SERIES A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
This
Series A Preferred Stock and Warrant Purchase Agreement (this “Agreement”)
is
made as of ___________, 2007, by and between New Design Cabinets, Inc., a Nevada
corporation (the “Company”),
and
XX Xxxxx, LLC, a Delaware limited liability company (the “Investor”).
SECTION
1
Authorization,
Sale and Issuance of Series A Preferred Stock
and Warrant
1.1 Authorization.
The Company will, prior to the Closing (as defined below), authorize
(a) the sale and issuance of seven million one hundred forty-two thousand
eight hundred fifty-seven (7,142,857) shares (the “Shares”)
of the
Company’s Series A Preferred Stock, $.001 par value (the “Series
A Preferred Stock”),
having the rights, privileges, preferences and restrictions set forth in the
Certificate of Designation, Powers, Preferences and Rights of Series A Preferred
Stock of the Company, in substantially the form attached hereto as Exhibit A
(the
“Certificate
of Designation”);
(b) the issuance of a warrant, in substantially the form attached hereto as
Exhibit B
(the
“Warrant”),
for
the purchase of up to one million seven hundred eighty-five thousand seven
hundred fourteen (1,785,714) shares of common stock, $.001 par value (the
“Common
Stock”)
of the
Company (the “the
Warrant Shares”);
and
(c) the reservation of shares of Common Stock for issuance upon conversion
of
the Warrant Shares (the “Conversion
Shares”).
1.2 Sale
and Issuance of Shares.
Subject to the terms and conditions of this Agreement, the Investor agrees
to
purchase, and the Company agrees to sell and issue to the Investor, the Shares
at a cash purchase price of $0.70 per share and an aggregate purchase price
for
all Shares equal to Five Million Dollars ($5,000,000) (the “Total
Base Purchase Price”).
1.3 Funding
Fee.
On the
Closing Date (as defined below), the Company shall pay the Investor an amount
equal to two percent (2%) of the Total Base Purchase Price (i.e., One Hundred
Thousand Dollars ($100,000)) in
consideration for the purchase by the Investor of the Shares (the “Funding
Fee”).
The
Total Base Purchase Price less the Funding Fee shall be referred to as the
“Total
Purchase Price.”
1.4 Issuance
of Series A Warrant.
On the Closing Date, the Company shall issue to the Investor the Warrant to
purchase up to the number of Warrant Shares. The Warrant shall be issued in
substantially the same form as attached hereto as Exhibit B.
SECTION
2
Closing
Date and Delivery
2.1 Closing.
The
purchase, sale and issuance of the Shares and the Warrant shall take place
at a
closing (the “Closing”)
at the
offices of Loeb & Loeb LLP, 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, at 10:00 a.m. local time on __________, 2007 (the
“Closing
Date”),
or
such other date as the Company and the Investor shall agree.
1
2.2 Delivery.
At
the Closing, the Company will deliver to the Investor a certificate registered
in the Investor’s name representing the Shares (the “Stock
Certificate”)
and
the executed Warrant to purchase up to the number of Warrant Shares against
payment of the Total Purchase Price, by wire transfer in accordance with the
Company’s instructions.
SECTION
3
Representations
and Warranties of the Company
The
Company represents and warrants to the Investor that:
3.1 Due
Incorporation, Qualification, etc.
The
Company (a) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation; (b) has the power and
authority to own, lease and operate its properties and carry on its business
as
now conducted; and (c) is duly qualified, licensed to do business and in good
standing as a foreign corporation in each jurisdiction where the failure to
be
so qualified or licensed could reasonably be expected to have a Material Adverse
Effect. For the purposes of this Agreement, “Material
Adverse Effect”
shall
mean a material adverse effect on (i) the business, assets, operations,
prospects or financial or other condition of the Company; (ii) the ability
of the Company to pay or perform its obligations under this Agreement in
accordance with the terms of this Agreement and the other Transaction Documents
(as defined below) and to avoid an event of default, or an event which, with
the
giving of notice or the passage of time or both, would constitute an event
of
default, under any Transaction Document; or (iii) the rights and remedies
of the Investor under this Agreement, the other Transaction Documents or any
related document, instrument or agreement.
3.2 Authority.
The
execution, delivery and performance by the Company of this Agreement, the
Warrant and the Stock Certificate, and all such other documents required by
the
terms of this Agreement to be executed by the Company (collectively, the
“Transaction
Documents”)
and
the consummation of the transactions contemplated thereby (a) are within
the power of the Company and (b) have been duly authorized by all necessary
actions on the part of the Company.
