Exhibit 10.64
VENTURES-NATIONAL INCORPORATED
D/B/A TITAN GENERAL HOLDINGS, INC.
SECURITIES PURCHASE AGREEMENT
NOVEMBER 20, 2003
TABLE OF CONTENTS
PAGE
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1. AGREEMENT TO SELL AND PURCHASE........................................1
2. FEES AND WARRANT......................................................1
3. CLOSING, DELIVERY AND PAYMENT.........................................2
3.1 CLOSING....................................................2
3.2 DELIVERY...................................................2
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................2
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION..............2
4.2 SUBSIDIARIES...............................................3
4.3 CAPITALIZATION; VOTING RIGHTS..............................3
4.4 AUTHORIZATION; BINDING OBLIGATIONS.........................4
4.5 LIABILITIES................................................4
4.6 AGREEMENTS; ACTION.........................................4
4.7 OBLIGATIONS TO RELATED PARTIES.............................5
4.8 CHANGES....................................................6
4.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC.................7
4.10 INTELLECTUAL PROPERTY......................................7
4.11 COMPLIANCE WITH OTHER INSTRUMENTS..........................8
4.12 LITIGATION.................................................8
4.13 TAX RETURNS AND PAYMENTS...................................8
4.14 EMPLOYEES..................................................8
4.15 REGISTRATION RIGHTS AND VOTING RIGHTS......................9
4.16 COMPLIANCE WITH LAWS; PERMITS..............................9
4.17 ENVIRONMENTAL AND SAFETY LAWS.............................10
4.18 VALID OFFERING............................................10
4.19 FULL DISCLOSURE...........................................10
4.20 INSURANCE.................................................10
4.21 SEC REPORTS...............................................10
4.22 LISTING...................................................11
4.23 NO INTEGRATED OFFERING....................................11
4.24 STOP TRANSFER.............................................11
4.25 DILUTION..................................................11
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER......................11
5.1 NO SHORTING...............................................11
5.2 REQUISITE POWER AND AUTHORITY.............................11
5.3 INVESTMENT REPRESENTATIONS................................12
5.4 PURCHASER BEARS ECONOMIC RISK.............................12
5.5 ACQUISITION FOR OWN ACCOUNT...............................12
5.6 PURCHASER CAN PROTECT ITS INTEREST........................12
5.7 ACCREDITED INVESTOR.......................................13
5.8 LEGENDS...................................................13
6. COVENANTS OF THE COMPANY.............................................14
6.1 STOP-ORDERS...............................................14
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6.2 LISTING...................................................14
6.3 MARKET REGULATIONS........................................14
6.4 REPORTING REQUIREMENTS....................................14
6.5 USE OF FUNDS..............................................14
6.6 ACCESS TO FACILITIES......................................14
6.7 TAXES.....................................................15
6.8 INSURANCE.................................................15
6.9 INTELLECTUAL PROPERTY.....................................16
6.10 PROPERTIES................................................16
6.11 CONFIDENTIALITY...........................................16
6.12 REQUIRED APPROVALS........................................16
6.13 REISSUANCE OF SECURITIES..................................17
6.14 OPINION...................................................17
7. COVENANTS OF THE PURCHASER...........................................18
7.1 CONFIDENTIALITY...........................................18
7.2 NON-PUBLIC INFORMATION....................................18
8. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION.....18
8.1 COMPANY INDEMNIFICATION...................................18
8.2 PURCHASER'S INDEMNIFICATION...............................18
8.3 PROCEDURES................................................18
9. CONVERSION OF CONVERTIBLE NOTE.......................................18
9.1 MECHANICS OF CONVERSION...................................18
9.2 MAXIMUM CONVERSION........................................20
10. REGISTRATION RIGHTS..................................................20
10.1 REGISTRATION RIGHTS GRANTED...............................20
10.2 OFFERING RESTRICTIONS.....................................20
11. MISCELLANEOUS........................................................20
11.1 GOVERNING LAW.............................................20
11.2 SURVIVAL..................................................21
11.3 SUCCESSORS................................................21
11.4 ENTIRE AGREEMENT..........................................21
11.5 SEVERABILITY..............................................21
11.6 AMENDMENT AND WAIVER......................................21
11.7 DELAYS OR OMISSIONS.......................................22
11.8 NOTICES...................................................22
11.9 ATTORNEYS' FEES...........................................23
11.10 TITLES AND SUBTITLES......................................23
11.11 FACSIMILE SIGNATURES; COUNTERPARTS........................23
11.12 BROKER'S FEES.............................................23
11.13 CONSTRUCTION..............................................23
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LIST OF EXHIBITS
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Form of Convertible Term Note....................................... Exhibit A
Form of Warrant..................................................... Exhibit B
Form of Opinion..................................................... Exhibit C
Form of Escrow Agreement............................................ Exhibit D
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of November 20, 2003, by and between VENTURES-NATIONAL
INCORPORATED D/B/A TITAN GENERAL HOLDINGS, INC., a Utah corporation (the
"Company"), and Laurus Master Fund, Ltd., a Cayman Islands company (the
"Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a
Convertible Term Note in the aggregate principal amount of two million one
hundred thousand dollars ($2,100,000) (the "Note"), which Note is convertible
into shares of the Company's common stock, $0.001 par value per share (the
"Common Stock") at a fixed conversion price of $0.77 per share of Common Stock
("Fixed Conversion Price");
WHEREAS, the Company wishes to issue a warrant to the Purchaser to
purchase up to 350,000 shares of the Company's Common Stock in connection with
Purchaser's purchase of the Note;
WHEREAS, Purchaser desires to purchase the Note and Warrant on the
terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company a Note in the amount of $2,100,000 convertible in
accordance with the terms thereof into shares of the Company's Common Stock in
accordance with the terms of the Note and this Agreement. The sale of the Note
on the Closing Date shall be known as the "Offering." A form of the Note is
annexed hereto as Exhibit A. The Note will have a Maturity Date (as defined in
the Note) thirty six (36) months from the date of issuance. Collectively, the
Note and Warrant (as defined in Section 2) and Common Stock issuable in payment
of the Note, upon conversion of the Note and upon exercise of the Warrant are
referred to as the "Securities."
