Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
AIR INDUSTRIES GROUP, INC.
SECURITIES PURCHASE AGREEMENT (as amended or supplemented from time to
time, this "AGREEMENT"), dated as of ______________, 2008, between Air
Industries Group, Inc., a Delaware corporation (the "COMPANY") with its
principal offices at 0000 X. Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxx Xxxx 00000, and the
undersigned (the "Subscriber").
WITNESSETH:
WHEREAS, the Company is offering to sell in a private placement one or
more junior subordinated promissory notes in an aggregate principal amount of up
to three million dollars ($3,000,000) in the form annexed hereto as Exhibit A
(each a "NOTE" and, collectively, the "NOTES"), together with two (240,000)
hundred forty thousand shares of the Company's Series B Preferred stock (the
"PREFERRED STOCK"). A description of the rights and preferences of the Series B
Preferred Stock and the Certificate of Designation therefor are annexed hereto
as Exhibits B-1 and B-2;
WHEREAS, the Company is also offering to issue to the holders of its
Junior Subordinated Notes in the aggregate principal amount of $2,950,000 the
opportunity to exchange such Notes for Notes in the form of Exhibit A together
with 8,000 shares of the Series B Preferred Stock for each $100,000 of Junior
Subordinated Notes so converted;
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Subscriber,
and the Subscriber shall purchase from the Company, a Note in the principal
amount indicated on the signature page hereto together with such number of
shares of the Company's Preferred Stock as are indicated on the signature page
hereto (the "Shares"). The Note and the Shares to be issued pursuant hereto are
collectively referred to herein as the "SECURITIES"; and
WHEREAS, the Company and the Subscriber are executing and delivering this
Agreement in reliance upon an exemption from the registration requirements of
the Securities Act of 1933, as amended (the "1933 ACT") afforded by the
provisions of Section 4(2), Section 4(6) and/or Regulation D ("REGULATION D") as
promulgated by the United States Securities and Exchange Commission (the
"COMMISSION") under the 1933 Act.
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Subscriber hereby
agree as follows:
1. SUBSCRIPTION FOR SECURITIES.
(a) Upon execution and delivery of this Agreement, and subject to the
terms and conditions hereof, including the satisfaction of the conditions
described in subsection (b) below, the Company shall deliver the original
executed Note and the certificates for the Shares to the Subscriber, each
registered in the name of the Subscriber, against receipt of an amount equal to
the principal amount of the Note for which the Subscriber is subscribing.
(b) Subscriber's obligation to purchase the Note and the Shares is subject
to the fulfillment (or written waiver by the Placement Agent) of each of the
following conditions:
(i) The representations and warranties of the Company contained in
this Agreement shall be true and correct on and as of the date of such purchase;
(ii) The Company shall have performed and complied with all
covenants, conditions and agreements required by this Agreement to be performed
or complied with by them on or prior to the date of such purchase;
(iii) There shall be in effect no injunction, writ, preliminary
restraining order or any order of any nature directing that the transactions
contemplated by this Agreement, including without limitation the purchase of the
Note and the Shares, not be consummated as herein provided; and
(iv) The Company shall have obtained the consents of Steel City
Capital Funding and PNC Bank, National Association, thereby avoiding any default
that would have occurred as a result of the issuance of the Notes, under the
Guarantor Security Agreement and the Revolving Credit, Term Loan, Equipment Line
of Credit, as amended.
2. COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS. The Company represents and
warrants to and agrees with Subscriber that, except as set forth in the
Company's Form 10-K for the year ended December 31, 2007 and all periodic
reports filed with the Commission thereafter (hereinafter referred to
collectively as the "SEC REPORTS"), including the Company's Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 2008 (the "FIRST QUARTER 2008
FORM 10-Q") and June 30, 2008 (the "SECOND QUARTER 2008 FORM 10-Q," collectively
with the First Quarter 2008 Form 10-Q, the "Form 10-Q's") or as set forth on the
disclosure schedule dated the date hereof delivered by the Company to the
Subscriber (the "DISCLOSURE SCHEDULE"):
(a) DUE INCORPORATION. The Company and each of its Subsidiaries is a
corporation (or in the case of a Subsidiary the type of entity described in the
Disclosure Schedule) duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has the
requisite corporate or other power to own its properties and to carry on its
business as disclosed in the SEC Reports. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation (or in the case of a
Subsidiary the type of entity described in the Disclosure Schedule) to do
business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would not have
a Material Adverse Effect. For purpose of this Agreement, a "MATERIAL ADVERSE
EFFECT" shall mean a material adverse effect on the financial condition, results
of operations, properties or business of the Company and its Subsidiaries taken
as a whole. For purposes of this Agreement, "SUBSIDIARY" means, with respect to
any entity at any date, any corporation, limited or general partnership, limited
liability company, trust, estate, association, joint venture or other business
entity) of which more than 50% of (i) the outstanding capital stock having (in
the absence of contingencies) ordinary voting power to elect a majority of the
board of directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly through one or
more intermediaries, by such entity. The Company's Subsidiaries are named in the
SEC Reports.
