GABRIEL TECHNOLOGIES CORP. CONVERTIBLE SENIOR PROMISSORY NOTE SUBSCRIPTION AGREEMENT
EXHIBIT
10.15
▇▇▇▇▇▇▇
TECHNOLOGIES CORP.
This
Convertible Senior Promissory Note Subscription Agreement (“Agreement”) is
entered into as of January 6, 2006 by and between ▇▇▇▇▇▇▇ Technologies Corp.,
a
Delaware Corporation and Trace Technologies LLC, a Nevada limited liability
company, on the one hand and Broidy Capital Management and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
an
individual, on the other.
RECITALS
WHEREAS,
▇▇▇▇▇▇▇ Technologies Corp., a Delaware corporation (“▇▇▇▇▇▇▇” or “the Company”)
and its wholly owned subsidiary Trace Technologies LLC, a Nevada limited
liability company (“Trace Technologies”), are in need of capital investment;
and
WHEREAS,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, an individual (“Broidy” or “Lender”), currently owns shares and
warrants in ▇▇▇▇▇▇▇ Technologies Corp. as set forth in Exhibit
A,
attached hereto; and
WHEREAS,
on or about December 9, 2005,
Lender
made a loan to the Company in the amount of Two Hundred Thousand Dollars
$200,000, as evidenced by that certain Promissory Note dated on December 9,
2005
(the “Original Promissory Note”) attached hereto as Exhibit
B
and
WHEREAS,
the Company has requested that Lender make an additional loan to the Company
of
Eight Hundred Thousand Dollars ($800,000); and
WHEREAS,
the Company and Lender have agreed that Lender will make an additional loan
to
the Company in the amount of Eight Hundred Thousand Dollars ($800,000) subject
to non-accountable expenses of $25,000; and
WHEREAS,
the Company and Lender have decided to treat Lender’s current loan of $800,000
and the loan involving the Original Promissory Note as one transaction (the
“Loan”) and concurrent with the Loan have the Company execute a Convertible
Senior Promissory Note (the “Convertible Note”) in the amount of One Million
Dollars ($1,000,000) in favor of Lender on the terms and conditions set forth
below;
NOW,
THEREFORE, for consideration duly acknowledged and received, the parties agree
as follows:
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1.
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Principal
and Interest.
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Subject
to the terms and conditions contained herein, ▇▇▇▇▇▇▇ Technologies Corp., (the
“Company”), a Delaware corporation, for value received, hereby promises to pay
to the order of Broidy Capital Management or holder (“Lender”) in lawful money
of the United States at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the principal amount of One Million Dollars ($1,000,000),
together with simple interest at a rate equal to nine percent (9.0%) per annum,
which interest shall be paid to Lender for the first three months to be paid
April 1, 2006. Subsequent to such quarterly payment, interest shall be paid
by
Company monthly.
1
In
exchange for the Convertible Note, Lender has or will have loaned to the Company
a total of One Million Dollars $1,000,000, comprised of:
(a) The
Two
Hundred Thousand Dollar ($200,000) loan made by Lender on or about December
9,
2005;
(b) Twenty
Five Thousand Dollars ($25,000) in
non-accountable expenses to be incurred by Lender in connection with this
transaction, including but no limited to documentation costs; and
(c) Seven
Hundred Seventy Five Thousand Dollars ($775,000) to be wire transferred to
▇▇▇▇▇▇▇ in immediately available funds within two business days upon
finalization and signature of this agreement and any ancillary documents
thereto.
The
principal of this Convertible Note is due and payable on January 6, 2007 (the
“Maturity Date”), unless this Convertible Note is earlier converted or prepaid
in accordance herewith. All interest on this Convertible Note is due and payable
on the Maturity Date.
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2.
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The
Note
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2.1 The
Convertible Note.
