Exhibit 10.7
________________________________________________________________________________
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
NESCO INDUSTRIES, INC.
AND
THE INVESTORS NAMED HEREIN
________________________________________________________________________________
Dated July 1, 2004
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made as of the 1st
day of July, 2004, by and between NESCO Industries, Inc., a Nevada corporation
(the "Company"), and the investors listed on the Schedule of Investors attached
hereto (each an "Investor" and collectively, the "Investors").
W I T N E S S E T H:
WHEREAS, the Company desires to sell to the Investors, and the Investors
desire to purchase from the Company, (a) an 8% senior secured convertible
promissory note in the principal amount of up to $3,000,000 (the "Note"), in the
form attached as Exhibit A hereto, and (b) a warrant (the "Warrant"), in the
form attached as Exhibit B hereto, to purchase an aggregate of 20,000,000,000
shares of the Company's common stock, $0.001 par value per share (the "Common
Stock") at an exercise price of $0.25 per share, or 666,667 Warrants for each
$100,000 of principal amount of Note sold, pursuant to the provisions of this
Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
1. Purchase and Sale of Note and Warrant.
1.1 Issuance and Sale of Note and Warrant. Subject to the terms and
conditions of this Agreement, the Investors agree to purchase at the Closing (as
hereafter defined), and the Company agrees to issue and sell to the Investors at
the Closing, the amount of Notes and the Warrants set forth opposite each
Investor's name on the Signature Page hereto, for an aggregate purchase price of
up to Three Million ($3,000,000) Dollars (the "Purchase Price"), which may
include the sale of up to $2,900,000 principal amount of Notes for cash and the
conversion/exchange of up to $100,000 principal amount of existing bridge notes
("Bridge Notes") for Notes with an aggregate principal amount equal to the
unpaid principal of the existing bridge notes ("Bridge Note Exchange Amount").
1.2 Closing.
(a) The initial closing of the purchase and sale of a minimum of $350,000
principal amount of Notes, inclusive of the Bridge Note Exchange Amount (the
"Minimum Amount") under this Agreement (the "Initial Closing") shall be held at
the offices of Sloan Securities Corp., 444 Madison Avenue, New York, New York
(or remotely via the exchange of documents and signatures), on or before July
16, 2004 (the date of the Initial Closing is hereinafter referred to as the
"Initial Closing Date"). The subsequent closing(s) of the purchase and sale of
up to an additional $2,650,000 of principal amount of Notes in excess of the
Minimum Amount (the "Maximum Amount") under this Agreement (the "Subsequent
Closing(s)") shall take place at a time agreed upon by the Company and the
Investors participating in the respective Subsequent Closing (the date(s) of the
Subsequent Closing(s) is hereinafter referred to as the "Subsequent Closing
Date(s)"), all of which shall occur in any event no later than August 23, 2004.
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The Investors agree that any additional persons or entities that acquire Notes
and Warrants at any "Subsequent Closing" shall become "Investors" under this
Agreement with all the rights and obligations attendant thereto, upon their
execution of this Agreement without further action by any other Investor. For
purposes of this Agreement, the terms "Closing" and "Closing Date", unless
otherwise indicated, refer to the applicable closing and closing date of the
Initial Closing or the Subsequent Closing(s), as the case may be.
(b) At the Closing, the Company shall deliver to the Investors, the Note
and the Warrant, against payment of the Purchase Price by wire transfer to the
Company or the delivery of the original Bridge Notes in the case of the
conversion/exchange of the Bridge Notes.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors, except as set forth on a Schedule of
Exceptions to Representations and Warranties attached hereto as Exhibit C (the
"Schedule of Exceptions"), the following:
2.1 Subsidiaries. Except for Converting Securities, Inc., an inactive
subsidiary, the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, association, or other
business entity except as disclosed in the SEC Reports (as hereinafter defined)
(each, a "Subsidiary" and collectively, the "Subsidiaries"). Unless the context
requires otherwise, all references herein to the "Company" shall refer to the
Company and its Subsidiaries. The Company is not a party to any joint venture,
partnership, or similar arrangement.