3.3 Enforceability.
Each
Transaction Document has been, or will be, duly executed and delivered by the
Company and constitutes, or will constitute, a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors’ rights
generally and general principles of equity.
3.4 Non-Contravention.
The
execution and delivery by the Company of the Transaction Documents and the
performance and consummation of the transactions contemplated thereby do not
and
will not (a) violate the Company’s Articles of Incorporation or Bylaws, as
amended, as the case may be (“Charter
Documents”),
or
any material judgment, order, writ, decree, statute, rule or regulation
applicable to the Company; (b) violate any provision of, or result in the
breach or the acceleration of, or entitle any other Person to accelerate
(whether after the giving of notice or lapse of time or both), any material
mortgage, indenture, agreement, instrument or contract to which the Company
is a
party or by which it is bound; or (c) result in the creation or imposition
of any lien upon any property, asset or revenue of the Company or the
suspension, revocation, impairment, forfeiture, or nonrenewal of any material
permit, license, authorization or approval applicable to the Company, its
business or operations, or any of its assets or properties. For the purposes
of
this Agreement, “Person”
shall
mean and include an individual, a partnership, a corporation (including a
business trust), a joint stock company, a limited liability company, an
unincorporated association, a joint venture or other entity or a governmental
authority.
2
3.5 Approvals.
The
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its obligations under or contemplated by
this
Agreement, in each case in accordance with the terms hereof or
thereof.
3.6 No
Violation or Default.
The
Company is not in violation of or in default with respect to (a) its
Charter Documents or any material judgment, order, writ, decree, statute, rule
or regulation applicable to it; or (ii) any material mortgage, indenture,
agreement, instrument or contract to which the Company is a party or by which
it
is bound (nor is there any waiver in effect which, if not in effect, would
result in such a violation or default), where, in each case, such violation
or
default, individually, or together with all such violations or defaults, could
reasonably be expected to have a Material Adverse Effect.
3.7 Litigation.
No
actions (including, without limitation, derivative actions), suits, proceedings
or investigations are pending or, to the knowledge of the Company, threatened
against the Company at law or in equity in any court or before any other
governmental authority that if adversely determined (a) would (alone or in
the aggregate) have a Material Adverse Effect or (b) seeks to enjoin,
either directly or indirectly, the execution, delivery or performance by the
Company of the Transaction Documents or the transactions contemplated
thereby.
3.8 Taxes.
Within
the times and in the manner prescribed by law, the Company has filed all
federal, state and local tax returns required by law and has paid all taxes,
assessments and penalties due and payable.
3.9 OTCBB
Compliance.
The
Company is in compliance with all requirements for, and its Common Stock is
quoted on the Electronic Over-the-Counter Bulletin Board system.
3.10 SEC
Reports.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC (the “SEC
Documents”)
pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the “Exchange
Act”).
As of
their respective dates, the financial statements of the Company included in
the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Securities and Exchange Commission (“SEC”)
with
respect thereto. Such financial statements have been prepared in accordance
with
generally accepted accounting principles, consistently applied, during the
periods involved (except (a) as may be otherwise indicated in such financial
statements or the notes thereto, or (b) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments).
3
3.11 Capitalization.
The
authorized capital stock of the Company currently consists of 250,000,000 shares
of Common Stock and 50,000,000 shares of preferred stock, $.001 par value (the
“Preferred
Stock”),
of
which 55,000,000 shares of Common Stock and no shares of Preferred Stock are
issued and outstanding. Except as provided for in this Agreement and as set
forth below, there are no outstanding shares of Common Stock, Preferred Stock,
options, rights, warrants, debentures, instruments, convertible securities
or
other agreements or commitments obligating the Company to issue any additional
shares of its capital stock of any class. Concurrently with the Closing, the
Company will close a private placement of Common Stock of up to $10.0 million
(the “Private
Placement”).
Assuming the Private Placement is fully subscribed for, and that all $10.0
million of Common Stock is purchased by the investors, immediately after the
closing of the Private Placement, the investors in the Private Placement will
receive an aggregate of 14,285,714 shares of Common Stock and warrants to
purchase 7,142,857 shares of Common Stock. Concurrently with the Closing, the
Company anticipates closing a bridge financing with investors for up to $5.0
million (the “Bridge
Financing”).
At
the closing of the Bridge Financing, the bridge note holders will receive
warrants to purchase shares of Common Stock. In addition, upon maturity of
the
notes, the bridge note holders will have the right to convert (in whole or
in
part) the amount then due and outstanding under the terms of the notes into
shares of Common Stock of the Company.
3.12 General
Solicitation.
Neither
the Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D promulgated under the Securities Act of
1933, as amended (the “Securities
Act”))
in
connection with the offer or sale of the Shares or Warrant.
3.13 Accuracy
of Information Furnished.
None of
the Transaction Documents and none of the other certificates, statements or
information furnished to the Investor by or on behalf of the Company in
connection with the Transaction Documents or the transactions contemplated
thereby 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
therein, in light of the circumstances under which they were made, not
misleading.
SECTION
4
Representations
and Warranties of the Investor
The
Investor hereby
represents and warrants to the Company as follows:
4.1 Binding
Obligation.
The
Investor has full legal capacity, power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement is
a
valid and binding obligation of the Investor, enforceable in accordance with
its
terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors’ rights
generally and general principles of equity.
4.2 Securities
Law Compliance.
The
Investor has been advised that the Shares and the Conversion Shares have not
been registered under the Securities Act, or any state securities laws and,
therefore, cannot be resold unless they are registered under the Securities
Act
and applicable state securities laws or unless an exemption from such
registration requirements is available. The Investor has not been formed solely
for the purpose of making this investment and is purchasing the Shares and
the
Warrant Shares for its own account for investment, not as a nominee or agent,
and not with a view to, or for resale in connection with, the distribution
thereof. The Investor has such knowledge and experience in financial and
business matters that the Investor is capable of evaluating the merits and
risks
of such investment, is able to incur a complete loss of such investment and
is
able to bear the economic risk of such investment for an indefinite period
of
time. The Investor is an accredited investor as such term is defined in
Rule 501 of Regulation D under the Securities Act.
4
4.3 Access
to Information.
The
Investor acknowledges that the Company has given the Investor access to the
corporate records and accounts of the Company and to all information in its
possession relating to the Company, has made its officers and representatives
available for interview by the Investor, and has furnished the Investor with
all
documents and other information required for the Investor to make an informed
decision with respect to the purchase of the Shares and the Warrant
Shares.
SECTION
5
Registration
Rights
5.1 Demand
Registration.
At any
time during one (1) year after the Closing Date, the Investor shall have the
right, exercisable by making a written request (a “Demand
Request”)
to the
Company (which request shall specify the aggregate number of shares of Common
Stock underlying the Shares and Conversion Shares requested to be registered),
to require that the Company file a registration statement (the “Demand
Registration Statement”)
with
the SEC covering, for the Investor, the shares of Common Stock underlying the
Shares and the Conversion Shares specified in the Demand Request. The Company
will file the Demand Registration Statement no later than thirty (30) calendar
days after the Company’s receipt of the Demand Request. If (i) in the good faith
judgment of the Board of Directors of the Company, the filing of the Demand
Registration Statement covering the Common Stock underlying the Shares and
the
Conversion Shares would be materially detrimental to the Company and the Board
of Directors of the Company concludes, as a result, that it is in the best
interests of the Company to defer the filing of such Demand Registration
Statement at such time, and (ii) the Company shall furnish to the Investor
a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be materially
detrimental to the Company for such Demand Registration Statement to be filed
in
the near future and that it is, therefore, in the best interests of the Company
to defer the filing of such Demand Registration Statement, then the Company
shall have the right to defer such filing for a period of not more than one
hundred eighty (180) days after receipt of the request of the Investor, and,
provided further, that the Company shall not defer its obligation in this manner
more than one (1) time under this Agreement. The Demand Registration Statement
filed pursuant to the request of the Investor may include other securities
of
the Company and may include securities of the Company being sold for the account
of the Company.
5.2 Company
Registration.
Upon
the
consummation of the PIPE, the Company will file a registration statement (the
“Company
Registration Statement”)
covering, for the Investor, 100% of the shares of Common Stock underlying the
Shares and the Conversion Shares no later than thirty (30) calendar days after
the Company closes the PIPE (the “Filing
Date”),
except that if the SEC limits the number of securities that may be registered
on
the Company Registration Statement, such number of securities shall be cutback
(in the following order) to comply with any such limitation imposed by the
SEC:
(i) shares of Common Stock underlying any and all warrants required to be
registered, (ii) Common Stock and (iii) shares of Common Stock underlying the
Shares. Any required cutbacks shall be applied to investors pro-rata in
accordance with the number of securities sought to be included in such Company
Registration Statement. The Company shall use its best efforts to have the
Company Registration Statement declared effective by the SEC as soon as possible
after the Filing Date.
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5.3 Penalty.
Except
as set forth in Section 5.1 above, if the Demand Registration Statement or
Company Registration Statement, as applicable, is not filed within thirty (30)
calendar days of receipt of the Company’s Demand Request or the closing of the
PIPE, as applicable, or is not declared effective by the SEC for any reason
within one hundred fifty (150) calendar days of the Company’s receipt of the
Demand Request, or after the closing of the PIPE, as applicable, the Company
will be required to pay the Investor an amount (the “Periodic
Amount”)
equal
to 1.5% of the Total Base Purchase Price for each thirty (30) day period (pro
rated for a shorter period), in each case until the Demand Registration
Statement or Company Registration Statement, as applicable, is filed or declared
effective, as the case may be. In no event will the aggregate Periodic Amounts
exceed 10% of the Total Base Purchase Price. Periodic Amount payments shall
be
made by the Company to the Investor if effectiveness of the Demand Registration
Statement or Company Registration Statement, as applicable, is suspended for
more than thirty (30) consecutive days. In no event shall the Company be liable
for liquidated damages as to any shares of Common Stock underlying the Shares
or
Conversion Shares which are not permitted by the SEC to be included in the
Demand Registration Statement or Company Registration Statement, as applicable,
solely due to comments received by the Company from the SEC.
5.4 Information
Requirements.
The
Company may request the Investor to furnish the Company with such information
with respect to the Investor and the Investor’s proposed distribution of
securities being purchased hereunder pursuant to the Demand Registration
Statement or Company Registration Statement, as applicable, as the Company
may
from time to time reasonably request in writing or as shall be required by
law
or by the SEC in connection therewith, and the Investor agrees to furnish the
Company with such information.
SECTION
6
Conditions
to the Investor’s Obligation to Close
The
Investor’s obligations at the Closing are subject to the fulfillment, on or
prior to the Closing Date, of all of the following conditions, any of which
may
be waived in whole or in part by the Investor:
6.1 Representations
and Warranties.
The
representations and warranties made by the Company in Section 3 hereof
shall have been true and correct when made, and shall be true and correct on
the
Closing Date.
6.2 Governmental
Approvals and Filings.
The
Company shall have obtained all governmental approvals required in connection
with the lawful sale and issuance of the Shares and the
Warrant.
6
6.3 Legal
Requirements.
At the
Closing, the sale and issuance by the Company, and the purchase by the Investor,
of the Shares and the Warrant shall be legally permitted by all laws and
regulations to which the Investor or the Company are subject.
6.4 Proceedings
and Documents.
All
corporate and other proceedings in connection with the transactions contemplated
at the Closing and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to the
Investor.
6.5 Transaction
Documents.
The
Company shall have duly executed and delivered to the Investor each of the
Transaction Documents.
6.6 Amended
and Restated Articles of Incorporation.
The
Amended and Restated Articles of Incorporation of the Company, in the form
attached hereto as Exhibit
C,
shall
have been duly authorized, executed and filed with and accepted by the Secretary
of State of the State of Nevada.
6.7 Certificate
of Designation.
The
Certificate of Designation shall have been duly authorized, executed and filed
with and accepted by the Secretary of State of the State of Nevada.
SECTION
7
Conditions
to Company’s Obligation to Close
The
Company’s obligation to issue and sell the Shares and the Warrant at the Closing
is subject to the fulfillment, on or prior to the Closing Date, of the following
conditions, any of which may be waived in whole or in part by the
Company:
7.1 Representations
and Warranties.
The
representations and warranties made by the Investor in Section 4 shall be
true and correct when made, and shall be true and correct on the Closing
Date.
7.2 Governmental
Approvals and Filings.
The
Company shall have obtained all governmental approvals required in connection
with the lawful sale and issuance of the Shares and the Warrant.
7.3 Legal
Requirements.
At the
Closing, the sale and issuance by the Company, and the purchase by the Investor,
of the Shares and the Warrant shall be legally permitted by all laws and
regulations to which the Investor or the Company are subject.
7.4 Purchase
Price.
The
Investor shall have delivered to the Company the Total Purchase
Price.
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SECTION
8
Miscellaneous
8.1 Expenses.
The
Company and the Investor shall each pay their own expenses in connection with
the transactions contemplated by this Agreement; provided,
however,
that if
the Closing is effected, the Company shall reimburse the reasonable documented
fees of one (1) counsel for the Investor and reasonable travel and other
expenses related to the transaction contemplated in this Agreement, within
two
(2) weeks of presentation of a final invoice from the Investor.
8.2 Waivers
and Amendments.
Any
provision of this Agreement may be amended, waived or modified only upon the
written consent of the Company and the Investor.
8.3 Delays
or Omissions.
Except as expressly provided herein, no delay or omission to exercise any right,
power or remedy accruing to either party to this Agreement upon any breach
or
default of the other party under this Agreement shall impair any such right,
power or remedy of such non-defaulting party, nor shall it be construed to
be a
waiver of any such breach or default, or an acquiescence therein, or of or
in
any similar breach or default thereafter occurring, nor shall any waiver of
any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of
any kind or character on the part of any party of any breach or default under
this Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only
to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party to this Agreement,
shall be cumulative and not alternative.
8.4 Attorney’s
Fees.
In the
event that any suit or action is instituted to enforce any provisions in this
Agreement, the prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing any right of
such prevailing party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.
8.5 Governing
Law.
This
Agreement and all actions arising out of or in connection with this Agreement
shall be governed by and construed in accordance with the laws of the State
of
Nevada, without regard to the conflicts of law provisions of the State of Nevada
or of any other state.
8.6 Survival.
The
representations, warranties, covenants and agreements made herein shall survive
the execution and delivery of this Agreement.
8.7 Successors
and Assigns.
This
Agreement, and any and all rights, duties and obligations hereunder, shall
not
be assigned, transferred, delegated or sublicensed by the Investor without
the
prior written consent of the Company. Any attempt by the Investor without such
permission to assign, transfer, delegate or sublicense any rights, duties or
obligations that arise under this Agreement shall be void. Subject to the
foregoing and except as otherwise provided herein, the provisions of this
Agreement shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties
hereto.
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8.8 Entire
Agreement.
This
Agreement together with the other Transaction Documents constitute and contain
the entire agreement between the Company and the Investor and supersede any
and
all prior agreements, negotiations, correspondence, understandings and
communications among the parties, whether written or oral, respecting the
subject matter hereof.
8.9 Notices.
All
notices, requests, demands, consents, instructions or other communications
required or permitted hereunder shall in writing and faxed, mailed or delivered
to each party as follows: (a) if to the Investor, at the Investor’s address
or facsimile number set forth on the signature page hereto, or at such other
address as the Investor shall have furnished the Company in writing, or
(b) if to the Company, at 0000 Xxxxxx Xxxxx Xxxxxx Xxxx., Xxxxx 000,
Xxxxxxx Xxxxx, XX 00000, Attn: Xxxxxxxxx Xxxxx, facsimile: (000) 000-0000,
or at
such other address or facsimile number as the Company shall have furnished
to
the Investor in writing. All such notices and communications will be deemed
effectively given the earlier of (i) when received, (ii) when
delivered personally, (iii) one business day after being delivered by
facsimile (with receipt of appropriate confirmation), (iv) one business day
after being deposited with an overnight courier service of recognized standing
or (v) four days after being deposited in the U.S. mail, first class with
postage prepaid.
8.10 Severability.
If any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, portions of such
provision, or such provision in its entirety, to the extent necessary, shall
be
severed from this Agreement, and such court will replace such illegal, void
or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the same economic, business and
other
purposes of the illegal, void or unenforceable provision. The balance of this
Agreement shall be enforceable in accordance with its terms.
8.11 Further
Assurances.
Each party hereto agrees to execute and deliver, by the proper exercise of
its
corporate, limited liability company, partnership or other powers, all such
other and additional instruments and documents and do all such other acts and
things as may be necessary to more fully effectuate this Agreement.
8.12 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
agreement. Facsimile copies of signed signature pages will be deemed binding
originals.
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IN
WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
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a
Nevada corporation
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By:
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Name:
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Xxxx
Xxxxxxxx
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Title:
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President
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INVESTOR:
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XX
Xxxxx, LLC,
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a
Delaware limited liability company
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By:
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Name:
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Title:
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Address:
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(Fax)
__________________________
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SERIES A
PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT
________________,
2007
