EXHIBIT 4.2
SUMMA INDUSTRIES
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of December 14, 2001, by and among Summa Industries, a
Delaware corporation (the "Company"), and the parties listed on the Schedule of
Investors attached hereto as EXHIBIT A (each, an "Investor" and collectively,
the "Investors").
WHEREAS, the Company desires to raise additional capital by the issuance
and sale of 5,000 shares of its authorized but unissued shares of Series A
Preferred Stock, $.001 par value (the "Shares") pursuant to the terms of this
Agreement to (i) partially fund the acquisition by the Company of the assets of
the Genesta Manufacturing division of Pavaco Plastics Inc., a corporation
organized under the laws of the Province of Ontario (the "Acquisition"), and
(ii) use any remaining funds for general corporate purposes; and
WHEREAS, the Investors desire to purchase, and the Company desires to sell
to the Investors, the Shares on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth in this Agreement, the parties agree as
follows:
1. PURCHASE AND SALE OF THE SHARES.
1.1 AUTHORIZATION. The Company has authorized the sale and issuance
of 5,000 shares of Series A Preferred Stock, with the Shares having the rights,
privileges, preferences and restrictions as stated in the Certificate of
Designations of the Series A Preferred Stock of the Company (the "Certificate of
Designations") attached as EXHIBIT B to this Agreement and in the Certificate of
Incorporation of the Company (the "Certificate of Incorporation"), a copy of
which has been made available to the Investors.
1.2 ISSUANCE AND SALE OF SHARES. Subject to the terms and conditions
hereof, each Investor agrees, severally and not jointly, to purchase, and the
Company agrees to issue and sell to each such Investor, at the Closing (as
defined in SECTION 1.4) the number of Shares set forth opposite the name of such
Investor on the Schedule of Investors at a purchase price equal to $1,000 per
share (the "Purchase Price"). The total purchase price payable by each Investor
for the number of Shares that such Investor is hereby agreeing to purchase is
set forth opposite the name of such Investor under the heading "Investment
Amount" on the Schedule of Investors. The aggregate purchase price payable by
the Investors to the Company for all of the Shares is $5.0 million.
1.3 AUTHORIZATION OF WARRANTS. The Company has authorized the
issuance to Investors of warrants to purchase shares of the Company's common
stock (the "Warrants") in the form attached as EXHIBIT C to this Agreement if
and only if the Company's ratio of net debt (total debt less cash and cash
equivalents) to trailing twelve month earnings before interest, taxes,
depreciation and amortization ("EBITDA"), adjusted to include the trailing
twelve month
EBITDA of closed acquisitions, at the end of any fiscal quarter exceeds 3.0
times (a "Warrant Trigger"). Upon the occurrence of a Warrant Trigger, the
Company shall promptly issue to Investors Warrants in an amount equal to 5%
of the number of shares into which the then outstanding Shares would convert
at the conversion price as set forth in the Certificate of Designations. The
exercise price for the Warrants shall be the conversion price and the
Warrants may be exercised by means of net exercise conversion or other
equivalent cashless exercise. The Warrants will have a life of 5 years. The
cumulative total number of warrants issued shall not exceed 25% of the number
of shares into which the originally issued Shares would convert.
1.4 CLOSING; DELIVERY.
(a) CLOSING. Upon satisfaction of the conditions set forth in
SECTIONS 5 AND 6, the closing of the purchase and sale of the Shares shall take
place at the offices of Shartsis, Xxxxxx & Xxxxxxxx LLP, 18th Floor, Xxx
Xxxxxxxx Xxxxx, Xxx Xxxxxxxxx, XX 00000, on December 14, 2001 (the "Closing
Date"), at 10:00 a.m., or at such other time and place as the parties may agree
(the "Closing").
(b) DELIVERIES. Subject to the terms of this Agreement, at the
Closing the Company will deliver to each Investor listed on the Schedule of
Investors a single stock certificate representing the number of Shares of
preferred stock set forth opposite the name of such Investor on the Schedule of
Investors under the heading "Shares of Series A Preferred Stock" against payment
of the purchase price of the Shares purchased by each such Investor set forth
opposite the name of such Investor on the Schedule of Investors under the
heading "Investment Amount" by wire transfer of immediately available funds to
such account as the Company shall designate in writing.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby represents and warrants to each Investor that, except as set
forth on the schedules attached hereto and except as set forth in any report,
schedule, form, statement and other document filed by the Company with the
Securities and Exchange Commission (the "SEC") (together with other documents
that revise or supersede earlier filed documents, the "SEC Reports"):
2.1 ORGANIZATION; STANDING AND POWER. The Company (a) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, (b) has all requisite corporate power and authority to
own and operate its properties and to carry on its businesses as presently
conducted and as proposed to be conducted and (c) is duly qualified and in good
standing to do business as a foreign corporation in each and every jurisdiction
where its assets are located and wherever such qualification is necessary to
carry out its business and operations, except where the failure to so qualify or
be in good standing would not have a material adverse effect on the condition
(financial or otherwise), business, operations, assets or results of operations
of the Company and its subsidiaries taken as a whole (a "Material Adverse
Effect"). The Company has all requisite corporate power and authority to execute
and deliver, and perform all of its obligations under this Agreement, and the
Certificate of Designations, the Registration Rights Agreement (defined in
SECTION 4.5 hereof) and the Warrants (collectively, the "Related Documents").