(b) AUTHORITY. The Company has the full right, power and authority to
execute, deliver and perform under this Agreement. This Agreement has been duly
executed by the Company and this Agreement and the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate action and
each constitute, the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms.
(c) OUTSTANDING SECURITIES. All of the issued and outstanding shares of
the Company's Common Stock and Series B Preferred Stock have been duly and
validly authorized and issued, are fully paid and nonassessable (with no
personal liability attaching to the holders thereof or to the Company) and are
free from preemptive rights or rights of first refusal held by any person. All
of the issued and outstanding shares of Common Stock and Series B Preferred
Stock have been issued pursuant to either a current effective registration
statement under the 1933 Act or an exemption from the registration requirements
thereof, and were issued in accordance with all applicable Federal and state
securities laws.
(d) ENFORCEABILITY. This Agreement, the Note, and any other agreements
delivered together with this Agreement or in connection herewith (collectively
"TRANSACTION DOCUMENTS") have been duly authorized, executed and delivered by
the Company and are valid and binding agreements, enforceable against the
Company in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity regardless of whether enforcement is sought in a
court of law or equity). The Company has full corporate power and authority
necessary to enter into and deliver the Transaction Documents and to perform its
obligations thereunder.
(e) CONSENTS. No consent, approval, authorization, filing with or notice
to any person, entity or public authority, or order of any court, governmental
agency or body or arbitrator having jurisdiction over the Company or any of its
Subsidiaries, or the Company's stockholders is required for the execution by the
Company of the Transaction Documents and compliance and performance by the
Company of its obligations under the Transaction Documents, including, without
limitation, the issuance and sale of the Securities, other than filings required
by Federal or state securities laws, which filings have been or will be made by
the Company on a timely basis.
(f) NO VIOLATION OR CONFLICT. Assuming the representations and warranties
of the Subscribers in Section 3 are true and correct, neither the issuance and
sale of the Securities nor the performance of the Company's obligations under
this Agreement and all other agreements entered into by the Company relating
thereto by the Company will:
(i) violate, conflict with, result in a breach of, or constitute a
default (or an event which with the giving of notice or the lapse of time or
both would be reasonably likely to constitute a default in any material respect)
under (A) the certificate of incorporation or bylaws of the Company, each as
amended as of the date hereof, (B) to the Company's knowledge, any decree,
judgment, order, law, treaty, rule, regulation or determination applicable to
the Company or any of its Subsidiaries of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or such Subsidiary or
over the properties or assets of the Company or such Subsidiary, or (C) the
terms of any bond, debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease, mortgage, deed
of trust or other instrument to which the Company or such Subsidiary is a party,
or by which the Company or such Subsidiary is bound, or to which any of the
properties of the Company or such Subsidiary is subject, except the violation,
conflict, breach, or default of which would not have a Material Adverse Effect;
or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company or any of
its Subsidiaries.
(g) THE SECURITIES. The Securities upon issuance:
(i) will be free and clear of any security interests, liens, claims
or other encumbrances, subject to restrictions upon transfer under the 1933 Act
and any applicable state securities laws;
(ii) have been duly and validly authorized and duly and validly
issued, and upon payment of the purchase price specified in this Agreement the
Shares will be fully paid and non-assessable (with no personal liability
attaching to the holders thereof or to the Company) and are free from preemptive
rights or rights of first refusal held by any person; provided Subscriber's
representations herein are true and accurate and Subscribers take no actions or
fail to take any actions required for their purchase of the Securities to be in
compliance with all applicable laws and regulations; and
(iii) will have been issued in reliance upon an exemption from the
registration requirements of and will not result in a violation of Section 5
under the 1933 Act.
(h) LITIGATION. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company
or any of its Subsidiaries that would affect the execution by the Company or the
performance by the Company of its obligations under the Transaction Documents.
There is no pending or, to the knowledge of the Company, or threatened action,
suit, proceeding or investigation before any court, governmental agency or body,
or arbitrator having jurisdiction over the Company or any of its Subsidiaries,
which litigation if adversely determined would have a Material Adverse Effect.
There are currently pending suits for the collection of sums owed by the Company
as set forth on the Disclosure Schedule.
