FIRST AMENDMENT TO SECURITY AGREEMENT AND 18% SECURED CONVERTIBLE NOTE
Exhibit
10.34
FIRST
AMENDMENT TO SECURITY AGREEMENT AND 18% SECURED CONVERTIBLE NOTE
This
First Amendment to Security Agreement and 18% Secured Convertible Note (this
“Agreement”),
is made and entered into as of January __, 2010, by and among Amber Ready, Inc.,
a Nevada corporation (the “Company”) and the
investors set forth on the signature pages hereto (each, a “Purchaser” and
collectively, the “Purchasers”).
WHEREAS,
the Company issued to the Purchasers an aggregate of $14,029,245.37 principal
face amount of secured convertible notes (the “Notes”) pursuant to
subscription agreements (each, a “Subscription
Agreement”) by and among the Company and the Purchasers (the “Private Placement”);
and
WHEREAS,
the Notes shall automatically convert in the event that the Company, among other
requirements, obtains 500,000 new subscribers paying at least $25.00 per
subscription to the Company (a “Qualified
Subscriber”); and
WHEREAS,
pursuant to Section 8.1(a) of the Subscription Agreement, the Purchasers
appointed ▇▇▇▇ ▇▇▇▇▇▇ Financial, Inc. (the “Placement Agent”) as
the exclusive agent and attorney-in-fact to act on behalf of the Purchasers;
and
WHEREAS,
pursuant to Section 8.1(a) of the Subscription Agreement, the Placement Agent is
authorized to take action upon the instructions of the Purchasers of a majority
of the aggregate principal amount of then outstanding Notes (the “Requisite
Purchasers”) and such instructions shall be binding upon all Purchasers
of outstanding Notes; and
WHEREAS,
in connection with the Private Placement, the Company and the Purchasers are
parties to that certain Security Agreement, dated April 2009, by and among the
Company and the signatories thereto (the “Security Agreement”),
pursuant to which the Company agreed to enter into a Control Account Agreement
(the “Control Account
Agreement”) pursuant to which the Company would establish a cash
collateral account (the “Sinking Fund”);
and
WHEREAS,
the Sinking Fund currently has $1,600,000 on account, which is held as security
for the repayment of the Notes; and
WHEREAS,
pursuant to Section 8.2(a) of the Subscription Agreement, the Purchasers
appointed ▇▇▇▇▇▇ Asset Partners, LLC to act as the collateral agent (the “Collateral Agent”)
pursuant to the Security Agreement; and
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WHEREAS,
pursuant to Section 8.2(a) of the Subscription Agreement, the Collateral Agent
is required to take action upon the instructions of the Purchasers of a majority
of the aggregate principal amount of then outstanding Notes (the “Requisite
Purchasers”) and such instructions shall be binding upon all Purchasers
of outstanding Notes; and
WHEREAS,
the parties have reached an agreement with respect to the modification and
amendment of certain terms of the Security Agreement to delete all references to
the Control Account Agreement and to release the Sinking Fund to the Company;
and
WHEREAS,
capitalized terms used herein, but not otherwise defined, shall have the
meanings ascribed to such terms as set forth in the Security Agreement;
and
NOW
THEREFORE, in consideration of the terms and conditions contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound hereby, agree as follows:
1. Incorporation of Preliminary
Statements and Acknowledgement of Supplemental
Information. The preliminary statements set forth above by
this reference hereto are hereby incorporated into this Agreement. In addition,
the Purchasers hereby acknowledge receipt of the supplemental information,
attached hereto as Exhibit A, which provides a summary of the recent activities
of the Company and risks relating to the execution of this
Agreement.
2. Amendment to
Notes. The Notes are amended so that Section 1.2 of the Notes
is hereby deleted in its entirely and replaced as follows: “1.2 Mandatory
Conversion. In addition to the
optional conversion provisions set forth in Section 3 hereof, upon the addition by Issuer, at any time
within 18 months after the closing of the Minimum Offering (as defined in the Subscription
Agreement) (the
“Measuring Date”), of 500,000 new Qualified Subscribers (as hereinafter defined)
and (ii) Issuer being Cash Flow Positive (as hereinafter defined) no later than
the Measuring Date (the addition of such minimum number of new Qualified
Subscribers and Issuer being Cash Flow Positive no later than the Measuring Date
are collectively referred to as the “Conditions”), the entire principal of and all
interest accrued and owing on this Note shall automatically be converted,
without any action on the part of Purchaser, into Units at the Unit Conversion
Price (as defined hereinafter), as of the date of the Issuer achieving the
Conditions. A Qualified Subscriber
shall mean a subscriber for Issuer’s services who has paid at least $19.95 to
Issuer during the 18 months preceding the Measuring Date. Issuer
being “Cash Flow Positive” no later than the Measuring Date shall mean that
during any three month period prior to the Measuring Date, Issuer’s business,
operated in the ordinary course consistent with past practice, has generated
cash receipts during such period in excess of Issuer’s cash disbursements during
such period. Issuer will notify
Purchaser of the achievement of the Conditions within a reasonable period of
time thereafter. For purposes hereof, the “Unit Conversion Price”
shall mean $0.99 per Unit. Upon conversion, Purchaser shall be
entitled to receive the number of Units calculated by dividing all principal and
interest accrued and owing on this Note by the Unit Conversion
Price. No fractional Units shall be issued upon
conversion. In lieu of any fractional securities underlying the Units
to which Purchaser would otherwise be entitled, Issuer shall, at its option, (i)
pay cash in an amount equal to such fraction multiplied by the Unit Conversion
Price or (ii) round up as nearly as practicable to the nearest whole number the
number of Units to be issued.”
