EXHIBIT 10.4
TRI-PARTY AGREEMENT
This TRI-PARTY AGREEMENT (this "Agreement"), dated as of February 4,
2004 is made by and among New York Regional Rail Corporation, a Delaware
corporation, with offices located at 0000 Xxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000
(the "Company"), Xxxx Xxxxxxx, an individual having an address at 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, XX 10021("Marsala"), and Transit Rail, LLC, a Delaware limited
liability company, with offices located at 0000 Xxxxxxx Xxxx, Xxxx Xxxxxx, Xxx
Xxxx 00000 (the "Investor").
W I T N E S S E T H
WHEREAS, the Company and the Investor have entered into the Investment
Agreement of even date herewith in connection with the purchase of up to 2,500
shares of the Company's Series D Preferred Stock by the Investor (the
"Investment Agreement"); and
WHEREAS, Marsala is the holder of 440,000 shares of the Company's
Series C Preferred Stock; and
WHEREAS, as a condition of the Investor entering into the Investment
Agreement the Investor desires to acquire certain rights of Marsala as the
holder of the shares of Series C Preferred Stock; and
WHEREAS, in connection with the transfer or other benefit to the
Investor of certain rights with respect to the shares of Series C Preferred
Stock the Investor and the Company have agreed to provide Marsala with the
rights specified herein.
NOW, THEREFORE, in consideration of the above premises and the mutual
promises set forth in this Agreement, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. OBLIGATIONS OF MARSALA.
(a) Upon the execution of this Agreement, Marsala shall
deliver to the Investor the proxy (the "Proxy") in the form annexed hereto as
Exhibit A entitling the Investor to direct the voting of the Series C Preferred
Stock held by Marsala. Marsala agrees not to assign, convey, encumber or in any
way transfer to any party the shares of Series C Preferred Stock, unless the
obligations hereunder are assumed by such party or to convert the shares of
Series C Preferred Stock held by Marsala into shares of common stock of the
Company during the term of the Proxy unless Marsala is required to convert the
Series C Preferred Stock as provided in Section 1(b) below. Any attempted
conversion of the Series C Preferred Stock in contravention hereof shall be
deemed null and void and shall not be recognized by the Company.
(b) In the event that (i) the Investor has purchased at least
1,700 shares of Series D Preferred Stock pursuant to the Investment Agreement
and (ii) there has been not been an Investor Breach, then Marsala hereby agrees,
within five (5) days after written notice from
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the Investor (a "Conversion Notice"), to convert the shares of Series C
Preferred Stock into shares of common stock of the Company in accordance with
the provisions set forth in Section 8 of the Company's Certificate of
Designation, Preferences and Rights of the Series C Preferred Stock. On the date
this Agreement is executed, Marsala shall execute and deliver to counsel for the
Company (in a form reasonably satisfactory to the Investor) a written directive
electing conversion of all of the Series C Preferred Stock, such directive to be
un-dated and specifying that all of the shares of Series C Preferred Stock are
to be converted (the "Escrowed Conversion Election") pursuant to the escrow
agreement in the form of Exhibit B. In the event that Marsala does not
affirmatively act to convert such shares of Series C Preferred Stock within five
(5) days following the delivery of such Conversion Notice from the Investor, the
Escrowed Conversion Election shall be released to the Company and dated the date
of the Conversion Notice and the Series C Preferred Stock shall be deemed to
have been converted to common stock as of the date of the Conversion Notice and
no longer of any effect and the Company shall issue shares of its common stock
to Marsala as provided in Section 8 of the Company's Certificate of Designation,
Preferences and Rights of the Series C Preferred Stock.
(c) A true and complete copy of the Company's Certificate of
Designation, Preferences and Rights of the Series C Preferred Stock is attached
hereto as Exhibit C.
(d) Marsala and the Investor agree to execute and deliver the
"Transaction Documents" (as that term is defined in the Investment Agreement) as
a condition of the Investor's obligations under this Agreement. Such Transaction
Documents shall include the Proxy.
