COMMON SHARE SUBSCRIPTION AGREEMENT
THIS COMMON SHARE SUBSCRIPTION AGREEMENT (this "Agreement") is made
between Ameritrans Capital Corporation, a Delaware corporation (the "Company"),
and the person executing this Agreement as an investor (the "Investor").
W I T N E S S E T H:
WHEREAS, the Company wishes to issue and sell to certain persons
(collectively the "Investors") (i) certain of the Company's authorized but
unissued common shares, $.0001 par value (such shares, the "Common Shares") and
(ii) warrants to purchase shares of the Company's authorized but unissued Common
Shares in the form attached as Annex A hereto (each a "Warrant" and,
collectively, the "Warrants"); and
WHEREAS, at the Closing, the Investor and the Company desire to enter into
a Registration Rights Agreement, substantially in the form attached hereto as
Annex B (the Registration Rights Agreement").
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Investor and the Company hereby agree
as follows (capitalized terms used in this Agreement shall, unless otherwise
defined herein, have the meanings ascribed to them in the Glossary attached as
Annex A hereto).
SECTION 1. TERMS OF PURCHASE AND ISSUANCE
1.1 Authorization of Sale of Shares and Warrants. The Company has
authorized the issuance and sale to the Investors of (i) up to an aggregate of
1,709,401 Common Shares (such shares, the "Shares") and (ii) up to an aggregate
of 427,350 Warrants.
1.2 Subscription. Subject to the terms and conditions hereof, the Investor
hereby subscribes to purchase the number of Shares specified on the signature
page hereof and one Warrant to purchase 25% of the number of Shares specified on
the signature page hereof; provided, however, that fractional shares shall not
be issued upon exercise of the Warrant and, in the event that 25% of the number
of Shares purchased would otherwise result in a fractional number of Shares
underlying the Warrants, such number shall be rounded down to the nearest whole
Share. Investor hereby tenders a check payable to "Stursberg & ▇▇▇▇▇, Escrow
Agent" or has wired funds to the Escrow Agent pursuant to the instructions set
forth in the Private Placement Memorandum (as defined below), in an amount equal
to US $5.85 for each Share (with each Share being accompanied by a warrant to
purchase 1/4th of a Share, rounded down to the nearest whole share) for which
the Investor has so subscribed (the "Aggregate Purchase Price").
1.3 Acceptance of Subscription. It is understood and agreed that the
Company shall have the right to accept or reject this Agreement, in whole or in
part, and to allocate a lesser number of Shares than subscribed for and that the
same shall be deemed to be accepted only when it is signed by an authorized
officer of the Company. Except as hereinafter provided, the undersigned
understands and acknowledges that the Company will rely on this Agreement and
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that the undersigned has no right to cancel, assign, terminate, or otherwise
change or amend this Agreement and that the Company has the right in its sole
discretion to refuse to accept this Agreement. If not accepted, this Agreement
shall be null and void and all funds deposited by the undersigned shall be
returned, without interest.
1.4 Sale and Purchase. At the Closing (as defined in Section 1.5 hereof)
and subject to the terms and conditions herein set forth, the Company shall
issue and sell to the Investor, and the Investor shall purchase from the
Company, (i) the number of Shares set forth on the signature page hereto and
(ii) one Warrant to purchase twenty-five percent (25%) of the number of Shares
specified on the signature page hereto (rounded down to the nearest whole
Share).
1.5 Closing. The initial closing (the "Initial Closing") of the sale and
purchase of the Shares and the Warrants to the Investor shall take place at the
offices of Stursberg & ▇▇▇▇▇ at 10:00 A.M. local time, as promptly as
practicable after the satisfaction or waiver of all the conditions set forth in
Sections 4 and 5 hereof (other than those conditions that will be satisfied at
or concurrent with the Initial Closing), or at such other time, date or place as
the Investor and the Company may agree (the date upon which the Initial Closing
occurs, the "Initial Closing Date"). In no even shall the Initial Closing occur
after January 25, 2006. After the Initial Closing, the Company may hold one or
more closings (each, including the Initial Closing, a "Closing" and the date
upon which any such closing occurs, a "Closing Date") from time to time as it
shall determine in its sole discretion. At the Closing, the Company will deliver
to the Investor a share certificate issued in the Investor's name representing
the number of Shares and the Warrants to be purchased by the Investor against
payment of the Aggregate Purchase Price therefor in immediately available funds
on behalf of the Investor by the Escrow Agent or otherwise. If the Initial
Closing does not take place on the agreed Initial Closing Date, any subscription
funds held by the Company or the Escrow Agent shall be promptly returned to the
Investor.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor, as of the date of the
Company's execution of this Agreement as set forth on the signature page, and as
of the Closing Date, as follows:
2.1 Organization and Qualification. The Company is a corporation duly
amalgamated, validly existing and in good standing under the laws of the state
of Delaware and has the requisite corporate power and authority to carry on its
business as it is now being conducted.