(i) REPORTING COMPANY. The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934 (the "1934 ACT") and the Common Stock is registered pursuant to Section
12(g) of the 1934 Act.
(j) INFORMATION CONCERNING COMPANY. The SEC Reports contain all material
information relating to the Company and its operations and financial condition
as of their respective dates and all the information required to be disclosed
therein. Since the last day of the fiscal year of the most recent audited
financial statements included in the SEC Reports ("LATEST FINANCIAL DATE"), and,
there has been no Material Adverse Event relating to the Company's business,
financial condition or affairs not disclosed in the SEC Reports. The SEC Reports
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in which made. The Company
has not provided to the Subscribers any material non-public information.
Although there has been no Material Adverse Event the Company's financial
condition has continued to deteriorate since the Latest Financial date and the
Company needs cash to realize its business plan.
(k) FINANCIAL STATEMENTS. The consolidated financial statements of the
Company and its Subsidiaries included in the Reports (hereinafter collectively,
the "Financial Statements"), were prepared in accordance with generally accepted
accounting principles consistently applied and present and reflect fairly the
financial position of the Company and its Subsidiaries at the respective balance
sheet dates and the results of its operations and cash flows for the periods
then ended, provided, however, that the financial statements included in the
Form 10-Q's are subject to normal year-end adjustments and lack footnotes and
other presentation items. During the period of McGladrey & Xxxxxx LLP's
engagement as the Company's independent certified public accountants, there has
been no disagreements between the accounting firm and the Company on any matters
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure and no events required to be reported on a current
report on Form 8-K relating to the relationship between the Company and the
accounting firm. The Company has made and kept books and records and accounts
which are in reasonable detail and which fairly and accurately reflect the
activities of the Company, subject only to year-end adjustments.
(l) NO UNDISCLOSED LIABILITIES. Neither the Company nor any of its
Subsidiaries has any liabilities of any kind or nature, whether accrued or
contingent, matured or unmatured, known or unknown, which are material,
individually or in the aggregate, which are not disclosed in the SEC Reports,
other than those incurred in the ordinary course of the Company's or such
Subsidiary's businesses since the Latest Financial Date, and which, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect.
(m) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since the Latest Financial
Date, no event or circumstance has occurred or exists with respect to the
Company or any of its Subsidiaries or their respective businesses, properties,
operations or financial condition, that, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed in the
SEC Reports.
(n) DEFAULTS. Neither the Company nor any of its Subsidiaries is in
violation of its certificate of incorporation or bylaws. Neither the Company nor
any of its Subsidiaries is in default under or in violation of any note, loan
agreement, security agreement, mortgage, contract, franchise agreement,
distribution agreement, lease, alliance agreement, joint venture agreement,
other agreement, license, permit, consent, approval or instrument to which it is
a party, and no event has occurred which, with or without the lapse of time or
giving of notice, or both, would constitute such default thereof by the Company
or such Subsidiary or would cause acceleration of any obligation of the Company
or such Subsidiary or would adversely affect the business, operations, or
financial condition of the Company, except for the failure to pay on a timely
basis for goods sold to or services reserved to the Company and amounts due
under promissory due the sellers of Welding Metallurgy and Sigma Metals and
where such default or event, whether with or without the lapse of time or giving
of notice, or both, has not and will not have a Material Adverse Effect. To the
best of the knowledge of the Company, no party to any note, loan agreement,
security agreement, mortgage, contract, franchise agreement, distribution
agreement, lease, alliance agreement, joint venture agreement, other agreement,
license, permit, consent, approval or instrument with or given to the Company or
any of its Subsidiaries is in default thereunder and no event has occurred with
respect to such party, which, with or without the lapse of time or giving of
notice, or both, would constitute a default by such party or would cause
acceleration of any obligations of such party. The Company and its Subsidiaries
are (i) not subject to nor in default with respect to any order of any court,
arbitrator or governmental body or subject to or party to any order of any court
or governmental authority arising out of any action, suit or proceeding under
any statute or other law respecting antitrust, monopoly, restraint of trade,
unfair competition or similar matters, or (ii) to the Company's knowledge not in
violation of any statute, rule or regulation of any governmental authority which
violation would have a Material Adverse Effect. There are no material (i.e.,
involving an asserted liability in excess of twenty-five thousand dollars
($25,000)) claims, actions, suits, proceedings or labor disputes, inquiries or
investigations (whether or not purportedly on behalf of the Company or such
Subsidiary), pending or, to the best of the Company's knowledge, threatened,
against the Company or such Subsidiary, at law or in equity or by or before any
Federal, state, county, municipal or other governmental department, the
Commission, the Financial Industry Regulatory Authority, board, bureau, agency
or instrumentality, domestic or foreign, whether legal or administrative or in
arbitration or mediation, nor is there any basis for any such action or
proceeding. Neither the Company, nor any of its assets are subject to, nor is
the Company in default with respect to, any order, writ, injunction, judgment or
decree that could adversely affect the financial condition, business, assets or
prospects of the Company.