(e) Marsala represents and warrants to the Investor that: (i)
he owns the shares of Series C Preferred Stock directly and free and clear of
any lien, encumbrance or rights of any kind pertaining to the Series C Preferred
Stock held by any other party, (ii) there is no agreement with any party or
encumbrance of any kind whatsoever which prevents or would in any way interfere
with the granting by Marsala of the Proxy to vote the shares of the Series C
Preferred Stock to the Investor as contemplated herein and as contemplated in
the Investment Agreement, (iii) there is no agreement with any party or
encumbrance of any kind whatsoever which prevents or would in any way interfere
with the conversion of the Series C Preferred Stock into common stock of the
Company as contemplated herein, (iv) he owns the Common Shares (as defined in
Section 2(ii) below) directly and free and clear of any lien, encumbrance or
rights of any kind, (v) this Agreement has been duly and validly authorized,
executed and delivered by Marsala and is a valid and binding agreement of
Marsala enforceable against Marsala in accordance with its terms, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies and (vi) the execution, delivery and performance of this
Agreement by Marsala and the consummation by Marsala of the transactions
contemplated hereby will not conflict with, or constitute a material default (or
an event which with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, contract, indenture,
mortgage, indebtedness or instrument to which Marsala is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree applicable to
Marsala or by which any property or asset of Marsala or by which Marsala is
bound.
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(f) Upon the execution hereof, Marsala and the Company hereby
agree to cause Marsala's shares of Series C Preferred Stock to contain the
following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS AND CONDITIONS OF THE TRI-PARTY AGREEMENT DATED
FEBRUARY , 2004 BY AND AMONG XXXX XXXXXXX,THE CORPORATION AND
TRANSIT RAIL LLC AND THE IRREVOCABLE PROXY.
(g) Marsala hereby agrees to transfer to the Investor 50% of
the Additional Shares received by Marsala under paragraph 1(i) (A), (B), (C) and
(D) of the agreement of even date herewith between the Company and Marsala in
the event that the Company does not amend its certificate of incorporation
within 120 days of the date hereof such that the Company has a sufficient number
of authorized shares of common stock with respect to all outstanding options,
warrants and conversion rights (other than the Additional Shares) provided that
no uncured Investor Breach has occurred.
2. CONSIDERATION. (a) In consideration of the foregoing,
(i) the Investor shall pay to Marsala the sum of $10,000 on the
date hereof;
(ii) (A) Marsala shall have the right to require the Investor
to purchase from Marsala up to 2,083,333 shares (the
"Common Shares") of common stock of the Company for a
purchase price equal to $0.12 per Common Share.
Beginning as of the date that is the three month
anniversary of the date hereof and extending for a
period of nine months from the date hereof, Marsala
shall be entitled to deliver a notice (the "Put
Notice") to the Investor to purchase all or a portion
of the Common Shares. The closing for the purchase of
the Common Shares shall take place within five (5)
days of the date of the Put Notice. Upon the closing
of a purchase of the Common Shares the Investor shall
wire the purchase price to Marsala in accordance with
the wiring instructions provided by Marsala to the
Investor and Marsala shall deliver to the Investor on
the date of such wire transfer the certificates for
the Common Shares duly endorsed for transfer, free
and clear of any and all liens and/or encumbrances.
(B) The obligations of the Investor pursuant to the
above paragraph 2(a)(ii)(A) shall be secured by a
pledge of shares of Series D Preferred Stock as
provided in the Pledge Agreement in the form annexed
hereto as Exhibit D (the "Pledge Agreement").
