EXHIBIT 10.1
SUMMA INDUSTRIES
SERIES A PREFERRED STOCK &
COMMON STOCK REPURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK &
COMMON STOCK REPURCHASE AGREEMENT (this “Agreement”) is
made and entered into as of May 3, 2004, 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, “Investors”).
WHEREAS, on December 14, 2001,
the Company issued and sold an aggregate of 5,000 shares of its
Series A Preferred Stock, $.001 par value (the “Preferred
Shares”), to Investors in the amounts for each set forth on
the Schedule of Investors attached hereto as Exhibit A
;
WHEREAS, from time to time prior to
the date hereof, Investors have purchased shares of the
Company’s Common Stock, $.001 par value, in the open market
and now hold an aggregate of 452,856 shares (the “Common
Shares”), in the amounts for each set forth on the
Schedule of Investors attached hereto as Exhibit A ;
and
WHEREAS, Investors desire to sell to
the Company, and the Company desires to repurchase from Investors,
the Preferred Shares and the Common Shares (collectively, the
“Shares”) on the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of
the foregoing recitals and the covenants and conditions set forth
in this Agreement, the parties hereto agree as follows:
1.
Sale & Repurchase of the
Shares.
1.1
Sale & Repurchase
. Subject to the terms and
conditions hereof, each Investor agrees, jointly and severally, to
sell to the Company, and the Company agrees to repurchase from 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 attached hereto as
Exhibit A .
1.2
Repurchase Price
.
(a)
Preferred Shares
. The repurchase price for the
Preferred Shares shall be equal to the value determined on the
Closing Date (as defined by Section 1.4 ) by
application of that certain accretion formula set forth in
Section 3(b)(ii) of the Certificate of Designations for the
Series A Preferred Stock filed by the Company with the Secretary of
State of the State of Delaware (the “Certificate of
Designations”). For example, assuming a Closing Date of
April 30, 2004, the aggregate repurchase price for the
Preferred Shares would equal Six Million Five Hundred Forty-Six
Thousand Five Hundred Eighty Dollars ($6,546,580.00).
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(b)
Common Shares
. The repurchase price
for the Common Shares shall be equal to ninety-two percent (92%) of
the average of the high and low trading price reported by Nasdaq
for the Common Shares on the Closing Date (or on the latest prior
trading date if there is no trading of Common Stock on the Closing
Date). For example, assuming high and low trading prices of
$8.95 and $8.75 on the Closing Date, the aggregate repurchase price
for the Common Shares would equal Three Million Six Hundred
Eighty-seven Thousand One Hundred Fifty-four
($3,687,154.00).
1.3
Payment of Repurchase
Price . At Closing,
the Company shall execute and deliver to each Investor one
Subordinated Promissory Note in the form attached hereto as
Exhibit B (each, a “Note” and collectively, the
“Notes”) in consideration for such Investor’s
sale and transfer of the Shares.
1.4
Closing . The closing of the sale and repurchase
of the Shares shall take place as soon as practicable at the
offices of the Company, One Park Plaza, Suite 600, Irvine,
California, simultaneously with the execution and delivery of this
Agreement and the Notes (the “Closing Date”), at 2:00
p.m., or at such other time and place as the parties may agree (the
“Closing”). No party shall have any obligation to
consummate the Closing contemplated herein prior to the execution
and delivery by such party of this Agreement.
1.5
Deliveries
. Subject to the terms of this
Agreement, at the Closing:
(a)
The Company will execute and deliver
to each Investor (i) an original of this Agreement, and (ii) a Note
representing the purchase price due to such Investor based on the
number of Shares set forth opposite the name of such Investor on
the Schedule of Investors attached hereto as Exhibit A
.
(b)
Each Investor will execute and
deliver to the Company (i) an original of this Agreement, and (ii)
a Note. In addition, each Investor shall deliver the Shares
set forth opposite the name of such Investor on the
Schedule of Investors attached hereto as Exhibit A ,
duly endorsed for valid transfer to the Company.
1.6
Amendment of Certificate of
Designations .
