Exhibit 10.03

 

PURCHASE AGREEMENT

 

PURCHASE AGREEMENT dated and effective as of July 31, 2020, by and among KORTH
DIRECT MORTGAGE INC., a Florida corporation (“KDM”); J.W. KORTH & COMPANY
LIMITED PARTNERSHIP, a Michigan limited partnership (the “Partnership”); and JW
KORTH LLC, a Florida limited liability company (“General Partner”) (each a
“Party” and collectively the “Parties.”)

 

WHEREAS, KDM is a commercial mortgage lender and a Securities and Exchange
Commission (“SEC”) reporting company engaged in financing commercial loans
through the offer and sale of its notes (the “Securities”) to qualified
institutional buyers and accredited investors; and

 

WHEREAS, the Partnership is a broker-dealer and a financial advisor registered
with the United States Securities and Exchange Commission (the “SEC”) and a
broker-dealer registered with the Financial Industry Regulatory Authority
(“FINRA”); and

 

WHEREAS, KDM offers its Securities through the Partnership as an underwriter,
placement agent or initial purchaser; and

 

WHEREAS, KDM has issued and outstanding 5,000,000 shares of common stock, which
is KDM’s sole voting class of stock, all of which common shares the Partnership
owns of record and is accordingly the controlling shareholder of KDM; and

 

WHEREAS, the General Partner is the sole general partner of the Partnership and
the beneficial owner of 73.6% of the Partnership’s Common Capital Interests,
which is the sole class of Partnership voting interests; and

 

WHEREAS, the Parties have determined that it is in the best interest of each
Party that the Partnership and the General Partner be acquired by, and become
subsidiaries of, KDM; and

 

WHEREAS, The parties desire to (i) make no changes in the management, clearing
and bank accounts, staffing, and registrations of the Partnership; and (ii)
maintain the Partnership’s SEC registrations as a broker-dealer and investment
advisor and FINRA registration a broker-dealer.

 

NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained, and for other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the Parties
hereto, intending legally to be bound, agree as follows:

 

1.       The Acquisition. Upon and subject to the terms and conditions set forth
in this Agreement, KDM shall acquire (i) the General Partner, including but not
limited to its 73.6% Common Capital Interest in the Partnership; all of
Partnership’s Common Capital Interests not held by the General Partner, and all
of the Partnership’s Preferred Capital Interests for the consideration and
subject to the terms and conditions which follow.

 

2.       Distribution of KDM Common Shares. On or before Closing, as hereinafter
defined, the Partnership shall distribute all of its 5,000,000 shares of the
common stock of KDM to its Common Capital Interest partners pro rata in
accordance with their relative Common Capital Interests, as defined in the
Partnership’s Limited Partnership Agreement dated February 20, 1990 (the
“Limited Partnership Agreement”), and pursuant to the Partnership Resolution
annexed as Exhibit A to this Agreement.

 

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3.       Certain Actions to be taken by KDM at Closing. At Closing, KDM shall
(i) purchase all of the equity in the General Partner, JWK, LLC, a Florida
limited liability company, from its members, for consideration of (i) the
payment to the Partnership’s Preferred Capital Interest Partners of the amount
of all dividends accrued and unpaid to the Preferred Capital Interest Partners
calculated at an annual rate of 6% through July 31, 2020, and (ii) pay to James
Korth the sum of $150,000 as consideration for his interest in the General
Partner’s Common Capital Interest account.

4.       Certain Actions to be taken by James Korth and Holly MacDonald-Korth at
Closing. James Korth and Holly MacDonald-Korth shall sell and assign their
respective member interests in the General Partner to KDM.

 

5.       The Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall occur by email or other electronic means as of,
and effective on, July 31, 2020, at 10:00 a.m. local time.

 

6.       Additional Commitments of KDM. KDM agrees to take the following actions
after Closing:

 

a.Retain James Korth as the Partnership’s Managing Partner, retain Holly
MacDonald-Korth as the Partnership’s Chief Financial Officer, and retain all
other employees of the Partnership employed at Closing.

