Nesco Industries, Inc. New York, New York 10165 February ___, 2007
EXHIBIT
10.5
Nesco
Industries, Inc.
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February ___,
2007
[NAME
AND ADDRESS OF NOTEHOLDER]
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Re:
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[NOTE
OR NOTES]
(the “Notes”)
made by Nesco Industries, Inc. (the “Company”)
in favor of [NOTEHOLDER]
(the “Lender”)
|
[NOTEHOLDER
SALUTATION]:
This
letter agreement is to memorialize our agreement concerning the conversion
of
all amounts outstanding under the Notes into shares of the common stock
(“Nesco Common
Stock”)
of the
Company.
The
Lender acknowledges that the Company has a strong need to raise capital that
will enable it to restructure its balance sheet and provide working capital
for
the recent asset acquisitions by the Company. The Lender further acknowledges
that the Company is currently negotiating a financing arrangement that will
provide it with the needed capital (the “Financing”).
In
order to induce the proposed lender to provide the Financing and to reorganize
the outstanding indebtedness of the Company, the Company is proposing the
conversion to Nesco Common Stock of the amounts under the Notes. The Lender
acknowledges that it is in its best interest, as well as the best interest
of
the Company, that the Company close the Financing. In consideration of the
foregoing and the covenants and agreements of the parties contained in this
letter agreement, the Company and the Lender are hereby entering into the
following agreements.
Subject
to and contingent on the closing of the Financing (the “Closing”),
the
parties agree as follows:
1. The
Notes
shall cease to accrue interest as of January 31, 2007. Notwithstanding anything
to the contrary contained in the Notes, immediately following the Common Stock
Increase (as defined below), the full amount of the principal outstanding under
the Notes shall be converted into shares of Nesco Common Stock, at $[Insert
Conversion Rate] per share or [Insert Number] shares of Nesco Common Stock
for
the [$Insert Amount] principal amount of Notes outstanding and a warrant to
purchase [Insert Number] shares of Nesco Common Stock (the “Warrant”)
at an
initial exercise price equal to the initial exercise price for the warrants
to
be issued in the Financing. Accordingly, promptly following the Common Stock
Increase, the Company will issue [Insert Number] of Nesco Common Stock to the
Lender (the “Conversion
Shares”)
and
the Warrant. For purposes of this letter agreement, the “Common
Stock Increase”
shall
mean such time as the Company has obtained the approval of its shareholders
at a
special or annual meeting to increase the Company’s authorized common stock in
accordance with the Financing and has filed with the Secretary of State of
Nevada the amendment to the Company’s Articles of Incorporation to so increase
the Company’s authorized common stock.
2. In
connection with the issuance of the Conversion Shares and the Warrant, the
Lender hereby makes the representations and warranties set forth on Schedule
A
attached
hereto. The Lender understands that the Company is relying on such
representations and warranties in connection with the issuance of the Conversion
Shares.
3. Upon
receipt of the Conversion Shares and the Warrant, the
Notes
shall be cancelled and Lender shall, automatically and without further action
of
the parties, release the Company and its officers, directors, employees and
agents, and each of its successors and assigns from all causes of action, debts,
contracts, demands and claims of every kind and nature, whether known or unknown
and whether in law or in equity, that the Lender had, now have, or hereafter
can, shall or may have with respect to the Notes.
Each
of
the foregoing agreements set forth in paragraphs 1 through 3, inclusive, of
this
letter agreement are expressly made subject to the Closing, and none of such
agreements shall be effective unless and until such time as the Closing occurs.
If the Closing has not occurred on or prior to February 28, 2007, this letter
agreement shall automatically terminate and shall be of no further force and
effect, and neither the Company nor the Lender shall have any obligations to
the
other hereunder.
Nothing
in this letter
agreement shall be construed as an admission of any liability by any of the
parties or as a release of any claim or obligation other than as specifically
set forth above.
This
letter agreement is binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, successors and assigns. No persons other
than
the Company and the Lender are intended to be benefited by this letter agreement
or to have rights hereunder as third-party beneficiaries or
otherwise.
This
letter agreement shall be deemed to be a contract made under, and to be
construed in accordance with, the laws of the State of New York, without giving
effect to conflicts of law.
If
any
provision of this letter agreement is held to be invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not
invalidate this letter agreement as a whole, but rather this letter agreement
shall be construed as though it did not contain the particular provision held
to
be invalid, illegal or unenforceable and the rights and obligations of the
parties hereto shall be construed and enforced only to such extent as may be
permitted by applicable law.
This
letter agreement may be executed by the parties in one or more counterparts,
each of which will be deemed an original but all of which will constitute one
and the same instrument.
2
If
the
foregoing accurately memorializes our agreement to settle the matters described
above, please sign below.
Very
truly yours,
Nesco
Industries, Inc.
By________________________
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President
and CEO
AGREED
AND ACCEPTED:
[NOTEHOLDER]
By_______________________________
Its_______________________________
3
Schedule
A
Representations
and Warranties
1.1. Purchase
Entirely for Own Account.
Each
Note purchased by Lender was, and the Conversion Shares and the Warrant to
be
issued in connection therewith will be, acquired for investment for Lender’s own
account and not with a view to the resale or distribution of any part thereof.
Lender represents that it has full power and authority to enter into this
Agreement.
1.2. Disclosure
of Information.
Lender
acknowledges that it has received all the information that it has requested
relating to the Company and conversion of the Notes. Lender further represents
that it has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the issuance of the Conversion
Shares and the Warrant.
1.3. Accredited
Investor.
Lender
is an “accredited investor” within the meaning of Rule 501 of Regulation D
of the Securities and Exchange Commission as presently in effect.
1.4. Restricted
Securities.
Lender
understands that the Conversion Shares, the Warrant and the shares of Nesco
Common Stock underlying the Warrant are characterized as “restricted securities”
under the federal securities laws inasmuch as they are 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.