SECURITIES PURCHASE AGREEMENT BETWEEN JORDAN 1 HOLDINGS COMPANY AND BARRON PARTNERS LP and the Equity Investors Named Herein DATED July 20, 2006
BETWEEN
JORDAN
1 HOLDINGS COMPANY
AND
XXXXXX
PARTNERS LP and
the
Equity Investors Named Herein
DATED
July
20, 2006
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”)
is
made and entered into as of the 20th
day of
July, 2006 between Jordan
1 Holdings Company, a
Delaware corporation (the “Company”)
and
Xxxxxx
Partners LP, a
Delaware limited partnership (“Xxxxxx”),
and
the other investors named in Schedule A to this Agreement (the “Equity
Investors”),
Xxxxxx and the Equity Investors being collectively referred to as the
“Investors”
and
each, individually, an “Investor.”
RECITALS
WHEREAS,
the
Xxxxxx wish
to
purchase from the Company, upon the terms and subject to the conditions of
this
Agreement, for the that portion of the Purchase Price as hereinafter defined
as
is set forth after Xxxxxx’x name on Schedule A to this Agreement, (a) the
Company’s promissory note (the “Note”)
in the
principal amount of one million dollars ($1,000,000), (b) four million seven
hundred twenty two thousand two hundred twenty two (4,722,222)
shares of the Company’s Series A Convertible Preferred Stock, par value $.001
per share (“Series
A Preferred Stock”),
with
each shares of Series A Preferred Stock being convertible into three (3) shares
of the
Company’s common stock, par value $.001 per shares (“Common
Stock”),
and (c)
Common Stock Purchase Warrants (the “Warrants”)
to
purchase
up to nine million six hundred twenty four thousand three hundred sixty nine
(9,624,369) shares of Common Stock, at an exercise price of thirty five cents
($.35) per share, and nine million six hundred twenty four thousand three
hundred sixty nine (9,624,369) shares of Common Stock at an exercise price
of
sixty cents ($.60) per share. The Note, shares of Series A Preferred Stock,
Warrants and shares of Common Stock issuable upon exercise or conversion of
the
Note, the Series A Preferred Stock and the Warrants issuable to the Investors
pursuant to this Agreement are referred to collectively as the “Securities.”
The
Note
and the Series A Preferred Stock will be convertible into shares of the Common
Stock in the manner set forth in the Note and in the Certificate of Designation,
as hereinafter defined;
and
WHEREAS,
each of
the Equity Investors, severally, wishes
to
purchase from the Company, upon the terms and subject to the conditions of
this
Agreement, for the that portion of the Purchase Price as hereinafter defined
as
is set forth after such Equity Investor’s name on Schedule A to this Agreement,
that portion of (a) five hundred fifty five thousand five hundred fifty six
(555,556) shares
of
Series A Preferred Stock, and (b) Warrants to purchase
up to nine hundred sixteen thousand six hundred thirty one (916,631) shares
of
Common Stock at an exercise price of thirty five cents ($.35) per share, and
nine hundred sixteen thousand six hundred thirty one (916,631) shares of Common
Stock at an exercise price of sixty cents ($.60) per share as is set forth
after
such Equity Investor’s name on said Schedule A;
WHEREAS,
pursuant
to a separate agreement, but as part of the transaction whereby the Investors
are purchasing the Securities, (i) the holders of all of the issued and
outstanding common stock of Delaware Fastener Acquisition Corp., a Delaware
corporation (“DFAC”), in exchange for five million three hundred sixty two
thousand (5,362,000) shares of Common Stock, representing shares of Common
Stock
and shares of the Company’s Series B Convertible Preferred Stock, par value
$.001 per share (“Series
B Preferred Stock”)
pursuant to a stock exchange agreement (the “Exchange Agreement”) by and among
such stockholders and the Company, (ii) DFAC is acquiring assets of Freundlich
Supply Company, Inc., a New York corporation (“Freundlich”)
pursuant to an asset purchase agreement (the “Asset
Purchase Agreement”)
dated
May 24, 2006, by and among Freundlich, Xxxxxxx Xxxxxxxxxx and DFAC, and (iii)
the Company is purchasing from a principal stockholder of the Company a total
of
twenty nine million (29,000,000) shares of Common Stock (without giving effect
to the Reverse Split) for a purchase price not to exceed five hundred fifty
thousand dollars ($550,000) plus four hundred thousand (400,000) shares of
Common Stock (after giving effect to the Reverse Split, as hereinafter defined)
pursuant to an agreement between such stockholder and the Company (the
“Jordan
Agreement”);
and
WHEREAS,
the
parties intend to memorialize the purchase and sale of the
Securities.
NOW,
THEREFORE,
in
consideration of the mutual covenants and premises contained herein, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby conclusively acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE
I
INCORPORATION
BY REFERENCE AND DEFINITIONS
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1.1.
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Incorporation
by Reference.
The foregoing recitals and the Exhibits and Schedules attached hereto
and
referred to herein, are hereby acknowledged to be true and accurate,
and
are incorporated herein by this
reference.
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1.2.
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Supersedes
Other Agreements.
This Agreement, to the extent that it is inconsistent with any other
instrument or understanding among the parties, shall supersede such
instrument or understanding to the fullest extent permitted by law.
A copy
of this Agreement shall be filed at the Company’s principal
office.
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1.3.
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Certain
Definitions.
For purposes of this Agreement, the following capitalized terms shall
have
the following meanings (all capitalized terms used in this Agreement
that
are not defined in this Article 1 shall have the meanings set forth
elsewhere in this Agreement):
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1.3.1. “4.9%
Limitation”
has
the
meaning set forth in Section 2.1.2 of this Agreement.
1.3.2. “1933
Act”
means
the Securities Act of 1933, as amended.
1.3.3. “1934
Act”
means
the Securities Exchange Act of 1934, as amended.
1.3.4. “Affiliate”
means
a
Person or Persons directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with the Person(s) in
question. The term “control,” as used in the immediately preceding sentence,
means, with respect to a Person that is a corporation, the right to the
exercise, directly or indirectly, of more than 50% of the voting rights
attributable to the shares of such controlled corporation and, with respect
to a
Person that is not a corporation, the possession, directly or indirectly, of
the
power to direct or cause the direction of the management or policies of such
controlled Person.
1.3.5. “Articles”
means
the certificate of incorporation of the Company, as the same may be amended
from
time to time.
1.3.6. “Bylaws”
means
the
bylaws of the Company, as the same may be amended from time to
time.
1.3.7. “Certificate
of Designation”
means
the certificate of the rights, preferences and privileges, subject to the
limitations, with respect to the Series A Preferred Stock. The Certificate
of
Designation shall be in substantially the form of Exhibit
B
to this
Agreement.
1.3.8. “Closing” means
the
consummation of the transactions contemplated by this Agreement and the Exchange
of Securities, all of which transactions shall be consummated contemporaneously
with the Closing.
1.3.9. “Closing
Date”
means
the date on which the Closing occurs, which be not later than July 20,
2006.
1.3.10. “Common
Stock”
means
the Company’s common stock, which is presently designated as the common stock,
par value $.001 per share. All references to numbers of shares of Common Stock
assume a one-for-150 reverse split.
1.3.11. “Company’s
Governing Documents”
means
the Articles and Bylaws.
1.3.12. “Convertible
Securities”
means
the Note and the Series A Preferred Stock.
1.3.13. “Delaware
Law”
means
the Delaware General Corporation Law, as amended.
1.3.14. “EBITDA”
means
consolidated earnings before interest, taxes, depreciation and amortization,
determined in accordance with U.S. GAAP.
1.3.15. “Escrow
Agreement”
means
the Escrow Agreement among the Company, the Investors and Sichenzia Xxxx
Xxxxxxxx Xxxxxxx LLP, as Escrow Agent, attached hereto as Exhibit
C
it being
acknowledged that the Escrow Agent is counsel for the Company.
1.3.16. “Equity
Purchase Price”
means
four million seven hundred fifty thousand dollars ($4,750,000).
1.3.17. “Exchange
of Securities”
means
the issuance of shares of Common Stock and Series B Preferred Stock in exchange
for the outstanding securities of DFAC pursuant to the Exchange
Agreement.
1.3.18. “Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers,
directors of and consultants (other than consultants whose services relate
to
the raising of funds) of the Company pursuant to the Company’s 2006 long-term
incentive plan, which is reflected on Schedule 4.3.1 to this Agreement, and
any
other stock or option plan that was or may be adopted by a majority of
independent members of the Board of Directors of the Company or a majority
of
the members of a committee of independent directors established for such
purpose, (b) securities upon the exercise of or conversion of any securities
issued hereunder and pursuant to the Registration Rights Agreement, the Note,
the Warrants and the Certificate of Designation and any other options, warrants
or convertible securities which are outstanding on after completion of the
Closing and the effectiveness of the Exchange of Securities, and (c) securities
issued pursuant to acquisitions, licensing agreements, or other strategic
transactions, provided any such issuance shall only be to a Person which is,
itself or through its subsidiaries, an operating company in a business which
the
Company’s board of directors believes is beneficial to the Company and in which
the Company receives benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities.
1.3.19. “GAAP”
means
United States generally accepted accounting principles consistently
applied.
1.3.20. “Material
Adverse Effect”
means
any adverse effect on the business, operations, properties or financial
condition of the Company that is material and adverse to the Company and its
subsidiaries, including Freundlich, taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company or any subsidiary to perform any of its material
obligations under this Agreement or the Registration Rights Agreement or to
perform its obligations under any other material agreement.
1.3.21. “Net
Income”
means
net income
determined in accordance with GAAP plus (a) any charges relating to the
transaction contemplated by this Agreement and the Registration Rights
Agreement, and (b) any other non-recurring items, including the issuance of
warrants which are not issued under a stock option or other equity-based
incentive plan.
1.3.22. “Person”
means
an individual, partnership, firm, limited liability company, trust, joint
venture, association, corporation, or any other legal entity.
1.3.23. “Pre-Tax
Income”
means
income
before income taxes determined in accordance with GAAP plus (a) any charges
relating to the transaction contemplated by this Agreement and the Registration
Rights Agreement, and (b) any other non-recurring items, including the issuance
of warrants which are not issued under a stock option or other equity-based
incentive plan.
1.3.24. “Purchase
Price”
means
the
five million seven hundred fifty thousand dollars ($5,750,000)
to be
paid by the Investors to the Company for the Securities.
1.3.25. “Registration
Rights Agreement”
means
the registration rights agreement between the Investors and the Company in
substantially the form of Exhibit
D
to this
Agreement.