2.2 CAPITALIZATION; RESERVED STOCK, PREEMPTIVE RIGHTS. The
total authorized capital stock of the Company consists of (i) 10,000,000
shares of common stock, $.001 par value, of which 4,366,336 shares of common
stock are issued and outstanding as of November 30, 2001 and (ii) 5,000,000
shares of preferred stock, $.001 par value, of which no shares are
outstanding as of the date hereof. All issued and outstanding shares of
common stock have been duly and validly issued, are fully paid and
nonassessable and have been issued in accordance with all applicable federal
and state securities laws. Except for (a) approximately 1.1 million shares of
common stock reserved for issuance on conversion of options which are
outstanding or reserved for issuance under the Company's stock option plans,
(b) 250,000 shares of common stock reserved for issuance under a pending
amendment to the Company's stock option plans subject to stockholder
approval, and (c) 40,000 shares of common stock reserved for issuance as
partial consideration for the Acquisition, no other shares have been reserved
for issuance and, except for options issuable pursuant to the Company's stock
option plans and this Agreement, there are no outstanding options, warrants
or other rights to subscribe for or purchase from the Company any shares of
its capital stock or any securities convertible into or exchangeable for its
capital stock. There are no preemptive rights or rights of first refusal or
similar rights which are binding on the Company permitting any person to
subscribe for or purchase from the Company shares of its capital stock
pursuant to any provision of law, the certificate of incorporation or bylaws
of the Company or by agreement or otherwise. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in respect
of each class and series of authorized capital stock of the Company are as
set forth in the certificate of incorporation of the Company, and all such
designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable against the Company and in
accordance with all applicable laws, rules and regulations.
2.3 AUTHORIZATION; NO CONFLICT AND BINDING OBLIGATION.
(a) The execution and delivery by the Company of this
Agreement, the Related Documents, the performance of the Company's
obligations hereunder and thereunder, and the consummation of the
transactions contemplated hereby and thereby (including the issuance and
delivery of the Shares, the Common Stock issuable upon conversion of the
Shares (the "Conversion Shares") and, if required from time to time, the
Warrants (collectively referred to herein as the "Securities")) have been
duly authorized by all necessary corporate action on the part of the Company,
and will not, either prior to or as a result of the consummation of the
transactions contemplated by this Agreement and the Related Documents: (i)
violate any law or any governmental rule or regulation applicable to the
Company, any provision of the certificate of incorporation or bylaws of the
Company, or any contract, indenture, agreement or other instrument to which
the Company is a party, or by which the Company or any of its assets or
properties are bound or (ii) be in conflict with, result in a breach of, or
constitute (after the giving of notice or lapse of time or both) a default
under, or result in the creation or imposition of any lien of any nature
whatsoever upon any of the property or assets of the Company pursuant to the
provisions of any contract, indenture, agreement or other instrument to which
the Company is a party or by which its assets or property is bound, except
where such violation, conflict, breach or default likely would not have,
individually or in the aggregate, a Material Adverse Effect, or where prior
consent has been obtained. The Company is not required to obtain any
approval, consent or authorization from, or to file any declaration or
statement with, any governmental instrumentality or agency in connection with
or as a condition to the execution, delivery or
performance of this Agreement (including the issuance and delivery of the
Securities) or the other Related Documents, other than (i) approval of the
Board of Directors of the Company, which has been obtained, (ii) the filing
of the Certificate of Designations with the Delaware Secretary of State, and
(iii) the filings of a Form D and Form 8-K with the SEC and any applicable
state securities law filings, which filing or filings, as the case may be,
will be made in accordance with applicable laws and regulations. No other
corporate action on the part of the Company is necessary to authorize the
execution, delivery and performance of this Agreement and the other Related
Documents and the consummation of the transactions contemplated hereby and
thereby. All consents necessary for the Company to perform its respective
obligations hereunder have been obtained.
(b) The Agreement has been duly executed and delivered by the
Company, the other Related Documents, when executed by the Company, shall be
duly executed and delivered by the Company, and each of the Agreement and the
other Related Documents (on their execution) is the legally valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
(c) The Shares being purchased hereunder, when issued, sold,
paid for and delivered in accordance with the terms of this Agreement will be
duly and validly issued, fully paid and non-assessable, and free and clear of
any restrictions on transfer (other than restrictions under the Securities Act
of 1933, as amended (the "Securities Act"), and state securities laws or
restrictions imposed by agreement with the Investors or restrictions created by
the Investors) and any claims, liens, pledges, options, security interests,
trusts, encumbrances or other rights or interests of any other person, unless
set forth in this Agreement. The Conversion Shares and the shares of common
stock issuable on exercise of the Warrants (the "Warrant Shares"), if and when
issued in accordance with the terms of this Agreement, will be duly and validly
issued, fully paid and non-assessable, and free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws or restrictions imposed by agreement with the Investors or
restrictions created by the Investors) and any claims, liens, pledges, options,
security interests, trusts, encumbrances or other rights or interests of any
other person, unless set forth in this Agreement. The Company has reserved such
number of shares of its Common Stock necessary for issuance upon conversion of
the Shares and exercise of the Warrants (assuming that the maximum number of
Warrants that could be issued are issued).
2.4 SECURITIES LAW EXEMPTION. Assuming the truth and accuracy of
each Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Shares, the Conversion Shares and, if required, the Warrants and
the Warrant Shares as contemplated by this Agreement are and will be exempt from
the registration requirements of the Securities Act and applicable state
securities laws, and neither the Company nor any authorized agent acting on its
behalf has taken or will take any action hereafter that would cause the loss of
such exemption.
2.5 NON-CONTRAVENTION. The Company is not in violation or
breach of or in default with respect to, any provision of any contract,
agreement, instrument, lease, license, arrangement or understanding to which
it is a party, except for violations, breaches or defaults
that likely would not have, individually or in the aggregate, a Material
Adverse Effect. Each such contract, agreement, instrument, lease, license,
arrangement and understanding is in full force and effect and is the legal,
valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability.
2.6 SEC REPORTS. The Company has timely filed all SEC Reports
with the SEC since November 1, 2000. The Company has made available to the
Investors true and complete copies of the SEC Reports. As of their respective
filing dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Reports. None of the SEC
Reports 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 as of their respective filing dates, except to the
extent corrected by a subsequently filed SEC Report.
2.7 LITIGATION. Except as disclosed or referenced in Item 1
"Environmental Matters" to the Company's most recent Annual Report on Form
10-K, there is no action, suit, arbitration or other proceeding or, to the
Company's knowledge, any investigation pending or threatened in which an
unfavorable outcome, ruling or finding in any said matter likely would have a
Material Adverse Effect. The foregoing includes, without limitation, any such
action, suit, proceeding or investigation that questions this Agreement or
the other Related Documents or the right of the Company to execute, deliver
and perform under same.
