AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
THIS AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (this
"Agreement"), dated as of February 13, 2006, by and among LASER ENERGETICS,
INC., (f/k/a HAPPY FOOD CORPORATION) an Oklahoma corporation (the "Company"),
and the Buyers listed on Schedule I attached hereto (individually, a "Buyer" or
collectively "Buyers").
WITNESSETH
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");
WHEREAS, on or about November 19, 2004, Laser Energetics, Inc., a Florida
corporation ("Laser"), entered that certain Securities Purchase Agreement with
Cornell Capital Partners, LP ("Cornell"). Laser and the Company consummated a
share exchange on June 1, 2005. The obligations of Laser under the Securities
Purchase Agreement dated November 19, 2004 have been assumed by the Company
pursuant to the Assignment and Assumption Agreement dated June 1, 2005 by and
among Laser, the Company and Cornell Capital Partners, LP. This Agreement shall
amend and restate the Securities Purchase Agreement dated November 19, 2004. The
Buyers shall have no further obligation to fund under the remaining Closings set
forth in the Securities Purchase Agreement dated November 19, 2004;
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to One Million Two
Hundred Thousand Dollars ($1,200,000) of secured convertible debentures (the
"Convertible Debentures"), which shall be convertible into shares of the
Company's Class A common stock, par value $0.001 (the "Common Stock") (as
converted, the "Conversion Shares") of which Two Hundred Thirty Thousand Dollars
($230,000) was previously funded on or about November 19, 2004 pursuant to the
secured convertible debenture issued pursuant to the Securities Purchase
Agreement dated November 19, 2004 (the "November 2004 Debenture"), Two Hundred
Thirty Thousand Dollars ($230,000) was previously funded on or about June 1,
2005 pursuant to the secured convertible debenture issued pursuant to the
Securities Purchase Agreement dated June 1, 2005 (the "June 2005 Debenture")
(the November 2004 Debenture, together with the June 2005 Debenture shall be
referred to collectively as the "Prior Debentures") and Five Hundred Ninety
Thousand Dollars ($590,000) shall be funded two (2) business days prior to the
date the registration statement (the "Registration Statement") is filed,
pursuant to the Amended and Restated Investor Registration Rights Agreement
dated the date hereof, with the United States Securities and Exchange Commission
(the "SEC") (the "First Closing"), pursuant to an Amended and Restated Secured
Convertible Debenture to be issued at the First Closing (the "Amended and
Restated Convertible Debenture"), and One Hundred Fifty Thousand Dollars
($150,000) shall be funded two (2) business days prior to the date the
Registration Statement is declared effective by the SEC (the "Second Closing")
(individually referred to as a "Closing" collectively referred to as the
"Closings"), for a total purchase price of up to One Million Two Hundred
Thousand Dollars ($1,200,000), (the "Purchase Price") in the respective amounts
set forth opposite each Buyer(s) name on Schedule I (the "Subscription Amount");
WHEREAS, the Amended and Restated Convertible Debenture shall reflect all
outstanding principal and accrued and unpaid interest on the Prior Debentures
($13,295.89 as and for interest on the November 2004 Debenture through the date
hereof and $7,183.56 as and for interest on the June 2004 Debenture through the
date hereof), and to reflect the additional funding of the principal amount of
Five Hundred Ninety Thousand Dollars ($590,000) pursuant to the First Closing,
for the aggregate amount of One Million Seventy Thousand Four Hundred Seventy
Nine Dollars ($1,070,479);
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Amended and
Restated Investor Registration Rights Agreement substantially in the form
attached hereto as Exhibit A (the "Investor Registration Rights Agreement")
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated there under,
and applicable state securities laws;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Xxxxxx X. Xxxxxx, Xx. Xxxx XxXxxxxx and Xxxxxx Xxxxx (the "Pledgors")
and the Buyer hereto are executing and delivering a Second Amended and Restated
Pledge and Escrow Agreement substantially in the form attached hereto as Exhibit
B (the "Pledge and Escrow Agreement") pursuant to which the Pledgors have agreed
to provide the Buyer a security interest in the Pledged Shares (as this term is
defined in the Pledge and Escrow Agreement) to secure the Company's obligations
under this Agreement, the Convertible Debenture, the Investor Registration
Rights Agreement, the Irrevocable Transfer Agent Instructions, the Pledge and
Escrow Agreement or any other obligations of the Company to the Buyer; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions substantially in the form attached hereto as Exhibit C (the
"Irrevocable Transfer Agent Instructions").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s) hereby agree
as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase of Convertible Debentures. Subject to the
satisfaction (or waiver) of the terms and conditions of this Agreement, each
Buyer agrees, severally and not jointly, to purchase at each Closing and the
Company agrees to sell and issue to each Buyer, severally and not jointly, at
each Closing, Convertible Debentures in amounts corresponding with the
Subscription Amount set forth opposite each Buyer's name on Schedule I hereto.