1.3.26. “Registration
Statement”
means
the registration statement under the 1933 Act to be filed with the Securities
and Exchange Commission for the registration of the Shares pursuant to the
Registration Rights Agreement.
1.3.27. “Restated
Certificate”
means
the Restated Certificate of incorporation of the Company in substantially the
form of Exhibit
E
to this
Agreement.
1.3.28. “Restricted
Stockholders”
shall
have the meaning set forth in Section 6.16 of this Agreement.
1.3.29. “Securities”
means
the Note, the shares of Series A Preferred Stock, the Warrants and the
Shares.
1.3.30. “SEC”
means
the Securities and Exchange Commission.
1.3.31. “SEC
Documents”
means,
at any given time, the Company’s latest Form 10-K or Form 10-KSB and all Forms
10-Q or 10-QSB and 8-K and all proxy statements or information statements filed
between the date the Form 10-K or Form 10-KSB was filed and the date as to
which
a determination is being made until such time as the Company no longer has
an
obligation to maintain the effectiveness of a Registration Statement as set
forth in the Registration Rights Agreement.
1.3.32. “Series
A Preferred Stock”
means
the shares of Series A Preferred Stock having the rights, preferences and
privileges and subject to the limitations set forth in the Certificate of
Designation.
1.3.33. “Series
B Certificate”
shall
mean the certificate of designation for the Series B Preferred Stock which
shall
be in substantially the form of Exhibit F to this Agreement.
1.3.34. “Series
B Preferred Stock”
means
the shares of Series B Preferred Stock issuable as part of the Exchange of
Shares and having the rights, preferences and privileges and subject to the
limitations set forth in the Series B Certificate.
1.3.35. “Shares”
means,
collectively, the shares of Common Stock issued or issuable (i) upon conversion
of the Notes or the Series A Preferred Stock or (ii) upon exercise of the
Warrants.
1.3.36. “Subsequent
Financing”
means
any offer and sale of shares of the Company’s preferred stock, par value $.001
per share, or debt that, in either case, is initially convertible into shares
of
Common Stock or otherwise senior or superior to the Series A Preferred
Stock.
1.3.37. “Transaction
Documents”
means
this Agreement, all Schedules and Exhibits attached hereto, the Certificate
of
Designation, the Note, the Warrants, the Registration Rights Agreement and
all
other documents and instruments to be executed and delivered by the parties
in
order to consummate the transactions contemplated hereby.
1.3.38. “Warrants”
means
the Common Stock Purchase Warrants in substantially the form of Exhibit
G-1 and G-2
to this
Agreement.
1.3.39. All
references in this Agreement to “herein” or words of like effect, when referring
to preamble, recitals, article and section numbers, schedules and exhibits
shall
refer to this Agreement unless otherwise stated.
ARTICLE
II
SALE
AND PURCHASE OF SECURITIES
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2.1.
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Sale
of Securities.
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2.1.1. Upon
the
terms and subject to the conditions set forth herein, and in accordance with
applicable law, the Company agrees
to
sell to the Investors, and the each Investor severally agrees to purchase from
the Company, on the Closing Date the Securities as set forth after such
Investor’s name on Schedule A to this Agreement for that portion of the Purchase
Price as is set forth on said Schedule A. The Purchase Price shall be paid
by
the Investors, severally, to the Company on the Closing Date by a wire
transfer
of the
Purchase Price into escrow to be held by the escrow agent pursuant to the terms
of the Escrow Agreement. The Company shall cause the Securities to be issued
to
the Investors upon the release of the Purchase Price to the Company by the
escrow agent pursuant to the terms of the Escrow Agreement.
2.1.2. Notwithstanding
any other provision of this Agreement, except as expressly provided in the
Note,
the Certificate of Designation or the Warrants, no Investor shall be entitled
to
convert the Notes or the Series A Preferred Stock
into
shares of Common Stock or to exercise the Warrants to the extent that such
conversion or exercise would result in beneficial ownership by such Investor
and
its Affiliates of more than 4.9% of the then outstanding number of shares of
Common Stock on such date. For the purposes of this Agreement beneficial
ownership shall be determined in accordance with Section 13(d) of the 1934
Act,
and Regulation 13d-3 thereunder. The limitation set forth in this Section 2.1.3
is referred to as the “4.9%
Limitation.”
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2.2.
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Purchase
Price.
The Purchase Price payable by each Investor shall be delivered by
such
Investor in the form of wire transfers in United States dollars from
the
Investor to the escrow agent pursuant to the Escrow Agreement on
the
Closing Date.
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2.3.
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Acquisition
of
Freundlich.
The
Company
shall have acquired
all of the outstanding capital stock of DFAC, which shall have acquired
the assets to be acquired by it pursuant to the Asset Purchase
Agreement.
No
Person shall have any right, title or interest in, or any right or
option
to acquire, any shares of any class of capital stock of DFAC.
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ARTICLE
III
CLOSING
DATE AND DELIVERIES AT CLOSING
| 3.1. |
Closing
Date. The
Closing of the transactions contemplated by this Agreement
shall be held
at the offices of counsel for the Company, at 11:00 A.M. local
time, on
the Closing Date or on such other date and time and at such
other place as
may be mutually agreed by the parties, including Closing by
facsimile with
originals to
follow.
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3.2.
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Deliveries
by the Company.
In
addition to and without limiting any other provision of this Agreement,
the Company agrees to deliver, or cause to be delivered, to the escrow
agent under the Escrow Agreement, the following:
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(a) At
or
prior to Closing, an executed Agreement with all exhibits and schedules attached
hereto.
(b) At
the
Closing, the executed Note in the names of Xxxxxx.
(c) At
the
Closing, a stock certificate for the shares of Series A Preferred Stock in
the
names of the Investors.
(d) At
the
Closing, executed Warrants in the names of the Investors.
(e) The
executed Registration Rights Agreement.
(f) Certifications
in form and substance acceptable to the Company and the Investors from any
and
all brokers or agents involved in the transactions contemplated hereby as to
the
amount of commission or compensation payable to such broker or agent as a result
of the consummation of the transactions contemplated hereby and from the Company
or Investors, as appropriate, to the effect that reasonable reserves for any
other commissions or compensation that may be claimed by any broker or agent
have been set aside.
(g) Evidence
of approval of the board of directors of the Company of (i) the Transaction
Documents and the transactions contemplated hereby and (ii) the Restated
Certificate, which shall be subject to stockholder approval.
(h) Evidence
of the agreement of the holders of not less than a majority of the share of
Common Stock outstanding after the Exchange of Securities to approve the
Restated Certificate.
(i) Evidence
that the Company has elected Xxxxxx Xxxxx as chief executive officer and Xxxxx
Xxxxxxxx as chief financial officer.
(j) Evidence
that the Company has entered into a consulting agreement with Xxxx Xxxx pursuant
to which he received annual compensation of $180,000 per annum, subject to
an
annual cost of living adjustment. Any bonus or stock options, stock grants
or
other equity-based incentives will be determined by a compensation committee
comprised of independent directors.
(k) Evidence
that the Company has complied with the provisions of Sections 6.10 and 6.11
of
this Agreement on or prior to the Closing Date or that it has taken steps to
enable to comply with such provisions within the time frames provided
therein.
(l) Evidence
that the Certificate of Designation and the Series B Certificate have been
filed
with the Secretary of State of the State of Delaware.
(m) Evidence
that (i) Xxxxxxx Xxxxx Xxxxxx has advanced $119,325.39
(the “Advanced
Amount”)
relating to the transactions contemplated by this Agreement, the Purchase
Agreement, the Exchange Agreement and the Jordan Agreement, and (ii) the
obligations of the Company and/or DFAC with respect to such advances have been
cancelled.
SECURITIES
PURCHASE AGREEMENT
PAGE
8
(n) Good
standing certificates of the Company issued by the Secretary of State of
Delaware.
(o) An
opinion from the Company’s
special
counsel
concerning the Transaction Documents
and the
transactions contemplated hereby in form and substance reasonably acceptable
to
Investors.
(p) The
executed Escrow Agreement.
(q) Copies
of
all executive employment agreements, all past and present financing
documentation or other documentation where stock could potentially be issued
or
issued as payment, all past and present litigation documents and historical
financials, not previously provided to Investors.
(r) Such
other documents or certificates as shall be reasonably requested by Xxxxxx
on
behalf of the Investor.
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3.3.
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Deliveries
by Investors.
In
addition to and without limiting any other provision of this Agreement,
the Investor agrees to deliver, or cause to be delivered, to the
escrow
agent under the Escrow Agreement, the following:
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(a) A
deposit
in the amount of the Purchase Price, net of the Advanced Amount;
(b) The
executed Agreement with all Exhibits and Schedules attached hereto;
(c) The
executed Registration Rights Agreement;
(d) The
executed Escrow Agreement; and
(e) Such
other documents or certificates as shall be reasonably requested by the Company
or its counsel.
In
the
event any document (other than the Note, the shares of Series A Preferred Stock
and the Warrants) provided to the other party in Sections 3.2 and 3.3 herein
are
provided by facsimile, the party shall forward an original document to the
other
party within seven (7) business days.
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3.4.
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Further
Assurances.
The Company and the Investors shall, upon request, on or after the
Closing
Date, cooperate with each other (specifically, the Company shall
cooperate
with the Investors, and the Investors shall cooperate with the Company)
by
furnishing any additional information, executing and delivering any
additional documents and/or other instruments and doing any and all
such
things as may be reasonably required by the parties or their counsel
to
consummate or otherwise implement the transactions contemplated by
this
Agreement.
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3.5.
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Waiver.
The Investors may waive any of the requirements of Section 3.2 of
this
Agreement or any of its rights under the Escrow Agreement, and the
Company
at its discretion may waive any of its rights of Section 3.3 of this
Agreement or any of its rights under the Escrow
Agreement.
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SECURITIES
PURCHASE AGREEMENT
PAGE
9
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to the Investors as of the date hereof and
as of
Closing (which warranties and representations shall survive the Closing
regardless of what examinations, inspections, audits and other investigations
the Investors have heretofore made or may hereinafter make with respect to
such
warranties and representations) as follows:
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4.1.
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Organization
and Qualification.