On or
about December 9, 2005, Lender loaned to the Company Two Hundred Thousand
Dollars ($200,000), as evidenced by the Original Promissory Note. Lender now
agrees, subject to the terms of this Agreement, to loan the Company an
additional Eight Hundred Thousand Dollars ($800,000), minus Twenty Five Thousand
Dollars ($25,000) in
non-accountable expenses to be incurred by the Lender in connection with this
transaction. Therefore, upon completion of the documentation of all legal
documents contemplated hereunder, Lender shall loan to Company Seven Hundred
Seventy Five Thousand Dollars ($775,000) (the “New Loan”). The loan reflected by
the Original Promissory Note shall then be rolled into this Convertible Note,
and Gabriel’s obligation to repay the Original Promissory Note, the New Loan and
the $25,000 in non-accountable expenses shall be evidenced by a Convertible
Senior Promissory Note (the “Convertible Note”) in the amount of One Million
Dollars ($1,000,000) dated as of the Closing Date (as defined below) in the
form
attached hereto as Exhibit
C.
2.2 Place
and Date of Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”) will
be held at the offices of Lender at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ on January 6, 2006 or at such other time and place as the
parties shall mutually agree (the “Closing Date”).
2.3 Delivery.
At the
Closing, the Company shall deliver the Convertible Note to Lender who shall
then
deliver to the Company within two business days $775,000 via wire transfer
of
immediately available funds to the Company’s designated bank account. If the
Company is not at the closing the Company shall deliver the executed Convertible
Note to Lender by the fastest available means.
2.4 Use
of
Proceeds.
The
proceeds from the sale of the Convertible Note will be used by the Company
for
general corporate purposes and working capital, including but not limited to
the
acquisition of a majority ownership in Resilent LLC dba Digital Defense plus
potential litigation involving intellectual property rights owned by Trace
Technologies, LLC.
2
2.5 Superiority
and Subordination.
Other
than the Company’s Revolving Credit Facility with the Nebraska State Bank,
entered into as of August 12, 2005, so long as the Convertible Note is
outstanding Lender’s rights under this Convertible Note shall be senior to and
shall have priority in payment of principal and interest as against any other
promissory notes or indebtedness of the Company.
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3.
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Conditions;
Representations and Warranties; Covenants.
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3.1 Conditions
to Obligations of the Lender.
The
Lender’s obligations at the Closing are subject to the fulfillment, prior to the
Closing Date, of all of the following conditions, any of which may be waived
in
whole or in part by Lender, and all of which shall be deemed satisfied by
Lender’s execution of this Agreement:
(a) Except
for the notices required or permitted to be filed after the Closing Date with
certain federal and state securities commissions, the Company shall have
obtained all governmental approvals (including without limitation all necessary
state securities laws permits and qualifications) required in connection with
the lawful sale and issuance of the Note.
(b) At
the
Closing, the sale and issuance by the Company, and the purchase by the Lender,
of the Convertible Note shall be legally permitted by all laws and regulations
to which the Lender or the Company is subject.
(c) All
corporate and other proceedings in connection with the transactions contemplated
at the Closing and all documents and instruments incident to such transaction
shall be reasonably satisfactory in substance and form to the
Lender.
(d) Prior
to
the Closing, the Company shall deliver to Lender copies of (i) the total amount
of authorized, issued and outstanding shares in ▇▇▇▇▇▇▇ and all related
entities; (ii) the total amount of options that have been issued by ▇▇▇▇▇▇▇
and
all related entities, including the terms of such options; (iii) the total
amount of warrants that have been issued by ▇▇▇▇▇▇▇ and all related entities,
including the terms of such warrants; (iv) the total amount of ▇▇▇▇▇▇▇ stock,
options and warrants owned by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ both before and after the
Investment, and (v) a copy of Company’s credit agreement with the Company’s
Revolving Credit Facility with the Nebraska State Bank, entered into as of
August 12, 2005 and (vi) the signed side letter referred to in Exhibit
I,
attached hereto.
3.2 Conditions
to Obligations of the Company.
