EXHIBIT 10.4
SECURITIES PURCHASE AGREEMENT
LAURUS MASTER FUND, LTD.
AND
RIVIERA TOOL COMPANY
DATED: MAY 17, 2005
TABLE OF CONTENTS
Page(s)
1. Agreement to Sell and Purchase...........................................1
2. Fees and Option..........................................................1
3. Closing, Delivery and Payment............................................2
3.1 Closing.........................................................2
3.2 Delivery........................................................2
4. Representations and Warranties of the Company............................2
4.1 Organization, Good Standing and Qualification...................2
4.2 Subsidiaries....................................................3
4.3 Capitalization; Voting Rights...................................3
4.4 Authorization; Binding Obligations..............................4
4.5 Controls and Procedures.........................................4
4.6 Obligations to Related Parties..................................5
4.7 Changes.........................................................5
4.8 Title to Properties and Assets; Liens, Etc......................6
4.9 Intellectual Property...........................................6
4.10 Compliance with Other Instruments...............................7
4.11 Litigation......................................................7
4.12 Tax Returns and Payments........................................7
4.13 Employees.......................................................8
4.14 Registration Rights and Voting Rights...........................8
4.15 Compliance with Laws; Permits...................................8
4.16 Environmental and Safety Laws...................................9
4.17 Valid Offering..................................................9
4.18 Full Disclosure.................................................9
4.19 Insurance.......................................................9
4.20 SEC Reports....................................................10
4.21 Listing........................................................10
4.22 No Integrated Offering.........................................10
4.23 Stop Transfer..................................................10
4.24 Dilution.......................................................10
4.25 Foreign Corrupt Practices......................................11
4.26 Certain Fees...................................................11
4.27 ERISA..........................................................11
5. Representations and Warranties of the Purchaser.........................11
5.1 No Shorting....................................................11
5.2 Organization, Requisite Power and Authority....................12
5.3 Investment Representations.....................................12
5.4 The Purchaser Bears Economic Risk..............................12
5.5 Acquisition for Own Account....................................12
5.6 The Purchaser Can Protect Its Interest.........................13
5.7 Certain Fees...................................................13
5.8 Patriot Act....................................................13
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Page(s)
5.9 Accredited Investor............................................13
5.10 Legends........................................................13
6. Covenants of the Company................................................14
6.1 Stop-Orders....................................................14
6.2 Listing........................................................15
6.3 Market Regulations.............................................15
6.4 Reporting Requirements.........................................15
6.5 Use of Funds...................................................15
6.6 Access to Facilities...........................................15
6.7 Taxes..........................................................16
6.8 Insurance......................................................16
6.9 Intellectual Property..........................................17
6.10 Properties.....................................................17
6.11 Confidentiality................................................17
6.12 Required Approvals.............................................17
6.13 Reissuance of Securities.......................................19
6.14 Opinion........................................................19
6.15 Margin Stock...................................................19
6.16 Financing Right of First Refusal...............................19
7. Covenants of the Purchaser..............................................20
7.1 Confidentiality................................................20
7.2 Non-Public Information.........................................20
7.3 Limitation on Acquisition of Common Stock of the Company.......20
8. Covenants of the Company and the Purchaser Regarding Indemnification....21
8.1 Company Indemnification........................................21
8.2 Purchaser's Indemnification....................................21
9. [RESERVED]..............................................................21
10. Registration Rights.....................................................21
10.1 Offering Restrictions..........................................21
11. Miscellaneous...........................................................22
11.1 Governing Law, Jurisdiction and Waiver of Jury Trial...........22
11.2 Severability...................................................23
11.3 Survival.......................................................23
11.4 Successors.....................................................23
11.5 Entire Agreement; Maximum Interest.............................23
11.6 Severability...................................................24
11.7 Amendment and Waiver...........................................24
11.8 Delays or Omissions............................................24
11.9 Notices........................................................24
11.10 Attorneys' Fees................................................25
11.11 Titles and Subtitles...........................................26
11.12 Facsimile Signatures; Counterparts.............................26
11.13 Construction...................................................26
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LIST OF EXHIBIT
Form of Convertible Term Note.........................................EXHIBIT A
Form of Option........................................................EXHIBIT B
Form of Opinion.......................................................EXHIBIT C
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of May 17, 2005, by and between RIVIERA TOOL COMPANY, a Michigan
corporation (the "Company"), and LAURUS MASTER FUND, LTD., a Cayman Islands
company (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a
Secured Convertible Term Note in the aggregate principal amount of Three Million
Two Hundred Thousand Dollars ($3,200,000) in the form of Exhibit A hereto (as
amended, modified and/or supplemented from time to time, the "Note"), which Note
is convertible into shares of the Company's common stock, no par value per share
(the "Common Stock") at an initial fixed conversion price of $1.66 per share of
Common Stock ("Fixed Conversion Price");
WHEREAS, the Company wishes to issue an option to the Purchaser in the
form of Exhibit B hereto (as amended, modified and/or supplemented from time to
time, the "Option") to purchase up to 650,000 shares of the Company's Common
Stock in connection with the Purchaser's purchase of the Note;
WHEREAS, the Purchaser desires to purchase the Note and the Option on
the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and the Option
to the Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company shall sell to the Purchaser, and the Purchaser shall purchase from the
Company, the Note. The sale of the Note on the Closing Date shall be known as
the "Offering." The Note will mature on the Maturity Date (as defined in the
Note). Collectively, the Note and the Option and Common Stock issuable upon
conversion of the Note and upon exercise of the Option are referred to as the
"Securities."
2. Fees and Option. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser the
Option to purchase up to 650,000 shares of Common Stock in connection
with the Offering, pursuant to Section 1 hereof. All the
representations, covenants, warranties, undertakings, and
indemnification, and other rights made or granted to or for the benefit
of the Purchaser by the Company are hereby also made and granted in
respect of the
Option and shares of the Company's Common Stock issuable upon exercise
of the Option (the "Option Shares").
(b) Subject to the terms of Section 2(d) below, the Company
shall pay to Laurus Capital Management, LLC, the manager of the
Purchaser, a closing payment in an amount equal to three and six tenths
percent (3.60%) of the aggregate principal amount of the Note. The
foregoing fee is referred to herein as the "Closing Payment."
(c) The Company shall reimburse the Purchaser for its
reasonable expenses (including legal fees and expenses) incurred in
connection with the preparation and negotiation of this Agreement and
the Related Agreements (as hereinafter defined), and expenses incurred
in connection with the Purchaser's due diligence review of the Company
and its Subsidiaries (as defined in Section 4.2) and all related
matters. Amounts required to be paid under this Section 2(c) together
with amounts required to be paid pursuant to Section 5(b)(iv) of the
Security Agreement (as defined below), will be paid on the Closing Date
and shall be $52,500, plus such additional fees and expenses incurred
by the Purchaser in connection with any required third party appraisals
and/or extraordinary diligence, for such expenses referred to in this
Section 2(c).
(d) The Closing Payment and the expenses referred to in the
preceding clause (c) (net of deposits previously paid by the Company)
shall be paid at closing out of funds held pursuant to the Escrow
Agreement (as defined below) and a disbursement letter (the
"Disbursement Letter").
3. Closing, Delivery and Payment.
3.1 Closing. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "Closing"), shall take
place on the date hereof, at such time or place as the Company and the Purchaser
may mutually agree (such date is hereinafter referred to as the "Closing Date").
3.2 Delivery. Pursuant to the Escrow Agreement, at the Closing
on the Closing Date, the Company will deliver to the Purchaser, among other
things, the Note and the Option and the Purchaser will deliver to the Company,
among other things, the amounts set forth in the Disbursement Letter by
certified funds or wire transfer.
4. Representations and Warranties of the Company. Except as set
forth on the Disclosure Schedule delivered by the Company to the Purchaser prior
to the execution of this Agreement which hereby is incorporated by reference in
and constitutes an integral part of this Agreement (the "Disclosure Schedule"),
or except as set forth in the SEC Reports (as defined below), the Company hereby
represents and warrants to the Purchaser as follows:
4.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Michigan. The Company has the corporate power and authority
to own and operate its properties and assets and, insofar as it is or shall be a
party thereto, to (1) execute and deliver (i) this Agreement, (ii) the Note and
the Option to be issued in connection with this Agreement, (iii) the Master
Security Agreement dated as of the date hereof between the Company, certain
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Subsidiaries of the Company and the Purchaser (as amended, modified or
supplemented from time to time, the "Master Security Agreement"), (iv) the
Registration Rights Agreement relating to the Securities dated as of the date
hereof between the Company and the Purchaser (as amended, modified or
supplemented from time to time, the "Registration Rights Agreement"), and (v)
all other documents, instruments and agreements entered into in connection with
the transactions contemplated hereby and thereby (the preceding clauses (ii)
through (v), collectively, the "Related Agreements"); (2) issue and sell the
Note and the shares of Common Stock issuable upon conversion of the Note (the
"Note Shares"); (3) issue and sell the Option and the Option Shares; and (4)
carry out the provisions of this Agreement and the Related Agreements and to
carry on its business as presently conducted. The Company is duly qualified and
is authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature or location of its activities and of its
properties (both owned and leased) makes such qualification necessary, except
for those jurisdictions in which failure to do so has not, or could not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, assets, liabilities, condition (financial or
otherwise), properties or operations of the Company (a "Material Adverse
Effect").
4.2 Subsidiaries. The Company does not have any Subsidiaries.
For the purpose of this Agreement, a "Subsidiary" of any person or entity means
(i) a corporation or other entity whose shares of stock or other ownership
interests having ordinary voting power (other than stock or other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the directors of such corporation, or other persons or
entities performing similar functions for such person or entity, are owned,
directly or indirectly, by such person or entity or (ii) a corporation or other
entity in which such person or entity owns, directly or indirectly, more than
50% of the equity interests at such time.
4.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, as of the
date hereof consists of 9,990,575 shares, of which 9,785,575 are shares
of Common Stock, no par value, 3,774,346 shares of which are issued and
outstanding, and 205,000 are shares of preferred stock, no par value of
which no shares of preferred stock are issued and outstanding.
(b) Other than: (i) the shares reserved for issuance under the
Company's stock option plans; and (ii) shares which may be granted
pursuant to this Agreement and the Related Agreements, there are no
outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal), proxy or stockholder
agreements, or arrangements or agreements of any kind for the purchase
or acquisition from the Company of any of its securities. Neither the
offer, issuance or sale of any of the Note or the Option, or the
issuance of any of the Note Shares or Option Shares, nor the
consummation of any transaction contemplated hereby will result in a
change in the price or number of any securities of the Company
outstanding, under anti-dilution or other similar provisions contained
in or affecting any such securities.
(c) To the knowledge of the Company, all issued and
outstanding shares of the Company's Common Stock: (i) have been duly
authorized and validly issued and are
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fully paid and nonassessable; and (ii) were issued in compliance with
all applicable state and federal laws concerning the issuance of
securities. For purposes of this Agreement, "knowledge of the Company"
and all derivatives thereof, shall mean the actual knowledge, after due
inquiry of each of ▇▇▇▇▇▇▇ ▇▇▇▇▇ and/or ▇▇▇▇▇ ▇▇▇▇▇▇ existing on the
date hereof.
(d) The rights, preferences, privileges and restrictions of
the shares of the Common Stock are as stated in the Company's
Certificate of Incorporation, as amended (the "Charter"). The Note
Shares and Option Shares have been duly and validly reserved for
issuance. When issued in compliance with the provisions of this
Agreement and the Company's Charter, the Securities will be validly
issued, fully paid and nonassessable, and will be free of any liens or
encumbrances; provided, however, that the Securities may be subject to
restrictions on transfer under state and/or federal securities laws as
set forth herein or as otherwise required by such laws at the time a
transfer is proposed.
4.4 Authorization; Binding Obligations. All corporate action
on the part of the Company (including its officers and directors) necessary for
the authorization of this Agreement and the Related Agreements, the performance
of all obligations of the Company hereunder and under the other Related
Agreements at the Closing and, the authorization, sale, issuance and delivery of
the Note and the Option has been taken or will be taken prior to the Closing.
This Agreement and the Related Agreements, when executed and delivered and to
the extent it is a party thereto, will be valid and binding obligations of each
of the Company, enforceable against each such entity in accordance with their
terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and
(b) general principles of equity that restrict the
availability of equitable or legal remedies.
The sale of the Note and the subsequent conversion of the Note into
Note Shares are not and will not be subject to any preemptive rights or rights
of first refusal that have not been properly waived or complied with. The
issuance of the Option and the subsequent exercise of the Option for Option
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.
4.5 Controls and Procedures.
(a) The Company has established and maintains "disclosure
controls and procedures" (as defined in Rules 13a-15(f) and 15d-16(e)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")); the Company's "disclosure controls and procedures" are
reasonably designed to ensure that all information (both financial and
non-financial) required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Rules
and Regulations, and that all such information is accumulated and
communicated to the Company's management as appropriate to allow
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timely decisions regarding required disclosure and to make the
certifications of the Chief Executive Officer and Chief Financial
Officer of the Company required under the Exchange Act with respect to
such reports.
(b) Since February 28, 2005 (the "Balance Sheet Date"), the
Company's auditors and the audit committee of the Board of Directors of
the Company (or persons fulfilling the equivalent function) have not
been advised of (i) any significant deficiencies in the design or
operation of internal controls which could adversely affect the
Company's ability to record, process, summarize and report financial
data nor any material weaknesses in internal controls; (ii) any fraud,
whether or not material, that involves management or other employees
who have a significant role in the Company's internal controls.
4.6 Obligations to Related Parties. No relationship, direct or
indirect, exists between or among any of the Company or any affiliate of the
Company, on the one hand, and any director, officer, stockholder, customer or
supplier of the Company or any affiliate of the Company, on the other hand,
which is required by the Securities Act, the Exchange Act or the Rules and
Regulations to be described in any SEC Report which is not so described and
described as required. There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members, except as
disclosed in the SEC Reports. The Company has not, in violation of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act"), directly or indirectly,
extended or maintained credit, arranged for the extension of credit, or renewed
an extension of credit, in the form of a personal loan to or for any director or
executive officer of the Company.
4.7 Changes. Since the Balance Sheet Date, there has not been:
(a) any Material Adverse Effect;
(b) any resignation or termination of any officer, key
employee or group of employees of the Company;
(c) any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of
guaranty, endorsement, indemnity, warranty or otherwise;
(d) any damage, destruction or loss, whether or not covered by
insurance, which has had a Material Adverse Effect;
(e) any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) any direct or indirect material loans made by the Company
to any stockholder, employee, officer or director of the Company, other
than advances made in the ordinary course of business;
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(g) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder of the
Company;
(h) any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) any labor organization activity related to the Company;
(j) any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business;
(k) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets owned
by the Company;
(l) any change in any material agreement to which the Company
is a party or by which either the Company is bound which has had a
Material Adverse Effect;
(m) any other event or condition of any character that has had
a Material Adverse Effect; or
(n) any arrangement or commitment by the Company to do any of
the acts described in subsection (a) through (m) above.
4.8 Title to Properties and Assets; Liens, Etc. The Company
has good and marketable title to its properties and assets, and good title to
its leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than:
(a) those resulting from taxes which have not yet become
delinquent;
(b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially
impair the operations of the Company or any of its Subsidiaries, so
long as in each such case, such liens and encumbrances have no effect
on the lien priority of the Purchaser in such property; and
(c) those that have otherwise arisen in the ordinary course of
business, so long as they have no effect on the lien priority of the
Purchaser therein.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. The Company is in compliance with all material terms
of each lease to which it is a party or is otherwise bound.
4.9 Intellectual Property.
(a) The Company owns or possesses sufficient legal rights to
all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary rights and
processes necessary for its business as now conducted
6
and, to the Company's knowledge, as presently proposed to be conducted
(the "Intellectual Property"), without any known infringement of the
rights of others. There are no outstanding options, licenses or
agreements of any kind relating to the foregoing proprietary rights,
nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information
and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase
of "off the shelf" or standard products.
(b) The Company has not received any communications alleging
that the Company has violated any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary
rights of any other person or entity, nor is the Company aware of any
basis therefor.
(c) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any
of its employees made prior to their employment by the Company, except
for inventions, trade secrets or proprietary information that have been
rightfully assigned to the Company.
4.10 Compliance with Other Instruments. The Company is not in
violation or default of (x) any term of its Charter or Bylaws, or (y) any
provision of any indebtedness, mortgage, indenture, contract, agreement or
instrument to which it is party or by which it is bound or of any judgment,
decree, order or writ, which violation or default, in the case of this clause
(y), has had a Material Adverse Effect. The execution, delivery and performance
of and compliance with this Agreement and the Related Agreements to which it is
a party, and the issuance and sale of the Note by the Company and the other
Securities by the Company each pursuant hereto and thereto, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
4.11 Litigation. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company that prevents the Company from entering into this Agreement
or the other Related Agreements, or from consummating the transactions
contemplated hereby or thereby, or which has had a Material Adverse Effect, nor
is the Company aware that there is any basis to assert any of the foregoing. The
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or material suit, proceeding or investigation which
the Company intends to initiate.
4.12 Tax Returns and Payments. The Company has timely filed
all tax returns (federal, state and local) required to be filed by it. All taxes
shown to be due and payable on such returns, any assessments imposed, and all
other taxes due and payable by the Company on or before the Closing, have been
paid or will be paid prior to the time they become delinquent
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(taking into account any extension of time to file granted or obtained). The
Company has not been advised:
(a) that any of its returns, federal, state or other, have
been or are being audited as of the date hereof; or
(b) of any adjustment, deficiency, assessment or court
decision in respect of its federal, state or other taxes.
To the Company's knowledge, no liability for any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.13 Employees. The Company does not have any collective
bargaining agreements with any of its employees. There is no labor union
organizing activity pending or, to the Company's knowledge, threatened with
respect to the Company. The Company is not a party to or bound by any currently
effective employment contract, deferred compensation arrangement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation plan or agreement. To the Company's knowledge, no employee of the
Company, nor any consultant with whom the Company has contracted, is in
violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Company because of the nature of the
business to be conducted by the Company; and to the Company's knowledge the
continued employment by the Company of its present employees, and the
performance of the Company's contracts with its independent contractors, will
not result in any such violation. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency that would interfere with
their duties to the Company. The Company has not received any notice alleging
that any such violation has occurred. Except for employees who have a current
effective employment agreement with the Company, no employee of the Company has
been granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. The Company
is not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company, nor does the Company
have a present intention to terminate the employment of any officer, key
employee or group of employees.
4.14 Registration Rights and Voting Rights. The Company is not
presently under any obligation, and the Company has not granted any rights, to
register any of the Company's presently outstanding securities or any of its
securities that may hereafter be issued. To the Company's knowledge, no
stockholder of the Company has entered into any agreement with respect to the
voting of equity securities of the Company.
4.15 Compliance with Laws; Permits. The Company is not in
violation of any provision of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act or SEC rule or rule of the
Principal Market (as hereafter defined) promulgated thereunder or any applicable
statute, rule, regulation, order or restriction of any domestic or foreign
government or any instrumentality or agency thereof in respect of the conduct of
its business or the ownership of its properties which has had a Material Adverse
8
Effect. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or declarations
are required to be filed in connection with the execution and delivery of this
Agreement or any other Related Agreement and the issuance of any of the
Securities, except such as have been duly and validly obtained or filed, or with
respect to any filings that must be made after the Closing, as will be filed in
a timely manner. The Company has all material franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which has had a Material Adverse Effect.
4.16 Environmental and Safety Laws. To the Company's
knowledge, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and to
its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation. No Hazardous Materials
(as defined below) are used or have been used, stored, or disposed of by the
Company or, to the Company's knowledge, by any other person or entity on any
property owned, leased or used by the Company. For the purposes of the preceding
sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as
"hazardous" or "toxic" under any applicable local, state, federal
and/or foreign laws and regulations that govern the existence and/or
remedy of contamination on property, the protection of the environment
from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building
materials; or
(b) any petroleum products or nuclear materials.
4.17 Valid Offering. Assuming the accuracy of the
representations and warranties of the Purchaser contained in this Agreement, the
offer, sale and issuance of the Securities will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws.
4.18 Full Disclosure. Each of the Company and each of its
Subsidiaries has provided the Purchaser with all information requested by the
Purchaser in connection with its decision to purchase the Note and the Option.
Neither this Agreement, the Related Agreements, the exhibits and schedules
hereto and thereto nor any other document delivered by the Company to Purchaser
or its attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, contain any untrue statement of a
material fact nor omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading.
4.19 Insurance. The Company has general commercial, product
liability, fire and casualty insurance policies with coverages which the Company
believes are customary for companies similarly situated to the Company in the
same or similar business.
9
4.20 SEC Reports. The Company has filed all reports required
to be filed by it under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law to file such
material) (the foregoing materials, including the exhibits thereto, being
collectively referred to herein as the "SEC Reports") on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with GAAP, except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, year-end audit adjustments.
4.21 Listing. The Company's Common Stock is listed for trading
on a Principal Market (as hereafter defined) and satisfies and at all times
hereafter will satisfy all requirements for the continuation of such listing.
The Company has not received any notice that its Common Stock will be delisted
from the Principal Market or that its Common Stock does not meet all
requirements for listing. For purposes hereof, the term "Principal Market" means
the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Marketing
System, American Stock Exchange or New York Stock Exchange (whichever of the
foregoing is at the time the principal trading exchange or market for the Common
Stock).
4.22 No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable shareholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated.
4.23 Stop Transfer. The Securities are restricted securities
as of the date of this Agreement. Other than as may be required by applicable
law, the Company will not issue any stop transfer order or other order impeding
the sale and delivery of any of the Securities at such time as the Securities
are registered for public sale or an exemption from registration is available,
except as required by state and federal securities laws.
4.24 Dilution. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note and
exercise of the Option is
10
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company.
4.25 Foreign Corrupt Practices. Neither the Company, nor to
the knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any corrupt funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended. Neither the Company nor, to the
knowledge of the Company, any director, officer, agent, employee or affiliate of
the Company is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department ("OFAC"); and
the Company will not directly or indirectly use the proceeds of the offering, or
lend, contribute or otherwise make available such proceeds to any subsidiary,
joint venture partner or other person or entity, for the purpose of financing
the activities of any person currently subject to any U.S. sanctions
administered by OFAC.
4.26 Certain Fees. No brokerage or finder's fees or
commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
person with respect to the transactions contemplated by this Agreement.
Purchaser shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
4.27 ERISA. Based upon the Employee Retirement Income Security
Act of 1974 ("ERISA"), and the regulations and published interpretations
thereunder: (i) the Company has not engaged in any Prohibited Transactions (as
defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code")); (ii) the Company has met all applicable minimum
funding requirements under Section 302 of ERISA in respect of its plans; (iii)
the Company does not have any knowledge of any event or occurrence which would
cause the Pension Benefit Guaranty Corporation to institute proceedings under
Title IV of ERISA to terminate any employee benefit plan(s); (iv) the Company
does not have any fiduciary responsibility for investments with respect to any
plan existing for the benefit of persons other than the Company's employees; and
(v) the Company has not withdrawn, completely or partially, from any
multi-employer pension plan so as to incur liability under the Multiemployer
Pension Plan Amendments Act of 1980.
5. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows (such representations
and warranties do not lessen or obviate the representations and warranties of
the Company set forth in this Agreement):
5.1 No Shorting. The Purchaser or any of its affiliates and
investment partners has not, will not and will not cause any person or entity,
to directly engage in "short sales" of the Company's Common Stock as long as the
Note shall be outstanding.
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5.2 Organization, Requisite Power and Authority. The Purchaser
is an entity duly organized, validly existing and in good standing under the law
of the jurisdiction of its organization. The Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
corporate action on the Purchaser's part required for the lawful execution and
delivery of this Agreement and the Related Agreements have been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
the Purchaser, enforceable in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and
(b) as limited by general principles of equity that restrict
the availability of equitable and legal remedies.
5.3 Investment Representations. The Purchaser understands that
the Securities are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon the Purchaser's
representations contained in this Agreement, including, without limitation, that
the Purchaser is an "accredited investor" within the meaning of Regulation D
under the Securities Act of 1933, as amended (the "Securities Act"). The
Purchaser confirms that it has received or has had full access to all the
information it considers necessary or appropriate to make an informed investment
decision with respect to the Note and the Option to be purchased by it under
this Agreement and the Note Shares and the Option Shares acquired by it upon the
conversion of the Note and the exercise of the Option, respectively. The
Purchaser further confirms that it has had an opportunity to ask questions and
receive answers from the Company regarding the Company's and its Subsidiaries'
business, management and financial affairs and the terms and conditions of the
Offering, the Note, the Option and the Securities and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the Purchaser or to which the Purchaser had access.
5.4 The Purchaser Bears Economic Risk. The Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. The Purchaser must bear the
economic risk of this investment until the Securities are sold pursuant to: (i)
an effective registration statement under the Securities Act; or (ii) an
exemption from registration is available with respect to such sale.
5.5 Acquisition for Own Account. The Purchaser is acquiring
the Note and the Option and the Note Shares and the Option Shares for the
Purchaser's own account for investment only, and not as a nominee or agent and
not with a view towards or for resale in connection with their distribution.
12
5.6 The Purchaser Can Protect Its Interest. The Purchaser
represents that by reason of its, or of its management's, business and financial
experience, the Purchaser has the capacity to evaluate the merits and risks of
its investment in the Note, the Option and the Securities and to protect its own
interests in connection with the transactions contemplated in this Agreement and
the Related Agreements. Further, the Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement
or the Related Agreements.
5.7 Certain Fees. No brokerage or finder's fees or commissions
are or will be payable by the Purchaser to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other person
with respect to the transactions contemplated by this Agreement. The Company
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by this
Agreement.
5.8 Patriot Act. The Purchaser certifies that, to the best of
the Purchaser's knowledge after due inquiry, the Purchaser has not been
designated, and is not owned or controlled, by a "suspected terrorist" as
defined in Executive Order 13224. The Purchaser seeks to comply with all
applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the Purchaser hereby represents, warrants and
agrees that: (i) none of the cash or property that the Purchaser will use to
purchase the Notes has been or shall be derived from, or related to, any
activity that is deemed criminal under United States law; and (ii) no
disbursement by the Purchaser to Company, to the extent within the Purchaser's
control, shall cause the Purchaser to be in violation of the United States Bank
Secrecy Act, the United States International Money Laundering Control Act of
1986 or the United States International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001. the Purchaser shall promptly notify
Company if any of these representations ceases to be true and accurate regarding
the Purchaser. The Purchaser agrees to provide Company any additional
information regarding the Purchaser that Company deems necessary or convenient
to ensure compliance with all applicable laws concerning money laundering and
similar activities. The Purchaser understands and agrees that if at any time it
is discovered that any of the foregoing representations are incorrect, or if
otherwise required by applicable law or regulation related to money laundering
similar activities, the Purchaser shall, at its own cost and expense, undertake
appropriate actions to ensure compliance with applicable law or regulation,
including but not limited to segregation and/or redemption of the Purchaser's
investment in Company. The Purchaser further understands that Company may
release information about the Purchaser and, if applicable, any underlying
beneficial owners, to proper authorities if Company, in its sole discretion,
determines that it is in the best interests of Company in light of relevant
rules and regulations under the laws set forth in subsection (ii) above.
5.9 Accredited Investor. The Purchaser represents that it is
an accredited investor within the meaning of Regulation D under the Securities
Act.
5.10 Legends.
(a) The Note shall bear substantially the following legend:
13
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO RIVIERA TOOL COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
(b) The Note Shares and the Option Shares, if not issued by
DWAC system (as hereinafter defined), shall bear a legend which shall
be in substantially the following form until such shares are covered by
an effective registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES
ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO RIVIERA TOOL COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
(c) The Option shall bear substantially the following legend:
"THIS OPTION AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
THIS OPTION AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS OPTION MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS OPTION OR THE UNDERLYING SHARES OF COMMON
STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO RIVIERA TOOL
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
6. Covenants of the Company. The Company covenants and agrees with the
Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser,
promptly after it receives notice of issuance by the SEC, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock of the
14
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
6.2 Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon conversion of the Note and upon the
exercise of the Option on the Principal Market upon which shares of Common Stock
are listed (subject to official notice of issuance) and shall maintain such
listing so long as any other shares of Common Stock shall be so listed. The
Company will maintain the listing of its Common Stock on the Principal Market,
and will comply in all material respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD
and applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to the
Purchaser and promptly provide copies thereof to the Purchaser.
6.4 Reporting Requirements. The Company shall timely file with
the SEC all reports required to be filed pursuant to the Exchange Act and
refrain from terminating its status as an issuer required by the Exchange Act to
file reports thereunder even if the Exchange Act or the rules or regulations
thereunder would permit such termination.
6.5 Use of Funds. The Company agrees that it will use the
proceeds of the sale of the Notes and the Options for general working capital
purposes only and to pay its senior secured debt to Comerica Bank and
subordinated debt to The Hillstreet Fund II, L.P. in full, in the amounts set
forth in the Company's Disbursement Letter.
6.6 Access to Facilities. Company will permit any
representatives designated by Laurus (or any successor of Laurus), upon
reasonable notice and during normal business hours, at such person's expense and
accompanied by a representative of Company, to:
(a) have access to, visit, inspect, review, evaluate and make
physical verification and appraisals of Company's properties and the
Collateral;
(b) inspect, audit and copy (or take originals if necessary)
and make extracts from Company's Books and Records, including
management letters prepared by independent accountants; and
(c) discuss with Company's principal officers, and independent
accountants, Company's business, assets, liabilities, financial
condition, results of operations and business prospects.
Company will deliver to Laurus any instrument necessary for Laurus to obtain
records from any service bureau maintaining records for Company. If any
internally prepared financial information, including that required under this
Section is unsatisfactory in any manner to Laurus, Laurus may request that the
Accountants review the same. Laurus acknowledges that it may be provided
material, non-public information and acknowledges its continuing obligations
under
15
that certain Confidentiality and Standstill Agreement dated January 3, 2005 by
and between Company and Laurus (the "Confidentiality Agreement").
6.7 Taxes. Each of the Company and each of its Subsidiaries
will promptly pay and discharge, or cause to be paid and discharged, when due
and payable, all taxes, assessments and governmental charges or levies imposed
upon the income, profits, property or business of the Company and its
Subsidiaries; provided, however, that any such tax, assessment, charge or levy
need not be paid currently if the validity thereof shall currently and
diligently be contested in good faith by appropriate proceedings, such tax,
assessment, charge or levy shall have no effect on the lien priority of the
Purchaser in any property of the Company or any of its Subsidiaries and if the
Company and/or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto in accordance with GAAP, and provided, further,
that the Company and its Subsidiaries will pay all such taxes, assessments,
charges or levies forthwith upon the commencement of proceedings to foreclose
any lien which may have attached as security therefor.
6.8 Insurance. Each of the Company and its Subsidiaries will
keep its assets which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in similar business similarly situated
as the Company and its Subsidiaries; and the Company and its Subsidiaries will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner which the Company reasonably believes is customary for companies in
similar business similarly situated as the Company and its Subsidiaries and to
the extent available on commercially reasonable terms. The Company, and each of
its Subsidiaries, will jointly and severally bear the full risk of loss from any
loss of any nature whatsoever with respect to the assets pledged to the
Purchaser as security for their respective obligations hereunder and under the
Related Agreements. At the Company's and each of its Subsidiaries' joint and
several cost and expense in amounts and with carriers reasonably acceptable to
the Purchaser, each of the Company and each of its Subsidiaries shall (i) keep
all its insurable properties and properties in which it has an interest insured
against the hazards of fire, flood, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to the
Company's or the respective Subsidiary's including business interruption
insurance; (ii) maintain a bond in such amounts as is customary in the case of
companies engaged in businesses similar to the Company's or the respective
Subsidiary's insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of the
Company or any of its Subsidiaries either directly or through governmental
authority to draw upon such funds or to direct generally the disposition of such
assets; (iii) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (iv) maintain all
such worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which the Company or the respective
Subsidiary is engaged in business; and (v) furnish the Purchaser with (x) copies
of all policies and evidence of the maintenance of such policies at least thirty
(30) days before any expiration date, (y) excepting the Company's workers'
compensation policy, endorsements to such policies naming the Purchaser as
"co-insured" or "additional insured" and appropriate loss payable endorsements
in form and substance satisfactory to the Purchaser,
16
naming the Purchaser as loss payee, and (z) evidence that as to the Purchaser
the insurance coverage shall not be impaired or invalidated by any act or
neglect of the Company or any Subsidiary and the insurer will provide the
Purchaser with at least thirty (30) days notice prior to cancellation. The
Company and each Subsidiary shall instruct the insurance carriers that in the
event of any loss thereunder, the carriers shall make payment for such loss to
the Company and/or the Subsidiary and the Purchaser jointly. In the event that
as of the date of receipt of each loss recovery upon any such insurance, the
Purchaser has not declared an event of default with respect to this Agreement or
any of the Related Agreements, then the Company and/or such Subsidiary shall be
permitted to direct the application of such loss recovery proceeds toward
investment in property, plant and equipment that would comprise "Collateral"
secured by the Purchaser's security interest pursuant to the Master Security
Agreement or such other security agreement as shall be required by the
Purchaser, with any surplus funds to be applied toward payment of the
obligations of the Company to the Purchaser. In the event that the Purchaser has
properly declared an event of default with respect to this Agreement or any of
the Related Agreements, then all loss recoveries received by the Purchaser upon
any such insurance thereafter may be applied to the obligations of the Company
hereunder and under the Related Agreements, in such order as the Purchaser may
determine. Any surplus (following satisfaction of all Company obligations to the
Purchaser) shall be paid by the Purchaser to the Company or applied as may be
otherwise required by law. Any deficiency thereon shall be paid by the Company
or the Subsidiary, as applicable, to the Purchaser, on demand.
6.9 Intellectual Property. Each of the Company and each of its
Subsidiaries shall maintain in full force and effect its existence, rights and
franchises and all licenses and other rights to use Intellectual Property owned
or possessed by it and reasonably deemed to be necessary to the conduct of its
business.
6.10 Properties. Each of the Company and each of its
Subsidiaries will keep its properties in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and each of the Company and each of its Subsidiaries will at all times
comply with each provision of all leases to which it is a party or under which
it occupies property if the breach of such provision could, either individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
6.11 Confidentiality. The Company will not, and will not
permit any of its Subsidiaries to, disclose, and will not include in any public
announcement, the name of the Purchaser, unless expressly agreed to by the
Purchaser or unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement. Notwithstanding the
foregoing, the Company may disclose the Purchaser's identity and the terms of
this Agreement to its current and prospective debt and equity financing sources.
6.12 Required Approvals. For so long as twenty-five percent
(25%) of the principal amount of the Note is outstanding, the Company, without
the prior written consent of the Purchaser, shall not, and shall not permit any
of its Subsidiaries to:
(a) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt) whether secured or unsecured other than (i)
Company's indebtedness to
17
Laurus, (ii) an aggregate amount of $50,000 in unsecured debt
outstanding at any time, or (iii) as set forth on the Schedules
attached hereto and made a part hereof;
(b) cancel any debt owing to it in excess of $50,000 in the
aggregate during any 12 month period;
(c) assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other
Person, except the endorsement of negotiable instruments by Company for
deposit or collection or similar transactions in the ordinary course of
business;
(d) directly or indirectly declare, pay or make any dividend
or distribution on any class of its Stock other than to pay dividends
on shares of its Preferred Stock outstanding on the date hereof or
apply any of its funds, property or assets to the purchase, redemption
or other retirement of any Stock of Company outstanding on the date
hereof except as required under the terms of Company's outstanding
Preferred Stock issued and outstanding on the date hereof, or issue any
Preferred Stock;
(e) purchase or hold beneficially any margin Stock or other
margin securities or evidences of indebtedness of, make or permit to
exist any loans or advances to, or make any investment or acquire any
interest whatsoever in, any other Person, including any partnership or
joint venture, except (x) travel advances, (y) loans to Company's
officers and employees not exceeding at any one time an aggregate of
$10,000, and (z) existing Subsidiaries of Company;
(f) create or permit to exist any Subsidiary, other than any
Subsidiary in existence on the date hereof and listed in the Schedules
unless such new Subsidiary is designated by Laurus as either a
co-borrower or guarantor hereunder and such Subsidiary shall have
entered into all such documentation required by Laurus to grant to
Laurus a first priority perfected security interest in substantially
all of such Subsidiary's assets to secure the Obligations;
(g) directly or indirectly, prepay any indebtedness (other
than to Laurus and in the ordinary course of business), or repurchase,
redeem, retire or otherwise acquire any indebtedness (other than to
Laurus and in the ordinary course of business) except to make scheduled
payments of principal and interest thereof;
(h) enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a
portion of the assets or Stock of any Person or permit any other Person
to consolidate with or merge with it, unless (1) Company is the
surviving entity of such merger or consolidation, (2) no Event of
Default shall exist immediately prior to and after giving effect to
such merger or consolidation, (3) Company shall have provided Laurus
copies of all documentation relating to such merger or consolidation
and (4) Company shall have provided Laurus with at least thirty (30)
days' prior written notice of such merger or consolidation;
(i) materially change the nature of the business in which it
is presently engaged;
18
(j) become subject to (including, without limitation, by way
of amendment to or modification of) any agreement or instrument which
by its terms would (under any circumstances) restrict Company's right
to perform the provisions of this Agreement or any of the agreements
contemplated thereby;
(k) change its fiscal year or make any changes in accounting
treatment and reporting practices without prior written notice to
Laurus except as required by GAAP or in the tax reporting treatment or
except as required by law;
(l) enter into any transaction with any employee, director or
Affiliate, except in the ordinary course on arms-length terms; or
(m) ▇▇▇▇ Accounts under any name except the present name of
Company or its existing Subsidiaries.
6.13 Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.8 above at such time as:
(a) the holder thereof is permitted to dispose of such
Securities pursuant to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement
after such Securities are registered under the Securities Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the Purchaser and broker, if any.
6.14 Opinion. On the Closing Date, the Company will deliver to
the Purchaser an opinion acceptable to the Purchaser from the Company's external
legal counsel. The Company will provide, at the Company's expense, such other
legal opinions in the future as are deemed reasonably necessary by the Purchaser
(and acceptable to the Purchaser) in connection with the conversion of the Note
and exercise of the Option.
6.15 Margin Stock. The Company will not permit any of the
proceeds of the Note or the Option to be used directly or indirectly to
"purchase" or "carry" "margin stock" or to repay indebtedness incurred to
"purchase" or "carry" "margin stock" within the respective meanings of each of
the quoted terms under Regulation U of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect.
6.16 Financing Right of First Refusal.
(a) The Company hereby grants to the Purchaser a right of
first refusal to provide any Additional Financing (as defined below) to
be issued by the Company and/or any of its Subsidiaries, subject to the
following terms and conditions. From and after the date hereof, prior
to the incurrence of any additional indebtedness convertible into
Common Stock and/or the sale or issuance of any convertible equity
interests of the
19
Company or any of its Subsidiaries (an "Additional Financing"), the
Company and/or any Subsidiary of the Company, as the case may be, shall
notify the Purchaser of its intention to enter into such Additional
Financing. In connection therewith, the Company and/or the applicable
Subsidiary thereof shall submit a fully executed term sheet (a
"Proposed Term Sheet") to the Purchaser setting forth the terms,
conditions and pricing of any such Additional Financing (such financing
to be negotiated on "arm's length" terms and the terms thereof to be
negotiated in good faith) proposed to be entered into by the Company
and/or such Subsidiary. The Purchaser shall have the right, but not the
obligation, to deliver its own proposed term sheet (the "Purchaser Term
Sheet") setting forth the terms and conditions upon which the Purchaser
would be willing to provide such Additional Financing to the Company
and/or such Subsidiary. The Purchaser Term Sheet shall contain terms no
less favorable to the Company and/or such Subsidiary than those
outlined in Proposed Term Sheet. The Purchaser shall deliver such
Purchaser Term Sheet within ten business days of receipt of each such
Proposed Term Sheet. If the provisions of the Purchaser Term Sheet are
at least as favorable to the Company and/or such Subsidiary, as the
case may be, as the provisions of the Proposed Term Sheet, the Company
and/or such Subsidiary shall enter into and consummate the Additional
Financing transaction outlined in the Purchaser Term Sheet.
(b) The Company will not, and will not permit its Subsidiaries
to, agree, directly or indirectly, to any restriction with any person
or entity that limits the ability of the Purchaser to consummate an
Additional Financing with the Company or any of its Subsidiaries.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with
the Company as follows:
7.1 Confidentiality. The Purchaser will not disclose, and will
not include in any public announcement, the name of the Company, unless
expressly agreed to by the Company or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.
7.2 Non-Public Information. The Purchaser will not effect any
sales in the shares of the Company's Common Stock while in possession of
material, non-public information regarding the Company if such sales would
violate applicable securities law.
7.3 Limitation on Acquisition of Common Stock of the Company.
Notwithstanding anything to the contrary contained herein, in any Related
Agreement or any document, instrument or agreement entered into in connection
with any other transactions between the Purchaser and the Company, the Purchaser
may not acquire stock in the Company (including, without limitation, pursuant to
a contract to purchase, by exercising an option or warrant, by converting any
other security or instrument, by acquiring or exercising any other right to
acquire, shares of stock or other security convertible into shares of stock in
the Company, or otherwise, and such contracts, options, warrants, conversion or
other rights shall not be enforceable or exercisable) to the extent such stock
acquisition would cause any interest (including any original issue discount)
payable by the Company to Laurus not to qualify as "portfolio interest" within
the meaning of Section 881(c)(2) of the Code, by reason of Section
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881(c)(3) of the Code, taking into account the constructive ownership rules
under Section 871(h)(3)(C) of the Code (the "Stock Acquisition Limitation"). The
Stock Acquisition Limitation shall automatically become null and void without
any notice to the Company upon the earlier to occur of either (a) the Company's
delivery to Laurus of a Notice of Redemption (as defined in the Note) or (b) the
existence of an Event of Default (as defined in the Note) at a time when the
average closing price of the Company's common stock as reported by Bloomberg,
L.P. on the Principal Market for the immediately preceding five trading days is
greater than or equal to 150% of the Fixed Conversion Price (as defined in the
Note).