(C) In accordance with Section 6 of the Company's
Certificate of Designation, Preferences, Rights and
Limitations of the Series D Preferred
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Stock (the "Certificate") of the Corporation if the
Investor or the Investor's appointees to the Board of
Directors breach, attempt to breach or vote in favor
of any proposal to breach any of the terms,
covenants, representations or agreements, or any
termination of the Certificate, this Agreement, the
Investment Agreement, then the shares of Series D
Preferred Stock held by the Investor shall be
automatically converted into shares of common stock
of the Company. In such event the Company and the
Investor hereby agree that the Company shall deliver
to the Escrow Agent, as such term is defined in the
Pledge Agreement, rather than the Investor, the
number of shares of common stock equal to the
difference between: (A) the quotient of 350,000 and
the Market Price of the common stock, as defined
below, and (B) the number of shares of common stock
issuable to the Escrow Agent upon the automatic
conversion of the shares of Series D Preferred Stock
which are held by the Escrow Agent on the date of the
automatic conversion. For purposes of this paragraph
the term Market Price of the common stock shall mean
the average closing bid price of the common stock as
quoted on the National Association of Securities
Dealers, Inc. OTC Bulletin Board (or other exchange
or quotation system on which the shares of common
stock are then listed) for the 20 trading days
immediately preceding the date of the automatic
conversion.
3. INVESTOR REPRESENTATIONS AND WARRANTIES
The Investor represents and warrants to Marsala that:
(a) SOPHISTICATED INVESTOR. The Investor has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Common Shares.
(b) AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Investor and is a
valid and binding agreement of the Investor enforceable against the Investor in
accordance with its terms, subject as to enforceability to general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
(c) NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Investor and the consummation by the Investor of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the Certificate of Formation or Membership Agreement of Investor or (ii)
conflict with, or constitute a material default (or an event which with notice
or lapse of time or both would become a material default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any material agreement, contract, indenture, mortgage, indebtedness or
instrument to which the Investor is a party, or result in a violation of any
law, rule, regulation, order, judgment or decree applicable to the Investor or
by which any property or asset of the Investor or by which the Investor is
bound.
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(d) ACCREDITED INVESTOR. Investor is an "accredited investor" as that
term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.
(e) FRACTIONALIZATION. The Investor is acquiring the Common Shares for
the Investor's account as principal, not as a nominee or agent, for investment
purposes only, and not with a view to, or for, resale, distribution or
fractionalization thereof in whole or in part and no other person has a direct
or indirect beneficial interest in the Common Shares. Further, the Investor does
not have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to the Common Shares.
(f) REPRESENTATIONS. No representations or warranties have been made to
the Investor by Marsala, other than the representations of Marsala contained
herein, and the Investor is not relying upon any representations other than
those contained herein.
(g) LEGEND. The Investor understands and agrees that the certificates
for the Common Shares shall bear the following legend until (i) such securities
shall have been registered under the Securities Act and effectively been
disposed of in accordance with a registration statement that has been declared
effective; or (ii) in the opinion of counsel for the Company such securities may
be sold without registration under the Securities Act as well as any applicable
"Blue Sky" or state securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME
EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii)
PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN
OPINION OF COUNSEL TO THE CORPORATION, OR OTHER COUNSEL REASONABLY
ACCEPTABLE TO THE CORPORATION, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL
AS ANY APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAW."
(h) REAFFIRMATION. The Investor hereby reaffirms to Marsala all of the
representations, warranties and covenants made by the Investor to the Company
pursuant to the Investment Agreement.
4. COVENANTS OF THE COMPANY AND THE INVESTOR.
(a) The Company and the Investor hereby covenant and agree: (i) that
the Company and the Investor shall comply with all of the terms and conditions
of the Investment Agreement, including but not limited to the Company's
covenants in Section 5(a) of the Investment
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Agreement, (ii) that the Investment Agreement shall not be amended without the
prior written consent of Marsala, (iii) whenever the Investment Agreement
provides for the written consent of all of the parties to the Transaction
Documents, as such term is defined in the Investment Agreement, that Marsala
shall be a required party and (iv) no representation, warranty, condition,
covenant or agreement contained in the Transaction Documents of either the
Company or the Investor shall be waived, amended or modified without the prior
written consent of Marsala.
5. TERMINATION.
(a) This Agreement may be terminated at any time by the mutual written
consent of the Company, the Investor and Marsala. The representations,
warranties and covenants contained in or incorporated into this Agreement,
insofar as applicable to the transactions consummated hereunder prior to such
termination, shall survive its termination for the period of any applicable
statute of limitations.