The
Company’s obligation to issue and sell the Convertible Note at the Closing is
subject to the fulfillment, to the Company’s satisfaction on or prior to the
Closing Date, of the following conditions, any of which may be waived in whole
or in part by the Company, and all of which shall be deemed satisfied by
Company’s execution of this Agreement:
(a) Except
for the notices required or permitted to be filed after the Closing Date with
certain federal and state securities commissions, the Company shall have
obtained all governmental approvals (including without limitation all necessary
state securities laws permits and qualifications) required in connection with
the lawful sale and issuance of the Convertible Note.
3
(b) At
the
Closing, the sale and issuance by the Company, and the purchase by Lender,
of
the Convertible Note shall be legally permitted by all laws and regulations
to
which the Lender or the Company is subject.
3.3 Representations
and Warranties by the Lender.
Lender
hereby represents and warrants to the Company as set forth in Exhibit
D.
3.4 Representations
and Warranties by the Company.
The
Company hereby represents and warrants to the Lender as set forth in
Exhibit
E.
3.5 Conversion
Right.
The
Company and Lender agree that at any time so long as the Convertible Note is
outstanding, Lender has the right to convert the Convertible Note (the
“Conversion Right”) into up to $1,000,000 worth of common stock of the Company
at a per share price of $1.00 (the “Strike Price”). As set forth in the
Convertible Note, the Company agrees that it may prepay principal amounts owed
to Lender under this Convertible Note provided that the Company provides fifteen
(15) days written notice and confirmation of the receipt of such notice by
Lender. Lender shall be able to exercise his Conversion Right under the
Convertible Note during the period that the Company has provided notice of
its
desire to prepay principal but before such prepayment has taken
place.
3.6 Antidilution.
The
Company and Lender agree that so long as any amounts are owed to the Lender
by
the Company under this Convertible Note, should the Company issue securities,
options, warrants or derivatives of any kind with a sale, exercise or strike
price less than One Dollar and Fifty Cents ($1.50) per share, then the Strike
Price of the Conversion Right will be reduced by the percentage of the
difference between $1.50 and the price of the issued security, option warrant
or
derivative. Thus, by way of example, if while the Convertible Note is still
outstanding the Company were to issue securities, warrants, options or
derivatives with an exercise price of $.75 — i.e.
a total
of 50% (75/150) below $1.50— then the $1.00 Strike Price referred to in Section
3.5 shall likewise be reduced by 50% - i.e.
to $.50
($l.00*50%) per share — and Lender would therefore have the option of converting
the Convertible Note into a total of 2,000,000 shares.
In
the
event that the Company shall at any time hereafter (a) pay a dividend in Common
Stock or securities convertible into Common Stock; (b) subdivide or split its
outstanding Common Stock; (c) combine its outstanding Common Stock into a
smaller number of shares; then the number of shares to be issued immediately
after the occurrence of any such event shall be adjusted so that Lender
thereafter may still receive the same number of warrants he would have owned
immediately following such action if he had exercised the Conversion Right
immediately prior to such action and the Strike Price of this Convertible Note
set forth in Section 3.5 above
shall be adjusted to reflect such proportionate increases or decreases in the
number of shares.
3.7 Change
in Control Event.
The
Company shall give Lender at least fifteen (15) days’ prior written notice of
the date of the consummation of any (i) reorganization, recapitalization, sale,
conveyance or other disposition of all or a majority of the property or business
of the Company or any subsidiary of the Company, (ii) merger into or
consolidation of the Company or a material subsidiary of the Company with any
other corporation (other than a wholly owned subsidiary corporation) or other
transaction or series of related transactions in which more than 50% of the
voting power of the Company is disposed of, or (iii) liquidation, dissolution
or
winding up of the Company (each, a “Change in Control Event”). If Lender
provides to the Company, within five days of the receipt of such notice, written
notice objecting to the consummation of such Change in Control Event (the
“Objection Notice”), then the Company shall not consummate such Change in
Control Event unless (a) the surviving entity of such Change in Control Event
(1) expressly assumes all of the obligations specified in this Agreement and
the
Note and (2) has a net worth not less than the consolidated net worth of the
Company at the time of such Change in Control Event; or (b) the Company
indefeasibly repays all of the outstanding principal amount of and interest
on
the Convertible Note within five business days after the closing date of such
Change in Control Event.
