing requirements applicable to securities traded on the Nasdaq National
Market and Nasdaq SmallCap Market and any other approval, authorization or
waiver that may be required by any state or other institution, persons or
agencies, including without limitation, the Securities and Exchange Commission
("SEC") ("Shareholder Approval"), and subject to the refinancing of the
Company's bank debt on terms reasonably satisfactory to Purchasers (which
condition Purchasers may waive), the Purchasers are hereby granted the option
(the "Option") by the Company to purchase shares of Series B-1 Convertible
Preferred Stock and additional Warrants to purchase shares of Common Stock at a
price of $3.00 per share. The Purchasers shall have no obligation to exercise
the Option. The total purchase price for the shares of Series B-1 Convertible
Preferred Stock and Warrants purchased pursuant to the Option, may, at the sole
discretion of the Purchasers, be between $500,000 and $1,500,000 (the "Option
Purchase Price"). The number of shares of Series B-1 Convertible Preferred Stock
to be issued to the Purchaser upon the exercise of the Option shall be a number
equal to the Option Purchase Price divided by $9.00 (the "Option Purchase Price
Per Share" which shall be subject to adjustment as set forth in Section
2.4(d)-(f)). The Warrants to be purchased upon the exercise of the Option shall
entitle the Purchasers to purchase that number of shares of Common Stock equal
to the product of (x) 25% and (y) the number of shares of Common Stock initially
issuable upon conversion of the shares of Series B-1 Convertible Preferred Stock
purchased upon the exercise of the Option. For example, if 100,000 shares of
Series B-1 Convertible Preferred Stock are purchased upon the exercise of the
Option, and assuming that each such share is initially convertible into three
(3) shares of Common Stock, then the Warrants would entitle the Purchasers to
purchase 75,000 shares of Common Stock (100,000 x 3 x 25% = 75,000).
(b) The Option may be exercised by the Purchasers by providing written
notice to the Company at any time after the Company obtains Shareholder Approval
but prior to 5:00 p.m. EST on January 3, 2005. Purchaser's written notice to the
Company shall specify the Option Purchase Price.
(c) Within thirty (30) days after Purchaser's written notice is delivered
to the Company, the Company and the Purchaser shall enter into agreements on
substantially similar
terms to those contained in this Agreement and the Transaction Documents
pursuant to which the Purchasers shall purchase and the Company shall issue the
shares of Series B-1 Convertible Preferred Stock and the Warrants. The terms of
the Series B-1 Convertible Preferred Stock shall be identical to the terms of
the Series B Convertible Preferred Stock, except that the purchase price per
share of the Series B-1 Convertible Preferred Stock shall be $9.00, the dividend
rate shall be $.45 per share and the liquidation preference shall be $9.00 per
share. In addition, the Series B-1 Convertible Preferred Stock and the Series B
Convertible Preferred Stock will share pari passu in any liquidation proceeds
pro rata based on the amount owed.
(d) If and whenever the Company subsequent to the date hereof:
(i) declares a dividend upon, or makes any distribution in respect
of, any shares of capital of the Company, payable in Common Stock (other than
upon conversion of the Series B Convertible Preferred Stock or the exercise of
the Warrants), Purchase Rights or Convertible Securities (as used herein:
"Purchase Rights" means any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock; and "Convertible
Securities" means stock or security convertible into or exchangeable for Common
Stock); or
(ii) subdivides its outstanding Common Stock into a larger number of
Common Stock; or
(iii) combines its outstanding Common Stock into a smaller number of
Common Stock,
then the Option Purchase Price Per Share shall be adjusted to that price
determined by multiplying the Option Purchase Price Per Share in effect
immediately prior to such event by a fraction, (A) the numerator of which shall
be the total number of outstanding Common Stock immediately prior to such event,
and (B) the denominator of which shall be the total number of outstanding Common
Stock immediately after such event, treating as outstanding all Common Stock
issuable upon conversions or exchanges of any such Convertible Securities issued
in such dividend or distribution and exercises of any such Purchase Rights
issued in such dividend or distribution.
(e) If any adjustment of the Option Purchase Price Per Share pursuant to
Section 2.4(d) shall result in an adjustment of less than $.0001, no such
adjustment shall be made, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which, together with any adjustments so carried forward, shall amount
to $.0001; provided that upon any adjustment of the Option Purchase Price Per
Share resulting from (i) the declaration of a dividend upon, or the making of
any distribution in respect of, any shares of capital stock of the Company
payable in Common Stock, Purchase Rights or Convertible Securities or (ii) the
reclassification by subdivision, combination or otherwise, of the Common Stock
into a greater or smaller number of Common Stock, the foregoing figure of $.0001
(or such figure as last adjusted) shall be proportionately adjusted; and
provided, further, that upon the exercise of the Option, the Company shall make
all necessary adjustments (to the nearest .0001 of a cent) not theretofore made
to the Exercise Price up to and including the date upon which the Option is
exercised.
(f) If and whenever subsequent to the date hereof the Company shall effect
(i) any reorganization, reclassification or recapitalization of any shares of
capital stock of the Company (other than in the cases referred to in Section
2.4(d)), (ii) any consolidation or merger of the Company with or into another
Person, (iii) the sale, transfer or other disposition of the property, assets or
business of the Company as an entirety or substantially as an entirety or (iv)
any other transaction (or any other event shall occur) as a result of which
holders of Common Stock become entitled to receive any other securities and/or
property (including, without limitation, cash) with respect to or in exchange
for the Common Stock, there shall thereafter be deliverable upon the exercise of
the Option or any portion thereof (in lieu of or in addition to the shares of
Series B-1 Convertible Preferred Stock and Warrants theretofore deliverable, as
appropriate) the number of other securities and/or the amount of property
(including, without limitation, cash) to which the Purchasers would have been
entitled upon such reorganization, reclassification, recapitalization,
conversion, consolidation, merger, sale, transfer, disposition or other
transaction or upon the occurrence of such other event, and at the same
aggregate Option Purchase Price Per Share.
Prior to and as a condition of the consummation of any transaction or
event described in the preceding sentence, the Company shall make and undertake
lawful, adequate and equitable written adjustments, binding upon the Company
and/or its successor entity, as applicable, in the application of the provisions
set forth herein for the benefit of the Purchasers, so that all such provisions
shall thereafter be applicable, as nearly as possible, in relation to any other
securities or other property thereafter deliverable upon exercise of the Option
and so that the Purchaser will (prior to exercise of the Option ) enjoy all of
the rights and benefits enjoyed by any Person who shall have acquired any other
securities and/or property in connection with any such transaction or event,
including, without limitation, any subsequent tender offer or redemption of any
other securities.
THE CLOSING; CLOSING ACTIONS
The consummation of the purchase and sale of the Purchased Shares and the
other transactions and deliveries contemplated by this Agreement (the "Closing")
shall take place at the offices of ▇▇▇▇▇▇, Halter & ▇▇▇▇▇▇▇▇ LLP, counsel to the
Purchasers, at 1400 ▇▇▇▇▇▇▇▇ Investment Center, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, simultaneously with the execution and delivery of this Agreement by
the Company and the Purchasers on the date of this Agreement (the "Closing
Date").
