Right to Purchase Promissory Note Agreement - Kolar Machine Inc. and CPI Aerostructures Inc.
AGREEMENT
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AGREEMENT dated as of November 26, 2002 among RALOK, INC., a New York
corporation formerly known as Kolar Machine, Inc. ("Holder"), and CPI
AEROSTRUCTURES, INC., a New York corporation ("Company"), and Green & Seifter,
Attorneys, PLLC, as Escrow Agent.
RECITALS:
A. Holder is the holder of a convertible promissory note issued by the
Company to Holder in the principal amount of $4,000,000 (plus interest) dated
June 25, 2002 (the "Note");
B. The Company desires to obtain from Holder, and Holder desires to grant
to the Company, the right to purchase the Note on the terms and conditions set
forth herein;
C. The Company proposes to make a public offering of its securities
("Offering") or engage in some other transaction to obtain the funds required
for it to purchase the Note pursuant to this Agreement;
IT IS AGREED:
1. Grant of Purchase Right. For good and valuable consideration, receipt of
which is acknowledged by Holder, Holder hereby grants to the Company the right
("Purchase Right") to purchase the Note from Holder on or before April 30, 2003
("Expiration Date") for the sum of $2,700,000 ("Purchase Price"). Upon exercise
of the Purchase Right and payment of the Purchase Price, the Company shall have
no further obligations to Holder under the Note.
2. Escrow of Note. Concurrently with the execution of this Agreement,
Holder has delivered the Note to Escrow Agent for disposition in accordance with
the terms hereof.
3. Exercise of Purchase Right. To exercise the Purchase Right, the Company
(a) shall deliver to Holder, with a copy to Escrow Agent, on or before 5:00 p.m.
local time on the Expiration Date, (i) notice of exercise, and (ii) copies of
all written consents from the Banks (as defined below) necessary for the Company
to consummate the Purchase Right and for the Holder to retain the Purchase Price
notwithstanding the terms of the Subordination Agreements (as defined below),
and (b) concurrently with or before delivery of such notice, shall pay the
Purchase Price to Escrow Agent for the benefit of Holder, by wire transfer of
immediately available funds to the account of Escrow Agent. Upon Escrow Agent
receiving the notice of exercise, written consents and payment, Escrow Agent
shall promptly deliver the Note to the Company and shall remit the Purchase
Price to Holder. If the net proceeds received by the Company in the Offering are
at least $4,000,000, exercise of the Purchase Right by the Company shall be
mandatory and shall be effected no later than three (3) business days after the
closing of the Offering. If such net proceeds are less than $4,000,000, exercise
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of the Purchase Right shall be at the discretion of the Company. If the Company
does not deliver notice of exercise in accordance with this section by 5:00 p.m.
local time on the Expiration Date, Escrow Agent shall redeliver the Note to
Holder.
4. Representations of Holder. Holder represents and warrants to the Company
as follows:
(a) Holder is the record and beneficial owner of, and has good and
marketable title to, the Note, free and clear of all liens, security
interests, charges, claims, restrictions and other encumbrances, subject in
any case to certain subordination agreements ("Subordination Agreements")
of which the Company is aware with certain financial institutions
("Banks"). No other person or entity has any interest in the Note of any
nature.
(b) Holder recognizes that its right to acquire equity securities of
the Company by converting the Note will be surrendered if the Company
exercises the Purchase Right.
(c) Holder has had both the opportunity to ask questions and receive
answers from the officers and directors of the Company concerning the
business and operations of the Company and to obtain any additional
information regarding the Company and its business and operations to the
extent the Company possesses such information or can acquire it without
unreasonable effort or expense necessary to verify the accuracy of such
information, including reports filed by the Company with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended.
(d) Holder possesses sufficient knowledge and experience in financial
and business matters to enable it to evaluate the merits and risks of the
grant of the Purchase Right and the exercise thereof by the Company.
(e) Holder has been advised by the Company that the Offering may
provide additional funds for use in the business and operations of the
Company in excess of those required for payment of the Purchase Price.
5. Escrow Agent.
(a) Escrow Agent acknowledges that it has received the Note from
Holder and has possession thereof.
(b) Escrow Agent's sole responsibility upon receipt of notice of
exercise of the Purchase Right, the written consents from the Banks and
payment of the Purchase Price is to deliver the Note to the Company and
remit the payment to Holder or, in the absence of such receipt by 5:00 p.m.
local time on the Expiration Date, to redeliver the Note to Holder.
(c) Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, instruction or request
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furnished to it hereunder and believed by it to be genuine and to have been
signed or presented by the proper party or parties. Escrow Agent may
conclusively presume that the undersigned representative of each of the
Company and the Holder has full power and authority to instruct Escrow
Agent on behalf of that party unless written notice to the contrary is
received by Escrow Agent.
(d) Escrow Agent shall not be liable for any action taken by it in
good faith and believed by it to be authorized or within the rights or
powers conferred upon it by this Agreement.
(e) Escrow Agent may resign and be discharged from its duties or
obligations hereunder by giving notice in writing of such resignation to
the Company and Holder specifying a date upon which such resignation shall
take effect. Upon being notified by joint notice from the Company and
Holder of the appointment of a successor escrow agent, Escrow Agent shall
deliver the Note to such successor.
(f) The Company acknowledges and agrees that Escrow Agent's acting as
agent hereunder shall not prevent it from representing Holder against the
Company in any future matter.
6. Notices. All notices, requests and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given or made as of the date delivered personally or one day after delivery
to a nationally recognized overnight courier for next day early morning
delivery, in each case to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
If to Holder:
Ralok, Inc.
1001 Bay Road
Apt. 210C
Vero Beach, FL 32963
with a copy to:
Green & Seifter, Attorneys, PLLC
One Lincoln Center
Suite 900
110 Fayette Street
Syracuse, New York 13202
Attention: David A. Holstein, Esq.
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If to the Company:
CPI Aerostructures, Inc.
200A Executive Drive
Edgewood, New York 11717
Attn: Mr. Edward Fred, President
with a copy to:
Graubard Miller
600 Third Avenue
New York, New York 10016
Attention: David Alan Miller, Esq.
If to Escrow Agent:
Green & Seifter, Attorneys, PLLC
One Lincoln Center
Suite 900
110 Fayette Street
Syracuse, New York 13202
Attention: David A. Holstein, Esq.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York without giving effect to
principles of conflicts of law.
8. Headings. The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
9. Amendment. This Agreement may not be amended or modified except by an
instrument in writing signed by the parties.
10. Counterparty. This Agreement may be signed in counterparts which, taken
together, shall constitute one Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
CPI AEROSTRUCTURES, INC.
By: /s/ Edward J. Fred
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Name: Edward J. Fred
Title: President
RALOK, INC.
By: /s/ Daniel Liguori
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Name: Daniel Liguori
Title: President
GREEN & SEIFTER, ATTORNEYS, PLLC
By: /s/ Robert Weiler
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Name: Robert Weiler
Title: Managing Partner
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