(b) OTHER TERMINATION EVENTS. This Agreement shall also terminate upon
any of the following events:
(i) 12 months from the date hereof;
(ii) the Investor or the Investor's appointees to the
Board of Directors breach, attempt to breach or vote
in favor of any proposal to breach any of the terms,
covenants, representations or agreements, contained
in the Certificate, this Agreement, the Investment
Agreement, or the Pledge Agreement (collectively, an
"Investor Breach"), which breach has not been cured
within thirty (30) days after written notice, except
in the case of the Investor's breach of the
provisions set forth in Section 2(a), (b) or (c) of
the Investment Agreement, in which event this
Agreement shall terminate five days after written
notice to the Investor, which breach has not been
cured within such period, unless otherwise agreed by
Marsala.
6. INDEMNIFICATION. Each party hereto (the "Indemnitor") shall defend,
protect, indemnify and hold harmless the other parties hereto and all of their
shareholders, officers, directors, employees and any of the foregoing person's
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Indemnitor in this Agreement or the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby and (ii) any breach of any covenant, agreement or
obligation of the Indemnitor contained in this Agreement or the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby.
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7. GOVERNING LAW; MISCELLANEOUS.
(a) GOVERNING LAW. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(b) FEES AND EXPENSES.
Each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. Any attorneys' fees and expenses incurred by a
party hereto in connection with the enforcement of the rights of any party,
after the occurrence of any breach of the terms of this Agreement by another
party or any default by another party in respect of the transactions
contemplated hereunder, shall be paid on demand by the party which breached the
Agreement and/or defaulted, as the case may be.
(c) COUNTERPARTS. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party; provided that a facsimile signature shall be considered due
execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original, not a facsimile signature.
(d) HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(e) SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
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(f) ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all other
prior oral or written agreements between Marsala, the Investor, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
(including the other Transaction Documents) contain the entire understanding of
the parties with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, no party makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
all of the parties hereto, and no provision hereof may be waived other than by
an instrument in writing signed by the party against whom enforcement is sought.
(g) NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally or by air courier or (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party). The addresses
and facsimile numbers for such communications shall be:
IF TO THE COMPANY: IF TO THE INVESTOR: IF TO MARSALA:
----------------- ------------------ -------------
Xxxxxx Xxxx Transit Rail LLC 000 Xxxx 00xx Xxxxxx
Xxx Xxxx Regional Rail Corp. 0000 Xxxxxxx Xxxx Xxx Xxxx, XX 00000
0000 Xxxxx Xxxxxx Xxxx Xxxxxx, XX 00000
Xxxxxxxx, XX 00000
Atten: Xxxxxx Xxxxx
WITH A COPY TO: WITH A COPY TO:
-------------- --------------
Marc. X. Xxxxxxxxx, Esq. Xxxxxxx X. Xxxxxxxxx, Esq.
XxXxxxxxxx & Xxxxx, LLP Duke, Holzman, Xxxxxx &
260 Madison Avenue Photiadis, LLP
Xxx Xxxx, XX 00000 0000 Xxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Each party shall provide five (5) days' prior written notice to the other party
of any change in address or facsimile number.
(h) SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by the
parties hereto.
(i) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
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(j) FURTHER ASSURANCES. Except as set forth herein, each party shall do
and perform, or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(k) NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
[Balance of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be duly executed as of the date and year first above written.
NEW YORK REGIONAL RAIL CORPORATION
By: /s/ Xxxxx Xxxxxxx
-----------------
Name: Xxxxx Xxxxxxx
Title: President
/s/ Xxxx Xxxxxxx
XXXX XXXXXXX
TRANSIT RAIL LLC
By: /s/ Xxxxxx Xxxxx
Xxxxxx Xxxxx, Manager
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EXHIBIT A
Proxy
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EXHIBIT B
Company's Certificate of Designation, Preferences and
Rights of the Series C Preferred Stock
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EXHIBIT C
Pledge Agreement
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