(b) Closing Date. The First Closing of the purchase and sale
of the Convertible Debentures shall take place at 10:00 a.m. Eastern Standard
Time two (2) business days prior to the date the Registration Statement is filed
with the SEC, subject to notification of satisfaction of the conditions to the
Closing set forth herein and in Sections 6 and 7 below (or such later date as is
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mutually agreed to by the Company and the Buyer(s)) (the "First Closing Date")
and the Second Closing of the purchase and sale of the Convertible Debentures
shall take place at 10:00 a.m. Eastern Standard Time two (2) business days prior
to the date the Registration Statement is declared effective by the SEC, subject
to notification of satisfaction of the conditions to the Second Closing set
forth herein and in Sections 6 and 7 below (or such later date as is mutually
agreed to by the Company and the Buyer(s)) (the " Second Closing Date")
(collectively referred to a the "Closing Dates"). The Closings shall occur on
the Closing Date at the offices of Yorkville Advisors, LLC, 000 Xxxxxx Xxxxxx,
Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000 (or such other place as is mutually
agreed to by the Company and the Buyer(s)).
(c) Form of Payment. Subject to the satisfaction of the terms
and conditions of this Agreement, on the Closing Dates, (i) the Buyers shall
deliver to the Company such aggregate proceeds for the Convertible Debentures to
be issued and sold to such Buyer(s), minus the fees to be paid directly from the
proceeds the Closings as set forth herein, and (ii) the Company shall deliver to
each Buyer, Convertible Debentures which such Buyer(s) is purchasing in amounts
indicated opposite such Buyer's name on Schedule I, duly executed on behalf of
the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
(a) Investment Purpose. Each Buyer is acquiring the
Convertible Debentures and, upon conversion of Convertible Debentures, the Buyer
will acquire the Conversion Shares then issuable, for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, such Buyer reserves the right to dispose of the
Conversion Shares at any time in accordance with or pursuant to an effective
registration statement covering such Conversion Shares or an available exemption
under the Securities Act.
(b) Accredited Investor Status. Each Buyer is an "Accredited
Investor" as that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. Each Buyer understands that the
Convertible Debentures are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire such securities.
(d) Information. Each Buyer and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information he deemed
material to making an informed investment decision regarding his purchase of the
Convertible Debentures and the Conversion Shares, which have been requested by
such Buyer. Each Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
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Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Each Buyer understands that its investment in the
Convertible Debentures and the Conversion Shares involves a high degree of risk.
Each Buyer is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables such Buyer
to obtain information from the Company in order to evaluate the merits and risks
of this investment. Each Buyer has sought such accounting, legal and tax advice,
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Convertible Debentures and the Conversion
Shares.
(e) No Governmental Review. Each Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Convertible Debentures or the Conversion Shares, or the fairness or suitability
of the investment in the Convertible Debentures or the Conversion Shares, nor
have such authorities passed upon or endorsed the merits of the offering of the
Convertible Debentures or the Conversion Shares.
(f) Transfer or Resale. Each Buyer understands that except as
provided in the Investor Registration Rights Agreement: (i) neither the
Convertible Debentures nor the Conversion Shares have not been and are not being
registered under the Securities Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, or (B) such Buyer shall have delivered to the Company an
opinion of counsel in a form reasonably acceptable to the Company, to the effect
that such securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration requirements;
(ii) any sale of such securities made in reliance on Rule 144 under the
Securities Act (or a successor rule thereto) ("Rule 144") may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder. The Company reserves the right to place stop transfer
instructions against the shares and certificates for the Conversion Shares.