4
3.8 Inspection
Rights.
Company
shall permit any authorized representatives designated by Lender to visit and
inspect any of the properties of Company, to inspect, copy and take extracts
from its financial and accounting records, and to discuss its affairs, finances
and accounts with its officers and independent public accountants (provided
that
Company may, if it so chooses, be present at or participate in any such
discussion), all upon reasonable notice and at such reasonable times during
normal business hours and as often as may reasonably be requested. Lender shall
not use any information obtained under this Agreement for any purpose that
is
not reasonably related to performance of the respective rights and obligations
of the parties hereunder, such rights and obligations including but not limited
to repayment of the Convertible Note.
3.9 Restriction
on Fundamental Changes.
The
Company shall not take any action that may reasonably be expected to have an
adverse effect on the Company’s ability to repay the Convertible Note and any
accrued interest thereon when and as due without the prior written permission
of
Lender.
3.10 Restriction
on Additional Debt.
Other
than the Company’s Revolving Credit Facility with the Nebraska State Bank,
entered into as of August 12, 2005, so long as the Convertible Note is
outstanding Lender shall have priority in payment of principal and interest
as
against any other promissory notes or indebtedness of the Company. The Company
shall provide Lender with fifteen days prior notice before incurring any
subordinated debt. Any such subordinated debt must be preapproved by Lender,
which approval shall not be unreasonably withheld.
3.11 No
Public Statement.
Lender
and the Company shall not issue any public statement concerning the transactions
contemplated by this Agreement without written consent of the parties named
in
such public statement.
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4.
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Security
Interest
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4.1 General
Security Interest.
To
guaranty and as security for repayment of the full principal amount of the
Convertible Note plus interest, Lender shall receive a priority security
interest in all of the assets and intellectual property of(i) the Company and
(ii) Resilent LLC dba Digital Defense (the “Security Interest”). Company and
Lender shall work together to promptly perfect Lender’s Security Interest in
such assets and intellectual property.
5
4.2 Pledge
of Securities.
In
addition to the Security Interest set forth in Paragraph 4.1 above, as
additional security for repayment of the full principal amount of the Note
plus
interest the Company shall pledge to Lender (i) all of the securities in the
possession, custody or control of Company after its transaction with Resilent
LLC, a Nebraska limited liability company, scheduled to take place on or about
January 11, 2006 and Company will also forward to Lender immediately upon
receipt the Unit Certificate from Resilent LLC representing 11,818 Units;.
and
(ii) 3,000,000 shares of the Company’s common treasury stock (together, the
“Pledged Securities”). Upon closing Company will instruct the Transfer Agent to
transfer to Lender stock certificates sufficient to transfer the full amount
of
the Pledged Securities to Lender, together with documentation sufficient to
transfer all associated stock powers to Lender in the event that the Company
defaults under this Convertible Note.
After
Closing, title to and ownership of the Pledged Securities shall remain with
the
Company unless and until the Convertible Note is paid off in full. In the event
that the Convertible Note is not paid off in full upon the Maturity Date,
however, title to and ownership of the Pledged Securities shall automatically
transfer to Lender and the Company shall document and effectuate such transfer,
including the transfer of all associated stock powers, of the registered
securities within five (5)
business
days of the Maturity Date. Transfer of the Pledged Securities to Lender shall
not impinge or limit in any way Lender’s additional rights under the Convertible
Note. Lender’s security interest in the Pledged Securities shall immediately
cease upon (i) the Company’s repayment of all amounts, including interest, due
and outstanding under the Convertible Note or (ii) Lender’s exercise of the
Conversion Right.
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5.