2.2 Organization, Good Standing, and Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada, and has all requisite corporate power and authority
to carry on its business as now conducted. The Subsidiaries are duly organized
in their respective jurisdictions of organization, validly existing and in good
standing in such respective jurisdictions and each has the power and authority
to carry on its respective business as now conducted. The Company and the
Subsidiaries are duly qualified to transact business and are in good standing in
each jurisdiction in which the failure so to qualify would have a Material
Adverse Effect (as hereafter defined) on the Company's business or properties.
2.3 Capitalization and Voting Rights. The number of authorized, issued and
outstanding capital stock of the Company as of the date hereof is set forth in
Exhibit C. Except as disclosed in Exhibit C, no securities of the Company or any
Subsidiary are entitled to preemptive or similar rights, nor is any holder of
securities of the Company or any Subsidiary entitled to preemptive or similar
rights arising out of any agreement or understanding with the Company or any
Subsidiary by virtue of any of the Transaction Documents (defined hereinafter).
Except as disclosed in Exhibit C, there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, except as a result of the purchase and sale of the
Securities, or rights or obligations convertible into or exchangeable for, or
giving any Person (as defined below) any right to subscribe for or acquire, any
shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
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exchangeable into shares of Common Stock. The Company covenants to file with the
applicable governmental authorities of the State of Nevada an amendment to its
certificate of incorporation which increases the authorized capital of the
Company as described in Exhibit C on or before September 30, 2004.
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors, and shareholders necessary for the authorization,
execution, and delivery of this Agreement, the Note and the Warrant
(collectively, the "Transaction Documents"), the performance of all obligations
of the Company hereunder and thereunder and the authorization, issuance (or
reservation for issuance), and delivery of the Note and the Warrant being sold
hereunder, the Common Stock issuable upon conversion of the Note and the Common
Stock issuable upon exercise of the Warrant (collectively, the "Securities"),
has been taken or will be taken prior to the Closing, and the Transaction
Documents constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except (i) as limited by
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) to the extent the
indemnification provisions contained in the Transaction Documents may be limited
by applicable federal or state laws.
2.5 Valid Issuance of Note, Warrant and Common Stock. The Note and the
Warrant are being purchased by the Investors hereunder, when issued, sold, and
delivered in accordance with the terms hereof for the consideration provided for
herein, will be duly and validly issued, and, based in part upon the
representations of the Investors in this Agreement, will be issued in compliance
with all applicable federal and state securities laws. The Common Stock issuable
upon conversion of the Note and upon exercise of the Warrant have been duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Note and the Warrant (and upon payment of the exercise price as required by
the Warrant), respectively, shall be duly and validly issued, fully paid and
nonassessable, and issued in compliance with all applicable securities laws, as
presently in effect, of the United States and each of the states whose
securities laws govern the issuance of the Note and the Warrant hereunder.
2.6 Filings, Consents and Approvals. Neither the Company nor any Subsidiary
is required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other govern- mental authority or other Person in connection
with the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) a proper Form D in accordance with Regulation D
promulgated under the Securities Act of 1933, as amended (the "Act"), and
applicable Blue Sky filings and (ii) in all other cases where the failure to
obtain such consent, waiver, authorization or order, or to give such notice or
make such filing or registration could not have or result in, individually or in
the aggregate, a material adverse effect on the results or operations of the
Company and its Subsidiaries taken as a whole ("Material Adverse Effect").
2.7 Litigation. There is no action, suit, proceeding, claim or
investigation pending or, to the knowledge of the Company, currently threatened
against the Company which questions the validity of the Transaction Documents,
or the right of the Company to enter into any of them, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition, affairs, or prospects of the Company, financially or otherwise, or
any change in the current equity ownership of the Company, nor is the Company
aware that there is any basis for the foregoing. The foregoing includes, without
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limitation, actions, pending or threatened (or any basis therefor known to the
Company), involving the prior employment of any of the Company's employees,
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. The Company is not a
party or subject to the provisions of any order, writ, injunction, judgment, or
decree of any court or government agency or instrumentality.
2.8 Compliance with Other Instruments. The Company is not in violation or
default of any provisions of its Amended and Restated Articles of Incorporation
or Bylaws or, to its knowledge, of any instrument, judgment, order, writ,
decree, mortgage, indenture, lease, license or contract to which it is a party
or by which it is bound or, to its knowledge, of any provision of federal,
state, or local statute, rule, or regulation applicable to the Company, except
as would not reasonably be expected, singly or in the aggregate, to have a
Material Adverse Effect. The execution, delivery, and performance of the
Transaction Documents and the consummation of the transactions contemplated
thereby 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, judgment, order, writ, decree or
contract, or an event which results in the creation of any lien, charge, or
encumbrance upon any assets of the Company or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license,
authorization, or approval applicable to the Company, its business or
operations, or any of its assets or properties, except as would not reasonably
be expected, singly or in the aggregate, to have a Material Adverse Effect.
2.9 Permits. The Company has all material franchises, permits, licenses,
and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
2.10 Compliance with Laws. The conduct of business by the Company and each
Subsidiary as presently and proposed to be conducted is not subject to
continuing oversight, supervision, regulation or examination by any governmental
official or body of the United States or any other jurisdiction wherein the
Company or any Subsidiary conducts or proposes to conduct such business, except
such regulation as is applicable to commercial enterprises generally. Neither
the Company nor any of the Subsidiaries has received any notice of any violation
of or noncompliance with, any federal, state, local or foreign laws, ordinances,
regulations and orders (including, without limitation, those relating to
environmental protection, occupational safety and health, federal securities
laws, equal employment opportunity, consumer protection, credit reporting,
"truth-in-lending", and warranties and trade practices) applicable to its
business or to the business of any Subsidiary, the violation of, or
noncompliance with, which would have a materially adverse effect on either the
Company's business or operations, or that of any Subsidiary, and the Company
knows of no facts or set of circumstances which would give rise to such a
notice.
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2.11 Disclosure. This Agreement, the Note, the Warrant and any other
statements or certificates made or delivered in connection herewith or
therewith, when taken together with the Disclosure Materials (as defined below),
do not contain any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not misleading.
2.12 SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials being collectively referred to herein as the "SEC Reports"
and, together with the Schedule of Exceptions to this Agreement, the "Disclosure
Materials") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Reports to the
extent required. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. Additionally,
since the adoption of the Sarbanes-Oxley Act of 2002 (the "New Act"), the
Company has complied in all material respects with the laws, rules and
regulation under the New Act.
3. Representations and Warranties of the Investors. Each of the Investors,
severally and not jointly, hereby represent and warrant that:
3.1 Authorization. The Transaction Documents constitute valid and legally
binding obligations of the Investor enforceable in accordance with their terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.
3.2 Purchase Entirely for Own Account. The Notes and the Warrants to be
purchased by the Investor and the Common Stock issuable upon conversion of the
Notes and the Common Stock issuable upon exercise of the Warrants (collectively,
the "Securities") will be acquired for investment for the Investor's own account
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and not with a view to the resale or distribution of any part thereof. The
Investor represents that it has full power and authority to enter into this
Agreement.
3.3 Disclosure of Information. The Investor acknowledges that it has
received all the information that it has requested relating to the Company and
the purchase of the Note and the Warrant. The Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Note and the Warrant.
The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of the
Investor to rely thereon.
3.4 Accredited Investor. The Investor is an "accredited investor" within
the meaning of Rule 501 of Regulation D of the Securities and Exchange
Commission (the "SEC"), as presently in effect.
3.5 Restricted Securities. Investor understands that the Note and the
Warrant (and the shares of Common Stock issuable upon conversion of the Note and
exercise of the Warrant) that it is purchasing is characterized as "restricted
securities" under the federal securities laws inasmuch as it is being acquired
from the Company in a transaction not involving a public offering, and that
under such laws and applicable regulations such securities may be resold without
registration under the Act, only in certain limited circumstances. In this
connection, the Investor represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
3.6 Legends. It is understood that the certificates evidencing the Notes
and the Warrants (and the Common Stock issuable upon conversion and exercise
thereof, respectively) may bear one or all of the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN
THIS CERTIFICATE. THE SECURITIES REPRESENTED HEREBY MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL,
REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT
THE PROPOSED SALE, TRANSFER, OR DISPOSITION MAY BE EFFECTUATED WITHOUT
REGISTRATION UNDER THE ACT."
3.7 Agent Appointment.
(a) Each Investor hereby confirms the appointment of Ocean Drive Holdings
LLC to act as its agent ("Agent") pursuant to the Notes. In such capacity, Agent
shall only be obligated to take action and shall act as directed by the Note
Requisite Holders (as hereinafter defined); neither Agent nor any of its
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officers, directors, managers, members, employees or affiliates shall be
responsible to Investors for any losses that any of such Investors may incur
hereunder. The Agent shall be entitled to conclusively rely on any such
direction or consent from the Note Requisite Holders. In addition, the Agent may
act in reliance upon any signature believed by it to be genuine, and may assume
that any person who has been designated by the Investors to give any written
instructions, notice or receipt, or make any statements in connection with the
provisions hereof has been duly authorized to do so. Agent shall have no duty to
make inquiry as to the genuineness, accuracy or validity of any statements or
instructions or any signatures on statements or instructions.
(b) Each Investor hereby confirms the appointment of Agent to act as its
security agent (the "Security Agent") under the Security Agreement with respect
to the Collateral (as defined in the Security Agreement), to take all actions as
contemplated in such capacity in the Security Agreement and to be entitled to
the benefits of the provisions of the Security Agreement. Each Investor
acknowledges that actions by the Security Agent under the Security Agreement
shall be authorized by the Note Requisite Holders.
(c) Agent may resign as Agent or Security Agent at any time by giving
written notice ("Notice") to the Company and the Investors, which resignation
shall be effective 30 days from the date of the Notice ("Effective Resignation
Date"). Upon the earlier of (i) the Effective Resignation Date or (ii) the
appointment of a successor Agent or Security Agent by the Note Requisite
Holders, Agent shall have no further obligations hereunder or pursuant to the
applicable agreements. In the event a successor Agent is not appointed by the
Note Requisite Holders on or before the Effective Resignation Date, then Agent
shall have the right to deliver any Collateral held by it with a clerk of a
court of competent jurisdiction or a third party escrow provider pending the
appointment of a successor Agent by the Note Requisite Holders.
(d) For purposes hereof, "Note Requisite Holder(s)" shall mean holders of
Notes representing at least 51% of the aggregate amount of principal and accrued
interest then outstanding under such Notes.
(e) In Agent's capacity as Agent and Security Agent, the Company and the
Investors each agree to indemnify and hold the Agent harmless from and against
any and all expenses (including counsel fees), liabilities, claims, damages,
actions, suits or other charges incurred by or assessed against the Agent for
anything done or omitted by them in the performance of their duties, except upon
final judicial determination of gross negligence or willful misconduct on the
part of the Agent.
3.8 Investor Questionnaire. If requested by the Company, the Investor
covenants to execute and deliver to the Company prior to, at or promptly
following the Closing an investor questionnaire supplied by the Company.
4. Conditions of the Investors' Obligations at Closing. The obligations of
the Investors under subsection 1.1 of this Agreement is subject to the
fulfillment on or before the Closing of each of the following conditions:
4.1 Representations and Warranties. The representations and warranties of
the Company contained in Section 2 hereof shall be true on and as of the Closing
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with the same effect as though such representations and warranties had been made
on and as of the date of such Closing.
4.2 Performance. The Company shall have performed and complied with all
agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Compliance Certificate. The President of the Company shall deliver to
the Investors, at the Closing, a certificate certifying that the conditions
specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Investors and counsel to the Investors, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
4.5 Secretary's Certificate. The Company shall have delivered to the
Investors a certificate executed by the Secretary of the Company dated as of the
Closing certifying the following matters: (a) the resolutions adopted by the
Company's Board of Directors relating to the transactions contemplated by this
Agreement; and (b) the Amended and Restated Articles of Incorporation and Bylaws
of the Company.
4.6 Delivery of Note and Warrant. The Company shall have delivered the Note
and the Warrant to the Investors, as specified in Section 1.
4.7 Ancillary Agreements. The Company and the Investors shall have entered
into a registration rights agreement dated of even date herewith, a form of
which is attached hereto as Exhibit D (the "Registration Rights Agreement") and
a Security Agreement, a form of which is attached hereto as Exhibit E (the
"Security Agreement").
4.8 Opinion of Counsel. The Purchasers shall have received an opinion of
counsel to the Company substantially in the form attached hereto as Exhibit F.
4.9 Other Payments. Concurrent with the Closing, the Company shall pay the
Sloan Compensation (as such terms are defined in Section 7.7 hereto) and the
Legal Expense Obligation (as defined in Section 7.8 hereto).
4.10 UCC Terminations. On or before the Closing, the Company shall have
filed UCC termination statements for any effective UCC1 financing statements in
the states of Delaware and Nevada other than Bechton Dickinson.
5. Conditions of the Company's Obligations at Closing. The obligations of
the Company to the Investors under this Agreement is subject to the fulfillment
on or before any Closing of each of the following conditions by the Investors:
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5.1 Representations and Warranties. The representations and warranties of
the Investors contained in Section 3 shall be true on and as of such Closing
with the same effect as though such representations and warranties had been made
on and as of such Closing.
5.2 Payment of Purchase Price. The Investors shall have delivered the
purchase price specified in Section 1.2.
5.3 Ancillary Agreements. The Company and the Investors shall have entered
into the Registration Rights Agreement and the Security Agreement.
6. Indemnification. The Company agrees to indemnify and hold harmless
Investors and any of Investors' general partners, employees, officers,
directors, members, agents and other representatives (collectively, the
"Indemnitees"), against any investigations, proceedings, claims or actions and
for any expenses, damages, liabilities or losses (joint or several) arising out
of such investigations, proceedings, claims or actions, to which the Indemnitees
may become subject, whether under the act or any rules or regulations
promulgated thereunder, the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or any rules or regulations promulgated thereunder, or any state
law or regulation, or common law, arising out of, related to or in any way
attributable to the Indemnitee's investment in the Company, including, but not
limited to, investigations, proceedings, claims or actions and any expenses,
losses, damages or liabilities (or actions in respect thereof) that arise out of
or are based upon any breach of any representation, warranty, agreement,
obligation or covenant of the Company contained herein. The Company also agrees
to reimburse the Indemnitees for any legal or other expenses reasonably incurred
in connection with investigating or defending any such investigations,
proceedings, claims or actions, as such expenses or other costs are incurred.
7. Miscellaneous.
7.1 Survival of Warranties. All of the representations and warranties made
herein shall survive the execution and delivery of this Agreement. The Investors
are entitled to rely, and the parties hereby acknowledge that the Investors have
so relied, upon the truth, accuracy and completeness of each of the
representations and warranties of the Company contained herein, irrespective of
any independent investigation made by Investors. The Company is entitled to
rely, and the parties hereby acknowledge that the Company has so relied, upon
the truth, accuracy and completeness of each of the representations and
warranties of the Investors contained herein, irrespective of any independent
investigation made by the Company.
7.2 Successors and Assigns. This Agreement is personal to each of the
parties and may not be assigned without the written consent of the other
parties; provided, however, that any of the Investor shall be permitted to
assign its rights under this Agreement and the Ancillary Agreements to any
affiliate of such Investor.
7.3 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within New York. The Company
(1) agrees that any legal suit, action or proceeding arising out of or relating
to this Agreement shall be instituted exclusively in New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York, (2) waives any objection which the Company may
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have now or hereafter to the venue of any such suit, action or proceeding, and
(3) irrevocably consents to the jurisdiction of the New York State Supreme
Court, County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. The Company further
agrees to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York and agrees that service of process upon the
Company mailed by certified mail to the Company's address shall be deemed in
every respect effective service of process upon the Company, in any such suit,
action or proceeding. THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
7.5 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
7.6 Notices. Any notice required or permitted by this Agreement shall be in
writing and shall be deemed sufficient upon receipt, when delivered personally
or by courier, overnight delivery service or confirmed facsimile, or forty-eight
(48) hours after being deposited in the U.S. mail as certified or registered
mail with postage prepaid, if such notice is addressed to the party to be
notified at such party's address or facsimile number as set forth below or as
subsequently modified by written notice. Any party may change its address for
such communications by giving notice thereof to the other parties in conformity
with this Section.
7.7 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finders' or brokers' fee or commission in connection with this
transaction; provided, however, that the Company is obligated to pay a cash fee
equal to 10% of the principal amount of Notes issued hereby to Sloan Securities
Corp. ("Sloan Compensation") pursuant to that certain investment banking
agreement dated May 25, 2004. Pursuant to the terms of said agreement, the Sloan
Compensation shall be 5% of the principal amount of the Notes issued hereby in
certain cases.
7.8 Transaction Expenses; Enforcement of Transaction Documents. The Company
and each Investor shall pay their respective costs and expenses incurred with
respect to the negotiation, execution, delivery and performance of this
Agreement; provided, however, that if the Closing is effected, the Company shall
promptly make payment to a law firm designated by Sloan Securities Corp., for up
to $25,000, of legal fees and expenses ("Legal Expense Obligation"). If any
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action at law or in equity is necessary to enforce or interpret the terms of the
Transaction Documents, the prevailing party shall be entitled to reasonable
attorney's fees, costs, and necessary disbursements in addition to any other
relief to which such party may be entitled.
7.9 Amendments and Waivers. This Agreement may be amended or terminated and
the observance of any term of this Agreement may be waived with respect to all
parties to this Agreement (either generally or in a particular instance and
either retroactively or prospectively), with the written consent of the Company
and the Note Requisite Holders. Notwithstanding the foregoing, (a) this
Agreement may not be amended or terminated and the observance of any term
hereunder may not be waived with respect to any Purchaser without the written
consent of such Purchaser unless such amendment, termination or waiver applies
to all Purchasers in the same fashion, (b) the Schedule of Investors hereto may
be amended by the Company from time to time in accordance with Section 1.2(a) to
add information regarding additional Investors participating in Subsequent
Closings without the consent of the other parties hereto and (c) Section 2,
Section 3, Section 6, Section 7.1, Section 7.9 may not be amended without the
written consent of the Company and holders of at least 85% of the aggregate
amount of principal and accrued interest then outstanding under the Notes. The
Company shall give prompt written notice of any amendment or termination hereof
or waiver hereunder to any party hereto that did not consent in writing to such
amendment, termination or waiver. Any amendment, termination or waiver effected
in accordance with this Section 7.9 shall be binding on all parties hereto, even
if they do not execute such consent. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.
7.10 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement among the parties and no party shall be liable
or bound to any other party in any manner by any warranties, representations, or
covenants except as specifically set forth herein or therein.
7.12 Series B Issuance. Notwithstanding anything contained herein or in the
Transaction Documents, whenever a provision provides for conversion or exchange
of securities or debt for the Company's common stock, at any time prior to the
filing of an amendment to the Company's certificate of incorporation which
increases the authorized capital of the Company, the Company may at its option
issue its Series B Preferred Stock in lieu of common stock provided that upon
conversion of such Series B Preferred Stock, an equivalent number of shares of
common stock are issued to the holder thereof on the same economic terms as is
contemplated under this Agreement or the applicable Transaction Document.
7.13 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under this Agreement or any transaction document
hereunder ("Transaction Document") are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under this
Agreement or any Transaction Document. Nothing contained herein or in any
12
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Investor has been represented by its own separate legal counsel in their review
and negotiation of this Agreement and the Transaction Documents.
13
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Company:
NESCO Industries, Inc.
By:_____________________________
Name:
Title:
As to Section 3.7 only:
Agent:
Ocean Drive Holdings LLC
By:_____________________________
Name:
Title:
Investors:
To sign a Financing Signature
Page to be provided to Investors
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
SCHEDULE OF INVESTORS
FIRST CLOSING
Name Original Principal Amount Number of Warrants
---- ------------------------- ------------------
of Purchaser of Notes
- ------------ --------
Total $
----- -
EXHIBIT A
NOTE
EXHIBIT B
WARRANT
EXHIBIT C
SCHEDULE OF EXCEPTIONS
None
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
EXHIBIT E
SECURITY AGREEMENT
EXHIBIT F
LEGAL OPINION
(i) The Company has been duly organized as a corporation and is validly
existing in good standing under the laws of the jurisdiction of its
incorporation.
(ii) The execution and delivery by the Company of the Transaction Documents and
the consummation by the Company of the transactions contemplated thereby
have been duly authorized by all necessary corporate action on the part of
the Company, and the Transaction Documents have been duly executed and
delivered by the Company. Each of the Transaction Documents constitutes the
valid and binding obligation of the Company, enforceable against the
Company in accordance with its respective terms, except (i) as limited by
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) to
the extent the indemnification provisions contained in the Transaction
Documents may be limited by applicable federal or state laws.
(iii)To the knowledge of counsel, none of the execution and delivery of, or
performance by the Company under, any of the Transaction Documents or the
consummation of the transactions therein contemplated, will conflict with,
or result in the creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the Company pursuant
to, the terms of any indenture, mortgage, deed of trust, note agreement or
other instrument pursuant to which the Company is a party or by which the
Company may be bound or to which any of its assets, properties or business
is or may be subject, except as would not reasonably be expected, singly or
in the aggregate, to have a Material Adverse Effect. None of the execution
and delivery of, or performance by the Company under, any of the
Transaction Documents or the consummation of the transactions therein
contemplated, will conflict with any term of the Certificate of
Incorporation or By-Laws of the Company, or any statute, rule, regulation
or ordinance, or any material license, permit, judgment, decree or order,
which, expressly by its terms is known by us to be applicable to the
Company or any of its assets, properties or businesses, except as would not
reasonably be expected, singly or in the aggregate, to have a Material
Adverse Effect.
(iv) Other than as described in the SEC Reports, we are not aware of any legal
or regulatory, administrative or governmental charges, actions,
proceedings, claims, hearings, investigations before or by any court,
governmental authority, or instrumentality pending or threatened against
the Company, or involving its assets or properties which, if determined
adversely to the Company, could reasonably be expected to have a Material
Adverse Effect on the Company or could be expected to adversely affect any
of the transactions contemplated by the Transaction Documents or the
validity or enforceability thereof.
(v) Based in part upon the representations made by the Investors in the
Securities Purchase Agreement, the offer, sale and issuance of the Notes
and Warrants to be issued in conformity with the terms of the Securities
Purchase Agreement constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act.