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4.1.1. The
Company
and DFAC are corporations duly organized, validly existing and in good standing
under the laws of the State
of
Delaware,
and
each of the Company and DFAC has the requisite corporate power and authority
to
own, lease and
operate
its properties and to carry on its business as it is now being conducted and
is
duly qualified to do business in any other jurisdiction by virtue of the nature
of the businesses conducted by it or the ownership or leasing of its properties,
except where the failure to be so qualified will not, when taken together with
all other such failures, have a Material Adverse Effect on the business,
operations, properties, assets, financial condition or results of operation
of
the Company and its subsidiaries taken as a whole.
4.1.2. DFAC
is
wholly-owned by the Company, and no person has any right, title or interest
in
any equity, debt or other securities of any kind of DFAC.
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4.2.
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Governing
Documents.
The complete and correct copies of the Company’s Governing Documents, as
in effect on the Closing Date, has been delivered to the
Investors.
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4.3.
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Capitalization.
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4.3.1. The
authorized and outstanding capital stock of the Company as of the date of this
Agreement and as adjusted to reflect issuances pursuant to the Exchange of
Securities and as contemplated by this Agreement is set forth in Schedule 4.3.1
to this Agreement. Schedule 4.3.1 contains all shares and derivatives currently
and potentially outstanding. The Company hereby represents that any and all
shares and current potentially dilutive events have been included in Schedule
4.3.1, including shares issuable pursuant to employment agreements, acquisition,
consulting agreements, debts, payments, financing or business relationships
that
could be paid in equity, derivatives or resulting in additional equity
issuances.
4.3.2. All
outstanding shares of capital stock have been duly authorized and are validly
issued, and are fully paid and non-assessable and free from preemptive rights.
All shares of capital stock described above to be issued have been duly
authorized and when issued, will be validly issued, fully paid and
non-assessable and free from preemptive rights.
4.3.3. Except
pursuant to this Agreement and as set forth in Schedule 4.3.1 hereto, and as
set
forth in the Company’s SEC Documents, filed with the SEC, as of the date hereof
and as of the Closing Date, there are no outstanding options, warrants, rights
to subscribe for, calls or commitments of any character whatsoever relating
to,
or securities or rights convertible into or exchangeable for, shares of any
class of capital stock of the Company, or agreements, understandings or
arrangements to which the Company is a party, or by which the Company is or
may
be bound, to issue additional shares of its capital stock or options, warrants,
scrip or rights to subscribe for, calls or commitment of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, any shares of any class of its capital stock. The Company agrees to inform
the Investors in writing of any additional warrants or convertible securities
granted prior to the Closing Date.
SECURITIES
PURCHASE AGREEMENT
PAGE
10
4.3.4. The
Company on the Closing Date (i) will have full right, power, and authority
to
sell the Securities to the Investors, free and clear of all liens, charges,
claims, options, pledges, restrictions, and encumbrances whatsoever; and (ii)
upon conversion of the Note and the Series A Preferred Stock or exercise of
the
Warrants, the Investors will acquire title to the Shares issuable upon such
conversion or exercise, free and clear of all liens, charges, claims, options,
pledges, restrictions, and encumbrances whatsoever, except as otherwise provided
in this Agreement and except for any of the foregoing which results from actions
or omissions on the part of the Investors.
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4.4.
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Authority.
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4.4.1. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, the Note, the Series A Preferred Stock and the Warrants, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this
Agreement by the Company and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company is necessary to authorize
this
Agreement or to consummate the transactions contemplated hereby except as
disclosed in this Agreement; provided, however, that stockholder approval is
required for the Company to adopt the Restated Certificate. This Agreement
has
been duly executed and delivered by the Company and constitutes the legal,
valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms;
provided, however, that no representation is made with respect to the ability
of
the Investor to convert the Note or the Series A Preferred Stock or to exercise
the Warrant, following the filing of the Restated Certificate, if and to the
extent that the Conversion Price of the Note or the Series A Preferred Stock,
as
defined in the Notes or the Certificate of Designation, or the number of Shares
issuable upon exercise of the Warrants would result in the issuance of a number
of shares of Common Stock which is greater than the amount by which the
authorized Common Stock exceeds the sum of the outstanding Common Stock and
the
shares of Common Stock reserved for issuance pursuant to outstanding agreements
and outstanding options, warrants, rights, convertible securities and other
securities upon the exercise or conversion of which or pursuant to the terms
of
which additional shares of Common Stock may be issuable (the foregoing proviso
being referred to as the “Authorized
Stock Proviso”).
4.4.2. The
Company’s
board of directors has adopted the Restated Certificate and the Certificate
of
Designation, subject to stockholder approval of the Restated Certificate, as
required by the Delaware Law. The
holders of shares of Common Stock issued pursuant to the Exchange of Securities
have agreed to execute a consent of stockholders approving the Restated
Certificate,
which
consent shall be given and become effective twenty (20) days after the filing
of
a definitive information statement pursuant to Section 14(c) of the 1934 Act.
The Company will file an information statement with the SEC as soon as practical
after the Closing Date, but not later than sixty (60) days after the Closing
Date.
SECURITIES
PURCHASE AGREEMENT
PAGE
11
4.4.3. The
Shares will be, when issued upon the conversion of the Note and the Series
A
Preferred Stock and upon exercise of the Warrants, duly and validly authorized
and issued, fully paid and non-assessable and not issued in violation of any
preemptive rights or rights of first refusal, subject to the filing of the
Restated Certificate.
4.4.4. Upon
the
filing with the shares of Series A Preferred Stock are duly and validly
authorized and issued, fully paid and non-assessable
and not
issued in violation of any preemptive rights or rights of first
refusal.
|
4.5.
|
No
Conflict; Required Filings and Consents.
The execution and delivery of this Agreement by the Company does
not, and
the performance by the Company of its obligations hereunder will
not: (i)
conflict with or violate the Company’s or DFAC’s Governing
Documents;
(ii)
conflict with, breach or violate any federal, state, foreign or local
law,
statute, ordinance, rule, regulation, order, judgment or decree
(collectively, “Laws”)
in effect as of the date of this Agreement and applicable to the
Company
or
DFAC;
or (iii) result in any breach of, constitute a default (or an event
that
with notice or lapse of time or both would become a default) under,
give
to any other entity any right of termination, amendment, acceleration
or
cancellation of, require payment under, or result in the creation
of a
lien or encumbrance on any of the properties or assets of the Company
or
DFAC pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
the
Company or
DFAC is
a party or by the Company or DFAC or
any
of their
respective
properties or assets is bound other than violations, conflicts, breaches,
defaults, terminations, accelerations, creations of liens, or incumbency
that would not, in the aggregate, have a Material Adverse
Effect
except to the extent that stockholder approval may be required as
a result
of the Authorized Stock Proviso, in which event, the Company will
seek
stockholder approval to an increase in the authorized Common Stock
sufficient to enable the Company to be in compliance with this Section
4.5.
|
| 4.6. |
Report
and Financial Statements.
|
4.6.1. The
Company has delivered to the Investors
the
audited balance sheet of Freundlich as of December 31, 2005 and the audited
statements of operations, stockholders equity and cash flows for the years
ended
December 31, 2005 and 2004, and the unaudited balance sheet as of March 31,
2006
and unaudited statements of operations and cash flows for the three months
ended
March 31, 2006 and 2005 and stockholders’ equity for the three months ended
March 31,
2006,
in each cash including notes to the financial statements (collectively, the
“Financial Statements”). Each of the balance sheets contained in such Financial
Statements (including the related notes and schedules thereto) fairly presented
the financial position of Freundlich, as of its date, and each of the statements
of operations, stockholders’ equity and cash flows in such Financial Statements
(including any related notes and schedules thereto) fairly presents, the results
of operations, changes in stockholders’ equity and changes in cash flows, as the
case may be, of Freundlich, for the periods to which they relate, in each case
in accordance with GAAP, except in each case as may be noted therein, subject
to
normal year-end audit adjustments in the case of unaudited statements. The
books
and records of Freundlich have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
Xxxxxxxx
and Company, CPA, PC, who audited the audited financial statements, is
independent within the meaning of the regulations of the SEC.
SECURITIES
PURCHASE AGREEMENT
PAGE
12
4.6.2. Xxxxxxxx
and Company, CPA, PC has not issued any management letter in connection with
its
audit of Freundlich’s audited Financial Statements for 2005 and 2004 if such
firm issued a management letter.
|
4.7.
|
Compliance
with Applicable Laws.
The Company is not in violation of, or, to the knowledge of the Company,
is under investigation with respect to or has been given notice or
has
been charged with the violation of any Laws, except for violations
which
individually or in the aggregate do not have a Material Adverse Effect.
|
|
4.8.
|
Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or Commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or
on
behalf of the Company.
|
|
4.9.
|
SEC
Documents.
|
4.9.1. The
Investors acknowledge that the Company is a publicly held company and has made
available to the Investors true and complete copies of any requested SEC
Documents. The Company has registered its Common Stock pursuant to Section
12(g)
of the 1934 Act. The Company has not provided to the Investors any information
that, according to applicable law, rule or regulation, should have been
disclosed publicly prior to the date hereof by the Company, but which has not
been so disclosed.
4.9.2. The
Company’s audited
balance sheet as of December 31, 2005 and the audited statements of operations,
stockholders equity and cash flows for the years ended December 31, 2005 and
2004, and the unaudited balance sheet as of March 31, 2006 and unaudited
statements of operations and cash flows for the three months ended March 31,
2006 and 2005 and stockholders’ equity for the three months ended March 31,
2006, in each cash including notes to the financial statements (collectively,
the “Company Financial Statements”) are included in the SEC Reports. Each of the
balance sheets contained in the Company Financial Statements (including the
related notes and schedules thereto) fairly presents the financial position
of
the Company, as of its date, and each of the statements of operations,
stockholders’ equity and cash flows in the Company’s Financial Statements
(including any related notes and schedules thereto) fairly presents the results
of operations, changes in stockholders’ equity and changes in cash flows, as the
case may be, of the Company, for the periods to which they relate, in each
case
in accordance with GAAP, except in each case as may be noted therein, subject
to
normal year-end audit adjustments in the case of unaudited statements. The
books
and records of the Company have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions. Xxxx
Backa Xxxxxx & Company, LLC,
who
audited the audited Company Financial Statements, is independent within the
meaning of the regulations of the SEC.
SECURITIES
PURCHASE AGREEMENT
PAGE
13
|
4.10.
|
Litigation.
To the knowledge of the Company, no litigation, claim, or other proceeding
before any court or governmental agency is pending or to the knowledge
of
the Company, threatened against the Company, DFAC or Freundlich,
the
prosecution or outcome of which, if adversely determined, is likely
to
have a Material Adverse Effect.
|
|
4.11.
|
Exemption
from Registration.