8. Covenants of the Company and the Purchaser Regarding
Indemnification.
8.1 Company Indemnification. The Company agrees to indemnify,
hold harmless, reimburse and defend the Purchaser, each of the Purchaser's
officers, directors, agents, affiliates, control persons, and principal
shareholders, against any and all claims, costs, expenses, liabilities,
obligations, losses or damages (including reasonable legal fees) of any nature,
incurred by or imposed upon the Purchaser which result, arise out of or are
based upon: (i) any misrepresentation by the Company or any of its Subsidiaries
or breach of any warranty by the Company or any of its Subsidiaries in this
Agreement, any other Related Agreement or in any exhibits or schedules attached
hereto or thereto; or (ii) any breach or default in performance by Company or
any of its Subsidiaries of any covenant or undertaking to be performed by
Company or any of its Subsidiaries hereunder, under any other Related Agreement
or any other agreement entered into by the Company and/or any of its
Subsidiaries and the Purchaser relating hereto or thereto.
8.2 Purchaser's Indemnification. The Purchaser agrees to
indemnify, hold harmless, reimburse and defend the Company and each of the
Company's officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claims, costs, expenses, liabilities,
obligations, losses or damages (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which result, arise out of or are based
upon: (i) any misrepresentation by the Purchaser or breach of any warranty by
the Purchaser in this Agreement or in any exhibits or schedules attached hereto
or any Related Agreement; or (ii) any breach or default in performance by the
Purchaser of any covenant or undertaking to be performed by the Purchaser
hereunder, or any other agreement entered into by the Company and the Purchaser
relating hereto.
9. [RESERVED].
10. Registration Rights.
10.1. The Company hereby grants registration rights to the
Purchaser pursuant to the Registration Rights Agreement.
10.2 Offering Restrictions. Except as previously disclosed in
the SEC Reports or in the Exchange Act Filings, or stock or stock options
granted to employees or directors of the Company (these exceptions hereinafter
referred to as the "Excepted Issuances"), neither the Company nor any of its
Subsidiaries will, prior to the full repayment or conversion of the Note
(together with all accrued and unpaid interest and fees related thereto), (x)
enter into any equity
21
line of credit agreement or similar agreement or (y) issue, or enter into any
agreement to issue, any securities with a variable/floating conversion and/or
pricing feature which are or could be (by conversion or registration)
free-trading securities (i.e. common stock subject to a registration statement).
11. Miscellaneous.
11.1 Governing Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND, AND THE PURCHASER, ON
THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE RELATED
AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT THE PURCHASER
AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE
OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL
BE DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE
OBLIGATIONS, TO REALIZE ON THE COLLATERAL (AS DEFINED IN THE MASTER
SECURITY AGREEMENT) OR ANY OTHER SECURITY FOR THE OBLIGATIONS (AS
DEFINED IN THE MASTER SECURITY AGREEMENT), OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF THE PURCHASER. THE COMPANY EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY
OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS.
(c) 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 RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN
CONTRACT, TORT, OR OTHERWISE BETWEEN THE PURCHASER AND/OR THE COMPANY
ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP
22
ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY OTHER
RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.
11.2 Severability. Wherever possible each provision of this
Agreement and the Related Agreements shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this
Agreement or any Related Agreement shall be prohibited by or invalid under
applicable law such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions thereof.
11.3 Survival. The representations and warranties of the
parties hereto contained in this Agreement shall survive the Closing for a
period of eighteen (18) months after the Closing; provided, however, that any
claim made with reasonable specificity by the party seeking to be indemnified
pursuant to Section 8 within the time period set forth in this Section 11.3
shall survive until such claim is finally and fully resolved. All covenants and
agreements contained herein shall remain in full force and effect for a period
of eighteen (18) months following the Closing, except for those covenants and
agreements that by their terms are to be performed in whole or in part after the
Closing, which shall remain in full force and effect for a period of eighteen
(18) months following the date by which such covenant or agreement is required
to be performed; provided, however, that any claim made with reasonable
specificity by the party seeking to be indemnified pursuant to Section 8 within
the time periods set forth in this Section 11.3 shall survive until such claim
is finally and fully resolved.
11.4 Successors. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each entity which shall
be a holder of the Securities from time to time, other than the holders of
Common Stock which has been sold by the Purchaser pursuant to Rule 144 or an
effective registration statement. The Purchaser may not assign its rights
hereunder to a competitor of the Company.
11.5 Entire Agreement; Maximum Interest. This Agreement, the
Related Agreements, the exhibits and schedules hereto and thereto and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and no
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein. Nothing contained herein or in any document referred
to herein or delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
amount permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Purchaser and thus refunded
to the Company.
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11.6 Severability. In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
11.7 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the
Purchaser under this Agreement may be waived only with the written
consent of the Purchaser.
(c) The obligations of the Purchaser and the rights of the
Company under this Agreement may be waived only with the written
consent of the Company.
11.8 Delays or Omissions. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under this Agreement or the
Related Agreements, shall impair any such right, power or remedy, nor shall it
be construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.
11.9 Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by
registered or certified mail, return receipt requested, postage
prepaid; or
(d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written
verification of receipt.
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All communications shall be sent as follows:
If to the Company, to: Riviera Tool Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief
Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to (which shall not
constitute notice hereunder):
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
MetLife Building
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. Annex, Esq.
If to the Purchaser, to: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
▇.▇. ▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
South Church Street
Grand Cayman, Cayman Islands
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
11.10 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement or any Related Agreement,
the prevailing party in such dispute shall be entitled to recover from the
losing party all fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Agreement and/or such Related
Agreement, including, without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
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11.11 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
11.12 Facsimile Signatures; Counterparts. This Agreement may
be executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
agreement.
11.13 Construction. Each party acknowledges that its legal
counsel participated in the preparation of this Agreement and the Related
Agreements and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Agreement or any Related Agreement to favor any
party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
RIVIERA TOOL COMPANY LAURUS MASTER FUND, LTD.
By: By:
--------------------------------- ---------------------------------
Name: Name:
--------------------------------- ---------------------------------
Title: Title:
--------------------------------- ---------------------------------
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