2. FEES AND WARRANT. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser a
Warrant to purchase up to 350,000 shares of Common Stock in connection
with the Offering (the "Warrant") pursuant to Section 1 hereof. The
Warrant must be delivered on the Closing
Date. A form of Warrant is annexed hereto as Exhibit B. All the
representations, covenants, warranties, undertakings, and
indemnification, and other rights made or granted to or for the benefit
of the Purchaser by the Company are hereby also made and granted in
respect of the Warrant and shares of the Company's Common Stock
issuable upon exercise of the Warrant (the "Warrant Shares").
(b) Subject to the terms of Section 2(d) below, the Company
shall pay to Laurus Capital Management, LLC, manager of Purchaser a
closing payment in an amount equal to three and six tenths percent
(3.6%) of the aggregate principal amount of the Note. The foregoing fee
is referred to herein as the "Closing Payment."
(c) The Company shall reimburse the Purchaser for its
reasonable legal fees for services rendered to the Purchaser in
preparation of this Agreement and the Related Agreements (as
hereinafter defined), and expenses in connection with the Purchaser's
due diligence review of the Company and relevant matters. Amounts
required to be paid hereunder will be paid at the Closing and shall not
exceed $22,000 for legal expenses and $17,500 for performing due
diligence inquiries on the Company.
(d) The Closing Payment, legal fees and due diligence fees
(net of deposits previously paid by the Company shall be paid at
closing out of funds held pursuant to a Funds Escrow Agreement of even
date herewith among the Company, Purchaser, and an Escrow Agent (the
"Funds Escrow Agreement") and a disbursement letter (the "Disbursement
Letter").
3. CLOSING, DELIVERY AND PAYMENT.
3.1 CLOSING. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "Closing"), shall take
place on the date hereof, at such time or place as the Company and Purchaser may
mutually agree (such date is hereinafter referred to as the "Closing Date").
3.2 DELIVERY. Pursuant to the Funds Escrow Agreement in the
form attached hereto as Exhibit C, at the Closing on the Closing Date, the
Company will deliver to the Purchaser, among other things, a Note in the form
attached as Exhibit A representing the principal amount of $2,100,000 and a
Warrant in the form attached as Exhibit B in the Purchaser's name representing
350,000 Warrant Shares and the Purchaser will deliver to the Company, among
other things, the amounts set forth in the Disbursement Letter by certified
funds or wire transfer.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchaser as of the date of this Agreement as set
forth below which disclosures are supplemented by, and subject to the Company's
filings under the Securities Exchange Act of 1934 (collectively, the "Exchange
Act Filings"), copies of which have been provided to the Purchaser.
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Utah. The Company has the corporate power and authority to
own and operate its properties and
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assets, to execute and deliver this Agreement, and the Note and the Warrant to
be issued in connection with this Agreement, the Security Agreement relating to
the Note dated as of November __, 2003 between the Company and the Purchaser
(the "Security Agreement"), the Registration Rights Agreement relating to the
Securities dated as of November __, 2003 between the Company and the Purchaser
(the "Registration Rights Agreement") and all other agreements referred to
herein (collectively, the "Related Agreements"), to issue and sell the Note and
the shares of Common Stock issuable upon conversion of the Note (the "Note
Shares"), to issue and sell the Warrant and the Warrant Shares, and to carry out
the provisions of this Agreement and the Related Agreements and to carry on its
business as presently conducted. The Company is duly qualified and is authorized
to do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.
4.2 SUBSIDIARIES. The Company owns all of the issued and
outstanding capital stock of Titan PCB East, Inc. and Titan PCB West, Inc. The
Company does not own or control any equity security or other material interest
of any other corporation, limited partnership or other business entity
4.3 CAPITALIZATION; VOTING RIGHTS.
(a) The authorized capital stock of the Company, as of the
date hereof consists of _________shares, of which ________are shares of
Common Stock, par value $0.001 per share, _________shares of which are
issued and outstanding.
(b) Except as disclosed on SCHEDULE 4.3, other than: (i) the
shares reserved for issuance under the Company's stock option plans;
and (ii) shares which may be granted pursuant to this Agreement and the
Related Agreements, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or arrangements or
agreements of any kind for the purchase or acquisition from the Company
of any of its securities. Except as disclosed on SCHEDULE 4.3, neither
the offer, issuance or sale of any of the Note or Warrant, or the
issuance of any of the Note Shares or Warrant Shares, nor the
consummation of any transaction contemplated hereby will result in a
change in the price or number of any securities of the Company
outstanding, under anti-dilution or other similar provisions contained
in or affecting any such securities.
(c) All issued and outstanding shares of the Company's Common
Stock: (i) have been duly authorized and validly issued and are fully
paid and nonassessable; and (ii) were issued in compliance with all
applicable state and federal laws concerning the issuance of
securities.