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Option
to Purchase Shares in Digital Defense
Group
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The
Company has secure a two year option to purchase 2,333 shares of “C” units in
Resilent LLC dba Digital Defense Group for $1,250,000 plus interest at
5%, pursuant
to that certain option agreement attached hereto as Exhibit
F
(the
“Resilent Option”). In addition to the other terms of this agreement, Lender
shall have a two year option from the date of this agreement to purchase all
shares of “C” units in Resilent LLC acquired by the Company pursuant to the
Resilent option. Lender shall acquire such units from ▇▇▇▇▇▇▇ on the same terms
and conditions that ▇▇▇▇▇▇▇ acquires such units pursuant to the Resilent Option.
Upon exercising the Option Company will forward the 2,333 class “C” Units to
Lender within five business days.
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6.
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Warrants
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In
addition to the other terms of this Agreement, Lender shall receive warrants
to
purchase an additional 1,000,000 shares of common stock of the Company
exercisable at a strike price of $1.00 per share (the “Warrants”). The form and
substance of the agreement with respect to the Warrants shall be identical
to
the form Warrant Agreement attached hereto has Exhibit
G.
Concurrent with the Warrant Agreement, ▇▇▇▇▇▇▇ and Lender shall enter into
a
Registration Rights Agreement (the “Registration Rights Agreement”) identical in
form to the Registration Rights Agreement attached hereto as Exhibit
H.
The
Registration Rights Agreement shall obligate the Company to register the
securities underlying (i) the Warrants, (ii) this Convertible Note,
(iii) all Pledged Securities and (iv) all warrants owned by Broidy as of the
date of this Agreement, all within 150 days of the date hereof.
6
The
parties will furthermore enter into a side agreement in the form attached hereto
as Exhibit
I,
adjusting the exercise price of the warrants based upon the Company’s future
revenues.
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7.
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Miscellaneous.
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7.1 Waivers
and Amendments.
The
terms and provisions of this Agreement or the Note may be waived, modified
or
amended (either generally or in a particular instance, either retroactively
or
prospectively and either for a specified period of time or indefinitely), unless
such waiver, modification or amendment is in writing, signed by both
parties.
7.2 Governing
Law.
This
Agreement shall be governed in all respects by the laws of the State of Delaware
as such laws are applied to agreements between Delaware residents entered into
and to be performed entirely within Delaware. Any lawsuit or litigation arising
under, out of, in connection with, or in relation to this Agreement, any
amendment thereof, or the breach thereof, shall be brought in the courts of
Los
Angeles, California, which courts shall have exclusive jurisdiction over any
such lawsuit or litigation.
7.3 Survival.
The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by any investor in the Company and the Closing of the
transactions contemplated hereby, including any conversion of the Note. All
statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company or any of its officers
pursuant hereto or in connection with the transactions contemplated hereby
shall
be deemed to be representations and warranties by the Company hereunder as
of
the date of such certificate or instrument.
7.4 Successors
and Assigns.
This
Agreement is not transferable by the Company, whether by sale, pledge or other
disposition, without the prior written consent of the Lender which consent
may
be withheld in Lender’s sole discretion, except that the Company may transfer
this Agreement without such consent in connection with a merger or other similar
transaction involving the Company. This Agreement is not transferable by the
Lender, whether by sale, pledge or other disposition, without the prior written
consent of the Company which consent may be withheld in the Company’s sole
discretion, except that the Lender may transfer this Agreement without such
consent to an affiliate of the Lender. Notwithstanding the foregoing, any such
transferee or assignee must agree to be bound by the terms of, and make the
representations required by, the Note and this Agreement. Any transfer in
violation hereof shall be void. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties
hereto.
7.5 Entire
Agreement.
The
Agreement (including the exhibits attached hereto) and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and
thereof.
7.6 Notices,
etc.
