FIRST AMENDMENT AGREEMENT
This First Amendment Agreement (the "Agreement"), dated as of December 27,
2007, is by and among Electronic Sensor Technology, Inc., a Nevada corporation
(the "Company") and the investors signatory hereto (each, a "Purchaser" and
collectively, the "Purchasers"). Capitalized terms not defined in this Agreement
shall have the meanings ascribed to such terms in the Purchase Agreement (as
defined below).
WHEREAS, pursuant to a securities purchase agreement dated December 7, 2005
among the Company and the Purchasers (the "Purchase Agreement"), the Purchasers
were issued 8% convertible debentures with an original aggregate principal
amount of $7,000,000 and warrants to purchase shares of Common Stock; and
WHEREAS, the parties wish to amend certain terms of the Transaction
Documents.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for good and valuable consideration the receipt and adequacy of
which are hereby acknowledged, the Purchasers and the Company agree as follows:
1. Extension of Quarterly Redemption. The Purchasers hereby agree to extend
the initial Quarterly Redemption Date from January 1, 2008 until April 1, 2008.
2. Amendments to Section 1 of the Debenture.
a) The definition of "Quarterly Redemption Amount" set forth in
Section 1 of the Debentures is hereby amended such that the Quarterly
Redemption Amount for each Quarterly Redemption as to a Purchaser shall
equal the amounts set forth on Schedule 1 attached hereto.
b) The definition of "Quarterly Redemption Date" set forth in Section 1
of the Debentures is hereby amended and restated as follows:
"Quarterly Redemption Date" means each January 1, April 1, July 1 and
October 1, commencing on April 1, 2008 and ending upon the full
redemption of this Debenture.
3. Effect on Purchase Agreement. The foregoing amendments are given solely
in respect of the transactions described herein. Except as expressly set forth
herein, all of the terms and conditions of the Transaction Documents, as
amended, shall continue in full force and effect after the execution of this
Agreement, and shall not be in any way changed, modified or superseded by the
terms set forth herein. This Agreement shall not constitute a novation or
satisfaction and accord of any Transaction Document.
4. Filing of Form 8-K. Within 2 Trading Days of the effective date of this
Agreement, the Company shall issue a Current Report on Form 8-K, reasonably
acceptable to each Purchaser disclosing the material terms of the transactions
contemplated hereby, which
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shall include this Agreement as an attachment thereto. In addition, within 2
Trading Days of the date hereof, the Company shall file prospectus supplements
under Rule 424 under the Securities Act to registration statement number
333-130900 and registration statement number 333-138977 (collectively, the
"Registration Statements"), disclosing the terms of the transactions hereunder.
5. Conditions to Purchasers Obligations. The respective obligations of the
Purchasers hereunder in connection with the Closing are subject to the following
conditions being met:
a) the accuracy in all material respects on the date of the Closing of
the representations and warranties of the Company contained herein;
b) all obligations, covenants and agreements of the Company required
to be performed at or prior to the Closing shall have been performed;
c) all Purchasers parties to the Purchase Agreement shall have agreed
to the terms and conditions of this Agreement;
d) there shall have been no Material Adverse Effect with respect to
the Company since the date hereof; and
e) from the date hereof to the Closing, trading in the Common Stock
shall not have been suspended by the Commission (except for any suspension
of trading of limited duration agreed to by the Company, which suspension
shall be terminated prior to the Closing), and, at any time prior to the
Closing, trading in securities generally as reported by Bloomberg Financial
Markets shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor
shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such magnitude
in its effect on, or any material adverse change in, any financial market
which, in each case, in the reasonable judgment of each Purchaser, makes it
impracticable or inadvisable to consummate the transactions hereunder.
6. Representations and Warranties of the Company. The Company hereby makes
the representations and warranties set forth below to the Purchasers that as of
the date of its execution of this Agreement:
a) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement by
the Company and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of
such Company and no further action is required by such Company, its board
of directors or its stockholders in connection therewith. This Agreement
has been duly executed by the Company and, when delivered in accordance
with the terms hereof
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will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i) as
limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.
b) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby do not and will not: (i) conflict with or
violate any provision of the Company's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or
(ii)conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation
of any lien upon any of the properties or assets of the Company, or give to
others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any material agreement,
credit facility, debt or other material instrument (evidencing Company debt
or otherwise) or other material understanding to which the Company is a
party or by which any property or asset of the Company is bound or
affected, or (iii) conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations), or by which any
property or asset of the Company is bound or affected.
c) Capitalization. The Company is a duly organized and validly
existing corporation in good standing under the laws of the State of
Nevada. The capitalization of the Company is as set forth on Schedule 6(c).
There are 56,756,098 shares of Common Stock issued and outstanding, all of
which are validly issued, fully paid and nonassessable. Except (i) as set
forth on the Disclosure Schedules to the Purchase Agreement, (ii) as set
forth in the sections of the Registration Statements captioned "Security
Ownership of Certain Beneficial Owners and Management" and (iii) for
options granted to the Company's employees pursuant to its broad based
stock option plan, there are no issued or outstanding securities and no
issued or outstanding options, warrants or other rights, or commitments or
agreements of any kind, contingent or otherwise, to purchase or otherwise
acquire shares of Common Stock or any issued or outstanding securities of
any nature convertible into shares of Common Stock. There is no proxy or
any other agreement, arrangement or understanding of any kind authorized,
effective or outstanding which restricts, limits or otherwise affects the
right to vote any shares of Common Stock.
7. Representation and Warranty of the Purchasers. The Purchasers severally
and not jointly hereby make the representation and warranty set forth below to
the Company that as of the date of its execution of this Agreement, such
Purchaser represents and warrants that (a) the execution and delivery of this
Agreement by it and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary action on its behalf and (b)
this Agreement has been duly executed and delivered by such Purchaser and
constitutes the valid and
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binding obligation of such Purchaser, enforceable against it in accordance with
its terms except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
8. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be made in accordance with
the provisions of the Purchase Agreement.
9. Survival. All warranties and representations (as of the date such
warranties and representations were made) made herein or in any certificate or
other instrument delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by the parties hereto. This Agreement shall
inure to the benefit of and be binding upon the successors and permitted assigns
of each of the parties; provided however that no party may assign this Agreement
or the obligations and rights of such party hereunder without the prior written
consent of the other parties hereto.
10. Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
11. Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
12. Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined pursuant to
the Governing Law provision of the Purchase Agreement.
13. Entire Agreement. The Agreement, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
14. Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
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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.
15. Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder are several and not joint with the
obligations of any other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each
Purchaser shall be entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
16. Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder, by written notice to the other parties,
if the Closing has not been consummated on or before December 31, 2007.
17. Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.
ELECTRONIC SENSOR TECHNOLOGY, INC.
By: /s/ Xxxxxx Xxx
------------------------------
Name: Xxxxxx Xxx
Title: Secretary, Treasurer and
Chief Financial Officer
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[PURCHASER SIGNATURE PAGES TO ESNR SECOND AMENDMENT AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
Name of Purchaser: Midsummer Investment Ltd.
Signature of Authorized Signatory of Purchaser: /s/ Xxxxx Xxxxxxx
Name of Authorized Signatory: Xxxxx Xxxxxxx
Title of Authorized Signatory: MD of Midsummer Capital as investment advisor to
Midsummer Investment
Email Address of Purchaser: xx@xxxxxxxxxxxxxxxx.xxx
Address for Notice of Purchaser:
Address for Delivery of Securities for Purchaser (if not same as above):
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Schedule 1
Quarterly Redemption Final Quarterly Redemption
Investor Amount Amount
--------------------------- -------------------- ---------------------------
Midsummer Investment, Ltd. $500,000 $1,000,000
Islandia L.P. $277,777.78 $555,555.56
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