2.8 FINANCIAL STATEMENTS. The financial statements of the Company
included in the SEC Reports (a) complied as of their respective dates of filing
with the SEC in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto, (b)
have been prepared (i) in accordance with generally accepted accounting
principles ("GAAP") (except, in the case of unaudited statements, as permitted
by Regulation S-X promulgated by the SEC), (ii) on a consistent basis for all
periods presented (except as may be indicated in the notes thereto), and (iii)
in accordance with the books and records of the Company, (c) are complete and
correct in all material respects, and (d) fairly present in all material
respects the financial condition of the Company as at such dates, and the
results of operations and cash flows for the periods stated (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
2.9 USE OF PROCEEDS. The net proceeds from the sale of the Shares
shall be used solely for the following: (a) to fund the cash portion of the
Acquisition and related expenses, and (b) the remainder shall be used to pay
existing indebtedness owed to banks or similar financial institutions. Except as
provided in SECTION 4.12, the proceeds from the sale of the Shares may not be
used to redeem, repurchase or otherwise acquire any shares of preferred stock,
common stock or other equity securities issued by the Company.
2.10 DISCLOSURE. This Agreement and Exhibits hereto, the other
Related Documents and all other documents delivered to the Investors in
connection herewith or
therewith at the Closing, do not contain any untrue statement of a
material fact, or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. There are no facts that, individually or in the aggregate,
that likely would have a Material Adverse Effect that has not been disclosed
to the Investors in this Agreement (including the Exhibits hereto), the other
Related Documents, the SEC Reports or any other documents made available to
Investors during due diligence, or delivered to the Investors in connection
herewith or therewith at the Closing.
2.11 BROKERS AND FINDERS. The Company has not employed any
broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement that would be entitled to a
broker's, finder's or similar fee or commission in connection herewith and
therewith
2.12 NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
Securities Act of the issuance of the Securities to the Investors. The issuance
of the Securities to the Investors will not be integrated with any past issuance
of the Company's securities for purposes of the Securities Act or any applicable
rules of Nasdaq.
2.13 NO MATERIAL ADVERSE CHANGE. Since August 31, 2001, there
has not been:
(a) any changes in the assets, liabilities, financial
condition or operations of the Company from that reflected in the financial
statements referred to in SECTION 2.8 hereof which has had or would be
reasonably expected to have a Material Adverse Effect;
(b) any material change, except in the ordinary course of
business, in the contingent obligations of the Company whether by way of
guarantee, endorsement, indemnity, warranty or otherwise; or
(c) any damage, destruction or loss, whether or not covered by
insurance, that would have a Material Adverse Effect.
2.14 NASDAQ COMPLIANCE. The Common Stock is listed on Nasdaq, and
the Company has taken no action designed to or likely to have the effect of
suspension of or delisting the Common Stock from Nasdaq. Within the time
required by Nasdaq, the Company shall have applied for the listing of the
Conversion Shares and Warrant Shares, if required by Nasdaq, in each case, upon
Nasdaq and shall maintain, at its expense, so long as any of the Conversion
Shares or Warrant Shares are outstanding, such listing of all Conversion Shares
from time to time issuable hereunder and all Warrant Shares from time to time
issuable upon exercise of the Common Stock Warrants.
2.15 CONTRACTS. The material contracts of the Company are in full
force and effect on the date hereof, and neither the Company nor, to the
Company's knowledge, any other party to such contracts is in breach of or
default under any of such contracts which breach or default would reasonably be
expected to have a Material Adverse Effect. For purposes of this Section, a
contract shall be "material" if aggregate payments to be made or received
thereunder exceed $100,000.
2.16 TAXES. The Company has filed all necessary federal, state and
foreign income and franchise tax returns due prior to the date hereof, or has
received valid extensions thereof, and has paid or accrued all taxes shown as
due thereon, and the Company has no knowledge of any material unpaid tax
deficiency which has been validly and finally assessed against it.
2.17 INVESTMENT COMPANY. The Company is not, and after consummation
of the sale of the Shares will not be, an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for an investment company,
or, to its knowledge, a company "controlled by" an "investment company" (other
than any Investor) within the meaning of the Investment Company Act of 1940, as
amended.
2.18 SUBSIDIARIES. Except as set forth in the exhibits to the
Company's most recent Form 10-K and except for a corporation newly formed to
complete the Acquisition, the Company does not own or control, directly or
indirectly, any interest in any other corporation, partnership, limited
liability company, association, or other business entity. The Company is not a
participant in any joint venture, partnership or similar arrangement.
2.19 S-3 ELIGIBILITY. The Company has been subject to the
requirements of the Exchange Act for more than twelve months and has timely
filed all reports required to be filed with the SEC pursuant to the Exchange Act
since before such time period. The Company believes it is currently eligible to
register the resale of its securities for persons other than the issuer on a
registration statement on Form S-3 under the Securities Act.
2.20 PLEDGE OF SHARES. The Company acknowledges and agrees that the
Shares, Conversion Shares, Warrant and Warrant Shares may be pledged by Investor
to commercial lenders, banks, savings and loan associations, insurance
companies, pension funds, mutual funds, brokerage houses, and/or other similar
financial institutions in connection with a bona fide margin agreement or other
loan secured by the Shares, Conversion Shares, Warrants and/or Warrant Shares.
Notwithstanding anything herein, the pledge of Shares, Conversion Shares,
Warrants or Warrant Shares shall not be deemed to be a transfer, sale or
assignment of the Shares, Conversion Shares, Warrants or Warrant Shares
hereunder, and no Investor effecting a pledge of Shares, Conversion Shares,
Warrants or Warrant Shares shall be required to provide the Company with any
notice thereof or otherwise make any delivery to the Company pursuant to this
Agreement. The Company hereby agrees to execute and deliver such reasonable
documentation as a pledgee of the Shares, Conversion Shares, Warrants or Warrant
Shares may reasonably request in connection with a pledge of such securities to
such pledgee by Investor, at Investor's sole expense. Should any Shares actually
be required to be transferred hereunder, the Investor shall first comply with
the provisions of SECTION 4.4 (Rights of First Offer).
