SECOND AMENDED AND RESTATED PLEDGE AND ESCROW AGREEMENT
THIS SECOND AMENDED AND RESTATED PLEDGE AND ESCROW AGREEMENT (the
"Agreement") is made and entered into as of February 13, 2006 (the "Effective
Date") by and among CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership
(the "Pledgee"), LASER ENERGETICS, INC., a corporation organized and existing
under the laws of the State of Oklahoma (the "Company"), XXXXXX X. XXXXXX,
XXXXXX XXXXX and XX. XXXX XXXXXXXX (individually referred to as the "Pledgor"
and collectively referred to as the "Pledgors"), and XXXXX XXXXXXXX, ESQ., as
escrow agent ("Escrow Agent").
RECITALS:
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.
WHEREAS, the Company shall issue and sell to the Pledgee, as provided in
the Amended and Restated Securities Purchase Agreement of even date herewith
between the Company and the Pledgee (the "Securities Purchase Agreement"), and
the Pledgee 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 common stock, par value
$0.001 per share (the "Common Stock") (as converted, the "Conversion Shares");
WHEREAS, to induce the Pledgee to enter into the transaction contemplated
by the Securities Purchase Agreement, the Convertible Debentures, the Amended
and Restated Investor Registration Rights Agreement of even date herewith
between the Company and the Pledgee (the "Investor Registration Rights
Agreement") and the Irrevocable Transfer Agent Instructions among the Company,
the Pledgee, the Transfer Agent, and the Escrow Agent (the "Transfer Agent
Instructions") (collectively referred to as the "Transaction Documents"), the
Pledgors have agreed to irrevocably pledge in the aggregate to the Pledgee
8,349,220 shares (the "Shares") of Common Stock beneficially owned by each
Pledgor in the amounts specified on the signature line hereto in order to secure
the Company's obligations under the Securities Purchase Agreement in accordance
with this Agreement; and
WHEREAS, this Agreement shall amend and restate the Amended and Restated
Pledge and Escrow Agreement dated June 1, 2005.
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NOW, THEREFORE, in consideration of the mutual covenants, agreements,
warranties, and representations herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
TERMS AND CONDITIONS
1. Pledge and Transfer of Pledge Shares.
1.1. Each Pledgor hereby grants to Pledgee a security interest in
the Shares as security for the obligations under the Securities Purchase
Agreement and Convertible Debentures issued thereunder. Simultaneously with the
execution of this Agreement and the closing of the transactions contemplated
under the Securities Purchase Agreement, Pledgor shall deliver to the Escrow
Agent stock certificates representing the Shares, together with duly executed
stock powers or other appropriate transfer documents executed in blank by
Pledgor (the "Transfer Documents"), and such stock certificates and Transfer
Documents shall be held by the Escrow Agent until the full payment of all
amounts due to the Pledgee under the Securities Purchase Agreement and
Convertible Debentures issued thereunder or the termination or expiration of
this Agreement.
1.2. Each Pledgor hereby grants Pledgee a further security interest
in any stock rights, rights to subscribe, stock dividends, new securities, or
other property (excluding cash dividends) to which each Pledgor is or may
hereafter become entitled to receive on account of the Shares. In the event
Pledgors receive additional property of such nature ("Additional Pledged
Property"), Pledgors shall immediately deliver such Additional Pledged Property
to the Escrow Agent to be held by the Escrow Agent in the same manner and on the
same terms as the Shares originally pledged hereunder.
2. Title to Pledge Shares. From the Effective Date, subject only to the
security interest of pledgee created hereunder, the Pledgors shall be the legal
and record owner of their respective Shares, and shall be entitled to vote the
Shares, to receive dividends and other distributions thereon, and to enjoy all
other rights and privileges incident to the ownership of the Shares, subject to
the restrictions herein. Upon the occurrence of an Event of Default (as defined
herein), the Pledgee shall be entitled to vote the Shares, to receive dividends
and other distributions thereon, and to enjoy all other rights and privileges
incident to the ownership of the Shares.
3. Release of Shares from Pledge. Upon the full payment of all amounts due
to the Pledgee under the Securities Purchase Agreement and Convertible
Debentures issued thereunder, the parties hereto shall notify the Escrow Agent
to such effect in writing. Upon receipt of such written notice, the Escrow Agent
shall return to the Pledgors the Transfer Documents, the certificates
representing the Shares, and any Additional Pledged Property (collectively, the
"Pledged Materials"), whereupon any and all rights of Pledgee in the Pledged
Materials shall be terminated. Notwithstanding anything to the contrary
contained herein, upon full payment of all amounts due to the Pledgee under the
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Securities Purchase Agreement and Convertible Debentures issued thereunder, this
Agreement and Pledgee's security interest and rights in and to the Shares, shall
terminate.
4. Event of Default. An "Event of Default" shall be deemed to have
occurred under this Agreement upon an Event of Default under the Securities
Purchase Agreement or any Convertible Debenture issued in connection therewith.
5. Remedies.
5.1. Upon and anytime after the occurrence of an Event of Default,
the Pledgee shall have the right to provide written notice of such Event of
Default (the "Default Notice") to the Escrow Agent, with a copy to the Pledgors.
As soon as practicable after receipt of the Default Notice, the Escrow Agent
shall deliver to Pledgee the Pledged Materials held by the Escrow Agent
hereunder. Upon receipt of the Pledged Materials, the Pledgee shall have the
right to (i) sell the Pledged Shares and to apply the proceeds of such sales,
net of any selling commissions, to the Obligations owed to the Pledgors by the
Company under the Transaction Documents, including, without limitation,
outstanding principal, interest, legal fees, and any other amounts owed to the
Pledgee, and exercise all other rights and (ii) any and all remedies of a
secured party with respect to such property as may be available under the
Uniform Commercial Code as in effect in the State of New Jersey. The Pledgee
shall have the absolute right to sell or dispose of the Pledged Shares in any
manner it sees fit and shall have no liability to each Pledgor, the Company or
any other party for selling or disposing of such Pledged Shares even if other
methods of sales or dispositions would or allegedly would result in greater
proceeds than the method actually used. The Escrow Agent shall have the absolute
right to disburse the Shares to the Pledgee in batches not to exceed 9.9% of the
outstanding capital of the Company (which limit may be waived by the Pledgee
providing not less than 65 days' prior written notice to the Escrow Agent). The
Pledgee shall return any Shares released to it and remaining after the Pledgee
has applied the net proceeds to all amounts owed to the Pledgee.
6. Concerning the Escrow Agent.
6.1. The Escrow Agent undertakes to perform only such duties as are
expressly set forth herein and no implied duties or obligations shall be read
into this Agreement against the Escrow Agent.
6.2. The Escrow Agent may act in reliance upon any writing or
instrument or signature which it, in good faith, believes to be genuine, may
assume the validity and accuracy of any statement or assertion contained in such
a writing or instrument, and may assume that any person purporting to give any
writing, notice, advice or instructions in connection with the provisions hereof
has been duly authorized to do so. The Escrow Agent shall not be liable in any
manner for the sufficiency or correctness as to form, manner, and execution, or
validity of any instrument deposited in this escrow, nor as to the identity,
authority, or right of any person executing the same; and its duties hereunder
shall be limited to the safekeeping of such certificates, monies, instruments,
or other document received by it as such escrow holder, and for the disposition
of the same in accordance with the written instruments accepted by it in the
escrow.
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6.3. Pledgee, the Company and Pledgors hereby agree, jointly and
severally, to defend and indemnify the Escrow Agent and hold it harmless from
any and all claims, liabilities, losses, actions, suits, or proceedings at law
or in equity, or any other expenses, fees, or charges of any character or nature
which it may incur or with which it may be threatened by reason of its acting as
Escrow Agent under this Agreement; and in connection therewith, to indemnify the
Escrow Agent against any and all expenses, including attorneys' fees and costs
of defending any action, suit, or proceeding or resisting any claim (and any
costs incurred by the Escrow Agent pursuant to Sections 6.4 or 6.5 hereof). The
Escrow Agent shall be vested with a lien on all property deposited hereunder,
for indemnification of attorneys' fees and court costs regarding any suit,
proceeding or otherwise, or any other expenses, fees, or charges of any
character or nature, which may be incurred by the Escrow Agent by reason of
disputes arising between the makers of this escrow as to the correct
interpretation of this Agreement and instructions given to the Escrow Agent
hereunder, or otherwise, with the right of the Escrow Agent, regardless of the
instructions aforesaid, to hold said property until and unless said additional
expenses, fees, and charges shall be fully paid. Any fees and costs charged by
the Escrow Agent for serving hereunder shall be paid by the Pledgor.
6.4. If any of the parties shall be in disagreement about the
interpretation of this Agreement, or about the rights and obligations, or the
propriety of any action contemplated by the Escrow Agent hereunder, the Escrow
Agent may, at its sole discretion deposit the Pledged Materials with the Clerk
of the United States District Court of New Jersey, sitting in Newark, New
Jersey, and, upon notifying all parties concerned of such action, all liability
on the part of the Escrow Agent shall fully cease and terminate. The Escrow
Agent shall be indemnified by the Pledgors, the Company and Pledgee for all
costs, including reasonable attorneys' fees in connection with the aforesaid
proceeding, and shall be fully protected in suspending all or a part of its
activities under this Agreement until a final decision or other settlement in
the proceeding is received.
6.5. The Escrow Agent may consult with counsel of its own choice
(and the costs of such counsel shall be paid jointly and severally by Pledgors,
the Company and Pledgee) and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel. The Escrow Agent shall not be
liable for any mistakes of fact or error of judgment, or for any actions or
omissions of any kind, unless caused by its willful misconduct or gross
negligence.
6.6. The Escrow Agent may resign upon ten (10) days' written notice
to the parties in this Agreement. If a successor Escrow Agent is not appointed
within this ten (10) day period, the Escrow Agent may petition a court of
competent jurisdiction to name a successor.
7. Conflict Waiver. Pledgee acknowledges and agrees that the Escrow Agent
is solely representing the Pledgor in connection with this Agreement and the
Securities Purchase Agreement and Pledgee waives any objection it might have
with respect to the Escrow Agent acting as the Escrow Agent pursuant to this
Agreement.
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8. Notices. Unless otherwise provided herein, all demands, notices,
consents, service of process, requests and other communications hereunder shall
be in writing and shall be delivered in person or by overnight courier service,
or mailed by certified mail, return receipt requested, addressed:
(i) If to the Company:
Laser Energetics, Inc.
0000 Xxxxxxxxxxxx Xxxx - Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, President & CEO
with a copy to:
Xxxxx & Xxxxx PC
XX Xxx 0000
Xxxxxxxxx, XX 00000
(ii) If the Pledgors:
Xxxxxx X. Xxxxxx
0000 Xxxxxxxxxxxx Xxxx - Xxxxx 000
Xxxxxxxxxxx, XX 00000
Xxxxxx Xxxxx
0000 Xxxx Xxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Xx. Xxxx XxXxxxxx
00000 Xxxxx Xxxxx Xxx
Xxxx Xxxxx, Xxxxxxx 00000
(iii) If to the Pledgee:
Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx, Portfolio Manager
with a copy to:
Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxx, Esq., Senior Vice-President
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(iv) If to the Escrow Agent:
Xxxxx Xxxxxxxx, Esq.
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Any such notice shall be effective (a) when delivered, if delivered by hand
delivery or overnight courier service, or (b) five (5) days after deposit in the
United States mail, as applicable.
9. Binding Effect. All of the covenants and obligations contained herein
shall be binding upon and shall inure to the benefit of the respective parties,
their successors and assigns.
10. Governing Law; Venue; Service of Process. The validity, interpretation
and performance of this Agreement shall be determined in accordance with the
laws of the State of New Jersey applicable to contracts made and to be performed
wholly within that state except to the extent that Federal law applies. The
parties hereto agree that any disputes, claims, disagreements, lawsuits, actions
or controversies of any type or nature whatsoever that, directly or indirectly,
arise from or relate to this Agreement, including, without limitation, claims
relating to the inducement, construction, performance or termination of this
Agreement, shall be brought in the state or Federal courts located in Xxxxxx
County, New Jersey, and the parties hereto agree not to challenge the selection
of that venue in any such proceeding for any reason, including, without
limitation, on the grounds that such venue is an inconvenient forum. The parties
hereto specifically agree that service of process may be made, and such service
of process shall be effective if made, pursuant to Section 8 hereto.
11. Enforcement Costs. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any provisions of this
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees, court costs and all expenses even if not
taxable as court costs (including, without limitation, all such fees, costs and
expenses incident to appeals), incurred in that action or proceeding, in
addition to any other relief to which such party or parties may be entitled.
12. Remedies Cumulative. No remedy herein conferred upon any party is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law, in equity, by statute, or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same instrument.
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14. No Penalties. No provision of this Agreement is to be interpreted as a
penalty upon any party to this Agreement.
15. JURY TRIAL. EACH OF THE PLEDGEE, THE COMPANY AND THE PLEDGORS HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT WHICH IT MAY HAVE TO A
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN ANY WAY CONNECTED WITH THE DEALINGS BETWEEN PLEDGEE
AND PLEDGOR, THIS PLEDGE AND ESCROW AGREEMENT OR ANY DOCUMENT EXECUTED IN
CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY
OR OTHERWISE.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Second
Amended and Restated Pledge and Escrow Agreement as of the date first above
written.
CORNELL CAPITAL PARTNERS, LP
By: /s/ Xxxx Xxxxxx
------------------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
LASER ENERGETICS, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President & CEO
PLEDGORS
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Number of shares pledged: 5,475,304
By: /s/ Xxxxxx Xxxxx
------------------------------
Name: Xxxxxx Xxxxx
Number of shares pledged: 1,565,164
By: /s/ Xx. Xxxx XxXxxxxx
------------------------------
Name: Xx. Xxxx XxXxxxxx
Number of shares pledged: 1,308,752
XXXXX XXXXXXXX, PC
By: /s/ Xxxxx Xxxxxxxx
------------------------------
Name: Xxxxx Xxxxxxxx, Esq.
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