SECURITIES PURCHASE AGREEMENT
Exhibit
10.4
SECURITIES
PURCHASE
AGREEMENT
THIS
SECURITIES PURCHASE
AGREEMENT (this
"Agreement") is dated as of __________________, 2006,
by and
among VALLEY FORGE COMPOSITE TECHNOLOGIES, INC., a Florida corporation (the
"Company"), and ____________________________ ("Purchaser").
WHEREAS,
the Company wishes to sell to the Purchaser, and the Purchaser wishes to
purchase, on the terms and subject to the conditions set forth in this
Agreement, an aggregate of up to ___________________ units of the Company's
securities, with each unit being comprised of one Warrant to purchase one share
of the Company’s Common Stock, par value $0.001 (the “Warrant”), and one share
of the Company’s Common Stock, par value $0.001 (“Common Stock”) (collectively
the "Units"), at a price of $1.00 per unit; and
WHEREAS,
the Warrants shall be exercisable at a strike price of $1.50 per share and
shall
expire six (6) months from the date the Registration Statement filed with SEC
registering the Units becomes effective; and
WHEREAS,
during the one year period following the effective date of the Registration
Statement, as it pertains to the Company’s Common Stock, and, during the six
month period following the effective date of the Registration Statement, as
it
pertains to the Company’s Warrants, the Units purchased hereby will be protected
from price decrease caused by the Company’s capital raising activities so long
as such Common Stock or Warrants are held during such time respective time
periods by the Purchaser; and
WHEREAS,
the Company will be required to obtain a trading symbol from the NASD within
three (3) months from the date the Registration Statement filed with SEC
registering the Units (or any component thereof) becomes effective or the
Company will be required to merge with a company that has its common stock
quoted in the Pink Sheets, the Over the Counter Bulletin Board or on NASDAQ;
and
WHEREAS,
if a change of control occurs within the times specified below where the price
per share in the transaction is valued at less than $1.50, then the Company
shall pay to each Purchaser $1.50 for each share of Common Stock Purchased
in
this Agreement;
WHEREAS,
the sale of the Units by the Company to the Purchasers will be effected in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D ("Regulation D"), as promulgated by the SEC under
the
Securities Act of 1933, as amended (the “Securities Act”); and
WHEREAS,
the Company has agreed to effect the registration under the Securities Act
of
the Units purchased by the Purchaser.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Company and each Purchaser hereby agree
as
follows:
I. DEFINED
TERMS.
When
used
herein, the following terms shall have the respective meanings
indicated:
“Change
of
control
of the
Company means:
i) any
person (meaning individual, corporation, general partnership, limited
partnership, syndicate or other group of persons) or two or more persons acting
in concert shall have acquired after the date hereof beneficial ownership
(within the meaning of SEC Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended), directly or indirectly of securities of the Company
(or other securities convertible into such securities) representing 20% or
more
of the combined voting power of securities of the company entitled to vote
in
the election of directors; or
ii) any
person or two or more persons acting in concert shall have acquired after the
date hereof by contract or otherwise, or shall have entered into a contract
or
otherwise, or shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of control over securities
of the Company (or other securities convertible into such securities)
representing 20% or more of the combined voting power of all securities of
the
Company entitled to vote in the election of directors; or
iii) consummation
of any merger or consolidation with respect to which the Company or it
subsidiary is a constituent corporation (other than a transaction for the
purpose of changing the Company’s corporate domicile) any liquidation or
dissolution of the Company or any sale of substantially all of the assets of
Company to another corporation.
“Exchange
Act" means the Securities Exchange Act of 1934, as amended (or any successor
act), and the rules and regulations promulgated thereunder (or respective
successors thereto).
"Material
Adverse Effect" means an effect that has material and adverse consequences
on
(i) the consolidated business, operations, properties, financial condition,
or
results of operations of the Company and its Subsidiaries taken as a whole
or
(ii) the ability of the Company to perform its obligations under this Agreement.
"Register",
"registered" and "securities registration" shall refer to a registration of
the
offering and sale or resale of the Units effected by preparing and filing a
Registration Statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such Registration Statement
by
the SEC.
"Registration
Statement” shall mean a registration statement (including, without limitation,
the related prospectus contained in such registration statement) of the Company
under the Securities Act on Form SB-2 (or any successor form thereto) or, in
the
event that the Company is not then eligible to use Form SB-2, on any other
Securities Act registration form selected by the Company for which it then
qualifies. The term "Registration Statement" shall also include all exhibits,
financial statements, schedules and documents incorporated by reference in
such
Registration Statement when it becomes effective under the Securities Act,
and
in the case of the references to the Registration Statement as of a date
subsequent to its effective date, all amendments or supplements to such
Registration Statement as of such subsequent date.
"SEC"
means the U.S. Securities and Exchange Commission.
“Subsidiary”
shall mean Valley Forge Composite Technologies, Inc., a Pennsylvania
corporation.
"Third-Party
Demand Stockholder” means any person (the “First Person”) having the right to
require that the Company effect a registration under the Securities Act of
the
Company securities owned by such First Person, other than pursuant to this
Agreement, and includes any other person exercising incidental rights of
registration pursuant to the agreement under which such First Person has the
right to require registration by the Company.
II.
SALE
AND PURCHASE OF UNITS; PURCHASE PRICE.
A. Sale
and
Purchase of Units. Upon the terms and subject to the conditions set forth
herein, the Company agrees to sell and each Purchaser agrees to purchase an
aggregate of up to _______________ Units for a Purchase Price of
$_________________ (“Purchase Price”) which Purchase Price shall be paid by
check or wire transfer.
B. Closing;
Closing Date. The date on which the closing of the sale and purchase of the
Units occurs (the "Closing") is hereinafter referred to as the "Closing Date".
Subject to the satisfaction or waiver of the conditions set forth herein, the
Closing will be deemed to occur when (a) this Agreement has been executed and
delivered by, respectively, the Company and each Purchaser (which delivery
may
be effected by facsimile transmission), and (b) full payment of each Purchaser's
Purchase Price has been made by such Purchaser by wire transfer or check. The
Company reserves the right to reject any offer to purchase the
Units.
III. REPRESENTATIONS
AND WARRANTIES OF EACH PURCHASER
Each
Purchaser hereby makes the following representations and warranties to the
Company and agrees with the Company that, as of the date of this Agreement
and
as of the date of each Closing:
A. Authorization;
Enforceability. Such Purchaser is duly and validly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
or
organization as set forth below such Purchaser's name on the signature page
hereof with full power and authority to purchase the Units and to execute and
deliver this Agreement. This Agreement constitutes such Purchaser's valid and
legally binding obligation, enforceable in accordance with its terms, except
as
such enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting
the
enforcement of creditors' rights generally and (ii) general principles of
equity. Purchaser further certifies that it was not organized for the specific
purpose of acquiring the Units.
B. Investment
Intent. Such Purchaser represents and warrants that it is acquiring the Units
solely for its own account as a principal and not with a present view to the
public resale or distribution of all or any part thereof, except pursuant to
sales that are exempt from the registration requirements of the Securities
Act
and/or sales registered under the Securities Act; provided; however, that in
making such representation, such Purchaser does not agree to hold the Units
for
any minimum or specific term and reserves the right to sell, transfer or
otherwise dispose of the Units at any time in accordance with the provisions
of
this Agreement and with Federal and state securities laws applicable to such
sale, transfer or disposition.
C. Information.
The Company has made available at xxx.xxx.xxx (by following the link to “Filing
and Forms (XXXXX),” then “Search for Company Filings”, then “Companies &
Other Filers” and then entering the words “Valley Forge Composite”), information
to such Purchaser regarding the business, operations and financial condition
of
the Company and its Subsidiary and has granted to such Purchaser the opportunity
to ask questions of and receive answers from representatives of the Company,
its
officers, directors, employees and agents concerning the Company and its
Subsidiary and materials relating to the terms and conditions of the sale and
purchase of the Units hereunder.
D. Limitations
on Disposition. Such Purchaser acknowledges that, except as provided in the
Registration Rights section below, the Units have not been and may not be
registered under the Securities Act and therefore may not be transferred or
resold without registration under the Securities Act unless pursuant to an
exemption therefrom.
E. Legend.
Such Purchaser understands that the certificates representing the Common Stock
may bear at issuance a restrictive legend in substantially the following
form:
"The
Shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended, or the securities laws of any state, and
may
not be offered or sold unless a registration statement under the Securities
Act
and applicable state securities laws shall have become effective with regard
thereto, or an exemption from registration under said Securities Act and
applicable state securities laws is available in connection with such offer
or
sale."
F. Reliance
on Exemptions. Such Purchaser understands that the Units are being offered
and
sold to it in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations and
warranties of such Purchaser set forth in this Section III in order to determine
the availability of such exemptions and the eligibility of such Purchaser to
acquire the Units.
G. Non-Affiliate
Status; Common Stock Ownership. Such Purchaser is neither an affiliate nor
an
associate (as such terms are defined in Rule 12b-2 promulgated under the
Exchange Act) of the Company or of any other Purchaser and is not acting in
association or concert with any other Purchaser in regard to its purchase of
Units or otherwise in regard to the Company. Such Purchaser's investment in
Units is not for the purpose of acquiring, directly or indirectly, control
of,
and it has no intent to acquire or exercise control of, the Company or to
influence the decisions or policies of the Company's Board of Directors.
H. Accredited
Investor Status. Such Purchaser represents and warrants that it is an
“accredited investor,” as that term is defined in Rule 501 of Regulation D,
because Purchaser:
(CHECK
ALL BOXES BELOW THAT APPLY TO YOUR CIRCUMSTANCES)
INDIVIDUALS
____ (a) is
an
individual with a net worth, or a joint net worth together with his or her
spouse, in excess of $1,000,000. (In calculating net worth, you may include
equity in personal property and real estate, including your principal residence,
cash, short-term investments, stock and securities. Equity in personal property
and real estate should be based on the fair market value of such property minus
debt secured by such property.)
____ (b) is
an
individual that had an individual income in excess of $200,000 in each of the
prior two years and reasonably expects an income in excess of $200,000 in the
current year; or
____ (c) is
an
individual that had with his/her spouse joint income in excess of $300,000
in
each of the prior two years and reasonably expects joint income in excess of
$300,000 in the current year.
____ (d) is
a
director or executive officer of Valley Forge Composite Technologies, Inc.
or
its subsidiaries.
ENTITIES
____ (e) is
an
entity all of whose equity owners meet one of the tests set forth in (a) through
(d) above.
____ (f) is
an
entity, and one or more of the following statements is applicable (check the
applicable boxes):
____ (i) The
undersigned (or, in the case of a trust, the undersigned trustee) is a bank
or
savings and loan association as defined in Sections 3(a)(2) and 3(a)(5)(A),
respectively, of the Securities Act acting either in its individual or fiduciary
capacity.
____ (ii) The
undersigned is an insurance company as defined in Section 2(13) of the
Securities Act.
____ (iii) The
undersigned is an investment company registered under the Investment Company
Act
of 1940 or a business development company as defined in Section 2(a)(48) of
that
Act.
____ (iv) The
undersigned is a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
____ (v) The
undersigned is an employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 and
either
(check one or more, as applicable):
____ (a) the
investment decision is made by a plan fiduciary, as defined in Section 3(21)
of
such Act, which is either a bank, savings and loan association, insurance
company, or registered investment adviser; or
____ (b) the
employee benefit plan has total assets in excess of $5,000,000; or
____
(c) the
plan
is a self-directed plan with investment decisions made solely by persons who
are
“Accredited Investors” as defined under the 1933 Act.
____ (vi) The
undersigned is a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
____ (vii) The
undersigned has total assets in excess of $5,000,000, was not formed for the
specific purpose of purchasing the Units and
is one
or more of the following (check one or more, as appropriate):
____ (a) an
organization described in Section 501(c)(3) of the Internal Revenue Code;
or
____ (b) a
corporation; or
____ (c) a
Massachusetts or similar business trust; or
____ (d) a
partnership; or
____ (e) a
plan
established by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit of
its
employees.
____ (viii) The
undersigned is a trust with total assets exceeding $5,000,000, which was not
formed for the specific purpose of purchasing the Units and whose purchase
is
directed by a person who has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
investment in the Units.
I. Hold
Harmless. Purchaser agrees that the registered broker dealer, its officers,
directors, shareholders, affiliates, agents, and associated persons (“Broker
Dealer”), from whom or through whom Purchaser acquires the Units, shall be held
harmless and indemnified for any loss, claim or expense incurred in carrying
out
Broker Dealer’s duties and responsibilities in accordance with the provisions of
this Agreement, or in any manner whatsoever directly or indirectly related
to
this Agreement, except for Broker Dealer’s own bad faith, gross negligence,
willful misconduct or breach of fiduciary duty based upon grossly negligent
acts.
IV. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby makes the following representations and warranties to each
Purchaser and agrees with each Purchaser that, as of the date of this Agreement
and as of the date of the Closing:
A. Organization,
Good Standing and Qualification. The Company and its Subsidiary are duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its respective incorporation and each has all requisite power
and authority to carry on its business as now conducted.
B. Authorization;
Consents. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreement, to issue and sell the
Units to the Purchasers in accordance with the terms hereof. All corporate
action on the part of the Company necessary for the authorization, execution
and
delivery of, and the performance by the Company of its obligations under, the
Agreement has been taken, and no further consent or authorization of the
Company, its Board of Directors, its stockholders, any governmental agency
or
organization, or any other person or entity is required.
C. Enforcement.
The Agreement constitutes the valid and legally binding obligation of the
Company, enforceable in accordance with its terms, except as such enforcement
may be limited by (i) applicable bankruptcy, insolvency, reorganization or
other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) general principles of equity.
D. Disclosure
Documents. The Company has filed with the SEC on reports on Form 8-K on July
11,
2006 (the
"Disclosure Document"). As of the date of such filing, the Disclosure Document
did not contain an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. As
of
their respective dates, the financial statements of the Company included in
the
Disclosure Document have been prepared in accordance with generally accepted
accounting principles consistently applied at the times and during the periods
involved.
E. Due
Authorization; Valid Issuance. The Units are duly authorized and, when issued,
sold and delivered in accordance with the terms hereof, (i) will be duly and
validly issued, fully paid and non-assessable, and (ii) based in part upon
the
representations of each Purchaser in this Agreement, will be issued, sold and
delivered in compliance with all applicable federal and state securities
laws.
F. No
Conflict with Other Instruments. Neither the Company nor its Subsidiary is
in
violation of any provisions of its charter, bylaws or any other governing
document or in default (and no event has occurred which, with notice or lapse
of
time or both, would constitute a default) under any provision of any instrument
or contract to which it is a party or by which it is bound, which has had or
would reasonably be expected to have a Material Adverse Effect. The (i)
execution, delivery and performance of the Agreement and (ii) consummation
of
the transactions contemplated hereby and thereby (including without limitation,
the issuance of the Units) will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving
of
notice, either a default under any such provision, instrument or contract or
an
event which results in the creation of any encumbrance upon any assets of the
Company or of its Subsidiary or the triggering of any preemptive or
anti-dilution rights or rights of first refusal or first offer, or any other
rights that would allow or permit the holders of the Company's shares to
purchase shares of Common Stock or other shares of the Company.
G. Financial
Condition. The Company and its Subsidiary's financial condition on a
consolidated basis is, in all material respects, as described in the Disclosure
Document, except for changes in the ordinary course of business and changes
that
are not, in the aggregate, materially adverse to the consolidated business
or
financial condition of the Company and its Subsidiary taken as whole. Except
as
otherwise described in the Disclosure Document, there has been no material
adverse change to the Company's and Subsidiary’s business, operations,
properties, financial condition, prospects or results of operations since the
date of the financial statements contained in the Disclosure Document.
H. Disclosure.
No written statement, information, report, representation or warranty made
by
the Company in this Agreement or furnished to such Purchaser by or on behalf
of
the Company in connection with (i) the Agreement, (ii) any transaction
contemplated hereby or thereby, or (iii) such Purchaser's due diligence
investigation of the Company contains any untrue statement of a material fact
or
omits to state any material fact necessary to make the statements herein or
therein, in light of the circumstances in which made, not
misleading.
I. The
Company’s current business plan involves the acquisition of the rights to
manufacture and distribute the THOR LVX photonuclear detection system (“THOR”)
in the United States and to certain other countries and to develop THOR.
However, the Company does not have a patent on THOR nor on any of its components
or proposed uses.
V. COVENANTS
OF THE COMPANY
A. Use
of
Proceeds.
The
Company shall use the net proceeds from the sale of the Units for general
corporate purposes. The Company expects to use the majority of the net proceeds
for development and manufacture of the THOR LVX photonuclear detection system.
However, the Company shall be allowed to use up to twenty (20) percent of the
net proceeds for payment of officers’, directors’, and employees’ compensation.
The balance will be used for general working capital, including but not limited
to raw materials, market development and sales.
B. Reservation
of Securities.
(a) The
Company shall at all times reserve and keep available out of its authorized
shares of Common Stock, solely for the purpose of issuance upon the exercise
of
the Warrants, such number of shares of Common Stock or other securities
properties or rights as shall be issuable upon the exercise
thereof.
(b) The
Company covenants and agrees that, upon exercise of the Warrants and payment
of
the Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any
stockholder.
(c) The
Company covenants and agrees that all shares of Common Stock issued as
Liquidated Damages (see Section C(e) below) or as Price Protection (see Section
D below) shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder.
C. Registration
of Units.
(a) Registration
Required
As
promptly as practicable but in no event later than thirty (30) days after the
Company obtains a shareholder base of 35 shareholders, the Company agrees to
file a Registration Statement to register the resale of all of the Units. The
Company shall have made its best efforts to cause the SEC to declare the
Registration Statement effective no later than the one hundred-eightieth (180th)
day following the date the Registration Statement is filed with the SEC (the
"Registration Deadline").
(b) Assignment
of Registration Rights.
Each
Purchaser may assign and delegate its rights and obligations pursuant to this
Agreement to any person, party or parties to which it may from time to time
transfer some or all of the Units held by such Purchaser in accordance with
the
terms of this Agreement. During the time each Purchaser, and each subsequent
transferee who so agrees to be bound, continues to hold Units, it shall be
referred to as a "Holder."
(c) Required
Registration Procedures.
i)
Using
the procedure set forth in Section V(C)(d), the Company shall advise the Holders
as to the initiation of the registration process contemplated by Section V(C)(a)
and as to the completion thereof. In addition, subject to Section V(C)(a),
the
Company shall, to the extent applicable to any Registration Statement filed
pursuant thereto:
a)
prepare and file with the SEC such amendments and supplements to the
Registration Statement as may be necessary to keep such Registration Statement
continuously effective and free from any material misstatement or omission
of
facts necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading and comply with provisions
of the Securities Act with respect to the disposition of all Units covered
thereby during the periods referred to in Section V(C)(a) and Section
V(C)(c);
b)
notify
the Holders promptly when the Registration Statement is declared effective
by
the SEC and furnish to each Holder such number of prospectuses, including
preliminary prospectuses, and other documents incident thereto as the Holders
may reasonably request from time to time;
c)
use
its best efforts to register or qualify such Units under such other securities
or blue sky laws of such jurisdictions of the United States where an exemption
is not available and as the Holders may reasonably request to enable such Holder
or Holders to consummate the disposition in such jurisdiction of such Units;
provided, however, that in no event will the Company be required to: (a) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to be so qualified; (b) consent to general service of process in any
such jurisdiction; or (c) subject itself to taxation in any jurisdiction where
it is not already subject to taxation;
d)
use
its best efforts to cause all Common Stock to be quoted on the Over The Counter
Bulletin Board;
e)
with a
view to making available to the Holders the benefits of certain rules and
regulations of the SEC that at any time permit the sale of the Units to the
public without registration, so long as any Units are outstanding, use its
best
efforts for a period of two (2) years from the date of this Agreement to make
and keep public information regarding the Company available, as those terms
are
understood and defined in SEC Rule 144(c), and to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Exchange Act.
f)
advise
the Holders promptly after receiving notice or obtaining knowledge of the
existence of any stop order by the SEC delaying or suspending the effectiveness
of the Registration Statement or of the initiation or threat of any proceeding
for that purpose, use its best efforts to obtain the withdrawal of any such
order suspending the effectiveness of the Registration Statement at the earliest
possible time, and promptly notify the Holders of the lifting or withdrawal
of
any such order.
ii)
Notwithstanding anything stated or implied to the contrary in this Section
V(C),
the Company shall not be required to consent to, participate or cooperate in
connection with any underwritten offering of the Units or to any specific
underwriter participating in any underwritten public offering of the
Units.
iii)
From
and after the date the Registration Statement is declared effective, the Company
shall, as promptly as practicable: (i) if required by applicable law, file
with
the SEC a post-effective amendment to the Registration Statement or prepare
and,
if required by applicable law, file a supplement to the related prospectus
or an
amendment or supplement to any document incorporated therein by reference or
file any other required document so that each Holder, including Holders who
became Holders after the filing of the Registration Statement or any amendments,
is named as a selling stockholder in the Registration Statement and so that
such
Holder is permitted to deliver such prospectus to purchasers of the Units in
accordance with applicable law and, if the Company shall file a post-effective
amendment to the Registration Statement, use its best efforts to cause such
post-effective amendment to be declared effective under the Securities Act
as
promptly as practicable; (ii) provide such Holder copies of any documents filed
pursuant to this Section; and (iii) notify such Holder as promptly as
practicable after the effectiveness under the Securities Act of any
post-effective amendment filed pursuant to this Section.
(d) Notice
Procedure.
The
Company will give written notice to each Holder of its intention to do so not
later than ten (10) days prior to the anticipated filing date of the applicable
Registration Statement. Any Holder may elect to participate in such registration
on the same basis as the planned method of distribution contemplated by the
proposed Registration Statement by delivering to the Company written notice
of
its election, in the form of the Notice and Questionnaire attached hereto,
within five (5) days after its receipt of the Company's notice pursuant to
this
Section V(C)(d). A Holder's election pursuant to this Section V(C)(d) must:
(i)
specify the amount of Units desired to be included in such Registration
Statement by such Holder; and (ii) include any other information that the
Company reasonably requests to be included in such Registration Statement.
Upon
its receipt of a Holder's election pursuant to this Section V(C)(d), the Company
will use its best efforts to include in such Registration Statement all Units
requested to be included.
(e)
Liquidated Damages for Failure to File Registration Statement.
In
the
event that the Registration Statement has not been filed on or prior to the
Registration Deadline, then in addition to any other rights the Holders may
have
hereunder or under applicable law, for each thirty (30) day period (each,
"Liquidated Damages Period") following such Registration Deadline until the
date
on which the Registration Statement is first filed or is no longer required
to
be filed pursuant to this Agreement, the Company shall pay a quantity of its
Common Stock to each Holder at the rate of 5% monthly of the quantity of shares
in the Company’s common stock held by the Holder, with the accretions each
having the same registration rights as the Units, as liquidated damages and
not
as a penalty. Any partial Liquidated Damages Period shall be computed as if
the
period were a full 30-Day period.
All
shares issued pursuant to this subparagraph shall have all of the Registration
Rights (this Section C and its subparagraphs) applicable to the
Units.
Once
the
Registration Statement has been declared effective, the Company shall thereafter
maintain the effectiveness of the Registration Statement until the earlier
of:
(i) the date on which all of the Units held by the Holders have been sold
pursuant to the Registration Statement or SEC Rule 144; or (ii) such time as
the
Company reasonably determines, based on the advice of counsel, that each Holder,
acting independently of all other Holders, will be eligible to sell under SEC
Rule 144 all of the Units then owned by such Holder within the volume
limitations imposed by SEC Rule 144(e) in the three (3) month period immediately
following the termination of the effectiveness of the Registration Statement.
Notwithstanding the foregoing, the Company's obligations contained in this
Section V(C) shall terminate on the second anniversary of the effective date
of
this Agreement.
(f)
Incidental Registration Rights
i)
Incidental Registration.
Subject
to Section V(C)(f)(ii), if at any time prior to the filing of a Registration
Statement in connection with a Required Registration, the Company may register
under the Securities Act any shares of the same class as any of the Units
(whether in an underwritten public offering or otherwise and whether or not
for
the account of the Company or for any stockholder of the Company), in a manner
that would permit the registration under the Securities Act of Units and for
their sale to the public, the Company will give written notice to each Holder
of
its intention to do so not later than ten (10) days prior to the anticipated
filing date of the applicable Registration Statement. Any Holder may elect
to
participate in such registration on the same basis as the planned method of
distribution contemplated by the proposed Registration Statement shall use
the
procedure in Section V(C)(d) above. Any registration of Units pursuant to this
Section V(C)(f)(i)
is referred to as an "Incidental Registration," and any Holder whose Units
are
included at the request of such Holder in an Incidental Registration pursuant
to
this Section V(C)(f)(i)is referred to as a "Selling Stockholder."
ii) Incidental
Registration Procedures.
Whenever
the Company is obligated to effect the Incidental Registration of any Units,
the
Company shall, to the extent applicable, follow the procedures in Section
V(C)(d) above.
(g) Expenses.
Except
as
required by law, all expenses incurred by the Company in complying with its
obligations to effect any Required Registration and any Incidental Registration
pursuant to this Agreement, including, without limitation, all: (i)
registration, application, qualification, filing, listing, transfer and
registrar fees; (ii) printing expenses; (iii) fees and disbursements of counsel
and accountants for the Company; and (iv) blue sky fees and expenses (including,
without limitation, fees and disbursements of counsel related to all blue sky
matters) incurred in connection with any registration, qualification or
compliance pursuant to Section V(C) shall
be
borne by the Company. All underwriting or brokerage discounts and selling
commissions applicable to a sale incurred in connection with any registration
of
Units and the legal fees and other expenses of a Holder or Selling Stockholder
shall be borne by such Holder or Selling Stockholder.
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(h)
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Further
Information.
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Each
Holder, in the case of a Required Registration, and each Selling Stockholder,
in
the case of an Incidental Registration, shall cooperate with the Company in
connection with the preparation of the Registration Statement, and for so long
as the Company is obligated to keep the Registration Statement effective, such
Holder or Selling Stockholder shall provide to the Company, in writing, for
use
in the Registration Statement, all information regarding such Holder or Selling
Stockholder, its intended method of disposition of the applicable Units and
such
other information as the Company may reasonably request to prepare the
Registration Statement and to maintain the currency and effectiveness thereof.
Each Holder and each Selling Stockholder shall indemnify the Company with
respect to such information in accordance with Section VII(I).
D. Price
Protection.
The
Company agrees that it will issue additional Common Stock and/or Warrants to
the
Purchaser, if at any time during the periods specified in subsections a) and
b)
below, following the effective date of the Registration Statement, the Company
sells its Common Stock or Warrants to a purchaser for less than $1.00 per share
of Common Stock or less than $1.50 per Warrant, provided that the Purchaser
has
not sold, transferred or assigned its interest in the Common Stock or Warrants
on or before the triggering transactional event, then the Company shall
automatically and immediately issue to the Purchaser herein such additional
Common Stock and/or Warrants without demand being first made by the Purchaser
to
equal the difference in value between the reduced price paid by the new
purchaser multiplied by the quantity of the Purchaser’s Common Stock or Warrants
acquired pursuant to this Agreement (with each event requiring a share
adjustment calculation being referred to as a “Re-set”), computed according to
the following formula:
Where
X =
(Y
*
$Z) - (Y * $A)
A
X
= the
number of additional shares of Common Stock or Warrants to be issued to the
Purchaser
Y
= the
quantity of shares of Common Stock or Warrants purchased pursuant to this
Agreement
Z
= the
price per share of Common Stock/Warrants purchased pursuant to this
Agreement
A
= the
reduced price per share paid by the new purchaser
As
an
example, if the Purchaser purchased 100,000 shares of Common Stock at $1.00
per
share pursuant to the Agreement, but then the Company sold 5,000 shares at
$0.75
per share to a different purchaser at a later date, then the initial Purchaser
would be entitled to 33,333 additional shares of Common Stock:
(100,000
* $1.00) - (100,000 * $0.75)/$0.75 = 33,333 (rounded) shares.
a) Common
Stock. The price protection period for the Purchaser’s Common Stock shall be one
(1) year from the effective date of the Registration Statement.
b) Warrants.
The price protection period for the Purchaser’s Warrants shall be six (6) months
from the effective date of the Registration Statement.
c) Registration.
All shares issued pursuant to this subparagraph shall have all of the
Registration Rights provided in Section C and its subparagraphs.
d) Automatic
Re-set of Purchase Price. Each time that the Company causes a Re-Set where
the
newly reduced price of securities sold is lower than any prior Re-set, the
value
of “Z” in the above formula shall be substituted with the next lowest Re-Set
value for “A” used in a prior calculation, so that Purchaser’s recovery will be
scaled, and Purchaser will not receive a windfall from each Re-Set. The value
of
“Y” will be changed to the quantity of additional shares issued in the prior
re-set.
As
an
example, and continuing from the example above where the next lowest issue
price
per share was $0.75, if the Company sold 10,000 shares of Common Stock for
$0.50
per share to a new purchaser, the initial Purchaser would be entitled to 16,667
additional shares:
(33,333.33
* $0.75) - (33,333.33 * $0. 50)/$0.50 = 16,667 (rounded) shares.
However,
if in a third or later transaction, the Company sold Common Stock to a purchaser
for an amount less than the Purchase Price but for a price per share higher
than
the lowest priced sale per share of Common Stock, then the Purchaser would
not
be entitled to additional shares for that transaction or for any transaction
meeting this criterion.
E. Agreement
to Remedy Failure to Obtain Trading Symbol.
If
the
Company fails to obtain a trading symbol from the NASD within three (3) months
after the effective date of the Company’s Registration Statement registering the
Purchaser’s Units or any component thereof, the Company agrees that it will
undertake all steps necessary to locate a suitable merger partner with a company
that has its common stock quoted in the Pink Sheets, the Over the Counter
Bulletin Board or on NASDAQ. The Company will cause a merger with such company
within the seven (7) month period following the effective date of the Company’s
Registration Statement registering the Purchaser’s Units or any component
thereof. If the Company fails to merge with another suitable company within
the
seven (7) month period, the Company will rescind the Purchaser’s investment, in
addition to any other damages that the Purchaser may be entitled to pursuant
to
the Agreement.
F. Guaranteed
Return on Investment
In
the
event that a change of control occurs within one (1) year after the effective
date of the Registration Statement, or if no Registration Statement has been
filed then within eighteen (18) months of the Purchaser’s Purchase of Units,
whichever time period comes first, and where in the change of control
transaction the price per share of Company Common Stock that will be paid to
the
Purchaser, or the per share value of the Purchaser’s Common Stock assigned by
the Company’s Board of Directors in any share exchange transaction is less than
$1.50, then the Company shall pay to the Purchaser with fourteen (14) days
of
the effective date of such change of control event the amount in cash equal
to
1.5 times the dollar amount of the Purchaser’s Purchase(s) of Units from the
Company.
VI. PROCEDURES
FOR WARRANTS
A. Warrant
Certificates.
The
warrant certificates (the “Warrant Certificates”) delivered and to be delivered
pursuant to this Agreement shall be in the form set forth in Exhibit A attached
hereto and made a part hereof, with such appropriate insertions, omissions,
substitutions, and other variations as required or permitted by this
Agreement.
B. Exercise
of Warrant.
(a) Method
of
Exercise.
The
Warrants initially are exercisable at $1.50 per share of Common Stock payable
by
check or wire transfer, subject to adjustment as provided in this Agreement.
Upon
surrender of a Warrant Certificate with the annexed NOTICE OF EXERCISE OF
WARRANT form to purchase duly executed, together with payment of the exercise
price for the shares of Common Stock purchased at the Company’s principal
offices, as reflected in the records of the SEC maintained on its XXXXX Internet
site, the Purchaser shall be entitled to receive a certificate or certificates
for the shares of Common Stock so purchased.
The
purchase rights represented by each Warrant Certificate are exercisable at
the
option of the Purchaser thereof, in whole or in part (but not as to fractional
shares of the Common Stock underlying the Warrants). Warrants may be exercised
to purchase all or part of the shares of Common Stock represented thereby.
In
the case of the purchase of less than all the shares of Common Stock purchasable
under any Warrant Certificate, the Company shall cancel said Warrant Certificate
upon the surrender thereof and shall execute and deliver a new Warrant
Certificate of like tenor for the balance of the shares of Common
Stock.
(b) Issuance
of Certificates.
i) Upon
the
exercise of the Warrant, the issuance of certificates for shares of Common
Stock
shall be made forthwith (and in any event such issuance shall be made within
fifteen (15) business days thereafter) without charge to the Purchaser thereof
including, without limitations any tax which may be payable in respect of the
issuance thereof and such certificates shall be issued in the name of, or in
such names as may be directed by, the Purchaser thereof; provided, however,
that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Purchaser and the Company shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that
such
tax has been paid.
The
Company shall not be required to issue certificates representing fractions
of
shares of Common Stock upon the exercise of the Warrants, nor shall it be
required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated
by
rounding any fraction up to the nearest whole number of shares of Common
Stock.
ii) The
Warrant Certificates and the certificates representing the shares of Common
Stock shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman of the Board of Directors or President
or
Vice President of the Company under its corporate seal reproduced thereon,
attested to by the manual or facsimile signature of the then present Secretary
or Assistant Secretary of the Issuer.
iii) Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
VII. MISCELLANEOUS
A. This
Agreement constitutes and embodies the entire understanding and agreement of
the
Parties and supersedes and replaces all prior understandings, agreements and
negotiations between the Parties.
B. Amendment;
Waiver. Any provision of this Agreement may be amended or waived only pursuant
to a written instrument executed by the Company and each Purchaser. Any
amendment or waiver affected in accordance with this paragraph shall be binding
upon each Purchaser and the Company. The failure of any party to exercise any
right or remedy under this Agreement or otherwise, or the delay by any party
in
exercising such right or remedy, shall not operate as a waiver
thereof.
C. Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed
an
original, and all of which together shall be deemed one and the same instrument.
This Agreement, once executed by a party, may be delivered to any other party
hereto by facsimile transmission.
D. Governing
Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida applicable to contracts made and to be performed
entirely within the State of Florida.
E. Binding
Effect; Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns. This
Agreement is not assignable by either party without the prior written consent
of
the other party.
F. Section
and Subsection Headings. All references herein to Section or Subsection headings
shall be deemed references to such parts of this Agreement, unless the context
shall otherwise require. The Section and Subsection headings in this Agreement
are for reference only and shall not affect the interpretation of this
Agreement.
G. Interpretation.
The parties acknowledge and agree that (a) each party and its counsel reviewed
and negotiated the terms and provisions of this Agreement and have contributed
to its revision, (b) the rule of construction to the effect that any ambiguities
are resolved against the drafting party shall not be employed in the
interpretation of this Agreement, and (c) the terms and provisions of this
Agreement shall be construed fairly as to all parties, regardless of which
party
was generally responsible for the preparation of this Agreement. Any Law defined
or referred to herein (or in any agreement or instrument that is referred to
herein) means such Law as, from time to time, may be amended, modified or
supplemented, including (in the case of statutes) by succession of comparable
successor statutes. References to a Person also refer to its predecessors and
permitted successors and assigns.
H. Severability
of Provisions. If any provision or any portion of any provision of this
Agreement shall be held invalid or unenforceable, the remaining portion of
such
provision and the remaining provisions of this Agreement shall not be affected
thereby. If the application of any provision or any portion of any provision
of
this Agreement to any Person or circumstance shall be held invalid or
unenforceable, the application of such provision or portion of such provision
to
Persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby.
I. Notices.
(a) All
notices, consents, waivers, or other communications which are required or
permitted hereunder shall be in writing and deemed to have been duly given
if
delivered personally or by messenger, transmitted by telex or telegram, by
express courier, or sent by registered or certified mail, return receipt
requested, postage prepaid. All communications shall be addressed to the
appropriate address of each party as follows:
Attention:
Xxxxx X. Brothers
River
Center I
00
Xxxx
Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxxxxx,
XX 00000
If
to
Purchaser:
Attention:
_____________________________
Address:
______________________________
_______________________________
________________________________
(b) For
purposes of notice, the address of each Party will be the address first set
forth above; provided, however, that each Party will have the right to change
its respective address for notices hereunder to another location by giving
ten
(10) days advance written notice to the other Party in the manner set forth
above.
(c) All
such
notices shall be deemed to have been given on the date delivered, transmitted,
or mailed in the manner provided above.
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first-above written.
By:_________________________________
Xxxxx
X.
Brothers
President
PURCHASER
By:
__________________________________
Name:________________________________
Title:_________________________________
Address:
_____________________________
_____________________________________
_____________________________________
Tax
ID_____________________________
Tel:
_____________________________
Fax:
_____________________________
Email:
____________________________
Number
of
Units:_____________________
Purchase
Price:_____________________
EXHIBIT
A
NOTICE
OF
EXERCISE OF WARRANT
River
Center I
00
Xxxx
Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxxxxx,
XX 00000
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The
undersigned hereby elects to purchase _______________ shares of the
Common
Stock of Valley Forge Composite Technologies, Inc. (the “Common Stock”)
pursuant to the terms of the attached Warrant, and tenders herewith
payment of the exercise price in full, together with all applicable
transfer taxes, if any.
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Please
issue a certificate or certificates representing said shares of Common Stock
in
the name of the undersigned or in such other name as is specified
below:
Name:_________________________________
Address:_______________________________
_______________________________
_______________________________
Signature:
______________________________
Tax
I.D.
Number: ________________________
Date:
__________________________________
Tel.
Number:____________________________