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3. Amendment to Security
Agreement. The Security Agreement is amended so that Section
2.5 of the Security Agreement is hereby deleted in its entirely and replaced as
follows: “2.5
RESERVED.”
4. Release of Sinking
Fund. Upon execution of this Agreement, the Collateral Agent
is hereby instructed to immediately release the funds currently held in the Cash
Control Account to the Company by wire transfer pursuant to the wiring
instructions attached hereto as Exhibit B.
5. Effect on Security
Agreement. Except as expressly set
forth above, all of the terms and conditions of the Security Agreement shall
continue in full force and effect after the execution of this Agreement and
shall not be in any way changed, modified or superseded by the terms set forth
herein, including but not limited to, any other obligations the Company may have
to the Purchasers under other agreements.
6. Amendments and
Waivers. The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
same shall be in writing and signed by the Company and the Requisite
Purchasers.
7. Notices. Any and all
notices or other communications or deliveries required or permitted to be
provided hereunder shall be delivered as set forth in the Security
Agreement.
8. Successors and
Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties and shall inure to
the benefit of the Purchasers. The Company may not assign (except by merger) its
rights or obligations hereunder without the prior written consent of the
Requisite Purchasers. The Purchasers may assign their respective rights
hereunder in the manner and to the Persons as permitted under the Security
Agreement.
9. Execution and
Counterparts. 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 or by e-mail delivery of a “.pdf” format
data file, 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 or “.pdf” signature page were an original
thereof.
10. Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined in
accordance with the provisions of the Security Agreement.
11. Severability. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
12. Headings. The
headings in this Agreement are for convenience only, do not constitute a part of
the Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, and intending to be legally bound hereby, the parties have
executed this Agreement as of the date first set forth above.
| AMBER READY, INC. | |||
|
|
By:
|
/s/ | |
| Name: ▇▇▇▇▇ Del ▇▇▇▇▇▇▇ | |||
| Title: Chief Executive Officer | |||
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SIGNATURE
PAGE OF PURCHASER TO FIRST AMENDMENT TO SECURITY AGREEMENT AND 18% SECURED
CONVERTIBLE NOTE
Name of
Purchaser:
Signature of Authorized Signatory of
Purchaser: __________________________
Name of
Authorized Signatory:
Title of
Authorized Signatory:
Principal
Amount of Outstanding Debenture:
$ ______________________________
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EXHIBIT
A
Amendment
to Security Agreement to Release Sinking Fund
The Company has requested that the
Purchasers of the Notes amend the Security Agreement to remove the Cash
Collateral Account and release to the Company the $1,600,000 currently held in
the Sinking Fund. The Company requires additional funds to implement
its revised business plan, which contemplates the Company entering into
additional lines of business, including pursuant to its proposed acquisition of
a private provider of “infomercials” discussed below. Accordingly, if
Purchasers approve the release of the Sinking Fund, the Company intends to use
the funds for working capital, general corporate purposes and if the acquisition
as described under “Letter of Intent to Acquire Private Company” below is
consummated, for financing the additional lines of business represented by the
acquisition. The amendment to the Security Agreement involves a high
degree of risk. The Purchasers of the Notes should carefully consider
the information set forth under “Risk Factors” in the attached Registration
Statement on Form S-1 before executing the amendment to the Security
Agreement.
Amendment
to Mandatory Conversion Provision of the Notes
The Company has reduced the cost of a
subscription for its services. This reduction requires an amendment
of the mandatory conversion provision of the Notes to revise the definition of a
Qualified Subscriber to reflect the new $19.95 subscription price for the
Company’s services.
Company
Business and Recent History
On December 18, 2009, the Company filed
an initial Registration Statement on Form S-1 with the Securities and Exchange
Commission registering, among other things, the shares of common stock
underlying your Notes. While this registration statement has been
filed with the Securities and Exchange Commission it has not yet been declared
effective. We can provide no assurance that either (i) the registration
statement will be declared effective or (ii) if declared effective, all of the
securities included on the initial registration statement will be included in
any final prospectus. A copy of the initial registration statement is
attached hereto and can also be accessed through the Securities and Exchange
Commission’s website at ▇▇▇.▇▇▇.▇▇▇.
Letter
of Intent to Acquire Private Company
On December 28, 2009, the Company
entered into a letter of intent with a private company engaged in the production
of “infomercials.” The letter of intent contemplates that the Company would
acquire all of the issued and outstanding capital stock of private company for
shares of the Company’s common stock. It is anticipated that the
private company and the Company will commence negotiations of a definitive
agreement(s) in form and substance satisfactory to the parties immediately, with
the signing of any such definitive agreement(s) to occur preferably as soon as
practicable, but in no event later than 60 days from the date set forth
above. Definitive agreement(s) will have terms and conditions
customary to transactions of this type, including representations, warranties
and conditions to closing. The execution of any definitive
agreement(s) would be subject, among other things, to the satisfactory
completion of the each parties’ due diligence review and investigation of the
other party’s business.
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EXHIBIT
B
AMBER READY WIRING
INSTRUCTIONS
Account
Name:
Account
Number:
Bank:
ABA
Number:
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