(d) The rights, preferences, privileges and restrictions of
the shares of the Common Stock are as stated in the Company's
Certificate of Incorporation (the "Charter"). The Note Shares and
Warrant Shares have been duly and validly reserved for issuance. When
issued in compliance with the provisions of this Agreement and the
Company's Charter, the Securities will be validly issued, fully paid
and nonassessable,
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and will be free of any liens or encumbrances; provided, however, that
the Securities may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise
required by such laws at the time a transfer is proposed.
4.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action
on the part of the Company, its officers and directors necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder at the Closing and, the authorization,
sale, issuance and delivery of the Note and Warrant has been taken or will be
taken prior to the Closing. The Agreement and the Related Agreements, when
executed and delivered and to the extent it is a party thereto, will be valid
and binding obligations of the Company enforceable in accordance with their
terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights;
(b) general principles of equity that restrict the
availability of equitable or legal remedies;
(c) indemnity and contribution provisions thereof insofar as
such provisions may be unenforceable as a matter of public policy ;
(d) choice of law provisions thereof, insofar as such
provisions may be unenforceable as a matter of public policy.
The sale of the Note and the subsequent conversion of the Note into Note Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. The issuance of the
Warrant and the subsequent exercise of the Warrant for Warrant Shares are not
and will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
4.5 LIABILITIES. The Company, to the best of its knowledge,
has no material contingent liabilities, except current liabilities incurred in
the ordinary course of business and liabilities disclosed in any Exchange Act
Filings.
4.6 AGREEMENTS; ACTION. Except as set forth on SCHEDULE 4.6 or
as disclosed in any Exchange Act Filings:
(a) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees
to which the Company is a party or to its knowledge by which it is
bound which may involve: (i) obligations (contingent or otherwise) of,
or payments to, the Company in excess of $50,000 (other than
obligations of, or payments to, the Company arising from purchase or
sale agreements entered into in the ordinary course of business); or
(ii) the transfer or license of any patent, copyright, trade secret or
other proprietary right to or from the Company (other than licenses
arising from the purchase of "off the shelf" or other standard
products); or (iii) provisions restricting the development, manufacture
or distribution of the Company's products or
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services; or (iv) indemnification by the Company with respect to
infringements of proprietary rights.
(b) Since August 31, 2002, the Company has not: (i) declared
or paid any dividends, or authorized or made any distribution upon or
with respect to any class or series of its capital stock; (ii) incurred
any indebtedness for money borrowed or any other liabilities (other
than ordinary course obligations) individually in excess of $50,000 or,
in the case of indebtedness and/or liabilities individually less than
$50,000, in excess of $100,000 in the aggregate; (iii) made any loans
or advances to any person not in excess, individually or in the
aggregate, of $100,000, other than ordinary advances for travel
expenses; or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary
course of business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting
the individual minimum dollar amounts of such subsections.
4.7 OBLIGATIONS TO RELATED PARTIES. Except as set forth on
SCHEDULE 4.7, there are no obligations of the Company to officers, directors,
stockholders or employees of the Company other than:
(a) for payment of salary for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf
of the Company;
(c) for other standard employee benefits made generally
available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of
Directors of the Company); and
(d) obligations listed in the Company's financial statements
or disclosed in any of its Exchange Act Filings.
Except as described above or set forth on SCHEDULE 4.7, none of the officers,
directors or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any members of their immediate families, are
indebted to the Company, individually or in the aggregate, in excess of $50,000
or have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the Company, other
than passive investments in publicly traded companies (representing less than
one percent (1%) of such company) which may compete with the Company. Except as
described above, no officer, director or stockholder, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company and no agreements, understandings or proposed
transactions are contemplated between the Company and any such person. Except as
set forth on SCHEDULE 4.7, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
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4.8 CHANGES. Since August 31, 2002, except as disclosed in any
Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) Any change in the assets, liabilities, financial
condition, prospects or operations of the Company, other than changes
in the ordinary course of business, none of which individually or in
the aggregate has had or is reasonably expected to have a material
adverse effect on such assets, liabilities, financial condition,
prospects or operations of the Company;
(b) Any resignation or termination of any officer, key
employee or group of employees of the Company;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of
guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business
or prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect material loans made by the Company
to any stockholder, employee, officer or director of the Company, other
than advances made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity related to the Company;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company
is a party or by which it is bound which may materially and adversely
affect the business, assets, liabilities, financial condition,
operations or prospects of the Company;
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(m) Any other event or condition of any character that, either
individually or cumulatively, has or may materially and adversely
affect the business, assets, liabilities, financial condition,
prospects or operations of the Company; or
(n) Any arrangement or commitment by the Company to do any of
the acts described in subsection (a) through (m) above.
4.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Except as set
forth on SCHEDULE 4.9, the Company has good and marketable title to its
properties and assets, and good title to its leasehold estates, in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than:
(a) those resulting from taxes which have not yet become
delinquent;
(b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially
impair the operations of the Company; and
(c) those that have otherwise arisen in the ordinary course of
business.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company are in good operating condition and repair
and are reasonably fit and usable for the purposes for which they are being
used. Except as set forth on SCHEDULE 4.9, the Company is in compliance with all
material terms of each lease to which it is a party or is otherwise bound.
4.10 INTELLECTUAL PROPERTY.
(a) The Company owns or possesses sufficient legal rights to
all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary rights and
processes necessary for its business as now conducted and to the
Company's knowledge as presently proposed to be conducted (the
"Intellectual Property"), without any known infringement of the rights
of others. There are no outstanding options, licenses or agreements of
any kind relating to the foregoing proprietary rights, nor is the
Company bound by or a party to any options, licenses or agreements of
any kind with respect to the patents, trademarks, service marks, trade
names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or entity other
than such licenses or agreements arising from the purchase of "off the
shelf" or standard products.