2.2 Capitalization.
(a) The authorized capital of the Company consists of (i) 5,000,000 Common
Shares, $.0001 par value, and (ii) and 1,000,000 Preferred Shares (the
"Preferred Shares"). Of such authorized capital stock, (i) 2,045,600 Common
Shares were issued and outstanding as of November 14, 2005, all of which are
validly issued and are fully paid, nonassessable and free of preemptive rights,
(ii)300,000 shares of 9 3/8% cumulative participating Preferred Shares
("Participating Preferred Shares") were issued and outstanding as of November
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14, 2005, (iii) as of November 14, 2005, 440,757 Common Shares were available
for issuance pursuant to the exercise of outstanding options to purchase Common
Shares and (iv) as of November 14, 2005, 30,000 Participating Preferred Shares
were available for issuance pursuant to the exercise of an outstanding options
to purchase units of Common Stock, Participating Preferred Shares and warrants
to purchase Common Stock.
(b) Except with respect to the Shares and the Warrants, as set forth in
subsection 2.2(a) above, or as stated in Section 2.2(b) of the Disclosure
Schedule attached hereto, there are no outstanding options, warrants,
subscriptions, calls, convertible securities or other rights, agreements,
arrangements or commitments (contingent or otherwise) (including any right of
conversion or exchange under any outstanding security, instrument or other
agreement) obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, any shares or obligating them to grant, extend or
enter into any such agreement or commitment.
(c) Upon consummation of each Closing, including receipt by the Company of
the Aggregate Purchase Price payable pursuant to Section 1.5 hereof, the Shares
and the Warrants purchased by the Investor will be validly issued, fully paid
and nonassessable, and the Common Shares issuable upon exercise of such Warrants
(the "Underlying Warrant Shares") will have been duly authorized, and upon
issuance of the Underlying Warrant Shares upon exercise of the Warrants, in
accordance with the terms thereof, such Underlying Warrant Shares will be
validly issued, fully paid and nonassessable.
2.3 Power and Authority; Non-contravention; Government Approvals.
(a) Power and Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and the Ancillary Documents and to
consummate the transactions contemplated hereby and thereby. This Agreement, the
Ancillary Documents and the transactions contemplated hereby and thereby have
been duly approved by the Board of Directors of the Company. No other corporate
proceedings on the part of the Company are necessary to authorize the execution
and delivery of this Agreement and the Ancillary Documents or the consummation
by the Company of the transactions contemplated hereby and thereby. This
Agreement has been, and when executed and delivered in accordance with the terms
hereof the Ancillary Documents will have been, duly executed and delivered by
the Company. This Agreement constitutes, and when executed and delivered in
accordance with the terms hereof the Ancillary Documents will constitute, valid
and binding obligations of the Company, enforceable against it in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to enforcement of
creditors' rights generally and by general equitable principles. Neither the
Company nor any of its subsidiaries is in violation of any of the provisions of
their respective articles, bylaws or equivalent organizational documents in any
material respect.
(b) Non-contravention. Except as set forth in the Disclosure Schedule, the
execution, delivery and performance of this Agreement and the Ancillary
Documents by the Company: (i) will not violate or conflict with any provisions
of the articles or bylaws of the Company or any of its subsidiaries, (ii) will
not conflict with or constitute a violation of any applicable law, order,
injunction, regulation or ruling of any governmental authority applicable to the
Company or any of its subsidiaries or by which the Company or any of its
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subsidiaries or any of their respective properties or assets are bound, and
(iii) will not, either alone or with the giving of notice or the passage of
time, or both, modify, violate, conflict with or accelerate the performance
required by any agreement, note, license, franchise, permit or other instrument
and will not result in the creation or imposition of (or the obligation to
create or impose) any Lien on any of the Company's or any of its subsidiaries'
assets.
(c) Approvals. Except for (i) compliance with any applicable requirements
of the HSR Act, (ii) compliance with any applicable requirements of the
Securities Act, Exchange Act, 1958 Act and the rules and regulations of NASDAQ
(including but not limited to NASDAQ SmallCap), and (iii) such filings as may be
required under any applicable state, or blue sky (the filings and approvals
referred to in clauses (i) through (iii) being herein referred to collectively
as the "Company Required Statutory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent, approval, order or
permit of, any governmental or regulatory body or authority or any other Person
is necessary for the execution and delivery of this Agreement and the Ancillary
Documents by the Company or the consummation by the Company of the transactions
contemplated hereby and thereby except to the extent that the failure to obtain
any such authorization, consent, approval or order or to make any such
registration, declaration, filing or notice, would not have a Company Material
Adverse Effect or a material adverse effect on the validity, binding effect or
enforceability of this Agreement or the Ancillary Documents or the ability of
the Company to perform its obligations hereunder or thereunder.
2.4 SEC Reports; Financial Statements.
(a) Since July 1, 2002, the Company has filed with the SEC all forms,
statements, reports and documents (including all exhibits, post-effective
amendments and supplements thereto) required to be filed by it under each of the
Securities Act and the Exchange Act (collectively, the "Company SEC Reports"),
all of which complied when filed in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
The Company has provided to the Investor a Confidential Investment Summary dated
July 29, 2005 in connection with the offering of Shares and Warrants to be
purchased pursuant to this Agreement (the "Private Placement Memorandum"). As of
its date, the Private Placement Memorandum did not contain any untrue statement
of material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) Each of the consolidated financial statements incorporated by
reference in the Private Placement Memorandum, together with the related notes
and schedules (collectively, the "Company Financial Statements"), has been
prepared in accordance with GAAP applied on a consistent basis, and fairly
presents the consolidated financial position of the Company and its subsidiaries
as of the respective dates thereof and the results of their operations and cash
flow for the periods then ended, subject, in the case of unaudited interim
financial statements, to normal year-end adjustments (none of which the Company
reasonably believes are or will be material in amount) and the omission of
footnotes.
2.5 Absence of Undisclosed Liabilities. Except as disclosed in the Private
Placement Memorandum or as set out in Section 2.5 of the Disclosure Schedule,
neither the Company nor any of its subsidiaries had, at June 30, 2005 or has
incurred since that date, any Liabilities, except for (a) Liabilities reflected
in the financial statements contained in Company SEC Reports filed prior to the
date hereof, (b) current Liabilities which were incurred after June 30, 2005 in
the ordinary course of business and consistent with past practice, (c)
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Liabilities which are of a nature not required to be reflected in the Company
Financial Statements in accordance with GAAP consistently applied and which were
incurred in the ordinary course of business and (d) other Liabilities in an
aggregate amount not exceeding US $500,000.
2.6 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports or in the Private Placement Memorandum, since June 30, 2005,
the business of the Company and its subsidiaries has been conducted in the
ordinary course consistent with past practice and there has not been any event,
occurrence or development that has had, or could reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
2.7 Litigation. There are no claims, suits, actions or proceedings pending
or, to the knowledge of the Company, threatened against, relating to or
affecting the Company, before any court, governmental department, commission,
agency, instrumentality or authority, or any arbitrator that seek a remedy (at
law or in equity) as a result of or otherwise in connection with this Agreement
and the transactions contemplated hereby. Neither the Company nor any of its
subsidiaries nor any of their respective properties or assets is subject to any
judgment, decree, injunction, or order of any court, governmental department,
commission, agency, instrumentality or authority or arbitrator which prohibits
or restricts the consummation of the transactions contemplated hereby.
2.8 Title to and Condition of Assets. Each of the Company and its
subsidiaries has good and marketable title to, or, in the case of leased
properties and assets, has good and valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in, or which are necessary to conduct, the business of the Company and its
subsidiaries as currently conducted, free and clear of all Liens, except for (a)
Liens arising under the Company's intercreditor agreements with its banks, (b)
security interests granted to the SBA, and (c) other Liens arising in the
ordinary course of business none of which are with respect to obligations that
are material in amount.
2.9 Insurance. The Company and each of its subsidiaries has in effect
insurance coverage, including directors and officers' liability insurance, with
reputable insurers which, in respect of amounts, premiums, types and risks
insured, constitutes reasonably adequate coverage against all risks customarily
insured against by companies comparable in size and operations to the Company
and its subsidiaries. Neither the Company nor any of its subsidiaries has
received any notice of cancellation of any insurance policy or binder currently
in effect.
2.10 No Violation of Law; Licenses; Permits and Registration. Except as
otherwise disclosed in the Company's SEC Reports, neither the Company nor any of
its subsidiaries is in material violation of, or has been given notice or been
charged with, or, to the Company's knowledge, is being investigated with respect
to, any material violation of, any law, statute, order, rule, regulation,
ordinance or judgment of any governmental or regulatory body or authority or
arbitration panel. Each of the Company and its subsidiaries has all material
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permits, licenses, approvals, authorizations of and registrations under all
Federal, state, local, and foreign laws applicable to it, and from all
applicable governmental authorities as are required by the Company and its
subsidiaries to carry on their respective businesses as currently conducted.
2.11 Brokers and Finders. Except as described in the Private Placement
Memorandum or set forth in Section 2.12 of the Disclosure Schedule, the Company
is not a party to or bound by any contract, arrangement or understanding with,
or subject to any claim by, any person or firm which may result in an obligation
of the Company to pay any finder's fees, brokerage or agent commissions or other
like payments in connection with the transactions contemplated hereby.
2.12 Material Contracts. Neither the Company nor any of its subsidiaries
is in material breach or violation of or in default in the performance or
observance of any terms or provisions of, and no event has occurred which, with
notice, lapse of time or both, could result in a default under any contract,
agreement, lease or deed that is material to the business or operation of the
Company and its subsidiaries taken as a whole (a "Material Contract"). To the
knowledge of the Company, no other party to any Material Contract is in material
breach thereof or default thereunder.
2.13 Delaware Law. The Company's original Certificate of Incorporation
includes a provision pursuant to which the Company elected not to be governed by
Section 203 of the Delaware General Corporation Law. As of the date hereof, such
provision contained in the Company's original Certificate of Incorporation has
not been modified and is in full force and effect.
2.14 Securities Law Compliance. Assuming the representations and
warranties of the Investor set forth in Section 3 hereof, the issuance and sale
of the Shares and a Warrants pursuant to this Agreement will be exempt from the
prospectus filing and registration requirements of applicable federal and state
securities laws.
SECTION 3. INVESTOR REPRESENTATIONS
3.1 Representations. The Investor hereby represents and warrants to the
Company with respect to the Investor's purchase of Shares and Warrants hereunder
that:
(a) The Investor is resident in the jurisdiction set forth below the
Investor's name on the signature page hereto.
(b) If the Investor is an individual, he or she has obtained the age
of majority and is legally competent to execute this Agreement and the Ancillary
Documents and to take all actions required pursuant thereto.
(c) If the Investor is a corporation, partnership, unincorporated
association or other entity, the Investor has the legal capacity and authority
to execute this Agreement and the Ancillary Documents and to take all actions
required pursuant thereto.
(d) The execution of this Agreement and each of the Ancillary
Documents to which the Investor is a party has been duly and validly authorized
by all necessary action on the part of the Investor, has been duly and validly
executed and delivered by the Investor, and constitutes a valid, binding
agreement of the Investor, enforceable in accordance with its terms, except as
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may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to enforcement of creditors' rights generally and by
general equitable principles.
(e) Neither the execution and delivery of this Agreement or the
Ancillary Documents to which the Investor is a party, or any other document or
instrument to be executed by the Investor in connection with the transactions
contemplated thereby nor the consummation of the transactions contemplated
thereby, nor the performance by the Investor of its covenants and agreements
thereunder, (i) violates any law, statute, ordinance, regulation, order,
judgment or decree of any court or other governmental authority applicable to
the Investor, or (ii) violates or will violate, or conflicts with or will
conflict with, or results in or will result in any breach of any of the terms
of, or constitutes or will constitute a default under, any contract or agreement
to which the Investor is a party or by which the Investor or any of its assets
is subject to or bound.
(f) Except as set forth in Section 2.11, no broker, finder, agent or
similar intermediary has acted on behalf of the Investor in connection with this
Agreement or the transactions contemplated hereby and, except as set forth in
Section 2.11, there are no brokerage commissions, finder's fees or similar fees
or commissions payable in connection therewith.
(g) The Investor acknowledges that it has been advised that it
and/or the Company may be required to provide to applicable securities
regulatory authorities with a list setting forth the identities of the
beneficial purchasers of the Shares and Warrants and the Investor will provide
to the Company and applicable securities regulatory authorities all such
information concerning the Investor as may be required to comply with applicable
securities laws. The Investor further acknowledges that if it is acting on
behalf of beneficial purchasers, the Investor has due and proper authority to
act on behalf of each such beneficial purchaser in connection with the
transactions contemplated hereby.
(h) The Investor acknowledges that the Company has not made any
written representations, warranties or covenants in respect of the Company, its
business, results of operations, financial condition or prospects, or the
offering of Shares and Warrants to be purchased pursuant to this Agreement,
except as expressly set forth in this Agreement. Without limiting the generality
of the foregoing, except as may be provided herein, no person has made any
written or oral representation to the Investor that any person will re-sell or
re-purchase the Shares, the Warrants or the Underlying Warrant Shares, or refund
any of the purchase price of the Shares, the Warrants or the Underlying Warrant
Shares.
(i) Except for the Private Placement Memorandum, the Investor has
not received, nor has the Investor requested, nor does the Investor have any
need to receive, any prospectus, sales or advertising literature, offering
memorandum or any other document describing the business and affairs of the
Company in order to assist it in making an investment decision in respect of the
purchase of the Shares and the Warrants (including the Underlying Warrant
Shares) pursuant to this Agreement.
(j) The obligations of the Investor under this Agreement, the
Registration Rights Agreement and any other documents delivered in connection
herewith and therewith (collectively, the "Transaction Documents") are several
and not joint with the obligations of any other purchaser of Shares and
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Warrants, and the Investor shall not be responsible in any way for the
performance of the obligations of any other purchaser of Shares and Warrants
under any Transaction Document. The decision of the Investor to purchase Shares
and Warrants pursuant to the Transaction Documents has been made by the Investor
independently of any other purchaser of Shares and Warrants. Nothing contained
herein or in any Transaction Document, and no action taken by any purchaser of
Shares and Warrants pursuant hereto, shall be deemed to constitute such
purchasers as a partnership, an association, a joint venture, or any other kind
of entity, or create a presumption that the purchasers of Shares and Warrants
are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Documents. The Investor
acknowledges that no other purchaser of Shares and Warrants has acted as agent
for the Investor in connection with making its investment hereunder and that no
other purchaser of Shares and Warrants will be acting as agent of the Investor
in connection with monitoring its investment in the Shares and Warrants or
enforcing its rights under the Transaction Documents. The Investor shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other purchaser of
Shares and Warrants to be joined as an additional party in any proceeding for
such purpose.
3.2 Representations by US Investor. The Investor, if resident in the
United States, hereby represents to the Company with respect to the Investor's
purchase of Shares and Warrants hereunder that:
(a) The Investor is acquiring the Shares and the Warrants (including
the Underlying Warrants Shares) for its own account, for investment, and not
with a view to any "resale" or "distribution" thereof within the meaning of the
Securities Act.
(b) The Investor understands that because the Shares, the Warrants
and the Underlying Warrants Shares have not been registered under the Securities
Act, it cannot dispose of any or all of such securities unless such securities
are subsequently registered under the Securities Act or exemptions from such
registration are available. The Investor understands that each certificate or
other instrument representing the Shares, the Warrants and the Underlying
Warrants Shares will bear the following legend or one substantially similar
thereto:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act". These
securities have been acquired for investment and not with a view to distribution
or resale, and may not be sold or otherwise transferred without an effective
registration statement for such securities under the Act, unless there is
available to the transferor an exemption from such registration, and/or
prospectus filing and registration requirements. The Company may request an
opinion of counsel as to the availability of any such exemption."
(c) The Investor is sufficiently knowledgeable and experienced in
the making of investments so as to be able to evaluate the risks and merits of
its investment in the Company, and is able to bear the economic risk of loss of
its investment in the Company.
(d) The Investor will execute and deliver within the applicable time
periods all documentation as may be required to be executed by the Investor by
applicable securities laws to permit the purchase of the Shares and Warrants by
the Investor on the terms herein set forth.
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(e) The Investor believes it has received all the information it
considers necessary or appropriate for deciding whether to purchase the Shares
and Warrants (including the Underlying Warrants Shares). The Investor has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Shares and the Warrants (including
the Underlying Warrants Shares) and the business, properties and financial
condition of the Company. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 or the right of the
Investor to rely thereon.
(f) The Investor is an "accredited investor" within the meaning of
SEC Rule 501 of Regulation D of the Securities Act, as presently in effect and
is purchasing the Shares and Warrants (including the Underlying Warrants Shares)
hereunder as principal, not for the benefit of any other person and not with a
view to the sale or distribution of all or any part of the Shares, the Warrants,
or the Underlying Warrants Shares.
(g) The Investor has been advised that the Shares, the Warrants and
the Underlying Warrants Shares have not been registered under the Securities Act
or under the "blue sky" laws of any jurisdiction and that the Company, in
issuing such securities is relying upon, among other things, the representations
and warranties of the Investor contained in this Section 3.
SECTION 4. MUTUAL CLOSING CONDITIONS
4.1 Mutual Closing Conditions to Closing. The Investor's obligation to
purchase and pay for its Shares and Warrants at the Closing, and the Company's
obligation to issue the Shares and the Warrants to the Investor and perform its
other obligations hereunder at the Closing, shall be subject to the fulfillment
to such party's satisfaction (or waiver in writing by the Company and the
Investor on or before the Closing Date) of the following conditions:
(a) Waiting Periods. All applicable waiting periods, if any, under
the HSR Act shall have expired or been terminated.
(b) No Order. No preliminary or permanent injunction or other order
or decree by any court or administrative or regulatory body which prevents the
consummation of the transactions at the Closing contemplated hereby shall have
been issued and remain in effect (the Company and the Investor agreeing to use
their reasonable best efforts to have any such injunction, order or decree
lifted).
(c) Consents. All governmental waivers, consents, orders and
approvals legally required, if any, for the consummation of the transactions at
the Closing contemplated hereby shall have been obtained and be in effect,
except where the failure to obtain the same would not be reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect
following the Closing.
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(d) No Conflicting Laws. No statute, rule or regulation shall have
been enacted by any state, provincial or Federal government or governmental
agency which would prevent the consummation of the transactions at the Closing
contemplated hereby.
(e) Minimum Condition. The Company shall have received and accepted
subscription agreements substantially equivalent to this Agreement from
Investors for an aggregate of five hundred twelve thousand, eight hundred twenty
(512,820) Shares together with one Warrants for every four (4) Shares purchased,
which subscription agreements shall remain in full force and effect, enforceable
by the Company in accordance with their respective terms (such condition, the
"Minimum Condition"), and the concurrent transactions described in the Private
Placement Memorandum shall be consummated simultaneously with the Closing
hereunder.
SECTION 5. SEPARATE CLOSING CONDITIONS
5.1 Investor's Closing Conditions. The Investor's obligation to
purchase and pay for its Shares and Warrants at the Closing shall be subject to
the fulfillment to the Investor's satisfaction on or before the Closing Date (or
waived in writing by the Investor) of the following conditions:
(a) Satisfaction of Conditions. The representations and warranties
of the Company contained in this Agreement shall be, if specifically qualified
by materiality or Company Material Adverse Effect, true in all respects, and, if
not so qualified, shall be true in all material respects, in each case as of the
date of execution of this Agreement by the Company and as of the Closing Date,
and the covenants and agreements contained in this Agreement to be complied with
by the Company on or before the Closing shall have been complied with in all
material respects. The Company shall have delivered to the Investor a
certificate dated as of the Closing Date to the foregoing effect.
(b) Delivery of the Share Certificates and Warrants. The Company
shall have executed and delivered to the Investor (or shall have caused to be
executed and delivered to the Investor by the appropriate persons) (i) a stock
certificate issued to the Investor evidencing the Shares issuable to the
Investor at the Closing and (ii) Warrants to purchase 25% of the number of
Shares purchased by the Investor, rounded down to the nearest whole Share.
(c) Registration Rights Agreement. The Company shall have duly
authorized, executed and delivered to the Investor the Registration Rights
Agreement.
5.2 Company's Closing Conditions. The Company's obligations to issue the
Shares and Warrants to the Investor at the Closing and perform its other
obligations hereunder with respect to the Investor at the Closing shall be
subject to the fulfillment to the Company's satisfaction at or before the
Closing Date (or waiver in writing by the Company) of the following conditions:
(a) Satisfaction of Conditions. The representations and warranties
of the Investor contained in this Agreement shall be, if specifically qualified
by materiality, true in all respects, and, if not so qualified, shall be true in
all material respects, in each case as of the date of the Investor's execution
of this Agreement and as of the Closing Date, and the covenants and agreements
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contained in this Agreement to be complied with by the Investor on or before the
Closing shall have been complied with in all material respects. If requested,
the Investor shall have delivered to the Company a certificate dated as of the
Closing Date to the foregoing effect.
(b) Purchase of Shares and Warrants. The Investor shall have
purchased the Shares and Warrants to be purchased by the Investor at the Closing
pursuant to the terms of this Agreement, and the Company shall have received the
Aggregate Purchase Price from the Investor, through the Escrow Agent or
otherwise, in accordance with the terms of this Agreement.
SECTION 6. COVENANTS
6.1 Expenses. Each party hereto shall bear and pay its own fees and
expenses incurred in connection with the negotiation, execution, delivery and
performance of this Agreement, the Ancillary Documents and the transactions
contemplated hereby and thereby.
6.2 Conduct of Business by the Company Pending Final Closing. The Company
covenants and agrees that, prior to each Closing or earlier termination of this
Agreement as provided herein, except as contemplated by this Agreement or as
disclosed in the Private Placement Memorandum the Company shall, and shall cause
its subsidiaries to, act and carry on their respective businesses in the
ordinary course of business consistent with past practice and use its and their
respective reasonable best efforts to preserve intact their current material
business organizations, keep available the services of their current officers
and employees (except for terminations of employees in the ordinary course of
business) and preserve their material relationships with others having business
dealings with them.
6.3 All Reasonable Efforts; Agreement to Cooperate.
(a) Subject to the terms and conditions herein provided, each party
hereto shall use its reasonable best efforts to take, or cause to be taken, all
action and to do, or cause to be done, and to assist and cooperate with the
other party in doing, all things necessary, proper or advisable consistent with
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement; provided, however, that nothing in
this Section 6.3 shall require the Investor or the Company to agree to any
modification of this Agreement or any of the Ancillary Documents or the Investor
to make an investment in the Company that is greater than the amount set forth
opposite the Investor's name on the signature page hereto.
(b) Without limiting the generality of the foregoing, and
notwithstanding anything in this Agreement to the contrary, the Company shall
use its reasonable best efforts to take or cause to be taken all reasonable
action and to do, or cause to be done, and to assist and cooperate with the
other party hereto in doing, all things necessary, proper or advisable to obtain
all governmental waivers, consents, authorizations, orders and approvals, all
consents, amendments to or waivers from other parties under the terms of all
Material Contracts and all other material permits, concessions, franchises or
licenses applicable to the Company or its subsidiaries required as a result of
the transactions contemplated by this Agreement.
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6.4 Selection of Counsel by Seller Shareholders. The Company covenants and
agrees that the selling shareholder purchasing the greatest number of Shares and
Warrants in the Offering shall have the right, in its sole discretion, to select
counsel to represent all the selling shareholders in connection with the filing
and effectiveness of the registration statement required to be filed pursuant to
the Registration Rights Agreement.
6.5 Board Nominee. Subject to compliance with the Investment Company Act
of 1940, as amended, and the rules and regulations promulgated thereunder, the
Company covenants and agrees that so long as Prides Capital Partners, LLC and
its affiliates ("Prides") is a shareholder owning beneficially five percent (5%)
or more of the Company's outstanding voting shares, the Company will cause one
person to be selected by Prides to be nominated for election as a director at
each annual meeting of shareholders of the Company commencing with the Company's
next annual meeting of shareholders and, further, to use its best efforts to
cause such nominee to be elected.
6.6 The Company agrees that pursuant to the Registration Rights Agreement
it shall prepare and file with the SEC on or before January 31, 2006 (the
"Filing Date") on one occasion a registration statement on Form N-2 (or other
applicable form), covering the Shares and the Shares underlying the Warrants
sold to the selling shareholders. The Company further covenants and agrees that
it will use its best efforts to cause such registration statement to be declared
effective no later than one hundred and twenty (120) days after the Filing Date
(the "Effective Date"). In the event that registration statement is not filed by
the Filing Date, the Company will pay to the selling shareholders a total of two
thousand five hundred dollars ($2,500) per week pro rata in proportion to their
respective percentage of Shares and Warrants purchased or a fraction thereof for
each week or part thereof that the date of filing is later than the Filing Date.
In addition, the Company will pay to the selling shareholders a total of one
thousand and five hundred dollars ($1,500) pro rata in proportion to their
respective percentage ownership for each week that the registration statement
has not been declared effective by the SEC after the Effective Date; provided,
however, if at any time the SEC has notified the Company (orally or in writing)
that it is prepared to declare the registration statement effective, but the
Company is requested by Prides to postpone the effectiveness because it has not
yet obtained approval from the SBA to acquire ten percent (10%) or more of the
Company's outstanding voting shares, the Company may postpone effectiveness, but
the selling shareholders will no longer be entitled to any payment if the SEC
has not declared the registration statement effective by the Effective Date.
SECTION 7. ACCESS
7.1 Access; Notification of Certain Matters.
(a) Prior to the Closing Date or the earlier termination of this
Agreement as provided herein, upon reasonable notice. the Company shall afford
the investor and its representatives reasonable opportunity to contact the
Company and request additional information to the extent permissible under
applicable securities laws.
(b) Prior to the Closing Date or the earlier termination of this
Agreement as provided herein, the Company shall promptly (and in any event
within five (5) business days after obtaining knowledge thereof) notify the
Investor of any action or event which could reasonably be expected to have a
Company Material Adverse Effect.
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7.2 Confidential Information. The Company and the Investor for themselves,
their respective directors, officers, employees, Affiliates, agents and
representatives covenant with each other that they each will use all information
provided by or relating to the other party acquired by them pursuant to the
provisions of this Agreement or in the course of negotiations with, or
examinations of, the other party (the "Confidential Information") only in
connection with the transactions contemplated hereby and not in any way
detrimental to the other party and shall cause the Confidential Information
obtained by them pursuant to this Agreement and such negotiations and
examinations to be treated as confidential, except as may otherwise be required
by law or the rules or regulations of NASDAQ including but not limited to NASDAQ
SmallCap Market or as may be necessary or appropriate in connection with the
enforcement of this Agreement or any instrument or document referred to herein
or contemplated hereby, and provided that to the extent that any such party or
any Affiliate thereof may become legally compelled to disclose any Confidential
Information, such party shall give notice to and consult with the party
providing such information prior to disclosing such information. Notwithstanding
the foregoing, no recipient of Confidential Information (each, a "Recipient")
shall be required to maintain the confidentiality of Confidential Information
that (i) is or becomes generally available to the public other than as a result
of disclosure by the Recipient or any party to whom the Recipient has disclosed
such information; (ii) is obtained by the Recipient, on a non-confidential
basis, from a third party entitled to disclose such information or (iii) is
already known by the Recipient at the time such information is received by the
Recipient. In the event of termination of this Agreement, each Recipient will
cause to be delivered to the party providing such information all documents,
work papers and other material containing Confidential Information obtained by
it from such party, whether so obtained before or after the execution of this
Agreement.
SECTION 8. TERMINATION
8.1 Termination. This Agreement may be terminated pursuant to written
notice of such termination to the other party as follows:
(a) by mutual written consent of the Company and the Investor;
(b) by either the Company or the Investor if the Initial Closing
shall not have occurred on or before January 25, 2006; provided, however, that
the right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose breach has caused the failure of the Closing to
occur on or before such date;
(c) by either the Company or the Investor if there shall be any
restraining order, injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the Closing or
any of the other transactions contemplated hereby which is final and
nonappealable;
(d) by the Investor upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, such
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that the conditions set forth in Section 5.1(a) would not be satisfied
("Terminating Company Breach"); provided, however, that if such Terminating
Company Breach is curable by the Company through the exercise of its reasonable
best efforts and for as long as the Company continues to exercise such efforts,
but not beyond the date specified in paragraph (b) above, the Investor may not
terminate this Agreement under this Section 8.1(d); and
(e) by the Company at any time, in its sole discretion.
8.2 Effect of Termination. In the event of termination of this Agreement
pursuant to Section 8.1, this Agreement shall forthwith become void as to the
Company and the Investor, there shall be no liability under this Agreement on
the part of the Company or the Investor, and all rights and obligations of the
Company and the Investor shall cease, other than the obligations set forth in
Sections 6.1 and 7.2 hereof; provided, however, that nothing herein shall
relieve any party from liability for any willful or intentional breach of any
covenant or agreement of such party contained in this Agreement.
SECTION 9. GENERAL
9.1 Amendments, Waivers and Consents. No covenant or other provision
hereof may be waived otherwise than by a written instrument signed by the party
so waiving such covenant or other provision. The waiver or failure to insist
upon strict compliance with any condition or provision hereof shall not operate
as a waiver of, or estoppel with respect to, any subsequent or other waiver or
failure. This Agreement may not be amended or modified except by an instrument
in writing signed by the Company and the Investor.
9.2 Survival of Representations, Warranties and Covenants, Assignability
of Rights. All representations and warranties made herein and in the
certificates, exhibits or schedules delivered or furnished by or on behalf of a
party to the other party in connection herewith shall terminate as of the
Closing. Except as otherwise provided in this Agreement, all covenants,
agreements, representations and warranties shall inure to the benefit of the
successors and assigns of the parties.
9.3 Governing Law. This Agreement shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws of the State of New
York (without giving effect to principles of conflicts of law the effect of
which would cause the application of domestic substantive laws of any other
jurisdiction). Any disputing between the parties and arising under this
Agreement shall be subject to the exclusive jurisdiction of the federal and
state courts of New York, New York County.
9.4 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts (including by facsimile), each of which when so executed
and delivered shall be taken to be an original; but such counterparts shall
together constitute but one and the same document.
9.5 Notices and Demands. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally, three
business days after being mailed by registered or certified mail (return receipt
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requested) or when sent via confirmed facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) If to any Investor, to the address set forth on the Investor's
signature page hereto, and
(ii) If to the Company:
Ameritrans Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
Stursberg & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
9.6 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
9.7 Integration. This Agreement, including the exhibits, documents and
instruments referred to herein or therein, constitutes all of the agreements and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
9.8 No Assignment. This Agreement may not be assigned, pledged,
hypothecated or otherwise transferred by the Company or the Investor.
9.9 Third-Party Beneficiary. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any Person
other than the parties hereto any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.
[Signature pages follow]
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IN WITNESS WHEREOF, the undersigned have executed this Common Share
Subscription Agreement as of the dates indicated below.
INVESTOR
Date: ____________________________________
Name: ____________________________________
Number of Shares: ________________________
Aggregate Purchase Price: $_______________
Country of Residence: ____________________
State of Residence: ______________________
Address: _________________________________
__________________________________________
__________________________________________
__________________________________________
ACCEPTED:
AMERITRANS CAPITAL CORPORATION
Date: ________________________________
By: __________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer and President
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ANNEX A
GLOSSARY
As used herein, the following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person, directly
or indirectly, controlling, controlled by, or under common control with, such
Person. For purposes of this definition, the term "control" (including the
correlative terms "controlling", "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Ancillary Documents" means the Registration Rights Agreement and the
Warrant.
"Company Material Adverse Effect" shall mean any material adverse effect
on the business, operations, assets, condition (financial or other) or results
of operations of the Company and its subsidiaries, taken as a whole.
"Disclosure Schedule" means the disclosure statement delivered at or prior
to the execution of this Agreement by the Company to the Investor setting out
certain information relating to the Company.
"Escrow Agent" means Stursberg & ▇▇▇▇▇, who shall act as escrow agent for
the receipt from Investors and disbursement to the Company (or return to the
applicable Investor in the case of termination of a subscription agreement as to
such Investor) of subscription funds pursuant to that certain Escrow Agreement
dated as of ___, 2005 between the Company and the Escrow Agent.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Federal" shall mean of or relating to the federal government of the
United States.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America from time to time.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
"Liability" means any liability or obligation (whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated and whether due or become due).
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"Lien" means any mortgage, pledge, security interest, encumbrance, lien,
claim or charge of any kind (including, but not limited to, any conditional sale
or other title retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in connection with such
mortgage, pledge, security interest, encumbrance, lien or charge).
"NASDAQ Small Cap" shall mean The NASDAQ Small Cap Stock Market.
"1958 Act" means he U.S. Small Business Investment Company Act of 1958.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or any other entity or organization.
"SBA" means United States Small Business Administration.
"SEC" means the Securities and Exchange Commission.
"Registration Rights Agreement" means the registration rights agreement by
and between the Company and each Investor, a copy of which agreement is annexed
hereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
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DISCLOSURE SCHEDULE
Section Description
2.2(b) Employee Stock Option Plan
Non-Employee Director Stock Option Plan
2.3(b) Written approval by SBA is required for purchases of 10%
or more of the Company's outstanding voting securities.
2.11 Moness, Crespi and ▇▇▇▇ - 5% commission
The Noble Financial Group - 6% commission
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ANNEX B
(form of Registration Rights Agreement)
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