EXHIBIT 10.1
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WAIVER AND LOAN PREPAYMENT AGREEMENT
THIS WAIVER AND LOAN PREPAYMENT AGREEMENT ("AGREEMENT") is made and entered into
this 8th day of February 2006, by and among BLUEGRASS GROWTH FUND LP, BLUEGRASS
GROWTH FUND LTD., CRESTVIEW CAPITAL MASTER LLC, IROQUOIS MASTER FUND LTD.,
OMICRON MASTER TRUST, SMITHFIELD FIDUCIARY LLC and CCA (US) FUND L.P.
(individually a "PURCHASER" and collectively, the "DEBENTURE PURCHASERS") and
WESTERN POWER & EQUIPMENT CORP., a Delaware corporation (the "COMPANY" or
"WESTERN").
WITNESSETH:
WHEREAS, on June 9, 2005, Western and the Debenture Purchasers consummated the
transactions contemplated by a Securities Purchase Agreement, dated as of June
8, 2005 (the "PURCHASE AGREEMENT") and the related Transaction Documents; and
WHEREAS, pursuant to the Purchase Agreement, Western sold to the Debenture
Purchasers and the Debenture Purchasers purchased and acquired from Western an
aggregate of $30,000,000 of Series A Debentures, $2,000,000 of Series B
Debentures and Warrants to purchase an aggregate of 8,500,218 shares of Western
common stock; and
WHEREAS, Western has received offers from unaffiliated third parties (the
"COMMON STOCK PURCHASERS") to purchase up to 1,750,000 shares of Western Common
Stock (the "SUBJECT SHARES") at various prices between $1.80 per share and $1.90
per share; which prices are below the $2.00 per share conversion price of the
Series A Debentures; and
WHEREAS, the sale of such Subject Shares to the Common Stock Purchasers would
result in (a) the violation of Sections 4.13 and 4.14(a) of the Purchase
Agreement and (b) trigger the full-ratchet anti-dilution provisions of the
Series A Debentures and the Warrants; and
WHEREAS, Western has requested that the Debenture Purchasers (a) waive the
violation in Sections 4.13 and 4.14(a) of the Purchase Agreement that would
occur solely by reason of the sale of the Subject Shares, and (b) agree that the
anti-dilution provisions of the Series A Debentures and Warrants will not be
triggered solely by reason of the sale of the Subject Shares (collectively, the
"CONTRACTUAL ACCOMMODATIONS"), and
WHEREAS, the Debenture Purchasers are willing, upon the terms and subject to the
conditions set forth in this Agreement, to provide Western with the Contractual
Accommodations;
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto intending to be bound hereby, it is agreed as
follows:
1. Definitions. Unless otherwise defined herein, all capitalized terms
when used in this Agreement shall have the same meaning as is defined in the
Purchase Agreement.
2. Contractual Accommodations. Subject at all times to the satisfaction of
all of the conditions set forth in Section 3 below, the Debenture Purchasers do
hereby agree:
2.1 to waive all defaults or breaches of Western's various covenants
and agreements contained in the Purchase Agreement and in any other Transaction
Documents (including, without limitation, the provisions of Section 4.13 and
Section 4.14 of the Purchase Agreement) that would occur or cause to exist
solely by reason of the sale by Western of any or all of the Subject Shares to
the Common Stock Purchasers; and
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2.2 that the anti-dilution provisions of Section 5(b) of the Series A
Debentures and Section 3(b) of the Warrants shall not be triggered solely by
reason of the sale by Western of any or all of the Subject Shares to the Common
Stock Purchasers.
3. Conditions to Contractual Accommodations. This Agreement and the
Contractual Accommodations of the Debenture Purchasers are subject to
satisfaction by Western of all, and not less than all, of the following
conditions:
3.1 Prepayment of Series A Debentures.
(a) Not less than 90% of all "Net Proceeds" (as hereinafter
defined) shall be applied to as a prepayment of the Series A Debentures to
reduce a portion of the then outstanding principal amount of the Series A
Debentures at the time of each such prepayment.
(b) Each and every such prepayment(s) shall be made by wire
transfer of immediately available funds in the allocable percentage amounts to
each Debenture Purchaser to the accounts set forth on EXHIBIT A annexed hereto
and made a part hereof (the "DISBURSEMENT Instructions") simultaneous with each
sale of Subject Shares. In such regard, Western shall direct in writing the
Common Stock Purchasers to wire funds representing 90% of the Net Proceeds
directly to the Debenture Purchasers in accordance with the Disbursement
Instructions.
(c) All such prepayment(s) shall be applied in the order of last
maturing indebtedness under the Series A Debentures; PROVIDED, that the Company
may apply such prepayment(s), upon prior written notice, to (i) 30% of the
monthly redemption installment due in the month of March 2006, and (ii) 30% of
the monthly redemption installment due for the month of April 2006; provided,
further, the application of prepayment(s) in clauses (i) and (ii) above shall in
no event exceed, in the aggregate, $240,000.
(d) Each such prepayment of Series A Debentures shall be paid to
each of the Debenture Purchasers in pro-rata amounts based upon the amount by
which the outstanding the principal amount of Series A Debenture held by each
Debenture Purchaser immediately prior to such prepayment bears to the aggregate
outstanding principal amount of all Series A Debentures owned by all Debenture
Purchasers, all as set forth in the Disbursement Instructions.
(e) As used in this Agreement, the term "Net Proceeds" means the
gross cash proceeds paid by the purchasers of the Subject Shares, less any
brokerage commissions or finders' fees paid by Western in connection with such
sales; provided, that such fees and commissions shall not exceed 5% of the gross
proceeds paid by the purchasers of the Subject Shares.
(f) By their execution of this Agreement, the Debenture Purchasers
do hereby consent to (i) the sale by the Company of the Subject Shares, not to
exceed 1,750,000 of Common Stock and (ii) such prepayments up to a maximum
amount not to exceed $3,000,000 principal amount of Series A Debentures.
3.2 Contractual Accommodation Fee.
(a) Ten percent (10%) of the Net Proceeds shall be paid to the
Debenture Purchasers as a fee for agreeing to the Contractual Accommodations set
forth in Section 2 above (the "CONTRACTUAL ACCOMMODATION FEE").
(b) All payments of the Contractual Accommodation Fees shall be
made by wire transfer of immediately available funds to accounts set forth in
the Disbursement Instructions simultaneous with each sale of Subject Shares and
the prepayments required to be made pursuant to Section 3.1 above. In such
regard, Western shall direct in writing the Common Stock Purchasers to wire
funds representing 10% of the Net Proceeds directly to the Debenture Purchasers
in accordance with the Disbursement Instructions.
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(c) Each payment of the Contractual Accommodation Fee shall be made
simultaneous with a prepayment of the Series A Debentures contemplated by
Section 3.1 above, and shall be paid to the Debenture Purchasers in pro-rata
amounts based upon the amount by which the outstanding principal amount of
Series A Debenture held by each Debenture Purchaser immediately prior to such
prepayment bears to the aggregate outstanding principal amount of all Series A
Debentures owned by all Debenture Purchasers, all as set forth in the
Disbursement Instructions. Western acknowledges and agrees that, as a result of
the payment of the prepayment of the Series A Debentures and the payment of the
Contractual Accommodation Fee, Western shall receive no cash proceeds from Sale
of the Subject Shares but shall benefit from the reduction of indebtedness.
3.3 Registration Statement. Subsequent to consummating the sale of any
of the Subject Shares, Western shall cause the Subject Shares to be registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), pursuant to
a Form S-1 registration statement (the "REGISTRATION STATEMENT") to be filed
with the Securities and Exchange Commission ("SEC") on a date which shall be not
later than ten (10) days following the date of execution by Western of
definitive purchase agreements for the purchase of the Subject Shares with the
Common Stock Purchasers (the "COMMON STOCK PURCHASE AGREEMENTS"), a form of
which Common Stock Purchase Agreement shall be approved by any one of the
Debenture Purchasers, which approval shall not be unreasonably withheld or
delayed. Such Registration Statement and any amendments thereto shall be
submitted to and approved by any one of the Debenture Purchasers; which approval
shall not be unreasonably withheld or delayed.
3.4 Minimum Sale Prices. Western does hereby covenant and agree that it
shall not sell any of the Subject Shares to any Common Stock Purchasers at per
share prices less than $1.80 per share, without the prior written consent of all
Debenture Purchasers.
3.5 Completion of Sale of Subject Shares and Payments. The consummation
of the sale of the maximum 1,750,000 Subject Shares to be sold by Western to the
Common Stock Purchasers, and the prepayments of the Series A Debentures and
Contractual Accommodation Fees to the Debenture Purchasers, as contemplated
hereby, shall have been completed by the close of business (Eastern Standard
Time) on Friday, February 17, 2006, unless such date shall be extended at the
sole discretion of the Debenture Purchasers (such date, as the same may be
extended, hereinafter the "OUTSIDE CLOSING DATE").
3.6 No Other Waivers. Except as expressly provided in this Agreement,
no other Defaults or Events of Default under the Purchase Agreement or other
Transaction Documents are being waived or relinquished by any of the Debenture
Purchasers hereunder. Except as expressly provided herein, each of the Debenture
Purchasers do hereby reserve all other rights and remedies under the Purchase
Agreement and Transaction Documents. Western does hereby represent and warrant
to the Debenture Purchasers that, as at the date of this Agreement, no Default
or Event of Default under the Purchase Agreement and Transaction Documents
exists.
4. Miscellaneous.
4.1 Financial Accommodation Limitation. The Financial Accommodations
granted by the Debenture Purchasers under this Agreement shall apply only to the
sale of the maximum 1,750,000 Subject Shares to the Common Stock Purchasers, and
on the terms and conditions contemplated by this Agreement. This Agreement shall
not, in any manner, constitute the waiver or consent by any of the Debenture
Purchasers to the sale of any other securities by Western; all of which other
sales shall at all times remained governed by the provisions of the Purchase
Agreement and other Transaction Documents. Notwithstanding anything in this
Agreement to the contrary, all references to a number of shares of Common Stock
set forth in this Agreement shall be subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement
4.2 Binding Effect. Except as the same may be amended and modified by
this Agreement, all of the terms and conditions of the Purchase Agreement and
each of the Transaction Documents
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shall remain in full force and effect and are deemed by this reference to be
incorporated in this Agreement, as though more fully set forth herein at length.
4.3 Entire Agreement. The this Agreement, the Purchase Agreement and
other Transaction Documents, 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.
4.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by Western and each Debenture Purchaser or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
4.5 Headings. 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. 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.
4.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Western may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Debenture Purchaser. Any Debenture
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Debenture Purchaser assigns or transfers any Securities, provided
such transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the "Debenture Purchasers".
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.
4.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The parties hereby waive all
rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys' fees
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and other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
4.9 Survival. The representations and warranties contained herein shall
survive consummation of the transactions contemplated hereby for the applicable
statue of limitations.
4.10 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.
4.11 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.
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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.
WESTERN POWER & EQUIPMENT CORP.
By:__________________________________________
Name:
Title:
Name of Debenture Purchaser: OMICRON MASTER TRUST
SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ________________________________
Name of Debenture Purchaser: SMITHFIELD FIDUCIARY LLC
SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ________________________________
Name of Debenture Purchaser: CRESTVIEW CAPITAL MASTER, LLC
SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ________________________________
Name of Debenture Purchaser: IROQUIS MASTER FUND LTD.
SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ________________________________
Name of Debenture Purchaser: CCA (US) FUND I
BY: CRESTVIEW CAPITAL ADVISORS, LLC, GENERAL PARTNER
SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ________________________________
Name of Debenture Purchaser: BLUEGRASS GROWTH FUND LP
SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ________________________________
Name of Debenture Purchaser: BLUEGRASS GROWTH FUND LTD
SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ________________________________
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