Exhibit 10.3
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AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT
BY AND BETWEEN
FOAM MANUFACTURING, INC.,
CHICAGO INVESTMENTS, INC.
AND
THE ADDITIONAL INVESTORS PARTY HERETO
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Dated February 1, 2006
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AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT
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THIS
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT (this "Agreement") is
made the 1st day of February, 2006, by and among (i) FOAM
MANUFACTURING, INC., a
Delaware corporation (the "Company"), (ii) CHICAGO INVESTMENTS,
INC., a Delaware
corporation (the
"Initial Investor") and (iii) the Persons (as hereinafter
defined) who hereafter
execute this
Agreement as
additional
investors (the
"Additional Investors" and together with the Initial Investor, the
"Investors").
W I T N E S S E T H:
WHEREAS, pursuant to
that certain Note Purchase Agreement dated December
20, 2005 (the
"Original Agreement"), between the Company and the Initial
Investor, the Company
sold and issued to the
Initial Investor and
the Initial
Investor purchased from the Company, a senior secured 11%
promissory note in the
principal amount of $50,000 (the "Original Note"); and
WHEREAS, the Company
desires to issue and sell to the Initial Investor and
the Additional
Investors and the Initial Investor and the Additional Investors
desire to purchase from the Company one or more additional senior secured 11%
promissory notes in
substantially the form
attached hereto as Exhibit A (each,
an "Additional
Note"), all on the terms and conditions set forth in this
Agreement; and
WHEREAS, in
consideration
for and as a condition
to the agreement of the
Investors to purchase one or more Additional Notes, the Company has agreed to
amend and restate the
Original Agreement
in its entirety as set
forth in this
Agreement; and
WHEREAS, in partial
consideration of the purchase of the Original Note and
any Additional
Notes,
the Initial Investor shall have the benefits of
prospective investors
pursuant to that
certain term sheet
describing
future
financing being pursued by the Company substantially in the form
attached hereto
as Exhibit B (the "Term Sheet"), all as more specifically set forth
herein.
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 Notes.
1.1.
Issuance and Sale of Notes.
1.1.1. Subject to the
terms and conditions
of this Agreement, the
Initial Investor
agrees to purchase
and the Company
agrees to issue
and
sell
to the Initial Investor, one or more Additional Notes in
such amounts
and
at such times as may be agreed to by the Company and Initial
Investor,
from
time to time.
Notwithstanding the
execution of this Agreement by the
Initial Investor,
the amendment and
restatement of the Original Agreement
or
anything in this Agreement to the contrary, the Initial Investor shall
not
be obligated to purchase, at any time, any Additional Notes.
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1.1.2. Subject to the
terms and conditions
of this Agreement, the
Company may offer and sell to Additional Investors to be identified from
time
to time by the Company or the Initial Investors Additional Notes in
such
amounts and at such
times as may be agreed to by the Company and such
Additional Investors,
from time to time.
At such time as an Additional
Investor shall agree
to purchase
an Additional Note, such Additional
Investor shall,
if it had not
already done so, execute a counterpart
signature page hereto.
1.2. Security
Agreement; Original
Note.
Contemporaneously with
the
execution of this Agreement and in consideration for the agreement of the
Investors to purchase
the Original
Note and any
Additional
Notes, the
Company and
Hydrogel (as hereinafter defined) have entered into and
delivered to Initial
Investor that certain
Amended and Restated
Security
Agreement of even date
herewith (the
"Security Agreement") granting to
Initial Investor,
individually
and as Agent as
provided in Section 8
herein, a senior
security interest in
all of the assets and rights of the
Company, and the
Company has issued to the Initial Investor and any
Additional Investors purchasing a note pursuant to the Original
Agreement a
Restated Senior Secured Promissory Note in the same form
as the Additional
Notes and in
restatement of the
Original Note and such
additional notes
(collectively, the "Restated Notes").
1.3. Closing.
1.3.1. The purchase
and sale of each
Additional Note (each,
a
"Note Closing")
shall take place at
the offices of the
Company (or
remotely via the exchange of documents and signatures) at such time
as
the Company and the applicable Investor mutually agree upon in
writing
(which writing may be email or other electronic communication).
1.3.2. At each Note
Closing, the Company shall deliver the
applicable Additional
Note, against payment of the purchase
price
therefore by wire
transfer to the
Company. At the election of the
Company, the purchase
price may be delivered
to the trust account of
its counsel for disbursement.
2. Additional
Consideration.
At and upon a
"Closing" as defined in the Term
Sheet, (a) an amount equal to up to $100,000 of the total
outstanding
principal
and interest thereon
owed to Initial
Investor under the
Original Note and all
outstanding Additional
Notes purchased by
Initial Investor shall
be converted
into the debt
instrument and
warrants being issued under the Term Sheet
with
such conversion rights
and other rights as set forth in the Term Sheet, and (b)
any outstanding
principal and interest exceeding $100,000 owed to Initial
Investor shall be repaid in full.
3. Representations and
Warranties of the Company. The Company hereby represents
and warrants to the Investors, the following:
3.1. Subsidiaries.
The Company
does not presently own or control,
directly or indirectly, any interest in any other corporation,
association,
or
other business entity.
The Company is not a party to any joint venture,
partnership, or similar arrangement.
3.2. 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 Delaware, and has all power and authority to own
its
properties and carry
on its business as now conducted. The Company is
duly
qualified and in good standing as a foreign corporation in each other
jurisdiction where the
location and character
of its properties
and the
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business conducted
by it require
such qualification, except where the
failure to be so
qualified would not
have a Material
Adverse Effect (as
hereinafter defined).
3.3. Capitalization
and Voting
Rights. The number of authorized,
issued and outstanding
shares of capital
stock of the
Company as of the
date
hereof is set forth in
Exhibit C attached
hereto. The
Company is a
wholly owned
subsidiary
of Hydrogel
Design Systems, Inc., a Delaware
corporation
("Hydrogel"), which is
a majority owned
subsidiary of
Nesco
Industries, Inc., a
Nevada corporation
("Nesco").
No securities of the
Company are entitled to preemptive or similar rights, nor is any holder of
securities of the Company entitled to preemptive or similar
rights arising
out
of any agreement or understanding with the Company by virtue of any
of
the
Transaction Documents (defined hereinafter). 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 Original Note and the Additional Notes, 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 other
equity or debt
securities
of the Company, or
contracts,
commitments,
understandings, or
arrangements
by which the
Company is or may become bound to issue additional shares of Common Stock
or
other equity or debt securities, or securities or rights
convertible or
exchangeable into shares of Common Stock or other equity or debt
securities
of
the Company. As used
in this Agreement,
the term "Person" means any
individual,
corporation, limited
liability company, partnership, limited
partnership,
limited liability
partnership,
trust,
association
and
organization of any type or nature.
3.4. Authorization.
All actions on the part of the Company, its
officers, directors,
and stockholders necessary for the authorization,
execution, and
delivery of this Agreement, the Original Note, the
Additional Notes,
the Security Agreement and any other document or
instrument issued in
connection
with the foregoing (collectively, the
"Transaction Documents"), the performance of all obligations of the
Company
and
Hydrogel hereunder and thereunder and the authorization,
issuance, and
delivery of the Original Note and any Additional Notes sold
hereunder, has
been
taken or will be taken
prior to each
Closing, and the Transaction
Documents constitute
valid and legally binding obligations of the Company
and
Hydrogel, as applicable, 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.
3.5. Issuance of Notes in Accordance with Laws. The Original Note
was,
and
each Additional Note
will be, issued in compliance with all applicable
federal and state securities laws.
3.6. Filings, Consents
and Approvals. Neither
the Company nor any of
Nesco or Hydrogel are 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 governmental
authority or
other Person in connection with the execution, delivery and performance by
the
Company and Hydrogel,
as applicable,
of the Transaction Documents,
other than (i) if determined by counsel, a proper Form D in
accordance with
Regulation D promulgated under the Securities Act of 1933,
as amended (the
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"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
assets, condition,
affairs, prospects, results or operations of the
Company, financially or otherwise ("Material Adverse Effect").
3.7. Litigation.
There is no action, suit, proceeding, claim or
investigation pending
or, to the knowledge of the Company, currently
threatened against the
Company, Nesco or Hydrogel that questions the
validity of the
Transaction
Documents,
or the right of the
Company or
Hydrogel 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 a
Material Adverse
Effect, or any change in the
current equity
ownership of the Company, Nesco or Hydrogel nor is the
Company aware that
there is any basis for
the foregoing.
The foregoing
includes, without limitation, actions, pending or threatened (or
any basis
therefor known to the
Company), involving
the prior employment
of any of
the Company's,
Nesco's and Hydrogel's
employees,
their use in
connection
with
the respective
businesses of the
Company, Nesco and
Hydrogel of any
information or
techniques
allegedly proprietary to any of their former
employers, or their
obligations under any agreements with prior employers.
None
of the Company,
Nesco or Hydrogel is a party or subject to the
provisions of any order, writ, injunction, judgment, or decree of
any court
or
government agency or instrumentality.
3.8. Compliance
with Other Instruments. The Company is not in
violation or default of any provisions of its Certificate of
Incorporation
or
Bylaws or 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 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
the violation or
default under any
instrument,
judgment, order,
writ, decree,
mortgage, indenture, lease, license or
contract to which
Nesco or Hydrogel
is party 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.
3.9. 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.
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3.10. Compliance
with Laws.
The conduct of business by the
Company
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 conducts
or proposes to conduct such business, except such
regulation as is
applicable
to commercial enterprises generally. The
Company has not
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