(g) Legends. Each Buyer understands that the certificates or
other instruments representing the Convertible Debentures and or the Conversion
Shares shall bear a restrictive legend in substantially the following form (and
a stop transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
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REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed from the Conversion Shares and the
Company within two (2) business days shall issue a certificate without such
legend to the holder of the Conversion Shares upon which it is stamped, if,
unless otherwise required by state securities laws, (i) in connection with a
sale transaction, provided the Conversion Shares are registered under the
Securities Act or (ii) in connection with a sale transaction, after such holder
provides the Company with an opinion of counsel, which opinion shall be in form,
substance and scope reasonably acceptable to the Company, to the effect that a
public sale, assignment or transfer of the Conversion Shares may be made without
registration under the Securities Act.
(h) Authorization, Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
(i) Receipt of Documents. Each Buyer and his or its counsel
has received and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein, the Investor
Registration Rights Agreement, the Escrow Agreement, the Irrevocable Transfer
Agent Agreement, and the Pledge and Escrow Agreement; (ii) all due diligence and
other information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; and (iii) answers to all questions
each Buyer submitted to the Company regarding an investment in the Company; and
each Buyer has relied on the information contained therein and has not been
furnished any other documents, literature, memorandum or prospectus.
(j) Due Formation of Corporate and Other Buyers. If the
Buyer(s) is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Convertible Debentures and
is not prohibited from doing so.
(k) No Legal Advice From the Company. Each Buyer acknowledges,
that it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and investment
and tax advisors. Each Buyer is relying solely on such counsel and advisors and
5
not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that, except as
set forth in the disclosure schedules attached hereto as Exhibit "D" (the
"Disclosure Schedule") (as defined herein):
(a) Organization and Qualification. The Company and its
subsidiaries are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power to own their properties and to carry on their
business as now being conducted. Each of the Company and its subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(b) Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Investor Registration Rights
Agreement, the Irrevocable Transfer Agent Agreement, the Pledge and Escrow
Agreement, and any related agreements (collectively the "Transaction Documents")
and to issue the Convertible Debentures and the Conversion Shares in accordance
with the terms hereof and thereof, (ii) the execution and delivery of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Convertible Debentures the Conversion Shares and the reservation
for issuance and the issuance of the Conversion Shares issuable upon conversion
or exercise thereof, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, (iii) the Transaction Documents have
been duly executed and delivered by the Company, (iv) the Transaction Documents
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies. The
authorized officer of the Company executing the Transaction Documents knows of
no reason why the Company cannot file the registration statement as required
under the Investor Registration Rights Agreement or perform any of the Company's
other obligations under such documents.
(c) Capitalization. As of the date hereof the authorized
capital stock of the Company consists of 700,000,000 shares of Common Stock, par
value $0.001 per share, 20,000,000 shares of Class B Common Stock, par value
$0.001 per share (the "Class B Common Stock") and 2,000,000 shares of Preferred
Stock, par value $0.001 ("Preferred Stock") of which 116,821,183 shares of
Common Stock, 3,025,000 shares of Class B Common Stock and zero shares of
Preferred Stock are issued and outstanding. All of such outstanding shares have
been validly issued and are fully paid and nonassessable. Except as disclosed in
the Disclosure Schedule, no shares of Common Stock are subject to preemptive
6
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company. Except as disclosed in the Disclosure Schedule, as of
the date of this Agreement, (i) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the Securities Act (except pursuant to the Registration
Rights Agreement) and (iv) there are no outstanding registration statements and
there are no outstanding comment letters from the SEC or any other regulatory
agency. There are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Convertible
Debentures as described in this Agreement. The Company has furnished to the
Buyer true and correct copies of the Company's Articles of Incorporation, as
amended and as in effect on the date hereof (the "Articles of Incorporation"),
and the Company's By-laws, as in effect on the date hereof (the "By-laws"), and
the terms of all securities convertible into or exercisable for Common Stock and
the material rights of the holders thereof in respect thereto other than stock
options issued to employees and consultants.
(d) Issuance of Securities. The Convertible Debentures are
duly authorized and, upon issuance in accordance with the terms hereof, shall be
duly issued, fully paid and nonassessable, are free from all taxes, liens and
charges with respect to the issue thereof. The Conversion Shares issuable upon
conversion of the Convertible Debentures have been duly authorized and reserved
for issuance. Upon conversion or exercise in accordance with the Convertible
Debentures the Conversion Shares will be duly issued, fully paid and
nonassessable.
(e) No Conflicts. Except as disclosed in the Disclosure
Schedule, the execution, delivery and performance of the Transaction Documents
by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any outstanding series of
preferred stock of the Company or the By-laws 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 to which the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of The National Association of Securities Dealers Inc.'s OTC
Bulletin Board on which the Common Stock is quoted) applicable to the Company or
any of its subsidiaries or by which any property or asset of the Company or any
of its subsidiaries is bound or affected. Except as disclosed in the Disclosure
Schedule, neither the Company nor its subsidiaries is in violation of any term
of or in default under its Articles of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
7
order or any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any material law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the Securities Act and any
applicable state securities laws, the Company 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 or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. Except as
disclosed in the Disclosure Schedule, all consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its subsidiaries are unaware of any facts or
circumstance, which might give rise to any of the foregoing.
(f) Financial Statements. As of their respective dates, the
financial statements of the Company disclosed in the Disclosure Schedule (the
"Financial Statements") for the two (2) most recent completed fiscal years and
any subsequent interim period complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
Financial Statements or the notes thereto, or (ii) 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). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the Disclosure Schedule, including, without limitation, information
referred to in this Agreement, contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(g) 10(b)-5. The Disclosure Schedule does not include any
untrue statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.
(h) Absence of Litigation. Except as disclosed in the
Disclosure Schedule, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company's subsidiaries, wherein an unfavorable
decision, ruling or finding would (i) have a material adverse effect on the
transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein,
or (iii) except as expressly disclosed in the Disclosure Schedule, have a
material adverse effect on the business, operations, properties, financial
condition or results of operations of the Company and its subsidiaries taken as
a whole.
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(i) Acknowledgment Regarding Buyer's Purchase of the
Convertible Debentures. The Company acknowledges and agrees that the Buyer(s) is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that the Buyer(s) is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Buyer(s) or any
of their respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to such Buyer's
purchase of the Convertible Debentures or the Conversion Shares. The Company
further represents to the Buyer that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation by the Company and
its representatives.
(j) No 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 under the Securities Act) in connection with the offer or sale of
the Convertible Debentures or the Conversion Shares.
(k) No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Convertible Debentures or the Conversion Shares under the Securities Act or
cause this offering of the Convertible Debentures or the Conversion Shares to be
integrated with prior offerings by the Company for purposes of the Securities
Act.
(l) Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
(m) Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service xxxx registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
(n) Environmental Laws. The Company and its subsidiaries are
(i) in compliance with any and all applicable foreign, federal, state and local
9
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
(o) Title. Any real property and facilities held under lease
by the Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.
(p) Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
(q) Regulatory Permits. The Company and its subsidiaries
possess all material certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
(r) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, and (iii) the recorded amounts for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(s) No Material Adverse Breaches, etc. Except as set forth in
the Disclosure Schedule, neither the Company nor any of its subsidiaries is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the judgment of the Company's
officers has or is expected in the future to have a material adverse effect on
the business, properties, operations, financial condition, results of operations
or prospects of the Company or its subsidiaries. Except as set forth in the
Disclosure Schedule, neither the Company nor any of its subsidiaries is in
breach of any contract or agreement which breach, in the judgment of the
Company's officers, has or is expected to have a material adverse effect on the
business, properties, operations, financial condition, results of operations or
prospects of the Company or its subsidiaries.
10
(t) Tax Status. Except as set forth in the Disclosure
Schedule, the Company and each of its subsidiaries has made and filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only to the
extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
(u) Certain Transactions. Except as set forth in the
Disclosure Schedule, and except for arm's length transactions pursuant to which
the Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than the
grant of stock options disclosed in the Disclosure Schedule, none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(v) Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents or other
third parties.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
(b) Reporting Status. Commencing on the effectiveness of the
registration statement filed with the SEC pursuant to the Investor Registration
Rights Agreement and until the earlier of (i) the date as of which the Buyer(s)
may sell all of the Conversion Shares without restriction pursuant to Rule
144(k) promulgated under the Securities Act (or successor thereto), or (ii) the
date on which (A) the Buyer(s) shall have sold all the Conversion Shares and (B)
none of the Convertible Debentures are outstanding (the "Registration Period"),
the Company shall file in a timely manner all reports required to be filed with
the SEC pursuant to the Exchange Act and the regulations of the SEC thereunder,
and the Company shall not terminate its status as an issuer required to file
reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would otherwise permit such termination.
11
(c) Use of Proceeds. The Company covenants to the Investor
that the net proceeds to be received by the Company in this transaction shall be
used in a manner consistent with uses described in Budget attached as Exhibit
"E" hereto. The Company in its discretion may deviate up to ten percent (10%)
for any single line described in Exhibit F hereto. So long as any portion of the
Convertible Debentures is outstanding, the Company shall not use the proceeds
from the sale of the Convertible Debentures to pay any principal or interest for
related party debts or deferred salaries to management, or to pay any
obligations to Honeywell.
(d) Reservation of Shares. The Company shall take all action
reasonably necessary to at all times have authorized, and reserved for the
purpose of issuance, such number of shares of Common Stock as shall be necessary
to effect the issuance of the Conversion Shares. If at any time the Company does
not have available such shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of the Conversion Shares, the Company
shall call and hold a special meeting of the shareholders within thirty (30)
days of such occurrence, for the sole purpose of increasing the number of shares
authorized. The Company's management shall recommend to the shareholders to vote
in favor of increasing the number of shares of Common Stock authorized.
Management shall also vote all of its shares in favor of increasing the number
of authorized shares of Common Stock.
(e) Listings or Quotation. The Company shall concurrently with
the effectiveness of the registration statement filed with SEC pursuant to the
Investor Registration Rights Agreement, promptly secure the listing or quotation
of the Conversion Shares upon each national securities exchange, automated
quotation system or The National Association of Securities Dealers Inc.'s
Over-The-Counter Bulletin Board ("OTCBB") or other market, if any, upon which
shares of Common Stock are then listed or quoted (subject to official notice of
issuance) and shall use its best efforts to maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all Conversion Shares
from time to time issuable under the terms of this Agreement. The Company shall
maintain the Common Stock's authorization for quotation on the OTCBB.
(f) Fees and Expenses.
(i) Each of the Company and the Buyer(s) shall pay all
costs and expenses incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of the Transaction Documents.
The Company shall pay Yorkville Advisors Management LLC a fee equal to Seventy
Four Thousand Dollars ($74,000), which represents ten percent (10%) of the gross
amount of additional funding of Seven Hundred Forty Thousand Dollars ($740,000),
of which Fifty Nine Thousand Dollars ($59,000) shall be paid on the First
Closing and One Hundred Fifty Thousand Dollars (15,000) shall be paid on the
Second Closing. The Company previously paid the aggregate amount of Forty Six
Thousand Dollars ($46,000), which represents ten percent (10%) of the gross
amount of the Prior Debentures.
(ii) The Company shall pay a structuring fee to
Yorkville Advisors Management, LLC of Thirty Two Thousand Dollars ($32,000),
which was paid on or about November 18, 2004.
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(iii) The Company shall pay the Buyers a non-refundable
due diligence fee of Eight Thousand Dollars ($8,000), which was paid on or about
June 1, 2005.
(iv) The Company shall issue to the Buyer a warrant to
purchase Three Million (3,000,000) shares of the Company's Common Stock (the
"Warrant Shares") for a period of three (3) years at an exercise price of $0.001
per share. The Warrant Shares shall have "piggy-back" and demand registration
rights.
(g) Corporate Existence. So long as any of the Convertible
Debentures remain outstanding, the Company shall not directly or indirectly
consummate any merger, reorganization, restructuring, reverse stock split
consolidation, sale of all or substantially all of the Company's assets or any
similar transaction or related transactions (each such transaction, an
"Organizational Change") unless, prior to the consummation an Organizational
Change, the Company obtains the written consent of each Buyer. In any such case,
the Company will make appropriate provision with respect to such holders' rights
and interests to insure that the provisions of this Section 4(h) will thereafter
be applicable to the Convertible Debentures.
(h) Transactions With Affiliates. So long as any Convertible
Debentures are outstanding, the Company shall not, and shall cause each of its
subsidiaries not to, enter into, amend, modify or supplement, or permit any
subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment, or arrangement with any of its or any subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two (2) years, stockholders who beneficially own five percent (5%)
or more of the Common Stock, or Affiliates (as defined below) or with any
individual related by blood, marriage, or adoption to any such individual or
with any entity in which any such entity or individual owns a five percent (5%)
or more beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
investment in an Affiliate of the Company, (c) any agreement, transaction,
commitment, or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, (d) any agreement, transaction, commitment, or arrangement which
is approved by a majority of the disinterested directors of the Company; for
purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement. "Affiliate" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. "Control" or "controls"
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.
(i) Transfer Agent. The Company covenants and agrees that, in
the event that the Company's agency relationship with the transfer agent should
be terminated for any reason prior to a date which is two (2) years after the
Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the new transfer agent execute and agree to be bound by the
terms of the Irrevocable Transfer Agent Instructions (as defined herein).
13
(j) Restriction on Issuance of the Capital Stock. So long as
any Convertible Debentures are outstanding, the Company shall not, without the
prior written consent of the Buyer(s), (i) issue or sell shares of Common Stock
or Preferred Stock with or without consideration, (ii) except for the stock
options issued or to be issued pursuant to the stock option plan described in
the Disclosure Schedule, issue any warrant, option, right, contract, call, or
other security instrument granting the holder thereof, the right to acquire
Common Stock with or without consideration, (iii) enter into any security
instrument granting the holder a security interest in any and all assets of the
Company, or (iv) file any registration statement on Form S-8.
(k) Neither the Buyer(s) nor any of its affiliates have an
open short position in the Common Stock of the Company, and the Buyer(s) agrees
that it shall not, and that it will cause its affiliates not to, engage in any
short sales of or hedging transactions with respect to the Common Stock as long
as any Convertible Debenture or warrants to purchase the Warrant Shares shall
remain outstanding.
(l) Lock Up Period. On the date hereof, the Company shall
obtain from Xxxxxx X. Xxxxxx, Xx. Xxxx Xxxxxxxx, Xxxxxx Xxxxx and Xxxx
Resources, Inc. a lock-up agreement, agreeing not to sell any shares of the
Company while any portion of the convertible debentures is outstanding and as
further set forth the in lock-up agreements.
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall issue the Irrevocable Transfer Agent
Instructions to its transfer agent irrevocably appointing Xxxxx Xxxxxxxx, Esq.
as the Company's agent for purpose of having certificates issued, registered in
the name of the Buyer(s) or its respective nominee(s), for the Conversion Shares
representing such amounts of Convertible Debentures as specified from time to
time by the Buyer(s) to the Company upon conversion of the Convertible
Debentures, for interest owed pursuant to the Convertible Debenture, and for any
and all Liquidated Damages (as this term is defined in the Investor Registration
Rights Agreement). Xxxxx Xxxxxxxx, Esq. shall be paid a cash fee of Fifty
Dollars ($50) for every occasion they act pursuant to the Irrevocable Transfer
Agent Instructions. The Company shall not change its transfer agent without the
express written consent of the Buyer(s), which may be withheld by the Buyer(s)
in its sole discretion. Prior to registration of the Conversion Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(g)
hereof (in the case of the Conversion Shares prior to registration of such
shares under the Securities Act) will be given by the Company to its transfer
agent and that the Conversion Shares shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement and the Investor Registration Rights Agreement. Nothing in this
Section 5 shall affect in any way the Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of Conversion Shares. If
the Buyer(s) provides the Company with an opinion of counsel, in form, scope and
substance reasonably acceptable to the Company to the effect that registration
of a resale by the Buyer(s) of any of the Conversion Shares is not required
14
under the Securities Act, the Company shall, within two (2) business days from
receipt of such opinion, instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by the Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyer by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyer(s) shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Convertible
Debentures to the Buyer(s) at each Closing is subject to the satisfaction, at or
before each respective Closing Date, of each of the following conditions,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion:
(a) Each Buyer shall have executed the Transaction Documents
and delivered them to the Company.
(b) The Buyer(s) shall have delivered to the Company the
Purchase Price for Convertible Debentures in respective amounts as set forth
next to each Buyer as outlined on Schedule I attached hereto, minus any fees to
be paid directly from the proceeds the Closings as set forth herein, by wire
transfer of immediately available U.S. funds pursuant to the wire instructions
provided by the Company.
(c) The representations and warranties of the Buyer(s) shall
be true and correct in all material respects as of the date when made and as of
each respective Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
Buyer(s) shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Buyer(s) at or prior to each
respective Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
(a) The obligation of the Buyer(s) hereunder to Purchase the
Convertible Debentures at the First Closing is subject to the satisfaction, at
or before the First Closing Date, of each of the following conditions:
(i) The Company shall have executed the Transaction
Documents and delivered the same to the Buyer(s).
(ii) The representations and warranties of the Company
shall be true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations and
15
warranties shall be true and correct without further qualification) as of the
date when made and as of the First Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the First Closing Date. If requested by the Buyer, the Buyer shall have
received a certificate, executed by the President of the Company, dated as of
the First Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by the Buyer including, without limitation an update
as of the First Closing Date regarding the representation contained in Section
3(c) above.
(iii) The Company shall have executed and delivered to
the Buyer(s) the Convertible Debentures in the respective amounts set forth
opposite each Buyer(s) name on Schedule I attached hereto.
(iv) The Buyer(s) shall have received an opinion of
counsel from Xxxxx & Xxxxx, PC in a form satisfactory to the Buyer(s).
(v) The Company shall have provided to the Buyer(s) a
certificate of good standing from the secretary of state from the state in which
the company is incorporated.
(vi) The Company shall have delivered the Pledged Shares
as well executed and medallion guaranteed stock bond powers as required pursuant
to the Pledge and Escrow Agreement.
(vii) The Company shall have provided to the Buyer an
acknowledgement, to the satisfaction of the Buyer, from the Company's
independent certified public accountants as to its ability to provide all
consents required in order to file a registration statement in connection with
this transaction.
(viii) The Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Convertible Debentures, shares of Common Stock to effect the
conversion of all of the Conversion Shares then outstanding.
(ix) The Irrevocable Transfer Agent Instructions, in
form and substance satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(x) The Company shall have delivered forbearance
agreements or deferments from Arisawa and the Dworkins in a form satisfactory to
the Buyer.
(xi) The Company shall have certified that all
conditions to the Closing have been satisfied and that the Company will file the
Registration Statement with the SEC in compliance with the rules and regulations
promulgated by the SEC for filing thereof two (2) business days after the
Closing. If requested by the Buyer, the Buyer shall have received a certificate,
executed by the two officers of the Company, dated as of the Closing Date, to
the foregoing effect. The Buyers shall have no obligation to fund at the Closing
if the Company has filed the Registration Statement.
16
(b) The obligation of the Buyer(s) hereunder to accept the
Convertible Debentures at the Second Closing is subject to the satisfaction, at
or before the Second Closing Date, of each of the following conditions:
(i) The Common Stock shall be authorized for quotation
on the OTCBB, trading in the Common Stock shall not have been suspended for any
reason.
(ii) The representations and warranties of the Company
shall be true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations and
warranties shall be true and correct without further qualification) as of the
date when made and as of the Second Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Second Closing Date. If requested by the Buyer, the Buyer shall have
received a certificate, executed by the President of the Company, dated as of
the Second Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by the Buyer including, without limitation an update
as of the Second Closing Date regarding the representation contained in Section
3(c) above.
(iii) The Company shall have executed and delivered to
the Buyer(s) the Convertible Debentures in the respective amounts set forth
opposite each Buyer(s) name on Schedule I attached hereto.
(iv) The Company shall have certified that all
conditions to the Second Closing have been satisfied, the Company has answered
any and all comments to the Registration Statement with the SEC and shall within
two (2) business days after the Second Closing request acceleration of the
Registration Statement. If requested by the Buyer, the Buyer shall have received
a certificate, executed by the President of the Company, dated as of the Second
Closing Date, to the foregoing effect.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of
this Agreement and acquiring the Convertible Debentures and the Conversion
Shares hereunder, and in addition to all of the Company's other obligations
under this Agreement, the Company shall defend, protect, indemnify and hold
harmless the Buyer(s) and each other holder of the Convertible Debentures and
the Conversion Shares, and all of their officers, directors, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Buyer
Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Buyer Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Buyer Indemnitees or any of them as a result of,
or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, the
Convertible Debentures or the Investor Registration Rights Agreement or any
17
other certificate, instrument or document contemplated hereby or thereby, (b)
any breach of any covenant, agreement or obligation of the Company contained in
this Agreement, or the Investor Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, or (c) any
cause of action, suit or claim brought or made against such Indemnitee and
arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the parties hereto, any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds
of the issuance of the Convertible Debentures or the status of the Buyer or
holder of the Convertible Debentures the Conversion Shares, as a Buyer of
Convertible Debentures in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities, which is permissible under applicable law.
(b) In consideration of the Company's execution and delivery
of this Agreement, and in addition to all of the Buyer's other obligations under
this Agreement, the Buyer shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company Indemnitees") from
and against any and all Indemnified Liabilities incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, instrument or document contemplated hereby or
thereby executed by the Buyer, (b) any breach of any covenant, agreement or
obligation of the Buyer(s) contained in this Agreement, the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Buyer, or (c) any cause of
action, suit or claim brought or made against such Company Indemnitee based on
material misrepresentations or due to a material breach and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement, the Investor Registration Rights Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the parties hereto. To
the extent that the foregoing undertaking by each Buyer may be unenforceable for
any reason, each Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New Jersey without
regard to the principles of conflict of laws. The parties further agree that any
action between them shall be heard in Xxxxxx County, New Jersey, and expressly
consent to the jurisdiction and venue of the Superior Court of New Jersey,
sitting in Xxxxxx County and the United States District Court for the District
of New Jersey sitting in Newark, New Jersey for the adjudication of any civil
action asserted pursuant to this Paragraph.
(b) Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
18
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
(c) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement, Amendments. This Agreement supersedes
all other prior oral or written agreements between the Buyer(s), the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
(f) Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon confirmation of receipt, when sent
by facsimile; (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company, to: Laser Energetics, Inc.
0000 Xxxxxxxxxxxx Xxxx - Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxx & Xxxxx PC
XX Xxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
19
If to the Buyer(s), to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
party hereto.
(h) No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
(i) Survival. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and the Buyer(s)
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closing for a period of two (2) years following the date on
which the Convertible Debentures are converted in full. The Buyer(s) shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
(j) Publicity. The Company and the Buyer(s) shall have the
right to approve, before issuance any press release or any other public
statement with respect to the transactions contemplated hereby made by any
party; provided, however, that the Company shall be entitled, without the prior
approval of the Buyer(s), to issue any press release or other public disclosure
with respect to such transactions required under applicable securities or other
laws or regulations (the Company shall use its best efforts to consult the
Buyer(s) in connection with any such press release or other public disclosure
prior to its release and Buyer(s) shall be provided with a copy thereof upon
release thereof).
(k) Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Termination. In the event that the First Closing shall not
have occurred with respect to the Buyers on or before January 20, 2006 due to
the Company's or the Buyer's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the non-breaching party's failure to waive such
unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, that if this Agreement is terminated by the Company pursuant
to this Section 9(l), the Company shall remain obligated to reimburse the
Buyer(s) for the fees and expenses of Yorkville Advisors Management, LLC
described in Section 4(g) above.
20
(m) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
21
IN WITNESS WHEREOF, the Buyers and the Company have caused this Amended
and Restated Securities Purchase Agreement to be duly executed as of the date
first written above.
COMPANY:
LASER ENERGETICS, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: President & CEO
22
EXHIBIT A
FORM OF INVESTOR REGISTRATION RIGHTS AGREEMENT
EXHIBIT B
PLEDGE AND ESCROW AGREEMENT
EXHIBIT C
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
EXHIBIT D
DISCLOSURE SCHEDULE
EXHIBIT E
BUDGET
SCHEDULE I
SCHEDULE OF BUYERS
-----------------------------------------------------------------------------------------------------------------------
Address/Facsimile Amount of
Name Signature Number of Buyer Subscription
-----------------------------------------------------------------------------------------------------------------------
Cornell Capital Partners, LP By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000 $1,200,000
Its: General Partner Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
By: /s/ Xxxx Xxxxxx
---------------
Name: Xxxx Xxxxxx
Its: Portfolio Manager
With a copy to: Xxxx Xxxxx, Esq. 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