 

b.Operate the Partnership as a broker-dealer and investment advisor, and in
accordance with the rules and regulations of, and registered with, the SEC and
FINRA.

 

c.Pay the quarterly dividends to the Preferred Capital Interest Partners each
time as it pays the dividends on its Series A Perpetual Convertible Preferred
stock, but not less than annually.

 

d.Redeem annually 25% of the Preferred Partners’ Preferred Interests pro rata to
each owner of a Preferred Capital Interest, but only in such years as it pays
dividends on its Series A Perpetual Convertible Preferred stock and only through
a contribution of capital to the Partnership.

 

e.Make a Discretionary Redemption of the accounts of all the Limited Partners
pursuant to the Partnership’s Limited Partnership Agreement.

 

7.       Additional Actions. If at any time after Closing KDM shall consider or
be advised that any deeds, bills of sale, assignments or assurances or any other
acts or things are necessary, desirable or proper (a) to vest, perfect or
confirm, of record or otherwise, in KDM, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either the General Partner or the Partnership or (b) otherwise to carry out the
purposes of this Agreement, KDM and its officers and directors or their
designees shall be authorized (to the fullest extent allowed under applicable
law) to execute and deliver, in the name and on behalf of either the Partnership
or the General Partner, all such deeds, bills of sale, assignments and
assurances and do, in the name and on behalf of the Partnership or the General
Partner, all such other acts and things necessary, desirable or proper to vest,
perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the Partnership
and the General Partner, as applicable, and otherwise to carry out the purposes
of this Agreement.

 

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8.       Managers and Officers of the General Partner; Partnership Employees and
Representatives. At all times after Closing (i) James W. Korth shall remain the
Managing Partner, and Holly MacDonald-Korth shall remain the Chief Financial
Officer, of the General Partner of the Partnership, and (ii) all representatives
of the Partnership as of the date of Closing shall remain employed by the
Partnership, subject to such new hires or terminations as James W. Korth shall
determine in his sole discretion.

 

9.       Matters Concerning the SEC and FINRA; Certificate of Limited
Partnership and the Limited Partnership Agreement of the Partnership. At or
prior to Closing, as it shall determine in its sole discretion the General
Partner shall cause the Partnership to (i) notify the SEC and FINRA of the
transactions which are the subject of this Agreement and make such other
regulatory filings as may be necessary to cause the Partnership to continue as a
duly licensed broker-dealer and investment advisor by all federal and state
agencies as may be necessary to continue the Partnership’s registrations as a
broker-dealer and investment advisor, (ii) make such state filings as may be
necessary to continue the Partnership as a Michigan limited partnership and as
otherwise may be appropriate to effect and carry out fully the purposes of this
Agreement.

 

10.       No Change of Control of the Partnership, Prior to the acquisitions of
the General Partner and the Partnership James Korth and Holly MacDonald-Korth
controlled 84% of the voting interests of the Partnership. After completion of
the acquisitions, James Korth and Holly MacDonald-Korth shall control 84% of the
outstanding common shares of KDM, which shall initially control 74% of the
voting interests of the Partnership and, after the Discretionary Redemptions
made under 6(e), above, 100% of the voting interests of the Partnership.

 

11.       Separate Signature Copies Valid. This agreement may be signed by each
party on separate copies of this agreement and emailed to James W. Korth at
jwkorth@jwkorth.com to be valid.

 

In Witness Whereof, the Parties have executed this Agreement as of July 31,
2020.

 

 

  /s/ James W. Korth   James Wilder Korth, Managing Member of   J. W. Korth LLC
      /s/ James W. Korth   James Wilder Korth, Managing Partner of   J. W. Korth
& Company Limited Partnership       /s/ James W. Korth   James Wilder Korth,
Chief Executive   Officer of Korth Direct Mortgage Inc.       /s/ Holly
MacDonald-Korth   Holly MacDonald-Korth,  President of   Korth Direct Mortgage
Inc.

 

 

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