2.21 INSURANCE. The Company maintains and will continue to maintain
insurance of the types and in the amounts that the Company reasonably believes
is prudent and adequate for its business, all of which insurance is in full
force and effect.
3. REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR. Each Investor,
severally but not jointly, represents and warrants to the Company that:
3.1 INVESTMENT INTENT. The Investor is acquiring the Securities
pursuant to this Agreement with its own funds for its own account and not as a
nominee or agent for the account of any other person. No other person has any
interest, beneficial or otherwise, in any of the Securities to be purchased by
the Investor. Except as provided herein, the Investor is not obligated to
transfer any Securities to any other person, nor does the Investor have any
agreement or understanding with any other person to do so. The Investor is
purchasing the Securities for investment purposes and not with a present view to
the sale or distribution of any Securities, by public or private sale or other
disposition, and the Investor has no present intention of selling, granting any
participation in or otherwise distributing or disposing of any of the
Securities. The Investor further represents that the Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or any third person, with
respect to any of the Securities. Notwithstanding the foregoing, the disposition
of the Investor's property shall be at all times within the Investor's own
control, and the Investor's right to sell or otherwise dispose of all or any
part of the Securities purchased by it pursuant to an effective registration
statement under the Securities Act or under an exemption under the Securities
Act shall not be prejudiced. Nothing herein shall prevent the distribution of
any Securities to any member, partner or stockholder, former member, partner or
stockholder of the Investor in compliance with the Securities Act and applicable
state "blue sky" laws.
3.2 NO PUBLIC OFFERING. The Investor is able to bear the economic
risk of its investment in the Securities. The Investor is aware that it must be
prepared to hold the Securities for an indefinite period and that the Securities
have not been, and when issued will not be, registered under the Securities Act
or registered or qualified under any state securities law, on the ground that
the Securities are being issued by the Company without any public offering
within the meaning of Section 4(2) of the Securities Act. The Investor
understands that the Company's reliance on such exemption is predicated on the
Investors' representations set forth herein. The Investor realizes that the
basis for the exemption may not be present if, notwithstanding such
representations, the Investor has in mind merely acquiring the Securities for a
fixed or determinable period in the future, or for a market rise, or for sale if
the market does not rise. The Investor does not have any such intention.
3.3 RECEIPT OF INFORMATION. The Investor believes that it has
received all the information it considers necessary or appropriate for
deciding whether to purchase the Securities. The Investor has had an
opportunity to discuss the terms and conditions of the offering of the
Securities and the Company's business, management and financial affairs with
the Company's management and to obtain additional information necessary to
verify the accuracy of any information furnished to the Investor or to which
the Investor had access. The Investor is not subscribing for the Securities
as a result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio or any solicitation of a subscription by
any person not previously known to the Investor in connection with
investments in securities generally. The Investor acknowledges that none of
the information, if any, received from management of the Company during
Investor's due diligence is soliciting information.
3.4 SECURITIES WILL BE "RESTRICTED SECURITIES". The Investor
understands that the Securities (and any common stock issued on the conversion
or exercise thereof) will be
"restricted securities" as that term is defined in Rule 144 promulgated under
the Securities Act and, accordingly, that the Securities may not be sold,
transferred or otherwise disposed of and must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption
from such registration is available. The Investor is aware that the
Securities (and any common stock issued on the conversion or exercise
thereof) may not be sold pursuant to Rule 144 promulgated under the
Securities Act unless the conditions of that Rule are met.
3.5 ACCREDITED INVESTOR. The Investor has been advised or is aware
of the provisions of Regulation D under the Securities Act relating to the
accreditation of investors, and the Investor is an "accredited investor" as
defined in Rule 501 of Regulation D promulgated under the Securities Act.
3.6 SOPHISTICATION OF THE INVESTOR. The Investor has such knowledge
and experience in financial and business matters that the Investor is capable of
evaluating the merits and risks of the investment contemplated by this Agreement
and has the capacity to protect its own interests. The Investor acknowledges
that investment in the Securities is highly speculative and involves a
substantial and high degree of risk of loss of the Investor's entire investment.
The Investor has adequate means of providing for current and anticipated
financial needs and contingencies, is able to bear the economic risk of the
investment for an indefinite period of time and has no need for liquidity of the
investment in the Securities and could afford a complete loss of such
investment. The Investor represents that it has not been organized for the
purpose of acquiring the Securities.
3.7 BROKERS' FEES. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Investor.
3.8 ORGANIZATION. The Investor is a limited partnership or other
entity duly organized, validly existing and in good standing in the jurisdiction
of its formation. The Investor has all requisite power and authority to execute,
deliver and perform all of its obligations of this Agreement and the Related
Documents. The Investor represents that it is domiciled in the State of
California.
3.9 AUTHORIZATION; NO CONFLICT; AND BINDING EFFECT.
(a) The execution and delivery of this Agreement and the
Related Documents, the performance of the Investor's obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby
or thereby have been duly authorized by all necessary action on the part of
the Investor and will not, either prior to or as a result of the consummation
of the transactions contemplated by this Agreement: (i) violate any law or
any governmental rule or regulation applicable to the Investor, any provision
of the organizational documents of the Investor, or any contract, indenture,
agreement or other instrument to which the Investor is a party, or by which
the Investor or any of its assets or properties are bound, or (ii) be in
conflict with, result in a breach of, or constitute (after the giving of
notice or lapse of time or both) a default under, or result in the creation
or imposition of any lien of any nature whatsoever upon any of the property
or assets of the Investor pursuant to the provisions of any contract,
indenture, agreement or other instrument to which the Investor is a party or
by which its assets or
property is bound, except where such violation, conflict, breach or default
likely would not have, individually or in the aggregate, a material adverse
effect on the financial condition, business, operations, assets or results of
operations of the Investor . The Investor shall obtain any approval, consent
or authorization from, and file any declaration or statement with, any
governmental instrumentality or agency required in connection with or as a
condition to the execution, delivery or performance of this Agreement. No
other action on the part of the Investor is necessary to authorize the
execution, delivery and performance of this Agreement and the Related
Documents and the consummation of the transactions contemplated hereby and
thereby.