ACTIONS AT OR PRIOR TO THE CLOSING
In connection with the execution and delivery of this Agreement, the
following actions shall occur (the "Closing Actions").
Prior to the execution and delivery of this Agreement:
A Certificate of Designation in the form attached to this Agreement
as Exhibit A (the "Certificate of Designation") shall have
been duly executed, acknowledged and filed and shall have
become effective in accordance with Section 151(g) and Section
103 of the General Corporation Law of the State of Delaware
(the "DGCL").
The Company shall have delivered to the Purchasers a copy of the
Certificate of Incorporation of the Company, including all
amendments and restatements thereof and all certificates of
designation, as in effect at and as of the Closing (the
"Certificate of Incorporation"), as certified as of the
Closing Date by the Secretary of the Company and by the
Secretary of State of the State of Delaware, and which shall
be attached to this Agreement as Exhibit C hereto.
The Company shall have delivered to the Purchasers a copy of the
By-Laws of the Company, including all amendments thereto, as
in effect at and as of the Closing, as certified by the
Secretary of the Company, which shall be attached to this
Agreement as Exhibit D hereto.
The Company shall deliver to the Purchasers a certificate of the
Secretary of State of the State of Delaware, dated as of the
Closing Date, as to the status of the Company as a corporation
in good standing under the laws of the State of Delaware as of
the Closing Date.
The Company shall have delivered evidence satisfactory to Purchasers
that the Company shall have entered into and consummated a
forbearance agreement with Comerica Bank, the Company's
lender, upon terms and conditions satisfactory to Purchasers.
Simultaneously with, or prior to, the execution and delivery of this
Agreement:
The Company and the Purchasers shall each duly execute and deliver
an Investor Rights Agreement by and among such parties in the
form attached to this Agreement as Exhibit E (the "Investor
Rights Agreement").
The Company and the Purchasers shall each duly execute and deliver a
Registration Rights Agreement by and among such parties in the
form attached to this Agreement as Exhibit F (the
"Registration Rights Agreement").
The Company, the Purchasers and certain stockholders of the Company
identified therein shall each duly execute and deliver a Right
of First Refusal Agreement in the form attached to this
Agreement as Exhibit G (the "Right of First Refusal
Agreement").
The Company, the Purchasers and certain stockholders of the Company
identified therein shall each duly execute and deliver a
Voting Agreement in the form attached to this Agreement as
Exhibit H (the "Voting Agreement").
The Company shall deliver to the Purchasers a certificate executed
by its Secretary, in form and substance satisfactory to the
Purchasers, certifying the resolutions authorizing the
transactions contemplated by this Agreement and certain
incumbency matters.
The Company shall deliver to the Purchasers the opinion of ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, P.C., counsel for the Company, addressed to the
Purchasers and dated as of the Closing Date, in form and
substance satisfactory to the Purchasers.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇ ▇'▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ shall be duly
elected to the board of directors of the Company pursuant to
the Investor Rights Agreement, and shall hold such positions
as of the Closing Date with the result being that the Board of
Directors of the Company consist of six (6) appointed Board
Members, and ▇▇▇▇▇▇▇ ▇▇▇▇▇ shall be duly elected as the
President and Chief Operating Officer of the Company.
The Company shall deliver to each Purchaser one or more certificates
or other instruments representing the Purchased Shares and the
Purchased Warrants being purchased by such Purchaser at the
Closing pursuant to Section 2.1, which certificates and
instruments shall be in a form satisfactory to such Purchaser
and registered in the name of such Purchaser or such nominee
or nominees as such Purchaser may designate in writing to the
Company, against receipt by the Company of payment of the full
amount of the Purchase Price for the Purchased Securities of
such Purchaser either by check or by wire-transfer of
immediately available funds to the Company in accordance with
wire-transfer instructions furnished by the Company to such
Purchaser at least two business days prior to the Closing
Date.
SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT
No Purchaser shall have any obligation to any other Purchaser in respect of the
failure by such Purchaser to purchase any Purchased Securities required to be
purchased by such Purchaser. The obligations of the Company at any time
hereunder and under the other Transaction Documents (as defined below) to each
Purchaser shall be separate and independent, and each Purchaser shall be
entitled to protect and enforce its rights arising out of this Agreement and the
Purchased Securities held by it and it shall not be necessary for any other
holder to consent to or be joined as an additional party in, any proceedings for
such purposes.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
Except as and to the extent otherwise specifically disclosed in the Schedule of
Exceptions attached to this Agreement as Exhibit I, the Company hereby
represents and warrants to the Purchasers as follows (which representations and
warranties shall be deemed to apply, where appropriate, to each subsidiary of
the Company):
ORGANIZATION AND QUALIFICATION
The Company is a corporation that has been duly incorporated and is validly
existing and in good standing under the laws of the State of Delaware. The
Company has all requisite corporate power and authority to own and operate its
properties and assets and to conduct its business as it is presently being
conducted and as it is proposed to be conducted. The Company is duly qualified
as a foreign corporation to transact business in, and is in good standing in,
each jurisdiction in which its ownership, lease or operation of its properties
or assets, the nature of its activities or the conduct of its business makes
such qualification necessary, except for any failure or failures to be so
qualified could not, individually or in the aggregate, reasonably be expected to
result in a material adverse effect on the condition, financial or otherwise, or
the earnings,
assets, liabilities, business or prospects of the Company. Exhibit C to this
Agreement contains a true, correct and complete copy of the Certificate of
Incorporation of the Company, including all amendments and restatements thereof
and certificates of designation, as in effect at and as of the Closing. Exhibit
D to this Agreement contains a true, correct and complete copy of the By-Laws of
the Company, including all amendments thereto, as in effect as of the Closing.
The Company is not in violation or breach of any of the terms, conditions or
provisions of such Certificate of Incorporation or By-Laws.
AUTHORIZATION
The Company has all requisite corporate power and authority to execute and
deliver (a) this Agreement, (b) the Purchased Securities, (c) the Registration
Rights Agreement, (d) the Investor Rights Agreement, (e) the Right of First
Refusal Agreement, and (f) the Voting Agreement (collectively, the "Transaction
Documents"), and to perform its obligations under the Transaction Documents. The
execution and delivery by the Company of each of the Transaction Documents and
the performance by the Company of its obligations thereunder have been duly
authorized by all necessary corporate action on its part, and no other corporate
proceedings on its part are necessary to authorize its execution and delivery of
the Transaction Documents or its performance of its obligations under the
Transaction Documents.
PURCHASED SECURITIES
The Purchased Securities and the issuance, sale and delivery thereof upon the
terms and conditions set forth in this Agreement have been duly authorized by
all requisite action of the Board of Directors of the Company and all requisite
stockholder action. When issued and delivered to the Purchasers upon the terms
and conditions of this Agreement (and paid for as contemplated by this
Agreement), the Purchased Securities will be validly issued and fully paid and
nonassessable, with no personal liability attached to the ownership thereof and
not subject to any preemptive rights, rights of first refusal or other similar
rights of any stockholder of the Company or any other person, and, based upon
the representations and warranties of the Purchasers set forth in Section 5 of
this Agreement, shall have been issued in compliance with all applicable
securities laws.
DUE EXECUTION AND DELIVERY; BINDING OBLIGATIONS
Each Transaction Document has been duly executed and delivered by the Company,
and each such Transaction Document constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or conveyance or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability and except as rights of indemnity or contribution may
be limited by federal or state securities or other laws or the public policy
underlying such laws.
NO CONFLICT OR VIOLATION
The execution and delivery by the Company of each Transaction Document, and the
performance by the Company of its obligations under each Transaction Document,
will not result in any conflict with, or result in a violation or breach of any
of the terms, conditions or provisions of, or constitute (with or without due
notice, lapse of time or both) a default under, or give rise to a right of
termination, cancellation or acceleration of any obligation under, or result in
the creation of any lien upon any of the properties or assets of the Company or
any of its subsidiaries under, (i) the Certificate of Incorporation or the
By-Laws of the Company, or the certificate of incorporation, articles of
incorporation or by-laws of any subsidiary of the Company, (ii) any
material contract to which the Company or any of its subsidiaries is a party or
to which any of their respective properties or assets is subject; or (iii) any
law, statute, ordinance, rule, regulation, judgment, order, decree, license or
permit applicable to the Company or any of its subsidiaries or to which any of
their respective properties or assets is subject.
CONSENTS AND APPROVALS
The execution and delivery by the Company of each Transaction Document, and the
performance by the Company of its obligations under each Transaction Document,
do not and will not require any consent, approval, license, permit, order or
authorization of, or any registration, notification, declaration or filing
(including any filing under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended) with, any person (including any securities exchange or
self-regulatory organization or any governmental agency, entity or authority),
except for (i) such as have been obtained or made and are in full force and
effect as of the Closing, (ii) the filing of any notice with respect to the
Closing with any governmental agency, entity or authority which may be required
subsequent to the Closing under the Securities Act of 1933, as amended (the
"Securities Act"), any state securities laws, or the rules and regulations
promulgated thereunder (and which, if required, will be filed on a timely basis
as may be so required), and (iii) the approval of the shareholders of the
Company which may be required by NASD listing standards.
CAPITALIZATION
The authorized capital stock of the Company consists of (i)
10,000,000 shares of Common Stock, par value $0.10 per share
(the "Common Stock"), and (ii) 500,000 shares of shares of
Preferred Stock, par value $1.00 per share (the "Preferred
Stock").
The authorized Preferred Stock consists of (i) 19,000 authorized
shares of Series A Preferred Stock, par value $1.00 per share
(the "Prior Preferred Stock"), and (ii) 215,000 authorized
shares of Series B Convertible Preferred Stock, par value
$1.00 per share (the "Series B Convertible Preferred Stock"),
and (iii) 266,000 shares which are not part of any designated
series of Preferred Stock or issued, outstanding, held in
treasury or reserved for issuance and which are available for
designation in one or more series by the Board of Directors of
the Company pursuant to the Certificate of Incorporation.
Of the authorized Common Stock, (i) 3,139,737 shares are issued and
outstanding, (ii) 116,000 shares are duly reserved for
issuance, sale and delivery upon the exercise of options
presently outstanding under, or options which are not
outstanding but are presently available to be granted under,
the Trans-Industries, Inc. 1996 Stock Option Plan (the "1996
Stock Option Plan"), (iii) 581,395.35 shares are duly reserved
for issuance and delivery upon the conversion of the Purchased
Shares, (v) 145,348.84 shares are duly reserved for issuance
and delivery upon the exercise of the Purchased Warrants in
accordance with the terms thereof, and (vi) the remaining
shares are not issued, outstanding, held in the treasury of
the Company or reserved for issuance.
All of the authorized Prior Preferred Stock is issued and
outstanding and is held of record by the Trans-Industries,
Inc. Employees 401(k) and Profit Sharing Plan.
All outstanding shares of capital stock of the Company of every
class and series have been duly authorized and validly issued,
free of any preemptive or similar rights except such as have
been fully complied with, and are fully paid and
nonassessable, with no liability attaching to the ownership
thereof.
Except as set forth in Section 4.7(c) or Section 4.7(d), and except
for (x) options presently outstanding or presently available
to be granted under the 1996 Stock Option Plan to purchase an
aggregate of 116,000 shares of Common Stock, and (y) Purchased
Securities hereunder, and (z) the Option (as described in
Section 2.4), there are no outstanding (i) shares of capital
stock or other voting securities of the Company, (ii)
securities of the Company or any of its subsidiaries
convertible into or exchangeable for shares of capital stock
or voting securities of the Company, and (iii) no options,
warrants or other rights to acquire from the Company or any of
its subsidiaries, and no obligation of the Company or any of
its subsidiaries to issue, any capital stock, voting
securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company (the items
in clauses (i), (ii) and (iii) of this Section 4.7(f) being
referred to collectively as the "Company Securities")
Except as set forth in the Registration Rights Agreement, the
Investor Rights Agreement, the Right of First Refusal
Agreement, the Voting Agreement or the Certificate of
Incorporation, there are no outstanding (i) rights of first
offer or first refusal, "drag-along" rights, "tag-along"
rights or other similar rights or agreements, arrangements or
commitments of any character which obligate the Company or any
of its subsidiaries, or, to the knowledge of the Company, any
stockholder of the Company or other person, to transfer, sell
or vote any Company Securities, (ii) obligations on the part
of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities, (iii)
liabilities on the part of the Company or any of its
subsidiaries for dividends declared or accumulated but unpaid
with respect to Company Securities, (iv) obligations on the
part of the Company or any of its subsidiaries to register for
public sale any Company Securities, and (v) obligations on the
part of the Company or any of its subsidiaries or, to the
knowledge of the Company, of any stockholder of the Company or
other person for the voting of Company Securities in any
manner whatsoever.
Except as set forth in (x) the 1996 Stock Option Plan with respect
to options granted or to be granted thereunder, (y) the
Purchased Warrants or (z) the Certificate of Incorporation, no
Company Securities will become issuable to any Person, nor
will the conversion or exercise price or exchange factor or
ratio of any Company Securities be reduced, pursuant to any
so-called "anti-dilution" or similar adjustment provisions of
any Company
Securities or pursuant to any agreements, arrangements or
commitments to which the Company or any of its subsidiaries is
a party.
The Company has no liability whatsoever to any stockholder, former
stockholder or other person, whether fixed or variable,
accrued or contingent, for the payment of any dividends,
whether or not declared and whether cumulative or
non-cumulative, except for the Company's liability for
cumulative dividends accrued with respect to the shares of
Prior Preferred Stock presently issued and outstanding in
accordance with the terms thereof as set forth in the
Certificate of Incorporation. None of such dividends are
currently due or payable, and the total amount of the
Company's liability for such accrued cumulative dividends on
the Prior Preferred Stock as of January 31, 2004, was
$390,000.
All shares of capital stock and other equity or debt securities of
the Company and its subsidiaries (including any predecessors
of the Company and such subsidiaries) issued prior to the
Closing have been offered, sold and issued either pursuant to
an effective registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), or in a
transaction exempt from registration under the Securities Act,
and in compliance with all applicable state securities laws
and all rules and regulations promulgated under the Securities
Act and applicable state securities laws. Neither the Company
nor any of its subsidiaries nor any predecessor thereof has
violated the Securities Act or any applicable state securities
laws or any rules or regulations promulgated thereunder in
connection with the issuance, sale and delivery of any
securities.
EXCHANGE ACT FILINGS
The Company has timely filed all documents required to be filed by the
Company (the "Exchange Act Filings") with the Securities and Exchange Commission
(the "SEC") pursuant to the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "1934 Act"). As of their
respective filing dates, all Exchange Act Filings complied in all material
respects with the requirements of the 1934 Act, and none of the Exchange Act
Filings contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading. All financial statements of the Company included in any Exchange Act
Filings complied as to form in all material respects with the then applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP") (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q and Regulation S-X) and fairly
present the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and changes in financial position for the periods then ended
(subject, in the case of unaudited statements, to normally, recurring year-end
audit adjustments).
FINANCIAL STATEMENTS
All financial statements of the Company included, whether as exhibits or
otherwise, or incorporated by reference in the Exchange Act Filings have been
prepared from and in accordance with the books and records of the Company and
its subsidiaries (which have been maintained in accordance with good business
practices and are true and complete in all material respects), and fairly
present in all material respects the consolidated financial position and
consolidated results of operations, stockholders' equity and cash flows of the
Company and its subsidiaries as of the respective dates thereof and for the
respective periods indicated therein in accordance with GAAP, subject, in the
case of any unaudited financial statements included among such financial
statements, to normal, recurring year-end adjustments (which adjustments are not
material, individually or in the aggregate) and the lack of footnotes and other
presentation items required by GAAP. Since December 31, 2002, except as required
by applicable law or GAAP, there has been no change in any accounting principle,
procedure or practice followed by the Company or any of its subsidiaries or in
the method of applying any such principle, procedure or practice.
UNDISCLOSED LIABILITIES
The Company and its subsidiaries do not have any liabilities or obligations
whatsoever (whether matured or unmatured, known or unknown, fixed or contingent
or otherwise) of a type required to be reflected on or reserved against in, or
to be disclosed in the notes to, a balance sheet prepared in accordance with
GAAP, except (i) to the extent expressly reflected on or reserved against in, or
otherwise disclosed in the notes to, the Company's audited consolidated
financial statements as of and for the period ended December 31, 2002 (the
"Latest Audited Financial Statements"), as set forth in the company's Annual
Report on Form 10-K as filed with the SEC pursuant to the 1934 Act (the "Annual
Report"), (ii) for those liabilities or obligations expressly disclosed or
reflected in Exchange Act Filings filed by the Company with the SEC subsequent
to the Annual Report, and (iii) for those liabilities or obligations arising
since December 31, 2002 in the ordinary course of business consistent (in amount
and kind) with past practice, none of which, except as expressly set forth in
any Exchange Act Filings filed by the Company with the SEC subsequent to the
Annual Report, is a liability or obligation arising from any breach of contract,
breach of warranty, tort, infringement claim, violation of law or any action,
suit or proceeding.
NO MATERIAL CHANGE
Since December 31, 2002, except as disclosed in any Exchange Act Filings filed
by the Company with the SEC subsequent to that date,
there has been no material adverse change or any development
involving a prospective material adverse effect on or
affecting the condition, financial or otherwise, or the
earnings, assets, liabilities, business or prospects of the
Company, whether or not arising in the ordinary course of
business;
there have been no transactions entered into by the Company other
than those in the ordinary course of business, which are
material with respect to the Company; and
there has been no dividend or distribution of any kind declared,
paid or made by the Company on or with respect to any class or
series of its capital stock,
nor has the Company repurchased or redeemed and shares of its
capital stock.
ENVIRONMENTAL MATTERS
Except as could not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the condition, financial or otherwise, or the
earnings, assets, liabilities, business or prospects of the Company,
the Company is in compliance with all applicable Environmental Laws
(as defined below);
the Company has all permits, authorizations and approvals required
under any applicable Environmental Laws and is in compliance
with the requirements of such permits authorizations and
approvals;
there are no pending or, to the knowledge of the Company, threatened
Environmental Claims (as defined below) against the Company;
and
under applicable law, there are no circumstances with respect to any
property or operations of the Company that are reasonably
likely to form the basis of an Environmental Claim against the
Company.
For purposes of this Agreement, the following terms shall have the following
meanings: "Environmental Law" means any federal, state, local or municipal
statute, law, rule, regulation, ordinance, code, policy or rule of common law
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, human health or safety, or any chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority. "Environmental Claims" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any way to
any Environmental Law.
NO DEFAULTS
Except as set forth in timely filed Exchange Act Filings by the Company since
December 31, 2002, the Company is not in material default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, deed, trust, note, lease,
sublease, voting agreement, voting trust, or other instrument or agreement to
which the Company is a party or by which it may be bound, or to which any of the
property or assets of the Company is subject, except for any such defaults as
could not, either individually or in the aggregate, reasonably be expected to
result in a material adverse effect on or affecting the condition, financial or
otherwise, or in the earnings, assets, liabilities, business or prospects of the
Company.
LABOR MATTERS
There exists no material dispute with any employees or group of employees of the
Company, whether or not covered by any collective bargaining agreement, and, to
the knowledge of the Company, no such dispute is or has been threatened.
NO ACTIONS
There are no actions, suits, proceedings or investigations before or by any
court or governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened against or affecting the Company which
if determined adversely to the Company could, either individually or in the
aggregate, reasonably be expected to result in a material adverse effect on the
condition, financial or otherwise, or the earnings, assets, liabilities,
business or prospects of the Company or which relates in any way to the
transactions contemplated by this Agreement, nor, to the knowledge of the
Company, is there any reasonable basis for any such action, suit or proceeding.
Neither the Company nor any of its subsidiaries is in default with respect to
any judgment, order or decree of any court or governmental agency or
instrumentality applicable the Company or any such subsidiary.
INTELLECTUAL PROPERTY
The Company owns or is licensed to use or otherwise possesses the
legal right to use all patents, patent applications,
inventions, trademarks, trade names, applications for
registration of trademarks, service marks, service ▇▇▇▇
applications, copyrights, know-how, manufacturing processes,
formulae, trade secrets, licenses and rights in any thereof
and any other intangible property and assets that are material
to the business of the Company as now conducted and as
proposed to be conducted (collectively, "Proprietary Rights").
The Company does not have any knowledge of, and the Company has not
given or received any notice of, any pending conflicts with or
infringement of the rights of others with respect to any
Proprietary Rights or with respect to any license of
Proprietary Rights which are material to the business of the
Company.
No action, suit, arbitration, or legal, administrative or other
proceeding, or investigation is pending, or, to the knowledge
of the Company, threatened, which involves any Proprietary
Rights and which, if determined adversely to the Company,
could reasonably be expected to result in a material adverse
effect on the condition, financial or otherwise, or the
earnings, assets, liabilities, business or prospects of the
Company, nor, to the knowledge of the Company, is there any
reasonable basis therefor.
PERMITS
The Company possesses and is operating in compliance with all material licenses,
certificates, consents, authorizations, approvals and permits from all
governmental agencies, entities and authorities of any foreign, federal, state,
local or other jurisdiction regulatory necessary to conduct the businesses now
operated by it, and the Company has not received any notice of proceedings
relating to the revocation or modification of any such permit or any
circumstance which would lead it to believe that such proceedings are reasonably
likely which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could reasonably be expected to result in a
material adverse effect on the condition, financial or otherwise, or the
earnings, assets, liabilities, business or prospects of the Company, nor, to the
knowledge of the Company, is there any reasonable basis therefor.
COMPLIANCE
The Company has conducted and is conducting its business in compliance with all
applicable statutes, laws, rules, regulations, ordinances, codes, decisions,
decrees, directives and orders of any foreign or federal, state, local or other
jurisdiction, except where any failure to so comply could not, either
individually or in the aggregate, reasonably be expected to result in a material
adverse effect on the condition, financial or otherwise, or the earnings,
assets, liabilities, business or prospects of the Company.
TAXES
(i) The Company and its subsidiaries (including their predecessors)
have timely filed in accordance with all applicable laws
(taking into account valid extensions) all tax returns,
reports and declarations ("Tax Returns") required to be filed
by them, and all such Tax Returns are true, correct and
complete in all material respects, (ii) the Company and its
subsidiaries (including their predecessors) have timely paid
all Taxes (as defined below) due and required to be paid by
them, including any Taxes levied upon any of their properties,
assets, income or franchises, (iii) all amounts required to be
collected or withheld by the Company and its subsidiaries
(including their predecessors) have been collected or withheld
and any such amounts which are required to be remitted to any
taxing authority have been duly remitted, (iv) no taxing
authority in any jurisdiction in which the Company or any
subsidiary thereof (including any predecessors thereof) has
not filed Tax Returns has made a claim, assertion or threat
that such non-filing entity is or may be subject to taxation
in such jurisdiction, (v) no audit, investigation or other
proceeding is in progress, pending, proposed or, to the
knowledge of the Company, threatened, in each case with regard
to any Taxes or Tax Returns of the Company or any subsidiary
thereof (including their predecessors), and (vi) neither the
Company nor any subsidiary thereof nor any predecessor thereof
is a party to or bound by a Tax sharing or Tax allocation or
similar agreement or arrangement. The accruals and reserves
for Taxes in the Latest Audited Financial Statements were
complete and adequate to cover any liability of the Company
and its subsidiaries for Taxes for the periods through the
dates thereof. The Company is not currently, nor has it been
at any time, a "United States real property holding
corporation" as such term is defined in Section 897 of the
Internal Revenue Code of 1986, as amended.
As used herein, "Taxes" means (i) all income taxes (including any
tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of
income, earnings or profits) and all gross receipts, sales,
use, ad valorem, transfer, franchise, license, withholding,
payroll, employment, excise, severance, stamp, occupation,
premium, property or windfall profits taxes, alternative or
add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with
all interest and penalties, additions to tax and other
additional amounts, in each case imposed by any taxing
authority (domestic or foreign) on any person (if any) and
(ii) any liability for the payment of any amount of the type
described in clause (i) above as a result
of (A) being a "transferee" (within the meaning of Section
6901 of the Code or any other applicable law) of another
person, (B) being a member of an affiliated, combined or
consolidated group or (C) a contractual arrangement or
otherwise.
OTHER GOVERNMENTAL PROCEEDINGS
To the Company's knowledge, there are no rulemaking or similar proceedings
before any Federal, state, local or foreign government bodies that involve or
affect the Company, which, if subject to an action unfavorable to the Company,
could involve a prospective material adverse change in or effect on the
condition, financial or otherwise, or in the earnings, assets, liabilities,
business or prospects of the Company.
INSURANCE
The Company maintains insurance of the type and in the amount that the Company
reasonably believes is adequate for its business, including insurance covering
all real and personal property owned or leased by the Company against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against by similarly situated companies, all of which insurance is in full force
and effect.
CONTRACTS
All material contracts to which the Company or any of its subsidiaries is
a party and which are described or incorporated by reference in any Exchange Act
Filing filed by the Company with the SEC subsequent to December 31, 2002, are in
full force and effect on the date hereof, except for any such contracts the
termination or expiration of which could not, individually or in the aggregate,
reasonably be expected to result in a material adverse effect on the condition,
financial or otherwise, or the earnings, assets, liabilities, business or
prospects of the Company. Neither the Company nor any of its subsidiaries nor,
to the knowledge of the Company, any other party is in material breach of or
default under any contract which is material to the business of the Company or
any of its subsidiaries.
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 in any
security or solicited any offers to buy any security under circumstances that
would require registration under the Securities Act of the issuance and sale of
the Purchased Securities to the Purchasers. The Company will not make any offers
or sales of any security that would cause the offering of the Purchased
Securities to be integrated with any other offering of securities by the Company
for purposes of any registration requirement under the Securities Act or any
applicable rules of any national securities exchange on which any securities of
the Company are on the date hereof or hereafter become traded.
BROKERS AND FINDERS
Except as set forth in (b) below, no action has been taken by the
Company or any other person on the Company's behalf that would
give rise to any valid claim against the Company or any
Purchaser for a brokerage commission,
finder's fee or other like payment with respect to the
transactions contemplated by any of the Transaction Documents.
The Company has employed Relational Advisors LLC ("Relational") as
its financial advisor in connection with the transactions
contemplated by the Transaction Documents. Relational is
acting as an intermediary between the Company and the
Purchasers in this transaction, both of whom are aware of such
relationship. The Company has waived any claim of conflict of
interest that might arise by virtue of Relational's
representation of the Company and the Purchasers. Relational
shall receive a fee from the Company, but not from the
Purchasers, for the investment contemplated herein.
DISCLOSURE
No representation or warranty made by the Company in this Agreement or in any
other writing furnished pursuant hereto contains an untrue statement of a
material fact or omits to state a material fact necessary to make the statements
and facts contained herein or therein, in light of the circumstances in which
they were or are made, not misleading
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally (as to itself only and not with respect to any other
Purchaser) represents and warrants to the Company as follows:
AUTHORIZATION
Such Purchaser has the requisite power and authority to execute and deliver the
Transaction Documents to which it is a party and to perform its obligations
under such Transaction Documents. The execution and delivery by such Purchaser
of the Transaction Documents to which it is a party and the performance by such
Purchaser of its obligations under such Transaction Documents have been duly
authorized by all necessary action on its part, and no other proceedings on its
part are necessary to authorize its execution and delivery of such Transaction
Documents or its performance of its obligations under such Transaction
Documents.
DUE EXECUTION AND DELIVERY; BINDING OBLIGATIONS
Each Transaction Document to which such Purchaser is a party has been duly
executed and delivered by such Purchaser, and each such Transaction Document
constitutes the legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or conveyance or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability and except as rights of indemnity or contribution may be limited
by federal or state securities or other laws or the public policy underlying
such laws.
CONSENTS AND APPROVALS
The execution and delivery by such Purchaser of each Transaction Document to
which it is a party, and the performance by such Purchaser of its obligations
under each such Transaction Document, do not and will not require any consent,
approval, license, permit, order or authorization of, or any registration,
declaration or filing with, any Person (including any governmental agency,
entity or authority), except for (i) such as have been obtained or made and
are in full force and effect, and (ii) the approval of the shareholders of the
Company which may be required by NASD listing standards.
INVESTMENT REPRESENTATIONS
Solely for establishing that the offer, sale and issuance of the Purchased
Securities being purchased by such Purchaser pursuant to this Agreement are
exempt from the registration requirements of the Securities Act and the
comparable provisions of state securities laws and not in any way to mitigate
the responsibility or liability of the Company for any breach of the
representations and warranties made by the Company in this Agreement, on which
such Purchaser is relying in full in connection with its, his or her decision to
invest in the Company:
Such Purchaser is acquiring the Purchased Securities to be purchased
by it under this Agreement, for its own account, for
investment and not with a view to the distribution thereof in
violation of the Securities Act or applicable state securities
laws.
Such Purchaser understands that the Purchased Securities have not
been registered under the Securities Act or applicable state
securities laws by reason of their issuance by the Company in
transactions exempt from the registration requirements of the
Securities Act and applicable state securities laws, and that
the Company's reliance upon such exemptions is based in part
on the representations of the Purchasers contained in this
Agreement; and that each such security must be held
indefinitely unless a subsequent disposition thereof is
registered under the Securities Act and applicable state
securities laws or is exempt from registration.
Such Purchaser further understands that the exemption from
registration under the Securities Act afforded by Rule 144
(the provisions of which are known to such Purchaser) depends
on the satisfaction of various conditions and that, if
applicable, Rule 144 affords the basis for sales of only
limited amounts and under limited circumstances.
Such Purchaser has had the opportunity to ask questions of the
Company's officers and directors about the business and
financial condition of the Company and its subsidiaries,
understands that its, his or her purchase of the Purchased
Securities being purchased by it pursuant to this Agreement,
are speculative investments which involve a high degree of
risk of loss of the entire investment therein; and has such
knowledge and experience in financial and business matters
that it is capable of evaluating the risks and merits of its
investment in such Purchased Securities.
Such Purchaser is an "accredited investor" as such term is defined
in Rule 501 of Regulation D promulgated under the Securities
Act.
Such Purchaser has not employed any broker or finder in connection
with the transactions contemplated by the Transaction
Documents. Relational is acting as an intermediary between the
Company and the Purchasers in this transaction, both of whom
are aware of such relationship. The Purchasers have waived any
claim of conflict of interest that might arise by virtue of
Relational's representation of the Company and the Purchasers.
Relational
shall receive a fee from the Company, but not from the
Purchasers, for the investment contemplated herein.
The principal office or residence of such Purchaser is located at
the address for such Purchaser specified on Annex I hereto,
and substantially all of the decisions of such Purchaser with
respect to its, his or her investment pursuant to this
Agreement were made at such location.
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Notwithstanding any investigation made at any time by or on behalf of any party
to this Agreement, all covenants, agreements, representations and warranties
made by the Company and the Purchasers in this Agreement and in any of the other
Transaction Documents shall survive the execution and delivery of this Agreement
and the issuance and delivery to the Purchasers of the Purchased Securities.
INDEMNIFICATION
INDEMNIFICATION OF PURCHASER INDEMNITEES
The Company shall indemnify, defend and hold each Purchaser and each of their
respective heirs, beneficiaries, officers, directors, partners, managing
directors, affiliates, employees, agents, consultants, representatives,
successors and assigns (each a "Purchaser Indemnitee") harmless from and against
all Losses (as hereinafter defined) incurred or suffered by a Purchaser
Indemnitee arising out of, relating to or resulting from (i) any breach of any
of the representations or warranties made by the Company in this Agreement or in
any of the other Transaction Documents or (ii) any breach of any of the
covenants or agreements made by the Company in this Agreement or in any of the
other Transaction Documents. Such right of indemnification shall be in addition
to and not in lieu of any and all other rights and remedies available to the
Purchasers at law or in equity.
INDEMNIFICATION PRINCIPLES
For purposes of this Agreement, "Losses" shall mean and include each and
all of the following items: claims, actions, demands, losses (including losses
of earnings), liabilities, obligations, payments, damages (actual, punitive and
consequential), charges, judgments, fines, penalties, amount paid in settlement,
costs and expenses (including interest which may be imposed in connection
therewith, costs and expenses of investigation, actions, suits, proceedings,
demands, assessments, and fees, expenses and disbursements of counsel,
consultants and other experts).
TRANSFERS OF SECURITIES
RESTRICTIVE LEGENDS; EXCHANGES; LOST, STOLEN OR MUTILATED
CERTIFICATES
Each certificate or other instrument evidencing Purchased Securities and each
certificate or other instrument for any such Purchased Securities issued to
subsequent transferees of any such Purchased Securities shall (unless otherwise
permitted by the provisions of Section 8.3) be stamped or otherwise imprinted
with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES
\
LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS.
"ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO CERTAIN
CONDITIONS SPECIFIED IN THE SERIES B CONVERTIBLE PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT DATED AS OF March 4, 2004, AMONG THE ISSUER
HEREOF AND THE PURCHASERS PARTY THERETO. UPON THE FULFILLMENT OF CERTAIN
CONDITIONS SPECIFIED THEREIN, THE ISSUER HEREOF HAS AGREED TO DELIVER TO
THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THESE LEGENDS, FOR THE
SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
ISSUER HEREOF."
NOTICE OF TRANSFER
As used herein, "Restricted Securities" means (a) Purchased Shares,
(b) shares of Common Stock issuable upon conversion of the
Purchased Shares in accordance with the Certificate of
Incorporation, (c) Purchased Warrants, and (d) shares of
Common Stock issuable upon exercise of the Purchased Warrants
in accordance with the terms thereof. The holder of any
Restricted Securities, by acceptance thereof, agrees, prior to
any transfer of such Restricted Securities, to give written
notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with the
provisions of this Section 8.2. Each such notice shall
describe the manner and circumstances of the proposed transfer
and shall be accompanied, if reasonably requested by the
Company, by the written opinion, addressed to the Company, of
counsel for the holder of such Restricted Securities, as to
whether in the opinion of such counsel (which opinion and
counsel shall be reasonably satisfactory to the Company and
which counsel may be the in-house counsel of such holder) such
proposed transfer involves a transaction requiring
registration of such Restricted Securities under the
Securities Act; provided, however, that (i) in the case of a
holder of Restricted Securities which is a partnership or a
limited liability company, no such opinion of counsel shall be
necessary for a transfer by such holder of Restricted
Securities to a partner or member of such holder of Restricted
Securities, or a retired partner or member of such holder who
retires after the date hereof, or the estate of any such
partner or member or retired partner or member, if in each
case the transferee agrees in writing to be subject to the
terms of this Section 8 to the same extent as if such
transferee were originally a signatory to this Agreement, (ii)
in the case of a holder of Restricted Securities which is a
corporation or a limited liability company, no such opinion of
counsel shall be necessary for a transfer by such holder of
Restricted Securities to an affiliate, officer, director,
member or manager of such entity, and (iii) no such opinion
shall be required in connection with a transfer pursuant to
Rule 144, provided,
that the Company, if reasonably requested by it, shall be
provided with customary written representations relating to
such transaction.
If in the opinion of such counsel (if such opinion is required
hereunder) the proposed transfer of Restricted Securities may
be effected without registration under the Securities Act, the
holder of such Restricted Securities shall thereupon be
entitled to transfer such Restricted Securities in accordance
with the terms of the notice delivered by it to the Company.
Each certificate or other instrument evidencing the securities
issued upon the transfer of any Restricted Securities (and
each certificate or other instrument evidencing any
untransferred balance of such securities) shall bear the
legends set forth in Section 8.1 unless (i) in the opinion of
such counsel, registration of future transfer is not required
by the applicable provisions of the Securities Act or (ii) the
Company shall have waived the requirement of such legends;
provided, however, that such legend shall not be required on
any certificate or other instrument evidencing the securities
issued upon such transfer in the event such transfer shall be
made in compliance with the requirements of Rule 144.
Upon surrender by any Purchaser to the Company of any certificate,
representing Purchased Securities, the Company at its expense
will, within five business days, issue in exchange therefor,
and deliver to the Purchaser, a new certificate or
certificates representing such Purchased Securities, in such
denominations as may be requested by such Purchaser. Upon
receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any certificate
representing any Purchased Securities purchased or acquired by
any Purchaser hereunder, and in case of any such loss, theft
or destruction, upon delivery of any indemnity agreement
satisfactory to the Company, or in any case of any such
mutilation, upon surrender and cancellation of such
certificate, the Company at its expense will, within five
business days, issue and deliver to the Purchaser a new
certificate or other instrument for such Purchased Securities
of like tenor, in lieu of such lost, stolen, destroyed or
mutilated certificate.
TRANSFER PURSUANT TO RULE 144
The Company covenants that (a) the Company will comply at all times with the
public information requirements of Rule 144(c)(1); and (b) at all times as Rule
144 is available for use by any Purchaser, the Company will furnish such
Purchaser, upon its request, with all information within the possession of the
Company reasonably required for the preparation and filing of Form 144.
MISCELLANEOUS COVENANTS
CERTAIN TAXES
The Company shall pay, and will hold each Purchaser harmless from, (a) any and
all liability with respect to any transfer, transfer gains, stamp or similar
Taxes which may be determined to be payable in connection with (i) the execution
and delivery and performance of this Agreement
or any modification, amendment or alteration of the terms or provisions of this
Agreement, or (ii) the issuance of any shares of Common Stock or other
securities upon conversion of the Purchased Shares or upon the exercise of the
Purchased Warrants, and (b) all Taxes arising as a result of the issuance of the
Purchased Securities to the Purchasers (collectively, "Transaction-Related
Taxes").
LISTING OF COMMON SHARES
If shares of Common Stock are listed on any national securities exchange or
automated quotation system on the date any registration statement filed by the
Company pursuant to the Registration Rights Agreement becomes effective, the
Company will promptly secure the listing of the shares of Common Stock issuable
upon conversion of the Purchased Shares or upon exercise of the Purchased
Warrants upon each national securities exchange or automated quotation system
upon which shares of Common Stock are then listed. The Company represents and
warrants that it has taken no action designed to delist, or which is likely to
have the effect of delisting, the Common Stock from any of the national
securities exchange or automated quotation system upon which shares of Common
Stock are currently listed.
PRESS RELEASE; LISTING OF COMMON SHARES
Prior to 8:30 a.m., Eastern Standard Time, on the day after the Closing
Date, the Company shall issue a press release disclosing the transactions
contemplated hereby and shall timely file a Current Report on Form 8-K under the
1934 Act disclosing the transactions contemplated hereby. In addition, the
Company will make such other filings and notices in the manner and time required
by the SEC and each national securities exchanges or automated quotation system
upon which shares of Common Stock are currently listed.
SHAREHOLDER APPROVAL
Promptly after the Closing Date, the Company will take all reasonable
actions necessary, including calling a shareholder meeting, to obtain
Shareholder Approval (as described in Section 2.4(a).
EXPENSES
The Company shall pay (a) all costs and other expenses incurred from time to
time by the Company in connection with the Company's performance of and
compliance with all agreements and conditions contained herein on its part to be
performed or complied with (including the costs and expenses of its counsel
incurred in connection with the drafting, review and negotiation of the
Transaction Documents), (b) all out-of-pocket costs and expenses reasonably
incurred by the Purchasers and their respective affiliates (including the
reasonable fees and expenses of ▇▇▇▇▇▇, Halter & ▇▇▇▇▇▇▇▇ LLP, counsel for the
Purchasers) in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Transaction Documents and the purchase
of the Purchased Securities hereunder (provided, the payment obligations of the
Company with respect to this clause (b) shall not exceed an aggregate amount
agreed upon by the Company and the Purchasers); (c) all out-of-pocket costs and
expenses actually incurred by the Purchasers (including the fees, charges and
disbursements of counsel for the Purchasers) in connection with (A) the
preparation, negotiation, execution and delivery of any amendments,
modifications or waivers of the provisions of this Agreement or any other
Transaction Document and (B) the enforcement or protection of the Purchasers'
rights under the provisions of this Agreement or any other Transaction Document;
and (d) any Transaction-Related Taxes. All
amounts payable under this Section 10 shall be payable by the Company promptly
after written demand therefor.
NOTICES
Any notices, demands, consents or other communications that are given or made
hereunder shall be in writing and shall be given or made to any party hereto by
physical delivery, U.S. mail (registered or certified mail, postage prepaid,
return receipt requested) or overnight courier or by transmission by facsimile
to such party at its, his or her address (or facsimile number) set forth below,
or such other address (or facsimile number) as shall have been specified by like
notice by such party:
if to the Company, to:
Trans-Industries, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person at such other place as the Company shall designate to
each Purchaser in writing; and
if to a Purchaser, to such Purchaser's address (or facsimile number)
as set forth on Annex I to this Agreement, or to such other
address for such Purchaser as such Purchaser may specify in
written notice given to the Company in accordance with this
section.
Each such notice, demand, consent or other communication shall be effective upon
receipt in the case of physical delivery or overnight courier, upon confirmation
of receipt by or on behalf of the addressee in the case of transmission by
facsimile if received prior to 5:00 p.m. local time at the destination of such
facsimile transmission, and, if received after 5:00 p.m. local time at the
destination of such facsimile transmission, on the next business day immediately
after the date of such receipt, and five business days after deposit in the U.S.
mail in the case of mailing.
MISCELLANEOUS PROVISIONS
ENTIRE AGREEMENT
This Agreement and the other Transaction Documents constitute the entire
agreement among the parties with respect to the subject matter hereof and
thereof and supersede any prior or contemporaneous understandings, negotiations,
agreements or representations by or among such parties, written or oral, that
may have related in any way to the subject matter hereof or thereof, including
any letter of intent or term sheet dated as of or prior to the date hereof,
between the Company and one or more of the Purchasers (or their affiliates).
FURTHER ASSURANCES
The Company will, and will cause its subsidiaries to, execute any and all
further documents, agreements and instruments, and take all such further actions
that may be required under any applicable law, or which the Purchasers may
reasonably request, to effectuate the transactions contemplated by the
Transaction Documents, all at the expense of the Company.
FURTHER ASSURANCES
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and
permitted assigns of such party, and all covenants and
agreements by or on behalf of the Company or the Purchasers
which are contained in this Agreement or in any of the other
Transaction Documents shall bind and inure to the benefit of
their respective heirs, successors, and permitted assigns,
except that the Company shall not assign its rights or
obligations hereunder without the consent of the Purchasers
holding a majority of the Purchased Shares issued hereunder.
Each Purchaser shall have the right, without the consent of the
Company but subject to compliance with applicable securities
laws and the applicable provisions of this Agreement and the
other Transaction Documents, to assign, all or part of, the
securities acquired by it hereunder (including securities into
which or for which such securities are convertible,
exchangeable or exercisable) and assign, all or part of, its
rights and obligations under this Agreement or any of the
other Transaction Documents. The Company shall promptly amend
Annex I to reflect the notice information for each transferee
thereof as contemplated by Section 11. Upon any such
amendment, the Company shall promptly deliver a copy of such
Annex I, as so amended, to each Purchaser.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement. Counterparts
transmitted by facsimile may be treated as an original instrument and relied
upon for all purposes as such.
GOVERNING LAW; WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION
All questions concerning the construction, interpretation and
validity of this Agreement shall be governed by and construed
and enforced in accordance with the internal law of the State
of Ohio, without giving effect to any choice or conflict of
law provision or rule (whether in the State of Ohio or any
other jurisdiction) that would cause the application of the
law of any jurisdiction other than the State of Ohio. In
furtherance of the foregoing, the internal law of the State of
Ohio will control the interpretation and construction of this
Agreement, even if under such jurisdiction's choice of law or
conflict of law analysis, the internal law of some other
jurisdiction would ordinarily or necessarily apply.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR
DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY
DOCUMENTS RELATED HERETO.
Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the non-exclusive
jurisdiction of any court of the State of Ohio or federal
court of the United States of America sitting in the State of
Ohio, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement or
for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such court of
the State of Ohio or, to the extent permitted by law, in such
federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so,
any objection that it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or
relating to this Agreement in any court of the State of Ohio
or federal court sitting in the State of Ohio. Each of the
parties hereto irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
WAIVERS AND AMENDMENTS
No failure or delay of any of the Purchasers in exercising any power
or right in this Agreement or in any other Transaction
Document shall operate as a waiver hereof or thereof, nor
shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to
enforce such right or power, preclude any other or further
exercise of any other right or power. No waiver of any
provision of this Agreement or any other Transaction Document
or consent to any departure by the Company therefrom shall in
any event be effective unless the same shall be authorized as
provided for in Section 12.6(b), and then such waiver or
consent shall be effective only in the specific instance and
for the purpose
for which given. No notice or demand on the Company in any
case shall entitle the Company to any other or further notice
or demand in similar or other circumstances.
Except as provided in Section 12.3, neither this Agreement nor any
provision hereof may be waived, amended or modified except
pursuant to a written instrument which specifically references
this Agreement which has been signed by the party against whom
such waiver, amendment or modification is sought to be
enforced or such party's authorized officer or representative.
INCORPORATION OF SCHEDULES AND EXHIBITS
The annexes, schedules and exhibits identified in this Agreement are
incorporated herein by reference and made a part hereof as though fully
rewritten herein.
INTERPRETATION AND CONSTRUCTION
The term "this Agreement" means this Series B Convertible Preferred Stock and
Warrant Purchase Agreement, together with all annexes, schedules and exhibits
hereto, as the same may from time to time be amended, modified, supplemented or
restated in accordance with the terms hereof. Accounting terms used but not
otherwise defined herein shall have the meanings given to them under GAAP. The
use in this Agreement of the term "including" means "including, without
limitation." The words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole, including its annexes,
schedules and exhibits, as the same may from time to time be amended, modified,
supplemented or restated, and not to any particular section, subsection,
paragraph, subparagraph or clause contained in this Agreement. All references to
sections, annexes, schedules and exhibits mean the sections of this Agreement
and the annexes, schedules and exhibits attached to this Agreement, except where
otherwise stated. The title of and the section and paragraph headings in this
Agreement are for convenience of reference only and shall not govern or affect
the interpretation of any of the terms or provisions of this Agreement. The use
herein of the masculine, feminine or neuter forms shall also denote the other
forms, as in each case the context may require or permit. Where specific
language is used to clarify by example a general statement contained herein,
such specific language shall not be deemed to modify, limit or restrict in any
manner the construction of the general statement to which it relates. The
language used in this Agreement has been chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against any
party. All references to payment amounts herein are United States dollar
amounts, and all payments hereunder shall be made in United States dollars.
Unless expressly provided otherwise, the measure of a period of one month or
year for purposes of this Agreement shall be that date of the following month or
year corresponding to the starting date, provided that if no corresponding date
exists, the measure shall be that date of the following month or year
corresponding to the next day following the starting date. For example, one
month following February 18 is March 18, and one month following March 31 is May
1.
NO FIDUCIARY RELATIONSHIP
No provision in this Agreement or in any other Transaction Document and no
course of dealing among the parties hereto shall be deemed to create any
fiduciary duty by any of the Purchasers or any of their respective affiliates to
the Company or its directors, officers, employees, stockholders or affiliates.
SEVERABILITY
It is the desire and intent of the parties that the provisions of this Agreement
be enforced to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. Accordingly, if any
particular provision of this Agreement shall be adjudicated by a court of
competent jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Series B Convertible
Preferred Stock and Warrant Purchase Agreement as of the date first written
above.
THE COMPANY:
TRANS-INDUSTRIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman of the Board and
President
IN WITNESS WHEREOF, the parties have executed this Series B Convertible
Preferred Stock and Warrant Purchase Agreement as of the date first written
above.
THE PURCHASERS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., trustee under the
Trust Agreement dated July 15, 1976,
as modified