Subject to the accuracy of the Investors’ representations in Article V,
except as required pursuant to the Registration Rights Agreement,
the sale
of the Securities by the Company to the Investors will not require
registration under the 1933 Act. When validly converted in accordance
with
the terms of the Series A Preferred Stock, and upon exercise of the
Warrants in accordance with their terms, the Shares underlying the
Series
A Preferred Stock and the Warrants will be duly and validly issued,
fully
paid, and non-assessable. The Company is issuing the Notes, the Initial
Shares and, upon conversion of the Notes, the Series A Preferred
Stock,
and the Warrants in accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, by Rule 506 under
Regulation D as promulgated by the SEC under the 1933 Act, and/or
Section
4(2) of the 1933 Act; provided, however, that certain filings and
registrations may be required under state securities “blue sky” laws
depending upon the residency of the
Investors.
|
|
4.12.
|
No
General Solicitation or Advertising in Regard to this
Transaction.
Neither the Company nor any of its Affiliates nor, to the knowledge
of the
Company, any Person acting on its or their behalf (i) has conducted
or
will conduct any general solicitation (as that term is used in Rule
502(c)
of Regulation D as promulgated by the SEC under the 0000 Xxx) or
general
advertising with respect to the sale of the Series A Preferred Stock
or
Warrants, or (ii) made any offers or sales of any security or solicited
any offers to buy any security under any circumstances that would
require
registration of the Series A Preferred Stock or Warrants, under the
1933
Act, except as required herein.
|
|
4.13.
|
No
Material Adverse Effect.
Since December 31, 2005, no event or circumstance resulting in a
Material
Adverse Effect has occurred or exists with respect to the Company,
DFAC or
Freundlich.
To the knowledge of the Company, no material supplier or customer
has
given notice, oral or written, that it intends to cease or reduce
the
volume of its business with Freundlich from
historical levels.
|
|
4.14.
|
Material
Non-Public Information.
The Company has not disclosed to any Investor any material non-public
information that (i) if disclosed, would reasonably be expected to
have a
material effect on the price of the Common Stock or (ii) according
to
applicable law, rule or regulation, should have been disclosed publicly
by
the Company prior to the date hereof but which has not been so disclosed;
provided, however, that the Company has disclosed to the Investors
matters
relating to the Company’s acquisition of DFAC and DFAC’s acquisition of
Freundlich.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
14
|
4.15.
|
Internal
Controls And Procedures.
To the knowledge
of the Company, Freundlich maintains books and records and internal
accounting controls which provide reasonable assurance that (a) all
transactions to which Freundlich is a party or by which its properties
are
bound have been executed with management’s authorization; (ii) the
recorded accounting of Freundlich’s assets is compared with existing
assets at regular intervals; (iii) access to Freundlich’s assets is
permitted only in accordance with management’s authorization; and (iv) all
transactions to which Freundlich is a party or by which its properties
are
bound are recorded as necessary to permit preparation of the financial
statements of the Company in accordance with standards
of the Public Company Accounting Oversight Board; it being understood
that
neither the Company nor Freundlich has
conducted an internal controls audit and that no such audit has been
required under applicable law.
|
|
4.16.
|
Full
Disclosure.
No representation or warranty made by the
Company in
this Agreement and no certificate or document furnished or to be
furnished
to the Investors pursuant to this Agreement contains or will contain
any
untrue statement of a material fact, or omits or will omit to state
a
material fact necessary to make the statements contained herein or
therein, taken as a whole, not
misleading.
|
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR
The
Investors, severally, represent and warrant to the Company that:
|
5.1.
|
Organization
and Standing of the Investor.
|
5.1.1. Such
Investor was not formed for the purpose of investing solely in the Securities.
Such Investor has the requisite power and authority to enter into and perform
this Agreement and to purchase the securities being sold to it hereunder. The
execution, delivery and performance of this Agreement by such Investor and
the
consummation by such Investor of the transactions contemplated hereby have
been
duly authorized by all necessary partnership action where
appropriate.
5.1.2. The
state
in which any offer to purchase Preferred Stock hereunder was made or accepted
by
such Investor is the state shown as such Investor’s address.
|
5.2.
|
Authorization
and Power.
This Agreement and the Registration Rights Agreement have been duly
executed and delivered by such Investor and at the Closing shall
constitute valid and binding obligations of such Investor enforceable
against such Investor in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership
or
similar laws relating to, or affecting generally the enforcement
of,
creditors’ rights and remedies or by other equitable principles of general
application.
|
|
5.3.
|
No
Conflicts.
The execution, delivery and performance of this Agreement and the
consummation by such Investor of the transactions contemplated hereby
or
relating hereto do not and will not (i) result in a violation of
such
Investor’s charter documents or bylaws where appropriate or (ii) conflict
with, or constitute a default (or an event which with notice or lapse
of
time or both would become a default) under, or give to others any
rights
of termination, amendment, acceleration or cancellation of any agreement,
indenture or instrument to which such Investor is a party, or result
in a
violation of any law, rule, or regulation, or any order, judgment
or
decree of any court or governmental agency applicable to such Investor
or
its properties (except for such conflicts, defaults and violations
as
would not, individually or in the aggregate, have a Material Adverse
Effect on such Investor). The Investor is not required to obtain
any
consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute,
deliver
or perform any of such Investor’s obligations under this Agreement or to
purchase the securities from the Company in accordance with the terms
hereof, provided that for purposes of the representation made in
this
sentence, such Investor is assuming and relying upon the accuracy
of the
relevant representations and agreements of the Company
herein.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
15
|
5.4.
|
Financial
Risks.
Such Investor acknowledges that such Investor is able to bear the
financial risks associated with an investment in the securities being
purchased by such Investor from the Company and that it has been
given
full access to such records of the Company and the subsidiaries and
to the
officers of the Company and the subsidiaries as it has deemed necessary
or
appropriate to conduct its due diligence investigation. The Investor
is
capable of evaluating the risks and merits of an investment in the
securities being purchased by such Investor from the Company by virtue
of
its experience as an investor and its knowledge, experience, and
sophistication in financial and business matters and such Investor
is
capable of bearing the entire loss of its investment in the securities
being purchased by such Investor from the
Company.
|
|
5.5.
|
Accredited
Investor.
The Investor is (i) an “accredited investor” as that term is defined in
Rule 501 of Regulation D promulgated under the 1933 Act by reason
of Rule
501(a)(3) and (6), (ii) experienced in making investments of the
kind
described in this Agreement and the related documents, (iii) able,
by
reason of the business and financial experience of its officers (if
an
entity) and professional advisors (who are not affiliated with or
compensated in any way by the Company or any of its affiliates or
selling
agents), to protect its own interests in connection with the transactions
described in this Agreement, and the related documents, and (iv)
able to
afford the entire loss of its investment in the securities being
purchased
by such Investor from the Company. The Investor is acquiring the
Securities for investment and not with a view to the sale or distribution
thereof and understands that such Securities are restricted securities,
as
defined in the 1933 Act, and may not be sold or otherwise distributed
except pursuant to an effective registration statement or an exemption
from the registration requirements of the 1933 Act and that the
certificates for such securities shares and Warrants will bear an
investment legend.
|
|
5.6.
|
Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or
on
behalf of such Investor.
|
|
5.7.
|
Knowledge
of Company.
The Investor and its advisors, if any, have been, upon request, furnished
with all materials relating to the business, finances and operations
of
the Company and materials relating to the offer and sale of the securities
being purchased by such Investor from the Company. The Investor and
its
advisors, if any, have been afforded the opportunity to ask questions
of
the Company and have received complete and satisfactory answers to
any
such inquiries.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
16
|
5.8.
|
Risk
Factors.
The Investor understands that the investment by such Investor in
the
Securities being purchased by such Investor from the Company involves
a
high degree of risk. The Investor understands that no United States
federal or state agency or any other government or governmental agency
has
passed on or made any recommendation or endorsement of the securities
being purchased by such Investor from the Company. The Investor warrants
that it is able to bear the complete loss of its investment in the
securities being purchased by it from the Company. In acquiring the
Securities, such Investor is not relying upon any projections of
the
future financial condition, results of operations or cash flows relating
to the Company.
The Investor acknowledges and agrees that (a) it has had the opportunity
to obtain, and it has reviewed and discussed with the Company, to
the
extent that it deems necessary, information concerning the Company,
including risks relating to the Company, Freundlich and their respective
financial statements, and that (b) in entering into and performing
this
Agreement, such Investor has not relied on any oral representations
made
by the Company or any of its agents, representatives or
advisors.
|
|
5.9.
|
Full
Disclosure.
No representation or warranty made by such Investor in this Agreement
and
no certificate or document furnished or to be furnished to the Company
pursuant to this Agreement contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not
misleading. Except as set forth or referred to in this Agreement,
(a) such
Investor does not have any agreement or understanding with any person
relating to acquiring, holding, voting or disposing of any equity
securities of the Company, and (b) during the past five years there
has
not occurred any event listed in Item 401(f) of Regulation S-K or
any
investigation relating to any such event with respect to such Investor
or
any of its managing partners.
|
ARTICLE
VI
COVENANTS
OF THE COMPANY
|
6.1.
|
Registration
Rights.
The Company shall cause the Registration Rights Agreement to remain
in
full force and effect and shall comply in all material respects with
the
terms thereof.
|
|
6.2.
|
Reservation
of Common Stock.
As of the date hereof, the Company has, subject to the filing of
the
Restated Certificate, reserved and the Company shall continue to
reserve
and keep available at all times, free of preemptive rights, shares
of
Common Stock for the purpose of enabling the Company to issue the
Shares
underlying the Notes or the Series A Preferred Stock, as the case
may be,
and the Warrants;
provided, however, that if, as a result of the Authorized Stock Proviso,
there are not sufficient shares reserved as required in this Section
6.2,
the Company shall, within thirty (30) days after the Company becomes
aware
of such deficiency, prepare and file with the Commission a proxy
statement
pursuant to which the Company will seek stockholder approval for
an
increase in the authorized Common Stock sufficient to enable the
Company
to be in compliance with this Section 6.2. Each Investor agrees to
vote in
favor of such proposal.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
17
|
6.3.
|
Compliance
with Laws.
The Company hereby agrees to comply in all material respects with
the
Company’s reporting, filing and other obligations under the federal
securities laws.
|
|
6.4.
|
1934
Act Registration.