(b) Upon the execution and delivery by the Investor, this
Agreement and the Related Documents shall constitute the legal, valid and
binding obligations of the Investor enforceable against the Investor in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, liquidation, reorganization, moratorium or
other laws relating to or limited creditors' rights generally or by equitable
principles relating to enforceability.
4. CERTAIN COVENANTS AND AGREEMENTS.
4.1 EFFORTS. Each of the Company and each Investor shall
cooperate and use commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and to make, or cause to be made, all filings
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the other Related Documents, including, without limitation, commercially
reasonable efforts to (i) obtain, prior to the Closing Date, all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company, and (ii)
defend against and respond to any action, suit, proceeding or investigation
relating to the transactions contemplated by this Agreement and the other
Related Documents, in each case as are necessary for consummation of the
transactions contemplated by this Agreement, the other Related Documents and
to fulfill the conditions to the sale and issuance of the Securities.
4.2 NO INTEGRATION. The Company will not make any offers or
sales of any security (other than the Securities and the securities issued in
connection with the Acquisition) under circumstances that would cause the
offering of the Securities to be integrated with any other offering of
securities by the Company.
4.3 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the
date hereof to the time of the Acquisition, the Company will conduct its
operations in the ordinary course of business consistent with past practice,
and, to the extent consistent therewith and with no less diligence and effort
than would be applied in the absence of this Agreement, will seek to preserve
intact its current business organizations, keep available the service of its
current officers and key employees and preserve its relationships with key
customers, suppliers and others having business dealings with it to the end that
goodwill and ongoing businesses shall not be materially impaired between the
date hereof and the time of the Acquisition. Without limiting the generality of
the foregoing, except as otherwise expressly provided in this Agreement, prior
to the time of the Acquisition, the Company will not, without the prior written
consent of the Investors (which consent shall not be unreasonably withheld):
(a) amend its certificate of incorporation or bylaws (or
other similar governing instrument), except by filing the Certificate of
Designations;
(b) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, make any other actual, constructive or deemed distribution in respect of
its capital stock or otherwise make any payments to stockholders in their
capacity as such, or redeem or otherwise acquire any of its securities or any
securities of any of subsidiaries;
(c) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company;
(d) alter, through merger, liquidation, reorganization,
restructuring or any other fashion, the corporate structure of ownership of
the Company;
(e) (i) incur or assume any long-term or short-term debt
or issue any debt securities, except for borrowings under existing lines of
credit, restructuring portions of existing debt via replacement with real
estate secured long-term debt, or equipment leases in the ordinary course of
business; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person except in the ordinary course of business consistent with
past practice; (iii) make any loans, advances or capital contributions to or
investments in any other person (other than customary loans or advances to
employees in each case in the ordinary course of business consistent with
past practice); or (iv) pledge or otherwise encumber shares of capital stock
of Company;
(f) except as may be required as a result of a change in
law or in generally accepted accounting principles, change any of the
accounting principles or practices used by it;
(g) revalue in any material respect any of its assets,
including without limitation writing down the value of inventory or
writing-off notes or accounts receivable other than in the ordinary course of
business;
(h) except for the Acquisition, acquire (by merger,
consolidation or acquisition of stock or assets) any corporation, partnership or
other business organization or division thereof or any equity interest therein
or be acquired (by merger, consolidation or acquisition of stock or assets) by
any other person or entity;
(i) settle or compromise any pending or threatened suit,
action or claim (i) that relates to the transactions contemplated hereby or (ii)
the settlement or compromise of which likely would have a Material Adverse
Effect;
(j) take or agree in writing or otherwise to take any of
the actions that would make any of the representations or warranties of
Company contained in this Agreement materially untrue or incorrect; or
(k) knowingly take any action that would result in a failure
to maintain the trading of Company's common stock on The Nasdaq National Market.
4.4 RIGHTS OF FIRST OFFER.
(a) In the event any Investor intends to sell all or any
portion of the Shares or the common shares into which the Shares are converted,
or, if applicable, the Warrants or the common shares into which the Warrants are
converted, then, in each such case the Investor will first offer (the "Right of
First Offer") the securities to the Company in writing (the "Offer Notice") at a
given price (the "Offer Price"). If the Company fails to respond within two (2)
business days after receipt of the Offer Notice or declines the offer in writing
during such period, the Investor may sell the securities offered to a third
party within one hundred and twenty days (120) thereafter at a price not less
than ninety percent (90%) of the Offer Price. If the Company accepts the Offer
Notice, the Company shall pay the Offer Price to the Investor in exchange for
the securities offered within twenty (20) days thereafter; provided that, if the
Company accepts the Offer Notice and fails to pay the Offer Price within such
twenty (20) day period, all Rights of First Offer shall thereupon terminate.
(b) Notwithstanding SUBSECTION 4.4(a) to the contrary, the
Company shall have no Right of First Offer, and an Investor shall not be
required to provide an Offer Notice, in connection with any sale or transfer of
the Shares, Conversion Shares, Warrants or Warrant Shares to a transferee or
assignee of such securities that (i) is a subsidiary, parent, current or former
partner, current or former limited partner, current or former member, current or
former manager or stockholder of an Investor or (ii) is an entity controlling,
controlled by or under common control, or under common investment management,
with an Investor, including without limitation a corporation, partnership or
limited liability company that is a direct or indirect parent or subsidiary of
the Investor. The Right of First Offer shall survive all such transfers and be
binding on all such transferees.
(c) If the Series A Redemption Price (as defined in the
Certificate of Designations) is otherwise required to be paid on any Redemption
Date (as defined in the Certificate of Designations) under Section 3 of the
Certificate of Designations and if for any reason or no reason at all it is not
so paid, then the Right of First Offer shall terminate.
4.5 REGISTRATION. The Investors shall possess the registration
rights set forth on EXHIBIT D attached hereto.
4.6 RESERVATION OF SHARES. The Company shall continuously reserve
such number of shares of its Common Stock as necessary for issuance upon
conversion of the Shares and exercise of the Warrants (assuming that the maximum
number of Warrants that could be issued are issued).
4.7 REPORTING STATUS. The Company shall timely file all reports
required to be filed with the SEC pursuant to the Exchange Act, and so long as
Investor beneficially owns any Shares or Warrant Shares, the Company shall not
terminate its status as an issuer subject to the reporting obligations under the
Exchange Act even if the rules and regulations thereunder would
otherwise permit such termination; provided that, the Company obligations
under this Section shall cease upon a Liquidation Event (as defined in the
Certificate of Designations).
4.8 SECURITIES COMPLIANCE. If applicable, the Company shall notify
the Principal Market (defined below), in accordance with its rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required by applicable law,
rule and regulation, for the legal and valid issuance of the Conversion Shares
and the Warrant Shares to the Investor or subsequent holders. "Principal Market"
shall mean initially the Nasdaq National market and shall include the American
Stock Exchange, the Nasdaq Small-Cap Market and the New York Stock Exchange if
the Company becomes listed and trades on such market or exchange after the date
hereof.
4.9 REGISTRATION AND LISTING. The Company shall cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all material respects with its reporting and filing
obligations under the Exchange Act, will comply with all requirements related to
any registration statement filed pursuant to this Agreement, and will not take
any action or file any document (whether or not permitted by the Securities Act
or the Exchange Act or the rules promulgated thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act or Securities Act, except as permitted
herein. The Company will take all action necessary to continue the listing or
trading of its Common Stock on the Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market and shall provide the Purchaser with
copies of any correspondence to or from such Principal Market which questions or
threatens delisting of the Common Stock, within three (3) Trading Days of the
Company's receipt thereof, until the Investor has disposed of all of the Shares,
Conversion Shares, Warrants and Warrant Shares; provided that, the Company
obligations under this Section shall cease upon a Liquidation Event (as defined
in the Certificate of Designations).
4.10 TRANSFER INSTRUCTIONS.
(a) Provided that the Company's transfer agent is
participating in The Depository Trust Company's (the "DTC") Fast Automated
Securities Transfer Program (or such other similar programs for the electronic
transfer of securities as may from time-to-time be implemented), and the
transferee of the Conversion Shares and/or Warrant Shares is eligible to receive
shares through the DTC, the Company shall instruct its transfer agent to process
all transfers of Conversion Shares, sales of Conversion Shares, and exercises of
Warrants by an Investor (each a "Transaction") on an expedited basis, with such
transfer being made through share credits to one or more balance accounts at the
DTC, in such name and in such denominations as specified by such Investor, no
later than the second (2nd) business day after receipt by the Company of (i) the
Shares, Conversion Shares, Warrants or Warrant Shares, as applicable, and (ii) a
completed Reissuance Notice, the form of which is attached hereto as EXHIBIT E
("Reissuance Notice"), including a representation by Investor contained therein
that such transfer will be made in compliance with all applicable securities
laws. For purposes hereof, "receipt by the Company" shall mean receipt at the
corporate office of the Company as such address is designated on the signature
page hereto (as may be updated in accordance with SECTION 8.4 hereof), with
facsimile copy of the Reissuance Notice addressed to the President of
the Company at the facsimile number designated on the signature page hereto
(as may be updated in accordance with SECTION 8.4 hereof), and additional
facsimile copy of the Reissuance Notice addressed to the General Counsel of
the Company at (000) 000-0000 (as may be updated in accordance with SECTION
8.4 hereof). The foregoing facsimile copies shall be sent on the same day as
the Reissuance Notice is sent by Investor.
(b) If the electronic transfer of shares is not offered by the
Company's transfer agent, or if the electronic transfer of shares is not
available for any given transaction, then the Company shall instruct its
transfer agent to process all Transactions on an expedited basis, with delivery
to the Investor (or its designee) of the certificates to be issued as a result
of the Transaction no later than the second (2nd) business day after receipt by
the Company of (i) the Shares, Conversions Shares, Warrants or Warrant Shares,
as applicable, and (ii) a completed Reissuance Notice.
(c) The Company shall bear all costs and expenses resulting
from processing the Transactions on an expedited basis. Until such time as all
shares of Common Stock have been delivered in connection with any given
Transaction and any replacement certificate(s) or replacement Warrant(s) are
delivered as requested by Investor, the Company's general counsel (or if there
is none, the Company's most senior executive officer) shall use his/her best
efforts to ensure that the Transaction is completed, including but not limited
to contacting the Company's transfer agent on a daily basis for the purpose of
having the Transaction completed.
4.11 FAILURE TO TIMELY TRANSFER. The Company shall pay a cash
penalty to the requesting Investor(s) each time Conversion Shares or Warrant
Shares, if any, are not delivered to the party entitled to receive such
securities within the applicable time period provided elsewhere for delivery of
such securities; provided that, the Company shall have a four (4) day grace
period following the applicable time period for delivery in one instance (the
"Grace Period"). In each instance that delivery of the Conversion Shares or
Warrant Shares, if any, has not been made on a timely basis, including following
any Grace Period, and for any continuing failure to deliver thereafter, the
Company shall pay the Investor (or Investors if more than one have made such
request) an aggregate penalty equal to $25,000 plus $1,000 per day commencing on
the tenth (10th) day after the due date until such delivery is made; provided
that, no penalty shall be assessed for transfers of fewer than 1,250 Conversion
Shares or Warrant Shares in the aggregate, as adjusted for any stock dividends,
combinations, splits or reverse splits, subdivisions, consolidations or
reclassifications. The Company's general counsel (or if there is none, the
Company's most senior executive officer) shall use his/her best efforts to
ensure that the delivery is made, including but not limited to contacting the
Company's transfer agent on a daily basis.
4.12 INDEMNIFICATION. The Company shall defend, protect, indemnify
and hold harmless each Investor and each of their stockholders, partners,
members, officers, directors, employees and representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(A) any misrepresentation or breach of any representation or warranty made by
the Company in this Agreement or any other certificate, instrument or
document contemplated hereby or thereby, or (B) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement or any
other certificate, instrument or document contemplated hereby or thereby. To
the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under
this Section 4.11 shall be the same as those set forth in Section 1.5 of the
Registration Rights Agreement, including, without limitation, those
procedures with respect to the settlement of claims and the Company's rights
to assume the defense of claims.
4.13 ACCOUNT/REPURCHASE. The Company shall hold the aggregate
Purchase Price ($5,000,000) in a separate, interest bearing account until the
Acquisition is consummated. Such funds may be released from the account to fund
the Acquisition. After the Acquisition has been consummated, the remaining funds
in the account shall be used in accordance with SECTION 2.9 hereof. If the
Acquisition is not consummated within thirty (30) days of the Closing, the
Company shall return the aggregate Purchase Price, together with all accrued
interest, to the Investors on the thirty-first (31st) day following the Closing.
Upon return of such funds to the Investors, (i) the Investors shall return the
Shares to the Company, (ii) the Registration Rights Agreement shall be deemed
terminated, (iii) the Investors' rights to receive Warrants shall be deemed
terminated; and (iv) this Agreement shall be deemed terminated, except for the
rights of indemnification set forth in SECTION 4.12.
4.14 AMENDMENT TO BYLAWS. The Company shall amend its Bylaws as
provided in EXHIBIT F within thirty (30) days following the Acquisition.
5. THE INVESTORS' CONDITIONS TO THE CLOSING. Each Investor's
obligation to purchase and pay for the Shares is subject to the fulfillment
to such Investor's satisfaction, prior to or at the Closing, of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in SECTION 2 shall be true and correct when
made and as of the Closing with the same effect as though such representations
and warranties had been made on and as of the date of the Closing.
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed by it or with which it is required to have complied
with on or before the Closing.
5.3 CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained
all consents, licenses, permits, orders, authorizations, waivers and the like
necessary or appropriate for consummation of the transactions contemplated by
this Agreement and the other Related Documents (except for such as may be
properly obtained subsequent to the Closing).
5.4 OPINION OF COUNSEL. The Investors shall have received the
opinion of General Counsel to the Company, dated the date of the Closing,
reasonably acceptable to the Investors.
5.5 STOCK CERTIFICATES. The Company shall have delivered to the
Investors the stock certificates representing their respective shares of Series
A Preferred Stock as set forth in EXHIBIT A attached hereto.
5.6 CERTIFICATE OF DESIGNATIONS. The Company shall have delivered to
the Investors the Certificate of Designations as filed with the Secretary of
State of the State of Delaware in the form attached hereto as EXHIBIT B.
5.7 EXPENSES. The Company shall pay the Investors due diligence and
other expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including reasonable legal fees and expenses of Investors'
legal counsel and travel expenses) in an amount not to exceed $50,000.
5.8 COMPLIANCE CERTIFICATE. The Company shall deliver to the
Investors at the Closing, relating to the purchase of Shares, a certificate
signed by an officer of the Company stating that the Company has complied with
or satisfied each of the conditions to the Investors' obligation to consummate
the Closing set forth in SECTIONS 5.1 through 5.3, unless waived in writing by
the Investor.
6. THE COMPANY'S CONDITIONS TO THE CLOSING. The Company's
obligation to consummate the Closing and to issue and sell the Shares to each
of the Investors at the Closing is subject to the fulfillment to the
Company's satisfaction, prior to or at such Closing, of the following
conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Investor contained in SECTION 3 hereof shall be true and
correct on and as of the Closing.
6.2 PERFORMANCE. The Investors shall have performed and complied
with all agreements, obligations, and conditions contained in the Agreement that
are required to be performed by it or them or with which it or they are required
to have complied with on or before the Closing.
6.3 CONSENTS, PERMITS, AND WAIVERS. The Investors shall have
obtained all consents, licenses, permits, orders, authorizations, waivers and
the like necessary or appropriate for consummation of the transactions
contemplated by this Agreement and the other Related Documents (except for such
as may be properly obtained subsequent to the Closing).
6.4 SHARES PURCHASED BY OTHER INVESTORS; FUNDS RECEIVED. Each of the
other Investors shall have purchased, in accordance with this Agreement, the
number of Shares set forth opposite its name on the Schedule of Investors, and
the Company shall have received the full amount of the Purchase Price.
7. TRANSFER OF SECURITIES; LEGENDS.
7.1. SECURITIES LAW TRANSFER RESTRICTIONS. No Investor shall sell,
assign, pledge, transfer or otherwise dispose or encumber any of the Shares
being purchased by it hereunder, or any underlying shares, except (i) pursuant
to an effective registration statement under the Securities Act or (ii) pursuant
to an available exemption from registration under the Securities Act and
applicable state securities laws. Any transfer or purported transfer of the
Shares in violation of this SECTION 7.1 shall be voidable by the Company. The
Company shall not register any transfer of the Shares, or any underlying shares,
in violation of this SECTION 7.1. The Company may, and may instruct any transfer
agent for the Company, to place such stop transfer orders as may be required on
the transfer books of the Company in order to ensure compliance with the
provisions of this SECTION 7.1.
7.2. LEGENDS. Each certificate representing any of the Shares
(and, if applicable, each certificate representing the underlying shares of
common stock) shall be endorsed with legends in substantially the forms set
forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD,
ASSIGNED, PLEDGED TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL, OR OTHER SPECIAL RIGHTS OF EACH CLASS OF
STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. THESE SHARES ARE
SUBJECT TO A RIGHT OF FIRST OFFER HELD BY THE ISSUER.
7.3 LEGEND REMOVAL. In the event that (I) a registration statement
covering the Conversion Shares is effective under the Securities Act, (II) the
Company shall receive an opinion of reputable counsel that such legend is not,
or is no longer, required, or (III) all or any portion of the Conversion Shares
are eligible for resale pursuant to the exemption afforded by Rule 144, upon
request from the Investor, the Company shall, or shall instruct its transfer
agent to, remove such legend from the certificate(s) evidencing such Conversion
Shares or issue new certificate(s) representing such Conversion Shares without
such legend in lieu thereof. All fees and expenses in effecting the legend
removal and issuance of new certificates (other than those of counsel to the
Investor) shall be borne by the Company.
8. MISCELLANEOUS.
8.1 PUBLIC STATEMENTS OR PRESS RELEASES. None of the parties to this
Agreement shall make, issue, or release any announcement, whether to the public
generally, or to any of its suppliers or customers, with respect to this
Agreement or the other Related Documents or the transactions provided for herein
or therein, or make any statement or acknowledgment of the existence of, or
reveal the status of, this Agreement or the transactions provided for herein,
without the prior consent of the other parties, which shall not be unreasonably
withheld or delayed, PROVIDED, that nothing in this Section shall prevent any of
the parties hereto from making such public announcements as it may consider
necessary in order to satisfy its legal obligations, but to the extent not
inconsistent with such obligations, it shall provide the other parties with an
opportunity to review and comment on any proposed public announcement before it
is made.
8.2 SURVIVAL OF WARRANTIES. The warranties and representations of
the Company and each Investor contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing for a
period of two (2) years.
8.3 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors.
Any amendment or waiver effective in accordance with this Section shall be
binding upon each Investor, his, her or its heirs, representatives or permitted
assigns, and the Company and its heirs, representatives and permitted assigns.
8.4 NOTICES. Any notice, consent, authorization or other
communication to be given hereunder shall be in writing and shall be deemed duly
given and received when delivered personally or transmitted by facsimile
transmission, three (3) days after being mailed by first class mail, or the next
business day after being deposited for next-day delivery with a nationally
recognized, receipted, overnight delivery service, charges and postage prepaid,
properly addressed to the party to receive such notice at the address(es)
specified on the signature page of this Agreement for the Company and each
Investor (or at such other address as shall be specified by like notice).
8.5 ENTIRE AGREEMENT. This Agreement (including the Exhibits and the
other Related Documents) contains the entire agreement of the parties and
supersede all prior negotiations, correspondence, term sheets, agreements and
understandings, written and oral, between or among the parties regarding the
subject matter hereof.
8.6 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the respective heirs, representatives, successors
and permitted assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective heirs, representatives, successors and permitted assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
8.7 SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable under applicable law, such
provision shall be replaced with a provision that accomplishes, to the extent
possible, the original business purpose of such provision in a valid and
enforceable manner, and the balance of the Agreement shall be interpreted as if
such provision were so modified and shall be enforceable in accordance with its
terms.
8.8 GOVERNING LAW. This Agreement shall be governed by and
construed and interpreted in accordance with the law of the State of
California, without regard to that state's conflict of laws principles.
8.9 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement or the other Related
Documents, the prevailing party shall be entitled to reasonable attorneys' fees,
costs and necessary disbursements in addition to any other relief to which such
party may be entitled.
8.10 INTERPRETATION. This Agreement shall be construed according to
its fair language. The rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
8.11 FURTHER ASSURANCES. Each party shall execute such other and
further certificates, instruments and other documents as may be reasonably
necessary and proper to implement, complete and perfect the transactions
contemplated by this Agreement.
8.12 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be
executed in any number of counterparts, each of which shall constitute an
original, and all of which together shall be considered one and the same
agreement. Signatures submitted via facsimile shall be deemed originals for all
purposes.
8.13 ASSIGNMENT. Each Investor may assign or transfer all or any
part of the Securities acquired hereunder provided that the conditions specified
in SECTION 7 are satisfied, which conditions are, among other things, intended
to insure compliance with the provisions of the Securities Act and state
securities laws in respect of the transfer of any of the Securities acquired
hereunder. The Company shall not assign this Agreement or any rights hereunder
or delegate any duties hereunder. Any attempted or purported assignment or
delegation in violation of the preceding sentence shall be void. Notwithstanding
the foregoing, a change in control of the Company shall not be deemed an
assignment, and the Company may merge with or sell itself to any third party in
its sole and absolute discretion.
8.14 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.15 EXCULPATION AMONG INVESTORS. Each Investor agrees that no
Investor nor the respective controlling person, officers, directors, partners,
members, managers, agents or employees of any Investor shall be liable to any
other Investor for any action heretofore or hereafter taken or omitted to be
taken by any of them in connection with the purchase of the
Securities or the execution of or performance under any of this
Agreement or the other Related Documents.
8.16 REPRESENTATION. Each Investor acknowledges that (a) Stadium
Capital Partners, LP retained Shartsis, Xxxxxx & Xxxxxxxx LLP ("SF&G") to
represent Stadium Capital Partners, LP and its affiliates (collectively,
"Stadium") in connection with this Agreement, the other Related Documents and
the transaction related hereto and thereto, (b) the interests of Stadium may not
necessarily coincide with the interests of other Investors, (c) SF&G does not
represent any Investor other than Stadium in connection with the transactions
contemplated hereby and thereby, and (d) each Investor has consulted with, or
has had an opportunity to consult with, its own legal counsel and has not relied
on SF&G for legal counsel in connection with this Agreement, the Related
Documents and the transactions related hereto and thereto.
8.17 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS TO ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
8.18 AGGREGATION OF STOCK. All Shares, Conversion Shares, Warrants
and Warrant Shares held or acquired by affiliated entities or persons will be
aggregated together for the purpose of determining the availability of any
rights under this Agreement or any of the Related Documents.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first set forth above.
THE COMPANY
SUMMA INDUSTRIES
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Print Name: XXXXX X. XXXXXXXXX
Title: PRESIDENT
Address: 00000 Xxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
THE INVESTORS:
STADIUM CAPITAL PARTNERS, L.P.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Print Name: XXXXXXX X. XXXX
Title: MANAGING MEMBER, STADIUM CAPITAL
MANAGEMENT LLC
Address: 000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
STADIUM SEPARATE I, L.P.
By: /s/ Xxxxxxx X. Xxxx
------------------------------------
Print Name: XXXXXXX X. XXXX
Title: MANAGING MEMBER, STADIUM CAPITAL
MANAGEMENT LLC
Address: 000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
STADIUM RELATIVE VALUE PARTNERS, L.P.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Print Name: XXXXXXX X. XXXX
Title: MANAGING MEMBER, STADIUM CAPITAL
MANAGEMENT LLC
Address: 000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
EXHIBITS
A. List of Investors
B. Certificate of Designations
C. Form of Warrant
D. Registration Rights Agreement
E. Reissuance Notice
F. Amendments to Company Bylaws