(b) The Company has not received any communications alleging
that the Company has violated any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary
rights of any other person or entity, nor is the Company aware of any
basis therefor.
(c) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any
of its employees made prior to
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their employment by the Company, except for inventions, trade secrets
or proprietary information that have been rightfully assigned to the
Company.
4.11 COMPLIANCE WITH OTHER INSTRUMENTS. Except as set forth on
SCHEDULE 4.11, the Company is not in violation or default of any term of its
Charter or Bylaws, or of any material provision of any mortgage, indenture,
contract, agreement, instrument or contract to which it is party or by which it
is bound or of any judgment, decree, order or writ. Except as otherwise
contemplated hereby and by the Related Agreements, the execution, delivery and
performance of and compliance with this Agreement and the Related Agreements to
which it is a party, and the issuance and sale of the Note by the Company and
the other Securities by the Company each pursuant hereto, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
4.12 LITIGATION. Except as set forth on SCHEDULE 4.12 hereto,
there is no action, suit, proceeding or investigation pending or, to the
Company's knowledge, currently threatened against the Company that prevents the
Company to enter into this Agreement or the Related Agreements, or to consummate
the transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for any of the foregoing. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
4.13 TAX RETURNS AND PAYMENTS. The Company has timely filed
all tax returns (federal, state and local) required to be filed by it. All taxes
shown to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing, have been paid or will be paid prior to the time they become
delinquent. Except as set forth on SCHEDULE 4.13, the Company has not been
advised:
(a) that any of its returns, federal, state or other, have
been or are being audited as of the date hereof; or
(b) of any deficiency in assessment or proposed judgment to
its federal, state or other taxes.
The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14 EMPLOYEES. Except as set forth on SCHEDULE 4.14, the
Company has no collective bargaining agreements with any of its employees. There
is no labor union organizing
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activity pending or, to the Company's knowledge, threatened with respect to the
Company. Except as disclosed in the Exchange Act Filings or on SCHEDULE 4.14,
the Company is not a party to or bound by any currently effective employment
contract, deferred compensation arrangement, bonus plan, incentive plan, profit
sharing plan, retirement agreement or other employee compensation plan or
agreement. To the Company's knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company's knowledge the continued employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent contractors, will not result in any such violation. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere in any material respect with their duties to the
Company. The Company has not received any notice alleging that any such
violation has occurred. Except for employees who have a current effective
employment agreement with the Company, no employee of the Company has been
granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. Except as set
forth on SCHEDULE 4.14, the Company is not aware that any officer, key employee
or group of employees intends to terminate his, her or their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees.
4.15 REGISTRATION RIGHTS AND VOTING RIGHTS. Except as set
forth on SCHEDULE 4.15 and except as disclosed in Exchange Act Filings, the
Company is presently not under any obligation, and has not granted any rights,
to register any of the Company's presently outstanding securities or any of its
securities that may hereafter be issued. Except as set forth on SCHEDULE 4.15
and except as disclosed in Exchange Act Filings, to the Company's knowledge, no
stockholder of the Company has entered into any agreement with respect to the
voting of equity securities of the Company.
4.16 COMPLIANCE WITH LAWS; PERMITS. Except as set forth on
SCHEDULE 4.16, to its knowledge, the Company is not in violation in any material
respect of any applicable statute, rule, regulation, order or restriction of any
domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties which
violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement and the
issuance of any of the Securities, except such as has been duly and validly
obtained or filed, or with respect to any filings that must be made after the
Closing in accordance with federal securities laws and state blue sky laws, as
will be filed in a timely manner. The Company has all material franchises,
permits, licenses and any similar authority necessary for the conduct of its
business as now being conducted by it, the lack of which would materially and
adversely affect the business, properties, prospects or financial condition of
the Company.
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4.17 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in
violation in any material respect of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation. Except as set forth on
SCHEDULE 4.17, no Hazardous Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or, to the Company's knowledge, by
any other person or entity on any property owned, leased or used by the Company.
For the purposes of the preceding sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as
"hazardous" or "toxic" under any applicable local, state, federal
and/or foreign laws and regulations that govern the existence and/or
remedy of contamination on property, the protection of the environment
from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building
materials; or
(b) any petroleum products or nuclear materials.
4.18 VALID OFFERING. Assuming the accuracy of the
representations and warranties of the Purchaser contained in this Agreement, the
offer, sale and issuance of the Securities will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws.
4.19 FULL DISCLOSURE. The Company has provided the Purchaser
with all information requested by the Purchaser in connection with its decision
to purchase the Note and Warrant, including all information the Company believes
is reasonably necessary to make such investment decision. Neither this
Agreement, the exhibits and schedules hereto, the Related Agreements nor any
other document delivered by the Company to Purchaser or its attorneys or agents
in connection herewith or therewith or with the transactions contemplated hereby
or thereby, contain any untrue statement of a material fact nor omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading.
Any financial projections and other estimates provided to the Purchaser by the
Company were based on the Company's experience in the industry and on
assumptions of fact and opinion as to future events which the Company, at the
date of the issuance of such projections or estimates, believed to be
reasonable.
4.20 INSURANCE. The Company has general commercial, product
liability, fire and casualty insurance policies with coverages which the Company
believes are customary for companies similarly situated to the Company in the
same or similar business.
