WAIVER AGREEMENT
This
WAIVER
AGREEMENT
(the
“Agreement”)
is
dated as of July __, 2008, by and among QPC Lasers, Inc., a Nevada corporation
(the “Company”),
the
undersigned holders (collectively, the “April
Creditors”)
of the
Company’s 10% Secured Convertible Debentures due April 16, 2009 (the
“April
2009 Debentures”),
and
the undersigned holders (collectively, the “May
Creditors”)
of the
Company’s 10% Secured Convertible Debentures due May 22, 2009 (the “May
2009 Debentures,”
together with the April 2009 Debentures, each a “Debenture”
and,
collectively, the “Debentures”)
(the
April Creditors and the May Creditors are herein collectively referred to as
the
“Creditors”).
RECITALS
WHEREAS,
the Company anticipates that it will not be able to meet the milestone
Projections set forth in the Debentures for the final six-month Milestone Period
ending June 30, 2008 (the “Last
Milestone Period”);
WHEREAS,
the Debentures provide that, upon the occurrence of a Milestone Failure, the
Conversion Price of the Debentures shall be reduced to equal to the lesser
of
(a) the Conversion Price then in effect or (b) the Market Price as determined
on
the date that is five Trading Days after the date the Company files its next
Form 10-Q with the Securities and Exchange Commission following the end of
the
applicable Milestone Period.
WHEREAS,
the parties hereto desire to enter into this Agreement to waive the requirement
of the Company to undertake a Conversion Cap Redemption pursuant to Section
9(a)
of the Debentures as it relates to any additional shares of Common Stock issued
or issuable to the Debenture holders upon an adjustment to the Conversion Price
resulting from (i) a Milestone Failure for the Last Milestone Period under
Sections 3(f)(iii) and 3(f)(iv) of the Debentures; (ii) any subsequent equity
financing transaction undertaken by the Company that is consummated on or prior
to August 31, 2008 and which results in an adjustment in the Conversion Price
under Section 3(f)(i) of the Debentures; and (iii) any voluntary reduction
of
the Conversion Price undertaken by the Company’s Board of Directors prior to the
effectiveness of any Milestone Adjustment resulting from the Milestone Failure
for the Last Milestone Period.
WHEREAS,
the parties hereto further desire to enter into this Agreement to defer the
payment of interest due under the Debentures on July 1, August 1 and September
1, 2008 in consideration for the Company’s issuance to the Creditors of three
shares of common stock for each dollar of deferred interest on the terms and
conditions set forth herein.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Incorporation
of Recitals; Definitions; Effectiveness of Waivers.
1.1 Recitals.
The
Recitals are incorporated herein by reference.
1.2 Definitions.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them as set forth in the
Debentures.
1.3 Effectiveness
of Waivers.
The
waiver of the Conversion Cap Redemption under Section 2 of this Agreement shall
become effective only if Creditors holding at least 67% of the outstanding
principal amount of the April 2009 Debentures and at least 67% of the
outstanding principal amount of the May 2009 Debentures have executed and
delivered this Agreement to the Company. The “Conversion
Cap Redemption Waiver Effective Date”
shall
be the date on which the foregoing condition is satisfied. If such condition
is
not satisfied for whatever reason, the waivers set forth in Section 2 below
shall have no force or effect. Notwithstanding the foregoing, the provisions
of
Section 3 below shall not be subject to the foregoing condition and shall become
effective with respect to any Debenture immediately upon the execution and
delivery of this Agreement by the Company and the holder of such Debenture.
2. Waiver
of Conversion Cap Redemption.
As of
the Conversion Cap Redemption Waiver Effective Date, each Creditor hereby waives
the requirement of the Company to undertake a Conversion Cap Redemption pursuant
to Section 9(a) of the Debentures as it relates to any additional shares of
Common Stock issued or issuable to the Debenture holders upon an adjustment
to
the Conversion Price resulting from any of the following events (each, an
“Exempt
Event”):
(i) a
Milestone Failure for the Last Milestone Period under Sections 3(f)(iii) and
3(f)(iv) of the Debentures; (ii) any subsequent equity financing transaction
undertaken by the Company that is consummated on or prior to August 31, 2008,
which results in an adjustment in the Conversion Price under Section 3(f)(i)
of
the Debentures; and (iii) any voluntary reduction of the Conversion Price
undertaken by the Company’s Board of Directors prior to the effectiveness of any
Milestone Adjustment under the Debentures resulting from the Milestone Failure
for the Last Milestone Period. The parties hereby acknowledge and agree that,
as
of the Conversion Cap Redemption Waiver Effective Date, (i) any shares of Common
Stock issued or issuable to a Holder resulting from any adjustments to the
Conversion Price following an Exempt Event shall not be counted in determining
the Fully Diluted Conversion Amount of a Holder under Section 9(a) of the
Debentures; and (ii) the Company shall not be required to undertake any
Conversion Cap Redemption with respect to any such shares.
3. Interest
Payment Deferral; Common Stock Issuance.
3.1 Interest
Payment Deferral.
Each
Creditor hereby agrees to defer the payment of interest due under the Debentures
on July 1, August 1 and September 1, 2008 (the “Deferral
Period”).
The
amount of interest being deferred under each Debenture shall be added to the
principal amount due under such Debenture and shall be deemed payable as
additional principal amount due on the Maturity Date in accordance with the
terms and conditions of the Debentures. Each Creditor hereby acknowledges and
agrees that, so long as the Company complies with its obligations under Section
3.2 below, the failure to pay interest during the Deferral Period shall not
constitute an Event of Default under the Debentures.
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3.2 Common
Stock Issuance.
In
consideration for the deferral of payment of interest during the Deferral
Period, the Company shall issue to each Creditor a number of duly and validly
issued, fully paid and non-assessable shares of common stock equal to three
(3)
shares for each dollar ($1.00) of interest being deferred by such Creditor.
The
Company shall deliver such shares of common stock to such Creditor as promptly
as practicable following the execution and delivery of this Agreement by the
Company and such Creditor. Each
Creditor hereby consents to such issuance and, to the extent applicable, waives
for all Creditors any anti-dilution adjustments or defaults that could otherwise
occur solely as a result of such issuance.
4. Representations
and Warranties.
4.1 Duly
Authorized Shares.
The
Company hereby represents and warrants to each Creditor that the shares of
common stock issuable under Section 3.2 above (the “Securities”)
have
been duly authorized for issuance and, when issued in accordance with the terms
of this Agreement, will be validly issued, fully paid and nonassessable.
4.2 Accredited
Investor Status; Restrictive Legend.
Each
Creditor hereby confirms its status as either (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act of 1933, as amended (the “Securities
Act”)
or
(ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the
Securities Act. Each Creditor hereby acknowledges and agrees that the Securities
are “restricted securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Securities
as
principal for its own account and not with a view to or for distributing or
reselling such Securities or any part thereof in violation of the Securities
Act
or any applicable state securities law, has no present intention of distributing
any of such Securities in violation of the Securities Act or any applicable
state securities law and has no direct or indirect arrangement or understandings
with any other persons to distribute or regarding the distribution of such
Securities (this representation and warranty not limiting such Creditor’s right
to sell the Securities in compliance with applicable federal and state
securities laws) in violation of the Securities Act or any applicable state
securities law. Each Creditor hereby agrees to the imprinting of a legend on
any
of the Securities in the following form:
THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
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5. Miscellaneous.
5.1 Effect
of Agreement.
Except
as set forth expressly herein, all terms of the Debentures shall be and remain
in full force and effect.
5.2 Governing
Law.
THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
THE
STATE OF NEW YORK.
5.3 Counterparts.
This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute but one
and
the same agreement.
5.4 Binding
Nature.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their respective successors, successors-in-titles, and assigns.
5.5 Entire
Agreement.
This
Agreement reflect the entire agreement between the parties hereto with respect
to the matters set forth herein and therein and supersede any prior agreements,
commitments, drafts, communication, discussions and understandings, oral or
written, with respect thereto.
5.6 Further
Assurances.
Each
party to this Agreement agrees to execute further instruments as may be
necessary or desirable to carry out this Agreement.
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[SIGNATURE
PAGE TO QPC WAIVER AGREEMENT]
IN
WITNESS WHEREOF, this Agreement has been duly executed by the parties as of
the
day and year set forth below.
COMPANY:
QPC
LASERS, INC.
_________________________
By:
Title:
Signature
Date:
Address
for Notice:
_________________________
_________________________
[SIGNATURE
PAGES CONTINUE]
[SIGNATURE
PAGE TO QPC
APRIL
CREDITORS:
Print
Name: _________________________
By: _______________________________
Name:
Title:
Signature
Date:
Address
for Notice:
_________________________
_________________________
[SIGNATURE
PAGES CONTINUE]
[SIGNATURE
PAGE TO QPC
MAY
CREDITORS:
Print
Name: _________________________
By: _______________________________
Name:
Title:
Signature
Date:
Address
for Notice:
_________________________
_________________________