(o) INDEBTEDNESS TO AFFILIATES. Except as described in the SEC Reports,
the Company does not have any indebtedness to any officer, director, 5%
stockholder or other Affiliate (as defined in Rule 405 of the Rules and
Regulations of the Commission under the 0000 Xxx) of the Company.
(p) COMPLIANCE WITH LAWS. The Company and each of its Subsidiaries is in
compliance with all laws, rules and regulations of all Federal, state, local and
foreign government agencies having jurisdiction over the Company or affecting
the business, assets or properties of the Company, except where the failure to
comply has not and will not have a Material Adverse Effect. The Company and each
of its Subsidiaries possesses all licenses, permits, consents, approvals and
agreements (collectively, "Licenses") which are required to be issued by any and
all applicable Federal, state, local or foreign authorities necessary for the
operation of its business and/or in connection with its assets or properties,
except where the failure to possess such Licenses has not and will not have a
Material Adverse Effect.
(q) TRANSACTIONS WITH AFFILATED PARTIES. To the best of the Company's
knowledge, no officer, director or 5% stockholder of the Company and no
Affiliate of any such person either (i) holds any interest in any corporation,
partnership, business, trust, sole proprietorship or any other entity which is
engaged in a business similar to that conducted by the Company (other than a
passive immaterial interest in a public company engaged in any such business) or
(ii) engages in business with the Company.
(r) ACCOUNTS RECEIVABLE. The accounts receivable of the Company and each
Subsidiary represent receivables generated from the sale of goods and services
in the ordinary course of business. The Company knows of no material disputes
concerning accounts receivable of the Company or any such Subsidiary not
disclosed in the SEC Reports.
(s) ACCOUNTS PAYABLE. The accounts payable of the Company and each
Subsidiary represent bona fide payables to third parties incurred in the
ordinary course of business and represent bona fide debts for services and/or
goods provided to the Company or such Subsidiary.
(t) EMPLOYMENT AND SEVERANCE AGREEMENTS. Except as neither the Company nor
any of its Subsidiaries has (i) any written employment contracts or oral
employment contracts not terminable at will by the Company or such Subsidiary
with any 5% percent shareholder, officer or director of the Company; (ii) any
consulting agreement or other compensation agreement with any 5% percent
shareholder, officer or director of the Company; or (iii) any agreement or
contract with any 5% percent shareholder, officer or director of the Company
that will result in the payment by the Company or such Subsidiary or the
creation of any commitment or obligation (absolute or contingent), of the
Company to pay any severance, termination, "golden parachute," or similar
payment to any present or former personnel of the Company or such Subsidiary
following termination of employment. No director, executive officer or other key
employee of the Company has advised the Company that he or she intends to resign
as director and/or executive officer of the Company or to terminate his or her
employment with the Company.
(u) LABOR AGREEMENTS AND EMPLOYEE RELATIONS. Neither the Company nor any
of its Subsidiaries is a party to a labor agreement with respect to any of its
employees with any labor organization, union, group or association and there are
no employee unions (nor any similar labor or employee organizations). There is
no labor strike or labor stoppage or slowdown pending, or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries, nor has
the Company nor any of its Subsidiaries experienced in the last five (5) years
any work stoppage or other labor difficulty. The Company and each of its
Subsidiaries is in compliance with all applicable laws, rules and regulations
regarding employment practices, employee documentation, terms or conditions of
employment and wage and hours and neither the Company nor any Subsidiary is
engaged in any unfair labor practices, except where the failure to comply has
not and will not have a Material Adverse Effect. There are no unfair labor
practice charges or complaints against the Company or any of its Subsidiaries
pending before the National Labor Relations Board or any other governmental
agency.
(v) ERISA AND EMPLOYEE PLANS. There is no employee pension, retirement or
other benefit plans, maintained, contributed to or required to be contributed to
by the Company or any of its Subsidiaries covering any employee or former
employee of the Company or such Subsidiary. Neither the Company nor any
Subsidiary has any material liability or obligation of any kind or nature,
whether accrued or contingent, matured or unmatured, known or unknown, under any
provision of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or any provision of the Internal Revenue Code of 1986, as amended,
specifically relating to persons subject to ERISA.