4.21 SEC REPORTS. Except as set forth on SCHEDULE 4.21, the
Company has filed all proxy statements, reports and other documents required to
be filed by it under the Exchange Act. The Company has furnished the Purchaser
with copies of: (i) its Annual Report on Form 10-KSB for the fiscal year ended
August 31, 2002; and (ii) its Quarterly Reports on Form 10-QSB for the fiscal
quarters ended November 30, 2003, February 28, 2003, and May 31, 2003, and the
Form 8-K filings which it has made during 2003 to date (collectively, the "SEC
10
Reports"). Except as set forth on SCHEDULE 4.21, each SEC Report was, at the
time of its filing, in substantial compliance with the requirements of its
respective form and none of the SEC Reports, nor the financial statements (and
the notes thereto) included in the SEC Reports, as of their respective filing
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.22 LISTING. The Company's Common Stock is listed for trading
on the NASD Over the Counter Bulletin Board ("OTCBB") and satisfies all
requirements for the continuation of such listing. The Company has not received
any notice that its Common Stock will be delisted from OTCBB or that its Common
Stock does not meet all requirements for listing.
4.23 NO INTEGRATED OFFERING. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Rule 506 under the Securities Act, or
any applicable exchange-related stockholder approval provisions, nor will the
Company or any of its affiliates or subsidiaries take any action or steps that
would cause the offering of the Securities to be integrated with other
offerings.
4.24 STOP TRANSFER. The Securities are restricted securities
as of the date of this Agreement. The Company will not issue any stop transfer
order or other order impeding the sale and delivery of any of the Securities at
such time as the Securities are registered for public sale or an exemption from
registration is available, except as otherwise provided in the Registration
Rights Agreement and as required by state and federal securities laws.
4.25 DILUTION. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note and
exercise of the Warrant is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company as follows (such representations
and warranties do not lessen or obviate the representations and warranties of
the Company set forth in this Agreement)
5.1 NO SHORTING. The Purchaser or any of its affiliates and
investment partners will not and will not cause any person or entity, directly
or indirectly, to engage in "short sales" or "short sales against the box" of
the Company's Common Stock or any other hedging strategies.
5.2 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on Purchaser's part required for the lawful
execution and delivery of this Agreement and the Related Agreements
11
have been or will be effectively taken prior to the Closing. Upon their
execution and delivery, this Agreement and the Related Agreements will be valid
and binding obligations of Purchaser, enforceable in accordance with their
terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and
(b) as limited by general principles of equity that restrict
the availability of equitable and legal remedies.
5.3 INVESTMENT REPRESENTATIONS. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser's representations
contained in the Agreement, including, without limitation, that the Purchaser is
an "accredited investor" within the meaning of Regulation D under the Securities
Act. The Purchaser confirms that it has received or has had full access to all
the information it considers necessary or appropriate to make an informed
investment decision with respect to the Note and the Warrant to be purchased by
it under this Agreement and the Note Shares and the Warrant Shares acquired by
it upon the conversion of the Note and the exercise of the Warrant,
respectively. The Purchaser further confirms that it has had an opportunity to
ask questions and receive answers from the Company regarding the Company's
business, management and financial affairs and the terms and conditions of the
Offering, the Note, the Warrant and the Securities and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the Purchaser or to which the Purchaser had access.
5.4 PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment until the Securities are sold pursuant to: (i) an effective
registration statement under the Securities Act; or (ii) an exemption from
registration is available with respect to such sale.
5.5 ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Note and Warrant and the Note Shares and the Warrant Shares for Purchaser's own
account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.
5.6 PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's, business and financial
experience, Purchaser has the capacity to evaluate the merits and risks of its
investment in the Note, the Warrant and the Securities and to protect its own
interests in connection with the transactions contemplated in this Agreement,
and the Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement
or the Related Agreements.
12
5.7 ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
5.8 LEGENDS.
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH
SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
VENTURES-NATIONAL INCORPORATED D/B/A TITAN GENERAL HOLDINGS,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) The Note Shares and the Warrant Shares, if not issued by
DWAC system shall bear a legend which shall be in substantially the
following form until such shares are covered by an effective
registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE, STATE SECURITIES LAWS. THESE SHARES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE LAWS
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
VENTURES-NATIONAL INCORPORATED D/B/A TITAN GENERAL HOLDINGS,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS
13
TO THIS WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER
SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO VENTURES-NATIONAL
INCORPORATED D/B/A TITAN GENERAL HOLDINGS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
6. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Purchaser as follows:
6.1 STOP-ORDERS. The Company will advise the Purchaser,
promptly after it receives notice of issuance by the SEC, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock of the Company for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.
6.2 LISTING. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon conversion of the Note and upon the
exercise of the Warrant on the OTCBB (the "Principal Market") upon which shares
of Common Stock are listed (subject to official notice of issuance) and shall
maintain such listing so long as any other shares of Common Stock shall be so
listed. The Company will maintain the listing of its Common Stock on the
Principal Market, and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers ("NASD") and such exchanges, as
applicable.
6.3 MARKET REGULATIONS. The Company shall notify the SEC, NASD
and applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to Purchaser
and promptly provide copies thereof to Purchaser.
6.4 REPORTING REQUIREMENTS. The Company will timely file with
the SEC all reports required to be filed pursuant to the Exchange Act and
refrain from terminating its status as an issuer required by the Exchange Act to
file reports thereunder even if the Exchange Act or the rules or regulations
thereunder would permit such termination.
6.5 USE OF FUNDS. The Company agrees that it will use the
proceeds of the sale of the Note and Warrant for general corporate purposes
only.
6.6 ACCESS TO FACILITIES. The Company will permit any
representatives designated by the Purchaser (or any successor of the Purchaser),
upon reasonable notice and during normal business hours, at such person's
expense and accompanied by a representative of the Company, to:
(a) visit and inspect any of the properties of the Company;
14
(b) examine the corporate and financial records of the Company
(unless such examination is not permitted by federal, state or local
law or by contract) and make copies thereof or extracts therefrom; and
(c) discuss the affairs, finances and accounts of the Company
with the directors, officers and independent accountants of the
Company.
Notwithstanding the foregoing, the Company will not provide any material,
non-public information to the Purchaser unless the Purchaser signs a
confidentiality agreement and otherwise complies with Regulation FD, under the
federal securities laws.
6.7 TAXES. The Company will promptly pay and discharge, or
cause to be paid and discharged, when due and payable, all lawful taxes,
assessments and governmental charges or levies imposed upon the income, profits,
property or business of the Company; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.
6.8 INSURANCE. The Company will keep its assets which are of
an insurable character insured by financially sound and reputable insurers
against loss or damage by fire, explosion and other risks customarily insured
against by companies in similar business similarly situated as the Company; and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner which the Company reasonably believes is
customary for companies in similar business similarly situated as the Company
and to the extent available on commercially reasonable terms. The Company and
each of its subsidiaries set forth in Section 4.2 hereof (the "Subsidiaries")
will jointly and severally bear the full risk of loss from any loss of any
nature whatsoever with respect to the assets pledged to the Purchaser as
security for its obligations hereunder and under the Related Agreements. At the
Company's own cost and expense in amounts and with carriers reasonably
acceptable to Purchaser, the Company and each of the Subsidiaries shall (i) keep
all its insurable properties and properties in which it has an interest insured
against the hazards of fire, flood, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to the
Company's or the respective Subsidiary's including business interruption
insurance; (ii) maintain a bond in such amounts as is customary in the case of
companies engaged in businesses similar to the Company's or the Subsidiary's
insuring against larceny, embezzlement or other criminal misappropriation of
insured's officers and employees who may either singly or jointly with others at
any time have access to the assets or funds of the Company either directly or
through governmental authority to draw upon such funds or to direct generally
the disposition of such assets; (iii) maintain public and product liability
insurance against claims for personal injury, death or property damage suffered
by others; (iv) maintain all such worker's compensation or similar insurance as
may be required under the laws of any state or jurisdiction in which the Company
or the Subsidiary is engaged in business; and (v) furnish Purchaser with (x)
copies of all policies and evidence of the
15
maintenance of such policies at least thirty (30) days before any expiration
date, (y) excepting the Company's workers' compensation policy, endorsements to
such policies naming Purchaser as "co-insured" or "additional insured" and
appropriate loss payable endorsements in form and substance satisfactory to
Purchaser, naming Purchaser as loss payee, and (z) evidence that as to Purchaser
the insurance coverage shall not be impaired or invalidated by any act or
neglect of the Company or any Subsidiary and the insurer will provide Purchaser
with at least thirty (30) days notice prior to cancellation. The Company and
each Subsidiary shall instruct the insurance carriers that in the event of any
loss thereunder, the carriers shall make payment for such loss to the Company
and/or the Subsidiary and Purchaser jointly. In the event that as of the date of
receipt of each loss recovery upon any such insurance, the Purchaser has not
declared an event of default with respect to this Agreement or any of the
Related Agreements, then the Company shall be permitted to direct the
application of such loss recovery proceeds toward investment in property, plant
and equipment that would comprise "Collateral" secured by Purchaser's security
interest pursuant to its security agreement, with any surplus funds to be
applied toward payment of the obligations of the Company to Purchaser. In the
event that Purchaser has properly declared an event of default with respect to
this Agreement or any of the Related Agreements, then all loss recoveries
received by Purchaser upon any such insurance thereafter may be applied to the
obligations of the Company hereunder and under the Related Agreements, in such
order as the Purchaser may determine. Any surplus (following satisfaction of all
Company obligations to Purchaser) shall be paid by Purchaser to the Company or
applied as may be otherwise required by law. Any deficiency thereon shall be
paid by the Company or the Subsidiary, as applicable, to Purchaser, on demand.
6.9 INTELLECTUAL PROPERTY. The Company shall maintain in full
force and effect its corporate existence, rights and franchises and all licenses
and other rights to use Intellectual Property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.
6.10 PROPERTIES. The Company will keep its properties in good
repair, working order and condition, reasonable wear and tear excepted, and from
time to time make all needful and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company will at all times comply
with each provision of all leases to which it is a party or under which it
occupies property if the breach of such provision could reasonably be expected
to have a material adverse effect.
6.11 CONFIDENTIALITY. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchaser, unless expressly agreed to by the Purchaser or unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement. The Company may disclose Purchaser's identity and
the terms of this Agreement to its current and prospective debt and equity
financing sources.
6.12 REQUIRED APPROVALS. For so long as twenty-five percent
(25%) of the principal amount of the Note is outstanding, the Company, without
the prior written consent of the Purchaser, shall not:
(a) directly or indirectly declare or pay any dividends, other
than dividends with respect to any series of preferred stock issued or
to be issued thereby;
16
(b) liquidate, dissolve or effect a material reorganization;
(c) become subject to (including, without limitation, by way
of amendment to or modification of) any agreement or instrument which
by its terms would (under any circumstances) restrict the Company's
right to perform the provisions of this Agreement or any of the
agreements contemplated thereby;
(d) materially alter or change the scope of the business of
the Company;
(e) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the purchase of
equipment (not in excess of five percent (5%) per annum of the
Company's assets) whether secured or unsecured other than the Company's
indebtedness to Laurus and as set forth on EXHIBIT 6.12(e) attached
hereto and made a part hereof or any refinancings or replacements
thereof or any debt incurred in connection with the purchase of assets
or in connection with operating lines of credit as necessary to operate
such assets, or any refinancings or replacements thereof; (ii) cancel
any debt owing to it in excess of $50,000 in the aggregate during any
12 month period; (iii) assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligations of
any other Person, except the endorsement of negotiable instruments by a
Company for deposit or collection or similar transactions in the
ordinary course of business or guarantees provided to any of the
lenders set forth in subparagraph (i) immediately above.
6.13 REISSUANCE OF SECURITIES. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.7 above at such time as:
(a) the holder thereof is permitted to dispose of such
Securities pursuant to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement
after such Securities are registered under the Securities Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144 and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the selling Purchaser and broker, if
any.
6.14 OPINION. On the Closing Date, the Company will deliver to
the Purchaser an opinion acceptable to the Purchaser from the Company's legal
counsel. The Company will use its best efforts to provide, at the Company's
expense, such other legal opinions in the future as are reasonably necessary for
the conversion of the Note and exercise of the Warrant.
7. COVENANTS OF THE PURCHASER. The Purchaser covenants and agrees with
the Company as follows:
7.1 CONFIDENTIALITY. The Purchaser agrees that it will not
disclose, and will not include in any public announcement, the name of the
Company, unless expressly agreed to by
17
the Company or unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
7.2 NON-PUBLIC INFORMATION. The Purchaser agrees not to effect
any sales in the shares of the Company's Common Stock while in possession of
material, non-public information regarding the Company if such sales would
violate applicable securities law.
8. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION.
8.1 COMPANY INDEMNIFICATION. The Company agrees to indemnify,
hold harmless, reimburse and defend Purchaser, and each of Purchaser's officers,
directors, agents, affiliates, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser which results, arises out of or is based upon: (i) any
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement; or (ii) any breach or default in performance by Company of any
covenant or undertaking to be performed by Company hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto.
8.2 PURCHASER'S INDEMNIFICATION. Purchaser agrees to
indemnify, hold harmless, reimburse and defend the Company and each of the
Company's officers, directors, agents, affiliates, control persons and principal
shareholders, against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Company which results, arises out of or is based upon: (i) any
misrepresentation by Purchaser or breach of any warranty by Purchaser in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement; or (ii) any breach or default in performance by Purchaser of any
covenant or undertaking to be performed by Purchaser hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto.
8.3 PROCEDURES. The procedures and limitations set forth in
Section 10.2(c) and (d) shall apply to the indemnifications set forth in
Sections 8.1 and 8.2 above.
9. CONVERSION OF CONVERTIBLE NOTE.
9.1 MECHANICS OF CONVERSION.
(a) Provided the Purchaser has notified the Company of the
Purchaser's intention to sell the Note Shares and the Note Shares are
included in an effective registration statement or are otherwise exempt
from registration when sold: (i) upon the conversion of the Note or
part thereof, the Company shall, at its own cost and expense, take all
necessary action (including the issuance of an opinion of counsel) to
assure that the Company's transfer agent shall issue shares of the
Company's Common Stock in the name of the Purchaser (or its nominee) or
such other persons as designated by the Purchaser in accordance with
Section 9.1(b) hereof and in such denominations to be specified
representing the number of Note Shares issuable upon such conversion;
and (ii) the Company warrants that no instructions other than these
instructions have been or will be given to the transfer agent of the
Company's Common Stock and that after the Effectiveness Date (as
defined in the Registration Rights Agreement) the Note Shares
18
issued will be freely transferable subject to the prospectus delivery
requirements of the Securities Act and the provisions of this
Agreement, and, upon the sale thereof, will not contain a legend
restricting the resale or transferability of the Note Shares.
(b) Purchaser will give notice of its decision to exercise its
right to convert the Note or part thereof by telecopying or otherwise
delivering an executed and completed notice of the number of shares to
be converted to the Company (the "Notice of Conversion"). The Purchaser
will not be required to surrender the Note until the Purchaser receives
a credit to the account of the Purchaser's prime broker through the
DWAC system (as defined below), representing the Note Shares or until
the Note has been fully satisfied. Each date on which a Notice of
Conversion is telecopied or delivered to the Company in accordance with
the provisions hereof shall be deemed a "Conversion Date." Pursuant to
the terms of the Notice of Conversion, the Borrower will issue
instructions to the transfer agent accompanied by an opinion of counsel
within one (1) business days of the date of the delivery to Borrower of
the Notice of Conversion and shall cause the transfer agent to transmit
the certificates representing the Conversion Shares to the Holder by
crediting the account of the Purchaser's prime broker with the
Depository Trust Company ("DTC") through its Deposit Withdrawal Agent
Commission ("DWAC") system within three (3) business days after receipt
by the Company of the Notice of Conversion (the "Delivery Date").
(c) The Company understands that a delay in the delivery of
the Note Shares in the form required pursuant to Section 9 hereof
beyond the Delivery Date could result in economic loss to the
Purchaser. In the event that the Company fails to direct its transfer
agent to deliver the Note Shares to the Purchaser via the DWAC system
within the time frame set forth in Section 9.1(b) above and the Note
Shares are not delivered to the Purchaser by the Delivery Date, as
compensation to the Purchaser for such loss, the Company agrees to pay
late payments to the Purchaser for late issuance of the Note Shares in
the form required pursuant to Section 9 hereof upon conversion of the
Note in the amount equal to the greater of: (i) $500 per business day
after the Delivery Date; or (ii) the Purchaser's actual damages from
such delayed delivery. Notwithstanding the foregoing, the Company will
not owe the Purchaser any late payments if the delay in the delivery of
the Note Shares beyond the Delivery Date is solely out of the control
of the Company and the Company is actively trying to cure the cause of
the delay. The Company shall pay any payments incurred under this
Section in immediately available funds upon demand and, in the case of
actual damages, accompanied by reasonable documentation of the amount
of such damages. Such documentation shall show the number of shares of
Common Stock the Purchaser is forced to purchase (in an open market
transaction) which the Purchaser anticipated receiving upon such
conversion, and shall be calculated as the amount by which (A) the
Purchaser's total purchase price (including customary brokerage
commissions, if any) for the shares of Common Stock so purchased
exceeds (B) the aggregate principal and/or interest amount of the Note,
for which such Conversion Notice was not timely honored.
Nothing contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or
19
dividends required to be paid or other charges hereunder exceed the maximum
amount permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to a Purchaser and thus refunded to
the Company.
9.2 MAXIMUM CONVERSION. The Purchaser shall not be entitled to
convert on a Conversion Date, nor shall the Company be permitted to require the
Purchaser to accept, that amount of a Note in connection with that number of
shares of Common Stock which would be in excess of the sum of: (i) the number of
shares of Common Stock beneficially owned by the Purchaser on a Conversion Date;
and (ii) the number of shares of Common Stock issuable upon the conversion of
the Note with respect to which the determination of this proviso is being made
on a Conversion Date, which would result in beneficial ownership by the
Purchaser of more than 4.99% of the outstanding shares of Common Stock of the
Company on such Conversion Date. For the purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and Regulation 13d-3 thereunder. Upon an Event of
Default under the Note, the conversion limitation in this Section 9.2 shall
become null and void.
10. REGISTRATION RIGHTS.10.1 REGISTRATION RIGHTS GRANTED. The Company
hereby grants registration rights to the Purchaser pursuant to a Registration
Rights Agreement dated as of even date herewith between the Company and the
Purchaser.
10.2 OFFERING RESTRICTIONS. Except as previously disclosed in
the SEC Reports or in the Exchange Act Filings, or stock or stock options
granted to employees or directors of the Company; or shares of preferred stock
issued to pay dividends in respect of the Company's preferred stock; or equity
or debt issued in connection with an acquisition of a business or assets by the
Company; or the issuance by the Company of stock in connection with the
establishment of a joint venture partnership or licensing arrangement (these
exceptions hereinafter referred to as the "Excepted Issuances"), the Company
will not issue any securities with a continuously variable/floating conversion
feature which are or could be (by conversion or registration) free-trading
securities (i.e. Common Stock subject to a registration statement) prior to the
full repayment or conversion of the Note (the "Exclusion Period").
11. MISCELLANEOUS.
11.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER PARTY AGAINST
THE OTHER CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE
BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN
THE STATE OF NEW YORK, IN EACH CASE LOCATED IN THE CITY OF NEW YORK. BOTH
PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND OTHER AGREEMENTS ON
BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS AND
WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY PROVISION OF THIS AGREEMENT OR ANY
OTHER AGREEMENT DELIVERED IN CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE
UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN
20
SUCH PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT
THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF
LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW
SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF ANY
AGREEMENT.
11.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby to the extent provided
therein. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.
11.3 SUCCESSORS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Securities from time to time, other than the holders of Common
Stock which has been sold by the Purchaser pursuant to Rule 144 or an effective
registration statement. Purchaser may not assign its rights hereunder to a
competitor of the Company.
11.4 ENTIRE AGREEMENT. This Agreement, the exhibits and
schedules hereto, the Related Agreements and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.
11.5 SEVERABILITY. In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
11.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the
Purchaser under this Agreement may be waived only with the written
consent of the Purchaser.
(c) The obligations of the Purchaser and the rights of the
Company under this Agreement may be waived only with the written
consent of the Company.
11.7 DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under this Agreement or the
Related Agreements, shall impair any such right, power or remedy, nor shall it
be construed to be a waiver of any such breach, default or
21
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. All remedies, either under this
Agreement, the Note or the Related Agreements, by law or otherwise afforded to
any party, shall be cumulative and not alternative.
11.8 NOTICES. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by
registered or certified mail, return receipt requested, postage
prepaid; or
(d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written
verification of receipt.
All communications shall be sent as follows:
IF TO THE PURCHASER, TO: Ventures-National Incorporated
d/b/a Titan General Holdings, Inc.
Attention: Chief Financial Officer
Facsimile:
WITH A COPY TO:
Reitler Xxxxx LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx Xxxxx, Esq.
Facsimile: 000-000-0000
IF TO THE COMPANY, TO: Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services ltd.
X.X. Xxx 0000 G.T.
Xxxxxxxxxx Xxxxx, Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx
Facsimile: 000-000-0000
WITH A COPY TO:
00
Xxxx X. Xxxxxx , Xxx.
000 Xxxxx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
11.9 ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
11.10 TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
11.11 FACSIMILE SIGNATURES; COUNTERPARTS. This Agreement may
be executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
11.12 BROKER'S FEES. Except as set forth on SCHEDULE 11.12
hereof, each party hereto represents and warrants that no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
such party hereto is or will be entitled to any broker's or finder's fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 11.12 being untrue.
11.13 CONSTRUCTION. Each party acknowledges that its legal
counsel participated in the preparation of this Agreement and the Related
Agreements and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Agreement to favor any party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
VENTURES-NATIONAL INCORPORATED
D/B/A TITAN GENERAL HOLDINGS, INC. LAURUS MASTER FUND, LTD.
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxx Grin
--------------------------- ---------------------------
Name: Xxxxxx Xxxxxxx Name: Xxxxx Grin
--------------------------- ---------------------------
Title: President Title:
--------------------------- ---------------------------
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