Immediately prior to the Closing, the Company shall file an
amendment to Section 3(b)(ii) of the Certificate of
Designations in the form attached hereto as Exhibit C to
permit the repurchase by the Company of the Preferred Shares as
contemplated hereby.
2.
Representations and Warranties of
the Company . The
Company hereby represents and warrants to each Investor
that:
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 (c) has all requisite corporate power and authority to execute
and deliver, and perform all of its obligations under this
Agreement and the Notes.
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2.2
Authorization; No Conflict and
Binding Obligation .
(a)
The execution and delivery by the
Company of this Agreement and the Notes, 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 Notes) 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:
(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 Notes), other than (i) approval of the Board of
Directors of the Company, which has been obtained, and (ii) the
filing of a Form 8-K with the Securities and Exchange Commission
(“SEC”). No other corporate action on the part of
the Company is necessary to authorize the execution, delivery and
performance of this Agreement and the Notes 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 and the Notes have
been duly executed and delivered by the Company, and each of the
Agreement and the Notes 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.
2.3
Financial Statements
. The financial statements of
the Company included in its filings with the SEC since
August 31, 2003 (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).
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2.4
No Material Adverse
Change . Since
February 29, 2004, 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 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.
2.5
SEC Reports
. The Company has timely filed
all SEC Reports with the SEC since August 31, 2003. 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 of 1933, as amended (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
. Since February 29, 2004, there has not been any
material change from the information filed in the most recent SEC
Report that would have been required to be filed therein if
occurring prior to or on such date, excluding all information
relating in any manner to the financial performance of the Company
since such date.
2.6
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 Notes to the Investors.
The issuance of the Notes 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.
2.7
Investment Company
. The Company is not, and
after consummation of the sale of the Notes 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.
2.8
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.
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2.9
Not Active in Market
. From and after
April 23, 2004, neither the Company nor any of its
representatives has purchased or sold, directly or indirectly, in
the public marketplace or otherwise, any Common Stock of the
Company.
3.
Representations and Warranties of
each Investor .
Investors, jointly and severally, represent and warrant to the
Company that:
3.1
Ownership of Shares
. Each Investor owns,
beneficially and of record, the Shares set forth opposite the name
of such Investor on the Schedule of Investors attached hereto
as Exhibit A , free and clear of all liens, pledges,
charges, claims, equities, restrictions or encumbrances whatsoever,
and each Investor has and will have the full right, power and
authority to sell, transfer and deliver the Shares to the Company
at the Closing. Upon delivery of the Shares to the Company at
the Closing and upon receipt by Investors of the Purchase Price,
good and valid title to the Shares will pass to the Company free
and clear of all liens, pledges, charges, claims, equities,
restrictions and encumbrances. The sale by each Investor of
the Shares does not constitute a breach or violation of, or default
under, any will, deed, trust, agreement or other instrument of any
kind, whether written or oral, by which each Investor is
bound.
3.2
Organization
. Each Investor is a limited
partnership duly organized, validly existing and in good standing
in the jurisdiction of its formation. Each Investor has all
requisite power and authority to execute, deliver and perform all
of its obligations of this Agreement and the Notes.
3.3
Authorization; No Conflict; and
Binding Effect .
(a)
The execution and delivery of this
Agreement and the Notes, the performance of each 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 each 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. Each
Investor has obtained any approval, consent or authorization from,
and filed 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, excluding any filings not required until after
Closing. No other action on the part of each Investor is
necessary to authorize the execution, delivery and performance of
this Agreement and the Notes and the consummation of the
transactions contemplated hereby and thereby.
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(b)
Upon the execution and delivery by
each Investor, this Agreement and the Notes shall constitute the
legal, valid and binding obligations of each 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.
3.4
Investment Intent
. Each Investor is acquiring
the Note 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 the Note to be purchased by the Investor.
Except as provided herein, the Investor is not obligated to
transfer the Note to any other person, nor does the Investor have
any agreement or understanding with any other person to do
so. The Investor is purchasing Note for investment purposes
and not with a present view to the sale or distribution, 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 the Note. 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 the Note. 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 the Note
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 Note 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.