The Company will use its best efforts to comply in all respects with
its
reporting and filing obligations under the 1934 Act, and will not
take any
action or file any document (whether or not permitted by the 1934
Act or
the rules thereunder) to terminate or suspend any such registration
or to
terminate or suspend its reporting and filing obligations under the
1934
until the Investors have disposed of all of their
Shares.
|
|
6.5.
|
Corporate
Existence; Conflicting Agreements.
The Company will take all steps necessary to preserve and continue
the
corporate existence of the Company. The Company shall not enter into
any
agreement, the terms of which agreement would restrict or impair
the right
or ability of the Company to perform any of its obligations under
this
Agreement or any of the other agreements attached as exhibits
hereto.
|
|
6.6.
|
Series
A Preferred Stock.
Until the earliest of (a) three years from the Closing or (b) such
date as
the Investors shall have converted the Note and the Series A Preferred
Stock into not less than 90% of the Shares and sold the Shares or
(c) such
date as the Investor shall have transferred the Note or the Series
A
Preferred Stock which are convertible into an aggregate of not less
than
90% of the Shares issuable upon such conversion of all of the Note
and
Series A Preferred Stock, the Company will not issue any preferred
stock
of with the exception of Series A Preferred Stock issued to the Investor
as provided in this Agreement and the Registration Rights Agreement
and
the Series B Preferred Stock held by the former DFAC stockholders,
which
shares will be automatically converted upon filing of the Restated
Certificate.
|
|
6.7.
|
Convertible
Debt.
On or prior to the Closing Date, the Company will cause to be cancelled
all convertible debt in the Company. Until the earliest of (a) three
years
from the Closing or (b) such date as the Investor shall have converted
the
Note and the Series A Preferred Stock into not less than 90% of the
Shares
issuable upon conversion of all of the Note and Series A Preferred
Stock
and sold the underlying Shares or (c) such date as the Investor shall
have
transferred the Notes or the Series A Preferred Stock which are
convertible into an aggregate of not less than 90% of the Shares
issuable
upon such conversion of all of the Note and Series A Preferred Stock,
the
Company will not issue any convertible debt.
|
|
6.8.
|
Debt
Limitation.
The Company agrees that, for two years after Closing, neither it
nor its
consolidated subsidiaries, shall permit outstanding indebtedness,
based on
the principal amount outstanding at the end of a calendar quarter,
to be
more than two times the sum of the EBITDA from continuing operations
over
the four quarters ending on such date. Indebtedness shall include
any
liabilities or obligations which, under GAAP, are reflected as
indebtedness on the Company’s consolidated balance
sheet.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
18
|
6.9.
|
Reset
Equity Deals.
On or prior to the Closing Date, the Company will cause to be cancelled
any and all reset features related to any shares outstanding that
could
result in additional shares being issued. For a period of three years
from
the Closing the Company will not enter into any transactions that
have any
reset features that could result in additional shares being issued.
For
purposes of this Section 6.9, a reset provision for a convertible
security
or derivative security shall mean a provision (a) whereby the issuance
of
securities at a lower price or having a lower conversion or exercise
price
will result in the conversion or exercise price of the security being
reduced to the lower price or lower conversion or exercise price
or more
shares being issued, as the case may be, or (b) which provide that
the
conversion or exercise price is based on the market price at the
time of
conversion or exercise or (c) any other device which results in an
adjustment to the exercise price or conversion price of the securities
other than stock dividends, stock splits, stock distributions, combination
of shares, reverse splits, and other recapitalizations, as long as
they
effect all stockholders
appropriately.
|
|
6.10.
|
Independent
Directors.
|
6.10.1. The
Company shall have caused the appointment of the majority of the board of
directors to be independent directors, as defined by the rules
of
the Nasdaq Stock Market, not later than thirty (30) days after the Closing
Date.
6.10.2. If,
at
any time subsequent to the expiration of thirty (30) days after the Closing
Date
until the earlier of (a) three years from the Closing or (b) such date as the
Investors shall have converted not less than 90% of the Notes and Series A
Preferred Stock (based on the number of
Shares
issuable upon such conversion of all of the Note and Series A Preferred
Stock)
and sold
the underlying Shares or (c) such date as the Investors shall have transferred
not less than 90% of the Note and Series A Preferred Stock (based on the number
of Shares
issuable upon such conversion of all of the Note and Series A Preferred
Stock
Convertible Securities), the board of directors shall not be composed of a
majority of independent directors:
6.10.2.1.
for a
reason other than for an Excused Reason, the Company shall have 60 days to
take
such steps as are necessary so that a majority of the Company’s directors are
independent directors, and
6.10.2.2.
for an
Excused Reason, the Company shall have 75 days from the date that the Company
becomes aware of the event (or the last event if there are more than one such
event) giving rise to the Excused Reason, to take such steps as are necessary
so
that a majority of the Company’s directors are independent
directors.
6.10.3. The
term
“Excused
Reason”
shall
mean the death or resignation of an independent director or the occurrence
of an
event whereby an independent director ceases to be independent.
6.10.4. If,
during the period referred to in Section 6.10.2 of this Agreement, the Company
shall have failed to have a board of directors composed of a majority of
independent directors after the date by which such situation was to have been
cured pursuant to Section 6.10.2.1 or Section 6.10.2.2 of this Agreement,
whichever shall apply, the Company shall pay to the Investors, as liquidated
damages and not as a penalty, an amount equal to fifteen percent (15%) per
annum
of the Purchase Price of the then outstanding shares of Series A Preferred
Stock
or principal amount of the Notes, as the case may be, payable monthly in cash
or
Series A Preferred Stock at the option of the Investors, based on the number
of
days that such condition exists beyond the applicable grace period; provided,
however, that if the Restated Certificate shall not have been filed, the Company
may issue a Note in lieu of shares of Series A Preferred Stock pursuant to
this
Section 6.10 and Section 6.11 of this Agreement. The parties agree that the
only
damages payable for a violation of such provisions shall be such liquidated
damages. Nothing shall preclude the Investors from pursuing or obtaining
specific performance or other equitable relief with respect to this Agreement.
The parties hereto agree that the liquidated damages provided for in this
Section 6.10.4 constitute a reasonable estimate of the damages that may be
incurred by the Investors by reason of the failure of the Company to have a
majority of directors as independent directors.
SECURITIES
PURCHASE AGREEMENT
PAGE
19
6.10.5. In
no
event shall the total payments made pursuant to this Section 6.10 and Section
6.11, whether in cash or Series A Preferred Stock exceed in the aggregate
fifteen percent (15%) of the Purchase Price of the shares of Series A Preferred
Stock or principal amount of the Notes, as the case may be, that are outstanding
as of the date on which a computation is being made.
|
6.11.
|
Independent
Directors on Audit and Compensation Committees.
No later than thirty (30) days after the Closing Date, the Company
will
have an audit committee comprised solely of not less than three
independent directors and a compensation committee comprised of not
less
than three directors, a majority of whom are independent directors.
If at
any time subsequent to the expiration of such thirty (30) day period,
independent directors do not comprise all of the members of the audit
committee and a majority of the members of the compensation committee
within the grace periods provided in Section 6.10, the Company shall
pay
to the Investors, as liquidated damages and not as a penalty, an
amount
equal to fifteen percent (15%) per annum of the Equity Purchase Price
of
the then outstanding Series A Preferred Stock or principal amount
of the
Notes, as the case may be, payable monthly in cash or Series A Preferred
Stock at the option of the Investors, such payment shall be based
on the
number of days that such condition exists. The parties agree that
the only
damages payable for a violation of the terms of this Agreement with
respect to which liquidated damages are expressly provided shall
be such
liquidated damages. Nothing shall preclude the Investors from pursuing
other remedies or obtaining specific performance or other equitable
relief
with respect to this Agreement. Notwithstanding the foregoing, no
liquidated damages shall be payable pursuant to this Section 6.11
during
any period for which liquidated damages are payable pursuant to Section
6.10.
|
| 6.12. |
Use
of Proceeds.
The Company will use the
net
proceeds
from the sale of the Notes, the Initial Shares and the Warrants (excluding
amounts paid by the Company for legal and administrative fees and
other expenses of the transaction) for
provide funds for the purchase of assets of Freundlich and for working
capital.
|
| 6.13. |
Right
of First Refusal
|
SECURITIES
PURCHASE AGREEMENT
PAGE
20
6.13.1. In
the
event that the Company seeks to raise additional funds through a private
placement of its securities (a “Proposed
Financing”),
other
than Exempt Issuances, each Investor shall have the right to participate in
any
subsequent funding by the Company of the offering price on a pro rata basis,
based on the percentage that (a) the number of such Investor’s Shares, without
regard to the 4.9% Limitation, bears to (b) the total number of shares of Common
Stock outstanding plus the number of Shares issuable upon conversion of the
Notes or Series A Preferred Stock, as the case may be, and any other series
of
convertible preferred stock or debt securities, without regard to the 4.9%
Limitations any other limitations on exercise such other convertible preferred
stock or debt securities. This Section 6.13 shall apply to each such offering
based on the total purchase price of the securities being offered by the
Company.
6.13.2. The
terms
on which the Investors shall purchase securities pursuant to Proposed Financing
shall be the same as such securities are purchased by other investors. The
Company shall give the Investors the opportunity to participate in the offering
by giving the Investors not less than ten (10) days notice setting forth the
terms of the Proposed Financing. In the event that the terms of the Proposed
Financing are changed in a manner which is more favorable to the potential
investor, the Company shall provide the Investors, at the same time as the
notice is provided to the other potential investors, with a new ten (10) day
notice setting forth the revised terms that are provided to the other potential
investors.
6.13.3. In
the
event that the Investors does not exercise its right to participate in the
Proposed Financing within the time limits set forth in Section 6.13.2 of this
Agreement, the Company may sell the securities in the Proposed Financing at
a
price and on terms which are no more favorable to the investors than the terms
provided to the Investors. If the Company subsequently changes the price or
terms so that the price is more favorable to the investors or so the terms
are
more favorable to the investors, the Company shall provide the Investors with
the opportunity to purchase the securities on the revised terms in the manner
set forth in Section
6.13.2
of this
Agreement.
| 6.14. |
Price
Adjustment.