All
notices and other communications required or permitted hereunder shall be
effective upon receipt and shall be in writing and may be delivered in person,
by
telecopy, electronic mail, overnight delivery service or U.S. mail, in which
event it may be mailed by first-class, certified or registered, postage prepaid,
addressed (a) if to an Lender, at such Lender’s address set forth on the
signature page of this Agreement, or at such other address as such Investor
shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such Securities who has so furnished an address to the Company, or
(b)
if to the Company, at its address set forth on the signature page of this
Agreement, or at such other address as the Company shall have furnished to
the
Lender and each such other holder in writing.
7
7.7 Separability
of Agreement; Severability of this Agreement.
If any
provision of this Agreement shall be judicially determined to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
The
parties further agree to replace any such invalid, illegal or unenforceable
provision with enforceable provisions, which will achieve, to the extent
possible, the economic, business and other purposes of the invalid, illegal
or
unenforceable provisions.
7.8 Payment
of Fees and Expenses.
The
Company and the Lender shall each bear their own expenses incurred with respect
to this transaction.
7.9 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
an original, but all of which together shall be deemed to constitute one
instrument.
7.10
Headings;
Exhibits.
The
headings in this Agreement are for convenience and ease of reference and are
not
to be considered in construction or interpretation of this Agreement nor as
evidence of the intention of the parties hereto. All exhibits and attachments
are incorporated herein by reference.
7.11 Interpretation.
No
presumption or burden of proof or persuasion will be implied because this
Agreement was prepared by or at the request of any party or its
counsel.
7.12
Injunctive
Relief.
The
parties acknowledge and agree that breach of this Agreement by the Company
cannot adequately be recompensed by damages, that a remedy at law would be
inadequate and accordingly the Company agrees that in the event of such breach
Lender shall be entitled to such injunctive and equitable relief as a court
of
equity may determine. The Company waives the requirement of Lender posting
bond
as a condition to seeking equitable relief.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
8
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and
delivered by their proper and duly authorized officer as of the date and year
first written above.
| ▇▇▇▇▇▇▇ Technologies, Inc. | ||
| |
|
|
| By: |
/s/ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
|
| Name: |
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
|
| Title: |
Chief
Executive Officer
|
|
| By: |
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
|
| Name: |
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
|
| Title: |
Chief
Financial Officer
|
|
| Broidy Capital Management | ||
| |
|
|
| By: |
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
|
| Name: |
▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
|
| Title: |
Chairman
|
|
| ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | ||
| |
|
|
| By: |
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
|
| Name: |
▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
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9
EXHIBIT A
▇▇▇▇▇▇▇
▇▇▇▇▇▇’▇ Ownership Percentage Prior to
the Transaction
|
Shares
|
Authorized
|
Issued
and Outstanding
|
|
GWLK
|
60,000,000
|
26,868,571
|
|
Trace
Technologies LLC
|
2,000
|
|
|
Resilient
LLC
|
23,635
|
|
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
675,000
|
|
Shares
|
Authorized
|
Issued
and Outstanding
|
|
GWLK
|
3,150,000*
|
|
|
Trace
Technologies LLC
|
500**
|
|
|
Resilient
LLC
|
|
|
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
n/a
|
|
* Employee
options @ $1.00
**
Management
options @ $2,000
|
Shares
|
Authorized
|
Issued
and Outstanding
|
|
GWLK
|
|
5,909,647***
|
|
Trace
Technologies LLC
|
|
|
|
Resilient
LLC
|
|
|
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
|
575,000
|
***
Resilient
Warrants (one million)
10
EXHIBIT
B
[OLD
PROMISSORY NOTE]
11
EXHIBIT
C
THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT
WITH
A VIEW TO OR IN CONNECTION WITH ANY SALE OR DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES,
AN
OPINION OF COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY IN FORM AND SUBSTANCE
TO THE COMPANY THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT
REQUIRED.
▇▇▇▇▇▇▇
TECHNOLOGIES CORP.
CONVERTIBLE
SENIOR PROMISSORY NOTE
| $1,000,000 |
Los
Angeles, California
January
6,
2006
|
1. Principal
and Interest.
Subject
to the terms and conditions contained herein, ▇▇▇▇▇▇▇ Technologies Corp., (the
“Company”), a Delaware corporation, for value received, hereby promises to pay
to the order of Broidy Capital Management or holder (“Lender”) in lawful money
of the United States at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the principal amount of One Million Dollars ($1,000,000),
together with simple interest at a rate equal to nine percent (9.0%) per annum,
which interest shall be paid to Lender for the first three months to be paid
April 1, 2006. Subsequent to such quarterly payment, interest shall be paid
by
Company monthly.
In
exchange for this Convertible Senior Promissory Note, Lender has loaned to
the
Company a total of One Million Dollars $1,000,000, comprised of:
|
(a)
|
A
Two Hundred Thousand Dollar ($200,000) loan made by Lender on or
about
December 9, 2005;
|
|
(b)
|
Twenty
Five Thousand Dollars ($25,000) in
non-accountable expenses to be incurred by Lender in connection with
this
transaction, including but no limited to documentation costs;
and
|
|
(c)
|
Seven
Hundred Seventy Five Thousand Dollars ($775,000) to be wired to ▇▇▇▇▇▇▇
in
immediately available funds upon finalization and signature of this
agreement and any ancillary documents
thereto.
|
12
The
principal of this Convertible Note is due and payable on January 6, 2007 (the
“Maturity Date”), unless this Convertible Note is earlier converted or prepaid
in accordance herewith. All interest on this Convertible Note is due and payable
on the Maturity Date.
2. Subordination
and Seniority.
Other
than the Company’s Revolving Credit Facility with the Nebraska State Bank,
entered into as of August 12, 2005, so long as the Convertible Note is
outstanding Lender’s rights under the Convertible Note shall be senior to and
shall have priority in payment of principal and interest as against any other
promissory notes or indebtedness of the Company.
3. Conversion
or Repayment.
The
Company and Lender agree that at any time so long as the Convertible Note is
outstanding, subject to the Prepayment provision of Section 6 below, Lender
has
the right to convert the Convertible Note (the “Conversion Right”) into up to
$1,000,000 worth of common stock of the Company at a per share price of $1.00
(the “Strike Price”). Lender may exercise the Conversion Right by informing the
Company either in writing or electronically that it intends to do
so.
4. Antidilution.
The
Company and Lender agree that so long as any amounts are owed to the Lender
by
the Company under this Convertible Note, should the Company issue securities,
options, warrants or derivatives of any kind with an exercise or strike price
less than One Dollar and Fifty Cents ($1.50) per share, then the Strike Price
of
the Conversion Right will be reduced by the percentage of the difference between
$1.50 and
the
price of the issued security, option warrant or derivative. Thus, by way of
example, if while the Convertible Note is still outstanding the Company were
to
issue securities, warrants, options or derivatives with an exercise price of
$.75 — i.e.
a
total
of 50% (75/150) below
$1.50— then the $1.00 Strike Price referred to in Section 3.5 shall
likewise be reduced by 50% - i.e.
to
$.50 ($1.00*50%)
per share — and Lender would therefore have the option of converting the
Convertible Note into a total of 2,000,000 shares.
5. Security.
To
guaranty and as security for repayment of the full principal amount of the
Convertible Note plus interest, Lender shall receive a priority security
interest in all of the assets and intellectual property of (i) the Company
and
(ii) Resilent LLC dba Digital Defense (the “Security Interest”). Company and
Lender shall work together to promptly perfect Lender’s Security Interest in
such assets and intellectual property.
As
additional security for repayment of the full principal amount of the Note
plus
interest the Company shall pledge to Lender (i) all of the securities in the
possession, custody or control of Company after its transaction with Resilent
LLC, a Nebraska limited liability company, scheduled to take place on or about
January 1115, 2006 and Company will also forward to Lender immediately upon
receipt the Unit Certificate from Resilent LLC representing 11,818 Units;.
and
(ii) 3,000,000 shares of the Company’s common treasury stock (together, the
“Pledged Securities”). Upon closing Company will instruct the Transfer Agent to
transfer to Lender stock certificates sufficient to transfer the full amount
of
the Pledged Securities to Lender, together with documentation sufficient to
transfer all associated stock powers to Lender in the event that the Company
defaults under this Convertible Note.