3.5
No Public Offering
. Each Investor is able to
bear the economic risk of its investment in the Note. Each
Investor is aware that the Note has not been, and when issued will
not be, registered under the Securities Act or registered or
qualified under any state securities law. Each Investor
understands that the Company’s reliance on such exemption
from registration is predicated on the Investors’
representations set forth herein.
3.6
Notes may be “Restricted
Securities” . The
Investor understands that the Notes may be “restricted
securities” as that term is defined in Rule 144 promulgated
under the Securities Act and, accordingly, that the Notes 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.
3.7
Accredited Investor
. Each 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.
3.8
Sophistication of
Investors . Each
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. Each
Investor acknowledges that investment in the Notes is highly
speculative
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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 Notes and
could afford a complete loss of such investment.
3.9
Not Active in Market
. From and after
April 23, 2004, neither any Investor nor any Investor
representative has purchased or sold, directly or indirectly, in
the public marketplace or otherwise, any Common Stock of the
Company.
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.
4.2
No Integration
. The Company will not make
any offers or sales of any security under circumstances that would
cause the offering of the Notes to be integrated with any other
offering of securities by the Company.
4.3
Limitation on Debt
Funding . Until
such time as the Notes are paid in full, the Company shall not
raise additional debt funding for any reason which shall be senior
or equivalent in liquidation preference to the Notes if the
resulting Net Debt (as defined below) of the Company after any such
funding would be in excess of four and one half (4.5) times the
Company’s trailing four-quarters’ EBITDA, including the
pro forma EBITDA of any acquired entities. As used herein,
“EBITDA” shall mean earnings before interest, income
taxes, depreciation and amortization, and “Net Debt”
shall mean the aggregate amount owed and/or payable by the Company
in respect of any loans, notes, bonds, debentures and mortgages,
which (i) is senior or equivalent in liquidation preference to the
Notes, or (ii) if junior in liquidation preference to the Notes, to
the extent such is due prior to September 5, 2006, plus
aggregate indebtedness outstanding under the Notes, less cash and
cash equivalents.
4.4
Registration
. If the Company registers any
debt securities similar to the Notes, then the Company, in its sole
discretion, may include the Notes in any such
registration.
4.5
SPA; Warrants; Certificate of
Designations . Investors acknowledge and agree
that any and all of their rights of any kind under or pursuant to
that certain Series A Preferred Stock Purchase Agreement dated
December 14, 2001 among Investors and the Company shall
terminate at Closing. The Company previously authorized the
issuance to Investors of warrants to purchase shares of the
Company’s common stock (the “Warrants”) if and
only if the Company’s ratios triggered such an
issuance. Investors acknowledge and agree that no such
Warrants have been nor should have been issued. Investors
acknowledge and agree that the Company may terminate the
Certificate of Designations at any time following the Closing, and
that Investors shall have no rights of any kind under or pursuant
to the Certificate of Designations after Closing.
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4.6
Third Party Indemnity
. Each party (the
“Indemnifying Party”) agrees to indemnify and hold
harmless the other parties, their affiliates, and their respective
directors, officers, employees, agents and assigns (collectively,
the Indemnified Party”), from and against any and all
liabilities, obligations, losses, damages, claims and expenses
(including reasonable attorney’s fees) incurred by, imposed
on, borne by or asserted against any Indemnified Party in any way
relating to, arising out of or resulting from claims by third
parties based on any inaccuracy in or the breach or nonperformance
of any of the representations, warranties, covenants or agreements
made by the Indemnifying Party in this Agreement or in any Note;
provided that, the Indemnifying Party shall have received timely
written notice of such claim or demand (it being understood and
agreed that any failure to receive timely notice from any
Indemnified Party shall not relieve the Indemnifying Party of its
obligations hereunder except to the extent the Indemnifying Party
is prejudiced by such failure). The Indemnifying Party shall
defend against such claim or demand at its sole expense and through
counsel of its own choosing and shall give written notice
confirming its assumption of the defense within twenty (20) days of
the receipt of the notice r