(w) TAXES. The Company and each of its Subsidiaries has timely filed or
will timely file with the appropriate taxing authorities all returns in respect
of taxes required to be filed through the date hereof and has timely paid or
will timely pay all taxes that it is required to pay or has established an
adequate reserve therefore. There are no pending or, to the knowledge of the
Company, threatened audits, investigations or claims for or relating to any
liability of the Company or any of its Subsidiaries in respect of taxes.
(x) ENVIRONMENTAL LAWS. The Company and each of its Subsidiaries is
currently in compliance in all respects with all applicable Environmental Laws
(as defined below), including, without limitation, obtaining and maintaining in
effect all permits, licenses, consents and other authorizations required by
applicable Environmental Laws, and the Company and each of its Subsidiaries is
currently in compliance with all such permits, licenses, consents and other
authorizations, except where the failure to comply does not and will not have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries has
received notice from any property owner, landlord, tenant or Governmental
Authority (as defined below) that Hazardous Wastes (as defined below) are being
improperly used, stored or disposed of at any property currently or formerly
owned or leased by the Company or such Subsidiary or that any soil or ground
water contamination has emanated from any such property. For purposes hereof,
the term "Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource
Conservation and Recovery Act, as amended, the Toxic Substances Act, as amended,
the Clean Air Act, as amended, the Clean Water Act, as amended, any other
"Superfund" or "Superlien" law or any other Federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to,
or imposing liability or standards of conduct concerning any hazardous, toxic or
dangerous waste, substance, or material, as now or at any time hereafter in
effect. For purposes hereof, the term "Governmental Authority" shall mean the
Federal Government of the United States of America, any state or any political
subdivision of the Federal Government or any state, including but not limited to
courts, departments, commissions, boards, bureaus, agencies, ministries or other
instrumentalities. For purposes hereof, the term "Hazardous Wastes" shall mean
any regulated quantity of hazardous substances as listed by the Environmental
Protection Agency (the "EPA") and the list of toxic pollutants designated by the
United States Congress and/or the EPA or defined by any other Federal, state or
local statute, law, ordinance, code, rule, regulation, order, or decree
regulating, relating to or imposing liability for standard of conduct concerning
any hazardous, toxic substance or material.
(y) INTELLECTUAL PROPERTY RIGHTS. The Company and each of its Subsidiaries
has the right to conduct its business in the manner in which its business has
been heretofore conducted. To the knowledge of the Company, the conduct of such
businesses by the Company and each of its Subsidiaries does not violate or
infringe upon the patent, copyright, trade secret or other proprietary rights of
any third party, and neither the Company nor any of its Subsidiaries has
received any notice of any claim of any such violation or infringement.
(z) PROPERTIES. The Company and each of its Subsidiaries has good and
marketable title to all of its material property and assets and, except as set
forth in the SEC Reports, none of such property or assets of the Company or any
such Subsidiary are subject to any lien, mortgage, pledge, encumbrance or other
security interest.
(aa) USE OF PROCEEDS. The proceeds from sale of the Securities to
Subscriber will be used by the Company for the purposes set forth in the
Disclosure Schedule.
(ab) NOT AN INTEGRATED OFFERING. Neither the Company, nor any person
acting on its behalf, has knowingly, either directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offer of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of the OTC Bulletin Board
("BULLETIN BOARD") which would impair the exemptions relied upon in for the
offer and sale of the Securities to Subscriber or the Company's ability to
timely comply with its obligations hereunder. Nor will the Company take any
action or steps that would knowingly cause the offer or issuance of the
Securities to be integrated with other offerings which would impair the
exemptions relied upon for the offer and sale of the Securities to Subscriber or
the Company's ability to timely comply with its obligations hereunder. The
Company will not knowingly conduct any offering other than the transactions
contemplated hereby that will be integrated with the offer or issuance of the
Securities, which would impair the exemptions relied upon for the offer and sale
of the Securities to Subscriber or the Company's ability to timely comply with
its obligations hereunder.
(ac) NO GENERAL SOLICITATION. Neither the Company, nor to its knowledge,
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 under
the 0000 Xxx) in connection with the offer or sale of the Securities.
(ad) LISTING. The Company's common stock is quoted on the Bulletin Board
under the symbol AIRI.OB. The Company has not received any oral or written
notice that the Common Stock is not eligible nor will become ineligible for
quotation on the Bulletin Board nor that the Common Stock does not meet all
requirements for the continuation of such quotation. The Company satisfies all
the requirements for the continued quotation of the Common Stock on the Bulletin
Board.
(ae) STOP TRANSFER. The Company will not issue any stop transfer order or
other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless contemporaneous notice of such instruction is given to the Subscriber.
(af) BROKERS. There are no finder's fees or brokerage commissions payable
with respect to the transactions contemplated by this Agreement due to the
actions of the Company.
(ag) INVESTMENT COMPANY. The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(ah) DISCLOSURE. The information contained in the SEC Reports taken
together, describes in all material respects the business and financial
condition of the Company and its Subsidiaries, and such material, taken
together, does not contain any misstatement of a material fact or omit to state
a material fact necessary to make the information not misleading. The Subscriber
shall be entitled to rely on such material notwithstanding any investigation
Subscriber may have made.
3. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. Subscriber hereby represents and
warrants to and agrees with the Company that:
(a) ORGANIZATION AND STANDING. If the Subscriber is an entity, such
Subscriber is a corporation, partnership or other entity duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has the requisite
corporate power to own its assets and to carry on its business.
(b) AUTHORIZATION AND POWER. Subscriber has the requisite power and
authority to enter into and perform this Agreement and to purchase the
Securities. The execution, delivery and performance of this Agreement by
Subscriber and the consummation by Subscriber of the transactions contemplated
hereby and have been duly authorized by all necessary corporate or partnership
action, and no further consent or authorization of Subscriber or its Board of
Directors, stockholders, partners, members, as the case may be, is required.
This Agreement has been duly authorized, executed and delivered by Subscriber
and constitutes a valid and binding obligation of the Subscriber enforceable
against the Subscriber in accordance with the terms hereof.
(c) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the consummation by Subscriber of the transactions contemplated
hereby do not and will not (i) result in a violation of Subscriber's charter
documents or bylaws or other organizational documents 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 or obligation to which Subscriber is a party or by which its
properties or assets are bound, 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 Subscriber or its properties (except for such conflicts, defaults
and violations as would not, individually or in the aggregate, have a material
adverse effect on Subscriber). Subscriber 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 its
obligations under this Agreement or to purchase the Securities, provided that
for purposes of the representation made in this sentence, Subscriber is assuming
and relying upon the accuracy of the relevant representations and agreements of
the Company herein.
(d) INFORMATION ON COMPANY. The Subscriber has been furnished with or has
had access at the XXXXX Website of the Commission to the SEC Reports. In
addition, the Subscriber has received in writing from the Company such other
information concerning its operations, financial condition and other matters as
the Subscriber has requested in writing (such other information is collectively,
the "OTHER WRITTEN INFORMATION"), and considered all factors the Subscriber
deems material in deciding on the advisability of investing in the Securities.
Subscriber has carefully read, and understands the information in the SEC
Reports, including without limitation, the information set forth in Item 1A of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2007 under the caption "Risk Factors."
(e) INFORMATION ON SUBSCRIBER. The Subscriber is an "accredited investor",
as such term is defined in Rule 501(a) of Regulation D promulgated by the
Commission under the 1933 Act, is experienced in investments and business
matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to utilize
the information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber has the
authority and is duly and legally qualified to purchase and own the Securities.
The Subscriber is able to bear the risk of such investment for an indefinite
period and to afford a complete loss thereof. The information set forth on the
signature page hereto regarding the Subscriber is accurate.
(f) PURCHASE OF SECURITIES. The Subscriber is purchasing the Securities as
principal for its own account for investment only and not with a view toward, or
for resale in connection with, the public sale or any distribution thereof, but
Subscriber does not agree to hold the Securities for any minimum amount of time.
(g) COMPLIANCE WITH SECURITIES ACT. The Subscriber understands and agrees
that the Securities have not been registered under the 1933 Act or any
applicable state securities laws, by reason of their issuance in a transaction
that does not require registration under the 1933 Act (based in part on the
accuracy of the representations and warranties of Subscriber contained herein),
and that such Securities must be held indefinitely unless a subsequent
disposition is registered under the 1933 Act or any applicable state securities
laws or is exempt from such registration.
(h) NOTE LEGEND. The Note shall bear the following legend:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
BE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO AIR INDUSTRIES GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(i) SHARES LEGEND. The certificates evidencing the Shares shall bear the
following or similar legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE BE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AIR
INDUSTRIES GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(j) COMMUNICATION OF OFFER. The offer to sell the Securities was directly
communicated to the Subscriber by the Company and no other person has solicited
an investment in the Notes on behalf of the Company, except the Broker
identified in the Disclosure Schedule. At no time was the Subscriber presented
with or solicited by any leaflet, newspaper or magazine article, radio or
television advertisement, or any other form of general advertising or solicited
or invited to attend a promotional meeting otherwise than in connection and
concurrently with such communicated offer.
(k) AUTHORITY; ENFORCEABILITY. This Agreement has been duly authorized,
executed and delivered by the Subscriber and is a valid and binding agreement of
Subscriber, enforceable against the Subscriber in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; and Subscriber
has full corporate power and authority necessary to enter into this Agreement
and to perform its obligations hereunder.
(l) NO GOVERNMENTAL REVIEW. Subscriber understands that no United States
federal or state agency or any other governmental or state agency has passed on
or made recommendations or endorsement of the Securities or the suitability of
the investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.
(m) NO TAX ADVICE. Subscriber acknowledges that no representation has been
made and no advice has been given to Subscriber by the Company or the Placement
Agent as to the potential tax consequences of the Subscriber's investment in the
Note and the Shares subscribed for or the repayment of the principal and
interest under the Note and that the Subscriber has been urged to consult with
his or her own tax advisors, with specific reference to the Subscriber's own
situation, with respect to such consequences.
4. REGULATION D OFFERING. The offer and issuance of the Securities to the
Subscriber is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder.
5. BROKER COMMISSIONS. The Company on the one hand, and Subscriber on the other
hand, agrees to indemnify the other against and hold the other harmless from any
and all liabilities to any persons claiming brokerage commissions or similar
fees other than the persons and entities identified in the Disclosure Schedule
(each a "BROKER"), on account of services purported to have been rendered on
behalf of the indemnifying party in connection with this Agreement or the
transactions contemplated hereby and arising out of such party's actions. The
Company agrees that it will pay the Broker the fee set forth in the Disclosure
Schedule ("BROKER'S FEES"). The Company represents that there are no other
parties entitled to receive fees, commissions, or similar payments in connection
with the offering described in this Agreement, except the Broker identified in
the Disclosure Schedule.
6. COVENANTS OF THE COMPANY AND SUBSCRIBER REGARDING INDEMNIFICATION.
(a) The Company agrees to indemnify, hold harmless, reimburse and defend
the Subscriber, the Subscriber's officers, directors, agents, affiliates,
control persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based solely upon (i) any material
misrepresentation by Company or material breach of any warranty by Company in
this Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice and/or
cure periods, any material breach or default in performance by the Company of
any covenant or undertaking to be performed by the Company hereunder, or any
other agreement entered into by the Company and Subscriber relating hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and defend
the Company and each of the Company's officers, directors, agents, affiliates,
control persons against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Company or any such person which results, arises out of or is based
solely upon (i) any material misrepresentation by Subscriber in this Agreement
or in any Exhibits or Schedules attached hereto, or other agreement delivered
pursuant hereto; or (ii)after any applicable notice and/or cure periods, any
material breach or default in performance by Subscriber of any covenant or
undertaking to be performed by Subscriber hereunder, or any other agreement
entered into by the Company and Subscriber, relating hereto.
(c) Any person entitled to indemnification under Section 6(a) or (b) of
this Agreement (an "indemnified party") shall notify promptly the person
obligated to provide such indemnification (the "indemnifying party") in writing
of the commencement of any action or proceeding brought by a third person
against the indemnified party with respect to a Claim (a "Third Party Claim")
for which the indemnified party may be entitled to indemnification from the
indemnifying party under this Section 6, but the omission of such notice shall
not relieve the indemnifying party from any liability which it may have to any
indemnified party under Section 6 of this Agreement, except to the extent that
such failure shall materially adversely affect any indemnifying party or its
rights hereunder. The indemnifying party shall be entitled to participate in,
and, to the extent that it chooses, to assume the defense of any Third Party
Claim with counsel reasonably satisfactory to the indemnified party; and, after
notice from the indemnifying party to the indemnified party that it so chooses,
the indemnifying party shall not be liable for any legal or other expenses or
disbursements subsequently incurred by the indemnified party in connection with
the defense thereof other than reasonable costs of investigation; provided,
however, that (i) if the indemnifying party fails to take reasonable steps
necessary to defend diligently the Third Party Claim within twenty (20) days
after receiving notice from the indemnified party that the indemnified party of
such Third Party Claim; (ii) if the indemnified party who is a defendant in such
Third Party Claim which is also brought against the indemnifying party
reasonably shall have concluded that there are legal defenses available to the
indemnified party which are not available to the indemnifying party; or (iii) if
representation of both parties by the same counsel is otherwise inappropriate
under applicable standards of professional conduct, the indemnified party shall
have the right to assume or continue its own defense as set forth above (but
with no more than one firm of counsel for all indemnified parties in each
jurisdiction, except to the extent any indemnified party or parties reasonably
shall have concluded that there are legal defenses available to such party or
parties which are not available to the other indemnified parties or to the
extent representation of all indemnified parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct) and
the indemnifying party shall be liable for any reasonable expenses therefor;
provided, that no indemnifying party shall be subject to any liability for any
settlement of a Third Party Claim made without its consent (which may not be
unreasonably withheld, delayed or conditioned). If the indemnifying party
assumes the defense of any Third Party Claim hereunder, such indemnifying party
shall not enter into any settlement without the consent of the indemnified party
if such settlement attributes liability to the indemnified party.
7. PRO RATA TREATMENT OF NOTEHOLDERS. Each payment or prepayment of principal of
the Notes shall be made to the holders of the Notes pro rata in accordance with
the respective unpaid principal amounts of such holders' respective Notes. Each
payment of interest on the Notes shall be made to the holders of the Notes pro
rata in accordance with the amounts of interest due and payable to such holders
under such holders' respective Notes. Each distribution of cash, property,
securities or other value received by the holders of the Notes in respect of the
indebtedness outstanding under the Notes, after payment of collection and other
expenses as provided in the Notes, shall be apportioned to such holders pro rata
in accordance with the respective unpaid principal amounts of and interest on
such holders' respective Notes.
8. REGISTRATION RIGHTS. The Subscriber shall have the piggy-back registration
rights described in Exhibit C attached hereto.
9. MISCELLANEOUS.
(a) NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i)personally served, (ii) deposited
in the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Company, to: Air Industries Group, Inc.,
0000 Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxx Xxxx 00000, Attn: Xxxxx X. Xxxxxx, CFO,
facsimile: (000) 000-0000 with a copy by facsimile only to: Xxxxx & Xxx Xxxxxx
LLP, Xxxxx Xxxx Xxxxxx,00xx xxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxxxx X. XxXxxx,
Esq., facsimile (000)000-0000, and (ii) if to the Holder, to the name, address
and facsimile number set forth on the signature page of this Agreement, with a
copy by telecopier only to the Placement Agent at Taglich Brothers, Inc., 000
Xxx Xxxx Xxxxxx, Xxxxxxxxxx, XX 00000, Attn: Mr. Xxxxxxx Xx, facsimile: (631)
757-1333.
(b) ENTIRE AGREEMENT; ASSIGNMENT. This Agreement and other documents
delivered in connection herewith represent the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by approval or written consent of Subscriber, as defined
in subparagraph (h) hereof. Neither the Company nor the Subscriber has relied on
any representations not contained or referred to in this Agreement and the
documents delivered herewith. No right or obligation of the Company shall be
assigned without prior notice to and the written consent of the Subscriber.
(c) COUNTERPARTS/EXECUTION. This Agreement may be executed in any number
of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.
(d) LAW GOVERNING THIS AGREEMENT. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflicts of laws principles that would result in the application of the
substantive laws of another jurisdiction. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the civil or state courts of New York or in the federal
courts located in New York County. THE PARTIES AND THE INDIVIDUALS EXECUTING
THIS AGREEMENT AND OTHER AGREEMENTS REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION
OF SUCH COURTS AND WAIVE TRIAL BY JURY. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and costs. In the
event that any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.
(e) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION. To the extent permitted
by law, the Company and Subscriber acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to one or more
preliminary and final injunctions to prevent or cure breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which any of them may be entitled
by law or equity. Subject to Section 9(d) hereof, each of the Company and
Subscriber hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction in
New York of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by law.
(f) SURVIVAL. The representations and warranties, covenants and other
agreements of the Company and the Subscriber set forth in this Agreement shall
survive the purchase of the Securities by the Subscriber hereunder for a period
of one year from the date hereof.
[SIGNATURE PAGE APPEARS ON THE FOLLOWING PAGE]
ALL INVESTORS MUST COMPLETE THIS PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on
___________________, 2008.
Principal Amount of Junior
Subordinated Promissory Note: $___________________
Number of Series B Preferred Shares: _______________________
(8,000 shares, having an initial face value of $80,000 shares for each
$100,000 principal amount of Junior Subordinated Promissory Note)
-------------------------------------------------
Exact Name in Which Title is to be Held
-------------------------------------------------
(Authorized Signature)
-------------------------------------------------
Print Name of Signatory and Capacity in which
Signed if an Entity
-------------------------------------------------
Signature (if Joint Tenants or Tenants in Common)
-------------------------------------------------
Print Name of above Signatory
SUBSCRIPTION ACCEPTED:
AIR INDUSTRIES GROUP, INC.
By:
---------------------------------
Name:
Title:
Date:
-------------------------------
-------------------------------------
Aggregate Purchase Price Accepted