From the date hereof until such time as the Investors holds no Securities,
except for Exempt Issuances, as to which this Section
6.14
does not apply
or
for issuances for which an adjustment has already been made pursuant
to
this Section 6.14,
the Note and the Certificate of Designation shall provide that if
the
Company sells or issues of Common Stock at a price, or warrants,
options,
convertible
debt or equity securities with a exercise price per share or exercise
price per share which is less than the Conversion Price then in effect
(such lower sales price, conversion or exercise price, as the case
may be,
being referred to as the “Lower Price”), the Conversion Price in effect
from and after the date of such transaction shall be reduced to the
Lower
Price. For purpose of determining the exercise price of warrants
issued by
the Company, the price, if the purchaser of the warrants paid separate
consideration for the warrants, the price paid per share for the
warrants
shall be added to the exercise price per share of the warrants in
determining the consideration received by the Company with respect
to the
warrants. A similar provision shall be included in the Warrants;
provided,
however, that the adjustment for the Warrants with exercise prices
of
$0.60 per share shall have a formula
reduction.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
21
| 6.15. |
Price
Adjustments Based on Pre-Tax Income
Per Share.
|
6.15.1. The
Note
and the Certificate of Designation shall contain the following provisions,
and
similar provisions shall be included in the Warrants.
6.15.2. In
the
event the Company’s consolidated Pre-Tax Income for the year ended December 31,
2006 is less than $.034
per
share on a fully-diluted basis, then the Conversion Price shall be reduced
by
the percentage shortfall, up to a maximum of 35%. Thus, if Pre-Tax Income for
the year ended December 31, 2006 is $.0289
per
share on a fully-diluted basis, the Conversion Price shall be reduced by 15%.
Such reduction shall be made at the time the Company files its Form 10-KSB
for
the year ended December 31, 2006, and shall apply to the Note and all shares
of
the Series A Preferred Stock, as the case may be, which are outstanding on
the
date the Form 10-KSB is filed, or, if not filed on time, on the date that filing
was required.
6.15.3. In
the
event the Company’s consolidated Pre-Tax Income for the year ended December 31,
2007 is less than $.051 per share on a fully-diluted basis, then the Conversion
Price then in effect shall be reduced by the percentage shortfall, up to a
maximum of 35%. Thus, if Pre-Tax Income for the year ended December 31, 2007
is
$.04335 per share on a fully-diluted basis, the Conversion Price shall be
reduced by 15%. Such reduction shall be made at the time the Company files
its
Form 10-KSB for the year ended December 31, 2007, and shall apply to the Note
and all shares of the Series A Preferred Stock, as the case may be, which are
outstanding on the date the Form 10-KSB is filed, or, if not filed on time,
on
the date that filing was required.
6.15.4. For
purpose of determining Pre-Tax Income Per Share on a fully-diluted basis, all
shares of Common Stock issuable upon conversion of convertible securities and
upon exercise of warrants and options shall be deemed to be outstanding,
regardless of whether (i) such shares are treated as outstanding for determining
diluted earnings per share under GAAP, (ii) such securities are “in the money,”
or (iii) such shares may be issued as a result of the 4.9%
Limitation.
| 6.16. |
Insider
Selling.
No Restricted Stockholder can sell any shares of Common Stock in
the
public market during the eighteen (18) month period following the
Closing
Date; provided, however, that after twelve (12) months from the Closing
Date, Xxxx Xxxx shall not be deemed to be a Restricted Stockholder
as long
as he is not an officer or director. Any shares owned by a limited
liability company which is wholly-owned or controlled by Xxxx Xxxx
shall
be treated as shares owned by Xxxx Xxxx and subject to the same
restrictions as Xxxx Xxxx. Restricted Stockholders shall include
all
persons who are officers and directors of the Company and all stockholders
who hold shares of Common Stock as a result of the Exchange of Shares.
The
restriction contained in this Section 6.16 shall apply to any transferee,
including any legatee or distribute. Xxxxxx Xxxxxx Xxxxxx and the
Investors shall not be considered Restricted Stockholders; provided,
that
any Investor who would be considered a Restricted Stockholder but
for his
being an Investor shall be a Restricted Stockholder only with respect
to
his shares of Common Stock which were not acquired in his capacity
as an
Investor pursuant to this Agreement. The restrictions in this Section
6.16
shall not apply to shares issued pursuant to a stock option or long-term
incentive plans which may be approved by the Compensation Committee
provided that such committee is comprised of a majority of independent
directors.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
22
| 6.17. |
Employment
and Consulting Contracts.
For three years after the Closing, the Company must have a unanimous
approval from the Compensation Committee of the Board of Directors
having
reached a conclusion that any awards other than salary are reasonable
for
any officer, director or consultants whose compensation is more than
$100,000 per annum. This Section 6.17 does not apply to attorneys,
accountants and other persons who provide professional services to
the
Company.
|
| 6.18. |
Subsequent
Equity Sales.
From the date hereof until such time as the Investors hold no more
than 5%
of the Shares (determined as if the Note and the Series A Preferred
Stock
were fully converted and the Warrants fully exercised), the Company
shall
be prohibited from effecting or entering into an agreement to effect
any
Subsequent Financing involving a “Variable
Rate Transaction”
or an “MFN
Transaction”
(each as defined below). The term “Variable
Rate Transaction”
shall mean a transaction in which the Company issues or sells (i)
any debt
or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares
of
Common Stock either (A) at a conversion, exercise or exchange rate
or
other price that is based upon and/or varies with the trading prices
of or
quotations for the shares of Common Stock at any time after the initial
issuance of such debt or equity securities, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some
future
date after the initial issuance of such debt or equity security or
upon
the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common
Stock.
The term “MFN
Transaction”
shall mean a transaction in which the Company issues or sells any
securities in a capital raising transaction or series of related
transactions which grants to an investor the right to receive additional
shares based upon future transactions of the Company on terms which
are
more favorable to the Investors than the terms initially provided
to the
investor in its initial securities purchase agreement with the Company.
The Investors shall be entitled to obtain injunctive relief against
the
Company to preclude any such issuance, which remedy shall be in addition
to any right to collect damages. Notwithstanding the foregoing, this
Section 6.18 shall not apply in respect of an Exempt Issuance, except
that
no Variable Rate Transaction or MFN Transaction shall be an Exempt
Issuance.
|
| 6.19. |
Approval
of Restated Certificate.
The Company shall adopt the Restated Certificate and the file the
Restated
Certificate not later than one hundred twenty (120) days from the
Closing
Date. As provided in the Restated Certificate, the Restated Certificate
will effect a one-for-150 reverse split of the Common Stock. Until
the
Restated Certificate is filed with the Secretary of State of the
State of
Delaware, the certificates for the Common Stock issued to the DFAC
stockholders shall be held in escrow with Sichenzia Xxxx Xxxxxxxx
Xxxxxxx
LLP along with stock powers endorsed in blank; provided, however,
that the
stockholders shall have the right to vote such shares. If the Restated
Certificate shall not be filed with the Secretary of State of the
State of
Delaware by the close of business on the required filing date, which
shall
be the one hundred twentieth (120th)
day after the date of this Agreement, or, if such one hundred twentieth
(120th)
day is not a day on which the Secretary of State of the State of
Delaware
accepts filings, then on the next day on which such filing are accepted,
the Company shall pay to the Investors, as liquidated damages and
not as a
penalty, an amount equal to five percent (5%) of the Purchase Price
paid
by such Investor. Such payment will become immediately due and payable,
without further demand by the Investors, on the close of business
on
required filing date.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
23
| 6.20. |
Stock
Splits.
All forward and reverse stock splits shall affect all equity and
derivative holders proportionately.
|
| 6.21. |
Continuation
in Aerospace Business.
During the three year period commencing on the date of this Agreement,
or
until such earlier date as all of the Investors shall no longer own
20% of
the Shares initially issuable to such Investor, (a) the Company will
continue to derive not less than 70% of its consolidated revenue
from
sales to the aerospace industries, and (b) any acquisitions will
be of
companies that sell products to the aerospace industries such that,
following completion of the acquisitions, this representation and
warranty
contained in clause (a) of this Section 6.21 will continue to be
true and
correct. For the purpose of determining whether an Investor owns
20% of
the Shares initially issuable to such Investor, the Investor shall
be
deemed to own the Shares which are issuable upon conversion of the
Note
and Series A Preferred Stock or upon exercise of Warrants purchased
by the
Investor pursuant to this
Agreement.
|
| 6.22. |
Payment
of Due Diligence Expenses.
At Closing the Escrow Agent shall disperse to the Xxxxxx Fifty Thousand
Dollars ($50,000.00) for due diligence, legal and any other expenses
which
the Investors may incur in connection with this
Agreement.
|
ARTICLE
VII
COVENANTS
OF THE INVESTORS
|
7.1.
|
Compliance
with Law.
Each Investor covenants that its trading activities with respect
to shares
of the Company’s Common Stock will be in compliance with all applicable
state and federal securities laws, rules and regulations and rules
and
regulations of any public market on which the Company’s Common Stock is
listed.
|
|
7.2.
|
Transfer
Restrictions.
Each Investor acknowledges that (a) the Note, the Series A Preferred
Stock
and Warrants and the Shares have not been registered under the 1933
Act,
and may not be transferred unless (i) they are subject to a current
and
effective registration statement under the 1933 Act, or (ii) the
Investor
shall have delivered to the Company an opinion of counsel, which
counsel
and opinion shall be reasonably satisfactory to the Company, to the
effect
that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; and (b) any sale
of the
Securities made in reliance on Rule 144 promulgated under the 1933
Act may
be made only in accordance with the terms of said Rule, to the extent
that
such Rule is applicable.
|
|
7.3.
|
Restrictive
Legend.
Each Investor acknowledges and agrees that the Securities and the
Shares
shall bear a restrictive legend and a stop-transfer order may be
placed
against transfer of any such Securities except that the requirement
for a
restrictive legend shall not apply to Shares sold pursuant to a current
and effective registration statement or a sale pursuant Rule 144
or any
successor rule.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
24
|
7.4.
|
Restated
Certificate.
Each Investor hereby agrees to vote any shares of capital stock that
the
Investor may own
directly or beneficially, for the adoption of the Restated Certificate.
|
|
7.5.
|
Limitation
on Amendment.
No Investor shall take any action to modify the 4.9% Limitation in
this
Agreement, the Notes, the Certificate of Designation or the
Warrants.
|
ARTICLE
VIII
CONDITIONS
PRECEDENT TO THE COMPANY’S OBLIGATIONS
The
obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions:
|
8.1.
|
No
Termination.
This Agreement shall not have been terminated pursuant to Article
X
hereof.
|
|
8.2.
|
Representations
True and Correct.
The representations and warranties of the Investors contained in
this
Agreement shall be true and correct in all material respects on and
as of
the Closing Date with the same force and effect as if made on as
of the
Closing Date.
|
|
8.3.
|
Compliance
with Covenants.