13
After
Closing, title to and ownership of the Pledged Securities shall remain with
the
Company unless and until this Convertible Note is paid off in full. In the
event
that this Convertible Note is not paid off in full upon the Maturity Date,
however, title to and ownership of the Pledged Securities shall automatically
transfer to Lender and the Company shall document and effectuate such transfer,
including the transfer of all associated stock powers, of the registered
securities within five (5) business days of the Maturity Date. Transfer of
the
Pledged Securities to Lender shall not impinge or limit in any way Lender’s
additional rights under this Convertible Note. Lender’s security interest in the
Pledged Securities shall immediately cease upon (i) the Company’s repayment of
all amounts, including interest, due and outstanding under the Convertible
Note
or (ii) Lender’s exercise of the Conversion Right
6. Prepayment.
The
Company agrees that it may prepay principal amounts owed to Lender under this
Convertible Note provided that the Company provides fifteen (15) days written
notice and confirmation of the receipt of such notice by Lender. Lender shall
be
able to exercise his Conversion Right under this Note during the period that
the
Company has provided notice of its desire to prepay principal but before such
prepayment has taken place.
7. Attorneys’
Fees.
If the
indebtedness represented by this Convertible Note or any part thereof is
collected in bankruptcy, receivership or other judicial proceedings or if this
Convertible Note is placed in the hands of attorneys for collection after
default, the Company agrees to pay, in addition to the principal and interest
payable hereunder, reasonable attorneys’ fees and costs incurred by
Lender.
8. Notices.
Any
notice, other communication or payment required or permitted hereunder shall
be
in writing and shall be deemed to have been given upon delivery if delivered
in
accordance with the terms of the Note Subscription Agreement.
9. Acceleration.
This
Convertible Note shall become immediately due and payable if (i) the Company
commences any proceeding in bankruptcy or for dissolution, liquidation,
winding-up, composition or other relief under state or federal bankruptcy laws;
(ii) such proceedings are commenced against the Company, or a receiver or
trustee is appointed for the Company or a substantial part of its property,
and
such proceeding or appointment is not dismissed or discharged within 60 days
after its commencement; or (iii) the Company materially breaches its obligations
under the Note Subscription Agreement.
10.
Waivers.
The
Company hereby waives presentment, demand for performance, notice of
non-performance, protest, notice of protest and notice of dishonor. No delay
on
the part of Lender in exercising any right hereunder shall operate as a waiver
of such right or any other right. This Note shall be construed in accordance
with the laws of the State of Delaware, without regard to the conflicts of
laws
provisions thereof. Any lawsuit or litigation arising under, out of, in
connection with, or in relation to this Agreement, any amendment thereof, or
the
breach thereof, shall be brought in the courts of Los Angeles, California,
which
courts shall have exclusive jurisdiction over any such lawsuit or
litigation.
14
11. Assignment.
This
Convertible Note is not transferable by the Company, whether by sale, pledge
or
other disposition, without the prior written consent of Lender which consent
may
be withheld in Lender’s sole discretion, except that the Company may transfer
this Note without such consent in connection with a merger or other similar
transaction involving the Company.
12. Nevada
Law.
This
Note shall be governed by and interpreted in accordance with the laws of the
State of Nevada.
IN
WITNESS WHEREOF, ▇▇▇▇▇▇▇ Technologies Corp. has caused this Convertible Senior
Promissory Note to be executed by its officer thereunto duly
authorized.
|
▇▇▇▇▇▇▇
TECHNOLOGIES CORP.
|
||
| |
|
|
| By: |
|
|
| Name: |
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
|
| Title: |
Chief
Executive Officer
|
|
| By: |
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
|
| Name: |
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
|
| