FUNDING AGREEMENT
FUNDING
AGREEMENT (this “
Agreement ”),
dated as of January 18, 2008, by and among PubliCARD, Inc., a
Pennsylvania corporation (the “
Debtor ”),
The 500 Group, LLC, a [Delaware] limited liability company (the
“
500 Group ”),
and Charlie Fisch, Folio Holdings, LLC, IA Capital Partners, LLC,
Ridge View Group, LLC, and Joseph E. Sarachek (collectively, the
“
Investors ”).
RECITALS
WHEREAS,
the 500 Group and the Debtor are parties to a Contribution
Agreement, entered into as of October 26, 2007 (the
“
Contribution Agreement ”),
pursuant to which the 500 Group has agreed to purchase shares
representing 90% of the outstanding shares (the “
Shares ”)
of the Common Stock, par value $0.01 per share (the “
New Common Stock ”),
of Chazak Value Corp. (as successor to the Debtor upon its
emergence from bankruptcy, the “
Company ”)
in connection with the implementation of the Debtor’s Plan of
Reorganization, as amended (the “
Plan ”);
WHEREAS,
the Investors desire to fund the 500 Group’s acquisition
of Shares under the Contribution Agreement through the
investment of an aggregate of $500,000 in exchange for
membership interests in the 500 Group and to provide for the
distribution of the Shares to the Investors following the 500
Group’s receipt of such Shares pursuant to the Plan in
proportion to 500 Group membership interests purchased
hereunder;
WHEREAS,
in connection with the receipt of their portion of the Shares,
the Investors and the Company desire to enter into a
stockholders agreement, substantially in the form attached
hereto as Exhibit A (the “
Stockholders Agreement ”),
and a registration rights agreement, substantially in the form
attached hereto as Exhibit B (the “
Registration Rights Agreement ”).
NOW,
THEREFORE, in consideration of these premises and for other
good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1.
INVESTMENT
1.1
Purchase of 500 Group Membership Interests; Funding Under
the Contribution Agreement .
(a)
On the date hereof, each Investor shall deliver by wire transfer to
an account specified by the 500 Group the amount set forth below
its name on the signature page hereto, which amounts shall total
$500,000 (the “
Investment ”),
each such Investor shall execute a counterpart signature to the 500
Group’s operating agreement and the 500 Group shall issue to
each Investor limited liability company membership interests in the
500 Group reflecting the amount of its investment (the
“
LLC Interests ”).
(b)
Upon receipt of the Investment, the 500 Group shall deliver such
funds to the Debtor pursuant to the Contribution Agreement, which
funds shall be held separate and apart by the Debtor from its other
funds, and Debtor shall not otherwise use such funds pending the
effectiveness of the Plan. In the event that the Plan does not
become effective by February 15, 2008, the Investment shall be
returned to the 500 Group, which will then deliver such funds, as
applicable, to the Investors in cancellation of the LLC Interests
acquired by the Investors.
1.2
Issuance and Distribution of Shares of New Common
Stock. Under
the terms of the Plan and upon its effectiveness, the Company shall
deliver to the 500 Group a certificate representing the Shares
purchased under the Contribution Agreement pursuant to the Plan.
Upon its receipt of such Shares, the 500 Group shall distribute to
each Investor 20% of the Shares of New Common Stock in respect of
the LLC Interests purchased hereunder (the “
Distribution ”).
In connection with the Distribution of such shares of New Common
Stock to the Investors, the 500 Group shall deliver to the Company,
duly endorsed for transfer, its certificate representing the Shares
and shall direct that the Company issue to each Investor a
certificate representing its shares of New Common Stock to be
received hereunder.
1.3
Stockholders Agreement and Registration Rights
Agreement. In
connection with the Distribution, each of the Investors and the
Company shall execute and deliver the Stockholders Agreement and
Registration Rights Agreement.
1.4
Representations and Warranties of the
Investors. Each
of the Investors hereby, severally and not jointly, represents and
warrants as follows.
(a)
Investment Intent .
Such Investor is (i) an "accredited investor" as defined in
Regulation D of the Securities Act of 1933, as amended (the
“
Securities Act ”),
and (ii) acquiring the shares of New Common Stock to be distributed
to such Investor hereunder for investment only and not with a view
to the distribution thereof.
(b)
Investment Risk and Experience .
Such Investor is in a financial position to hold its portion of the
Shares for an indefinite period of time and able to bear the
economic risk and withstand a complete loss of its or his
investment in such Shares and is experienced in evaluating and
investing in companies such as the Company, or is familiar with the
risks associated with the business and operations of the Company,
and has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its
investment.
(c)
Authorization .
The execution, delivery and performance of this Agreement and each
of the Stockholders Agreement and Registration Rights Agreement to
which it or he is or will be a party have been duly authorized by
all necessary or appropriate action.
(d)
Enforceability .
The execution and delivery by such Investor of this Agreement and
each of the Stockholders Agreement and Registration Rights
Agreement will result in legally binding obligations of such
Investor enforceable against such Investor in accordance with the
respective terms and provisions hereof and thereof, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general applicability relating to or
affecting creditors’ rights or general equity principles
(regardless of whether considered at law or in
equity).
(e)
Exemption .
Such Investor understands that the Shares are not registered under
the Securities Act on the grounds that the Company intends the sale
and the issuance of securities hereunder to be exempt from
registration under the Securities Act pursuant to Regulation D
thereof, and that the Company's reliance on such exemption is
predicated on the Investor’s representations set forth
herein.
(f)
Restrictions on Resale .
Such Investor understands that the Shares may not be sold,
transferred or otherwise disposed of without registration under the
Securities Act and applicable state securities laws or an exemption
therefrom, and that in the absence of an effective registration
statement covering the Shares or an available exemption from
registration under the Securities Act and applicable state
securities laws, the Shares must be held indefinitely. Such
Investor understands that any certificates representing the Shares
will bear a restrictive legend to this effect as set forth
below.
(g)
No Conflicts .
The execution, delivery and performance of this Agreement and each
of the Stockholders Agreement and Registratio
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