The Investors shall have performed and complied in all material respects
with all covenants, agreements, and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing
Date.
|
|
8.4.
|
No
Adverse Proceedings.
On the Closing Date, no action or proceeding shall be pending by
any
public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the
consummation of this Agreement or the transactions contemplated hereby
or
to recover any damages or obtain other relief as a result of the
transactions proposed hereby.
|
ARTICLE
IX
CONDITIONS
PRECEDENT TO INVESTORS’ OBLIGATIONS
The
obligation of the Investors to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions:
|
9.1.
|
No
Termination.
This Agreement shall not have been terminated pursuant to Article
X
hereof.
|
|
9.2.
|
Representations
True and Correct.
The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects on and
as of
the Closing Date with the same force and effect as if made on as
of the
Closing Date.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
25
|
9.3.
|
Compliance
with Covenants.
The Company shall have performed and complied in all material respects
with all covenants, agreements, and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing
Date.
|
|
9.4.
|
No
Adverse Proceedings.
On the Closing Date, no action or proceeding shall be pending by
any
public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the
consummation of this Agreement or the transactions contemplated hereby
or
to recover any damages or obtain other relief as a result of the
transactions proposed hereby.
|
|
9.5.
|
Exchange
of Securities Completed.
The Exchange of Securities shall have been completed on or prior
to the
Closing Date, and the Company shall be the sole equity owner of DFAC
and
DFAC shall have acquired the assets of Freundlich pursuant to the
Asset
Purchase Agreement..
|
ARTICLE
X
TERMINATION,
AMENDMENT AND WAIVER
|
10.1.
|
Termination.
This Agreement may be terminated at any time prior to the Closing
Date
|
10.1.1. by
mutual
written consent of the Investors and the Company;
10.1.2. by
the
Company upon a material breach of any representation, warranty, covenant or
agreement on the part of the Investors set forth in this Agreement, or by the
Investors upon a material breach of any representation, warranty, covenant
or
agreement on the part of the Company set forth in this Agreement, or by either
party if (a) the representations or warranties of the other party, taken
together, shall fail to be true and correct in all material respects or (b)
if
the conditions to closing set forth in Article VIII or Article IX of this
Agreement shall not be satisfied, and such breach or failure shall, if capable
of cure, not have been cured within five (5) business days after receipt by
the
party in breach of a notice from the non-breaching party setting forth in detail
the nature of such breach.
|
10.2.
|
Effect
of Termination.
Except as otherwise provided herein, in the event of the termination
of
this Agreement pursuant to Section 10.1 hereof, there shall be no
liability on the part of the Company or the Investors or any of their
respective officers, directors, agents or other representatives and
all
rights and obligations of any party hereto shall
cease.
|
|
10.3.
|
Amendment.
This Agreement may be amended by the parties hereto any time prior
to the
Closing Date by an instrument in writing signed by the parties
hereto;
provided, however that the 4.9% Limitation may not be amended or
waived.
|
|
10.4.
|
Waiver.
At any time prior to the Closing Date, the Company or the Investors,
as
appropriate, may: (a) extend the time for the performance of any
of the
obligations or other acts of other party or; (b) waive any inaccuracies
in
the representations and warranties contained herein or in any document
delivered pursuant hereto which have been made to it or them; or
(c) waive
compliance with any of the agreements or conditions contained herein
for
its or their benefit other than the 4.9% Limitation which may not
be
waived. Any such extension or waiver shall be valid only if set forth
in
an instrument in writing signed by the party or parties to be bound
hereby.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
26
ARTICLE
XI
GENERAL
PROVISIONS
|
11.1.
|
Transaction
Costs.
Except as otherwise provided herein, each of the parties shall pay
all of
his or its costs and expenses (including attorney fees and other
legal
costs and expenses and accountants’ fees and other accounting costs and
expenses) incurred by that party in connection
with this Agreement; provided, the Company shall pay the Investors
for its
expenses as provided in Section 6.22.
|
|
11.2.
|
Indemnification.
Each Investor, singly and not jointly, agrees to indemnify, defend
and
hold the Company (following the Closing Date) and its officers and
directors harmless against and in respect of any and all claims,
demands,
losses, costs, expenses, obligations, liabilities or damages, including
interest, penalties and reasonable attorney’s fees, that it shall incur or
suffer, which arise out of or result from any breach of this Agreement
by
such Investor or failure by such Investor to perform with respect
to the
representations, warranties or covenants contained in this Agreement
or in
any exhibit or other instrument furnished or to be furnished under
this
Agreement. The Company agrees to indemnify, defend and hold the Investors
(following the Closing Date) harmless against and in respect of any
and
all claims, demands, losses, costs, expenses, obligations, liabilities
or
damages, including interest, penalties and reasonable attorney’s fees,
that it shall incur or suffer, which arise out of, result from or
relate
to any breach of this Agreement or failure by the Company to perform
with
respect to the representations, warranties or covenants contained
in this
Agreement or in any exhibit or other instrument furnished or to be
furnished under this Agreement. In no event shall the Company or
the
Investors be entitled to recover consequential or punitive damages
resulting from a breach or violation of this Agreement nor shall
any party
have any liability hereunder in the event of gross negligence or
willful
misconduct of the indemnified party. In the event of the failure
of the
Company to issue the Securities in violation of the provisions of
this
Agreement and the Registration Rights Agreement, the Investors, as
their
sole remedy, shall be entitled to pursue a remedy of specific performance
upon tender into the Court an amount equal to the Purchase Price
hereunder. The indemnification by the Investors shall be limited
to
$50,000.00. This Section 11.2 shall not relate to indemnification
under
the Registration Rights Agreement.
|
|
11.3.
|
Headings.
The headings contained in this Agreement are for reference purposes
only
and shall not affect in any way the meaning or interpretation of
this
Agreement.
|
|
11.4.
|
Entire
Agreement.
This Agreement (together with the Schedule, Exhibits and documents
referred to herein) constitute the entire agreement of the parties
and
supersede all prior agreements and undertakings, both written and
oral,
between the parties, or any of them, with respect to the subject
matter
hereof.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
27
|
11.5.
|
Notices.
All notices and other communications hereunder shall be in writing
and
shall be deemed to have been given (i) on the date they are delivered
if
delivered in person; (ii) on the date initially received if delivered
by
facsimile transmission or e-mail provided that any notice by facsimile
or
e-mail shall only be effective if receipt is acknowledged by the
recipient; or (iv) on the on the date of delivery as shown on the
return
receipt, if mailed by registered or certified mail, return receipt
requested with postage and other fees prepaid as
follows:
|
If
to
the Company:
Jordan
1
Holdings Company
0000
Xxxxxx Xxxx Xxxx
Xxxxxx
Xxxxxx, XX 00000
Attention:
Xxxxxx Xxxxx, CEO
Facsimile:
e-mail:
With
a
copy to:
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx, Esq.
Facsimile
No.: (000) 000-0000
e-mail:
xxxxxxxx@xxxx.xxx
If
to
the Investors:
at
their
respective addresses set forth in Schedule A
|
11.6.
|
Severability.
If any term or other provision of this Agreement is invalid, illegal
or
incapable of being enforced by any rule of law or public policy,
all other
conditions and provisions of this Agreement shall nevertheless remain
in
full force and effect so long as the economic or legal substance
of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any such term
or other
provision is invalid, illegal or incapable of being enforced, the
parties
hereto shall negotiate in good faith to modify this Agreement so
as to
effect the original intent of the parties as closely as possible
in an
acceptable manner to the end that the transactions contemplated hereby
are
fulfilled to the extent possible.
|
|
11.7.
|
Binding
Effect.
All the terms and provisions of this Agreement whether so expressed
or
not, shall be binding upon, inure to the benefit of, and be enforceable
by
the parties and their respective administrators, executors, legal
representatives, heirs, successors and assignees.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
28
|
11.8.
|
Preparation
of Agreement.
This Agreement shall not be construed more strongly against any party
regardless of who is responsible for its preparation. The parties
acknowledge each contributed and is equally responsible for its
preparation. In
resolving any dispute regarding, or construing any provision in,
this
Agreement, there shall be no presumption made or inference drawn
because
of the drafting history of the Agreement, or because of the inclusion
of a
provision not contained in a prior draft or the deletion or modification
of a provision contained in a prior
draft.
|
|
11.9.
|
Governing
Law.
This Agreement shall be governed by, and construed in accordance
with, the
laws of the State of New York, without giving effect to applicable
principles of conflicts of law.
|
|
11.10.
|
Jurisdiction.
If any action is brought among the parties with respect to this Agreement
or otherwise, by way of a claim or counterclaim, the parties agree
that in
any such action, and on all issues, the parties irrevocably waive
their
right to a trial by jury. Exclusive jurisdiction and venue for any
such
action shall be the federal and state courts situated in the City,
County
and State of New York. In the event suit or action is brought by
any party
under this Agreement to enforce any of its terms, or in any appeal
therefrom, it is agreed that the prevailing party shall be entitled
to
reasonable attorneys fees to be fixed by the arbitrator, trial court,
and/or appellate court if such party prevails on substantially all
issues
in dispute.
|
|
11.11.
|
Preparation
and Filing of SEC filings.
The Investors shall reasonably assist and cooperate with the Company
in
the preparation of all filings with the SEC after the Closing Date
due
after the Closing Date.
|
|
11.12.
|
Further
Assurances, Cooperation.
Each party shall, upon reasonable request by the other party, execute
and
deliver any additional documents necessary or desirable to complete
the
transactions herein pursuant to and in the manner contemplated by
this
Agreement. The parties hereto agree to cooperate and use their respective
best efforts to consummate the transactions contemplated by this
Agreement.
|
|
11.13.
|
Survival.
The representations, warranties, covenants and agreements made herein
shall survive the Closing of the transaction contemplated hereby.
|
|
11.14.
|
Third
Parties.
Except as disclosed in this Agreement, nothing in this Agreement,
whether
express or implied, is intended to confer any rights or remedies
under or
by reason of this Agreement on any persons other than the parties
hereto
and their respective administrators, executors, legal representatives,
heirs, successors and assignees. Nothing in this Agreement is intended
to
relieve or discharge the obligation or liability of any third persons
to
any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any party
to
this Agreement.
|
|
11.15.
|
Failure
or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of any party hereto in the exercise
of any
right hereunder shall impair such right or be construed to be a waiver
of,
or acquiescence in, any breach of any representation, warranty, covenant
or agreement herein, nor shall any single or partial exercise of
any such
right preclude other or further exercise thereof or of any other
right.
All rights and remedies existing under this Agreement are cumulative
to,
and not exclusive of, any rights or remedies otherwise
available.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
29
|
11.16.
|
Counterparts.
This Agreement may be executed in one or more counterparts, and by
the
different parties hereto in separate counterparts, each of which
when
executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement. A facsimile
transmission of this signed Agreement shall be legal and binding
on the
party who delivered the Agreement by facsimile transmission; provided,
that such party shall promptly deliver the signed Agreement by overnight
courier services.
|
[SIGNATURES
ON FOLLOWING PAGE]
SECURITIES
PURCHASE AGREEMENT
PAGE
30
IN
WITNESS WHEREOF,
the
Investors and the Company have as of the date first written above executed
this
Agreement.
THE
COMPANY:
JORDAN
1 HOLDINGS COMPANY
By:
Xxxxxx
X. Xxxxx
Name:
Xxxxxx X. Xxxxx
Title:
Chief Executive Officer
INVESTORS:
XXXXXX
PARTNERS LP
By:
Xxxxxx Capital Advisors, LLC, its General Partner
By:
/s/
Xxxxxx Xxxxxx Xxxxxx
Xxxxxx
Xxxxxx Xxxxxx
President
000
Xxxxx
Xxxxxx, 0xx Xxxxx
Xxx
Xxxx
XX 00000
/s/
Xxxxxxx Xxxxx Xxxxxx
Xxxxxxx
Xxxxx Xxxxxx
Schedule
A
|
NAME
AND ADDRESS
|
AMOUNT
OF
INVESTMENT
|
PRINCIPAL
OF
NOTE
|
SHARES
OF SERIES A
PREFERRED
STOCK/SHARES
OF
COMMON
STOCK
ISSUABLE
UPON
CONVERSION**
|
NUMBER
OF
SHARES
UNDERLYING
“A”
AND
“B” WARRANTS
|
|
Xxxxxx
Partners LP
000
Xxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attn:
Xxxxxx Xxxxxx Xxxxxx
e-mail:
xxx@xxxxxxxxxxxxxx.xxx
xxx@xxxxxxxxxxxxxx.xxx
|
$5,250,000
|
$1,000,000
|
4,722,222/
14,166,666
|
9,624,369/
9,624,369
|
|
Xxxxxxx
Xxxxx Xxxxxx
000
Xxxxxxxx Xxxxxx
Xxx.
0000
Xxx
Xxxxxxxx, Xxx Xxxx 00000
e-mail:
xxxxxxx@xxxxxxxxxxxxxxx.xxx
|
500,000*
|
-0-
|
555,556/
1,666,668
|
916,631/
916,631
|
*
of which $119,325.39
has
been
paid on behalf of the Company, leaving a remaining balance of
$380,674.61.
**
Each
share of Series A Preferred Stock is initially convertible into three shares
of
Common Stock.
Exhibit
E
Restated
Certificate
RESTATED
CERTIFICATE OF INCORPORATION
OF
Precision
Aerospace Components, Inc.
Precision
Aerospace Components, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the “Corporation”), does
hereby certify:
1. The
Certificate of Incorporation of the Corporation was filed with the Secretary
of
State on December 28, 2005 under the name Jordan 1 Holdings
Company.
2. The
name
of the Corporation was changed to Precision Aerospace Components, Inc. by a
Certificate of Ownership and Merger of Precision Aerospace Components, Inc.
into
Jordan 1 Holdings Company which was filed with the Secretary of State on July
,
2006.
3. The
Certificate of Incorporation of the Corporation is hereby amended and restated
to read as follows:
FIRST:
The name of the Corporation is Precision Aerospace Components, Inc. (the
“Corporation”).
SECOND:
The address of its registered office in the State of Delaware is 0000
Xxxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx, 00000. The name of its
registered agent at such address is Corporation Service Company.
THIRD:
The purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: (a) The
total
number of shares of capital stock which this Corporation is authorized to issue
is one hundred million (100,000,000) shares, of which:
(i) ten
million (10,000,000) shares shall be designated as Preferred Stock, and shall
have a par value of $.001 per share;
(ii) ninety
million (90,000,000) shares shall be designated as Common Stock, and shall
have
a par value of $.001 per share; and
(b) The
Board
of Directors is expressly authorized at any time, and from time to time, to
provide for the issuance of shares of Preferred Stock in one or more series,
with such voting powers, full or limited, or without voting powers and with
such
designations, preferences and relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof, as shall be stated
and expressed in the resolution or resolutions providing for the issue thereof
adopted by the Board of Directors and as are not stated and expressed in this
Certificate of Incorporation, or any amendment thereto, including (but without
limiting the generality of the foregoing) the following:
(i) the
designation of such series;
(ii) the
dividend rate of such series, the conditions and dates upon which such dividends
shall be payable, the preference or relation which such dividends shall bear
to
the dividends payable on any other class or classes or of any other series
of
capital stock, whether such dividends shall be cumulative or noncumulative,
and
whether such dividends may be paid in shares of any class or series of capital
stock or other securities of the Corporation;
(iii) whether
the shares of such series shall be subject to redemption by the Corporation,
and, if made subject to such redemption, the times, prices and other terms
and
conditions of such redemption;
(iv) the
terms
and amount of any sinking fund provided for the purchase or redemption of the
shares of such series;
(v) whether
or not the shares of such series shall be convertible into or exchangeable
for
shares of any other class or classes or series of capital stock or other
securities of the Corporation, and, if provision be made for conversion or
exchange, the times, prices, rates, adjustment and other terms and conditions
of
such conversion or exchange;
(vi) the
extent, if any, to which the holders of the shares of such series shall be
entitled to vote, as a class or otherwise, with respect to the election of
the
directors or otherwise, and the number of votes to which the holder of each
share of such series shall be entitled;
(vii) the
restrictions, if any, on the issue or reissue of any additional shares or series
of Preferred Stock; and
(viii) the
rights of the holders of the shares of such series upon the dissolution of,
or
upon the distribution of assets of, the Corporation.
(c) No
holder
of any stock of the Corporation of any class or series now or hereafter
authorized, shall, as such holder, be entitled as of right to purchase or
subscribe for any shares of stock of the Corporation of any class or any series
now or hereafter authorized, or any securities convertible into or exchangeable
for any such shares, or any warrants, options, rights or other instruments
evidencing rights to subscribe for, or purchase, any such shares, whether such
shares, securities, warrants, options, rights or other instruments be unissued
or issued and thereafter acquired by the Corporation.
FIFTH:
Election of directors need not be by ballot unless the By-laws of the
Corporation shall so provide.
SIXTH:
A
director of the Corporation shall not be personally liable to the Corporation
or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director’s duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not
in good faith or which involve intentional misconduct or a knowing violation
of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.
SEVENTH: (a) Right
to Indemnification.
Each
person who was or is made a party or is threatened to be made a party to or
is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter, a “proceeding”), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a director or officer of the Corporation or is or was serving at
the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis
of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred
or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee
or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in Paragraph (b)
of
this Article SEVENTH, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated
by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred
in
this Article SEVENTH shall be a contract right and shall include the right
to be
paid by the Corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by
a
director or officer in his or her capacity as a director of officer (and not
in
any other capacity in which service was or is rendered by such person while
a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be
made
only upon delivery to the Corporation of an undertaking, by or on behalf of
such
director or officer, to repay all amounts so advanced if it shall ultimately
be
determined that such director or officer is not entitled to be indemnified
under
this Article SEVENTH or otherwise. The Corporation may, by action of its Board
of Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors
and
officers.
(b) Right
of Claimant to Bring Suit.
If a
claim under Paragraph (a) of this Article SEVENTH is not paid in full by the
Corporation within thirty (30) days after a written claim has been received
by
the Corporation, the claimant may at any time thereafter bring suit against
the
Corporation to recover the unpaid amount of the claim, and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense
of
prosecuting such claim. It shall be a defense to any such action (other than
an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant
has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of such action that indemnification
of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or stockholders) that the claimant has
not
met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard
or
conduct.
(c) Non-Exclusivity
of Rights.
The
right to indemnification and the payment of expenses incurred in defending
a
proceeding in advance of its final disposition conferred in this Article SEVENTH
shall not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the Certificate of Incorporation,
by-law, agreement, vote of stockholders or disinterested directors or
otherwise.
(d) Insurance.
The
Corporation may maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
EIGHTH:
In furtherance and not in limitation of the powers conferred upon the Board
of
Directors by law, the Board of Directors shall have power to make, adopt, alter,
amend or repeal from time to time By-laws of the Corporation, subject to the
right of the stockholders entitled to vote with respect thereto to alter and
repeal By-laws made by the Board of Directors and subject to the provisions
of
any By-law limiting the right of the Board of Directors to make certain
modifications to the By-laws.
4. Upon
the
filing of this Restated Certificate of Incorporation:
(a) Each
share of Common Stock outstanding on the date this Restated Certificate of
Incorporation is filed with the Secretary of State shall automatically become
and be converted into one one hundred fiftieth (1/150) of a share of Common
Stock (the “Reverse Split”). The par value of the Common Stock shall not be
affected by the Reverse Split. No fractional shares shall be issued as a result
of the Reverse Split. The Corporation shall pay, with respect to fractional
shares, the value of such fractional shares based on the last reported trading
price on the principal stock exchange or market on which the Common Stock is
traded on the trading day preceding the effective date of the Reverse Split,
or
there is no trading of such date, the average of the closing bid prices on
such
date.
(b) Each
of
the presently outstanding shares of Series B Convertible Preferred Stock, par
value $.001 per share (“Series B Preferred Stock”), will, in accordance with the
provisions of the Certificate of Designation creating the Series B Preferred
Stock, automatically, without any action on the part of the holder, become
and
be converted into two shares of Common Stock (determined after giving effect
to
the Reverse Split), and the shares of Series B Preferred Stock so converted
shall have the status of authorized but unissued shares of Preferred Stock,
without designation as to series until such stock is once more designated as
part of a particular series by the Corporation’s Board of
Directors.
5. Set
forth
as Exhibit A to this Restated Certificate of Incorporation is a Statement of
Designations setting forth the rights, preferences, privileges and limitations
of a series of Preferred Stock consisting of seven million one hundred thousand
(7,100,000) shares and designated as the Series A Convertible Preferred
Stock.
6. This
Restated Certificate of Incorporation has been duly adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of
Delaware.
7. The
capital of the Corporation will not be reduced under or by reason of any
amendment herein certified.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by
its
president this __th day of _______, 2006.
s/________________________________
Name:
Title:
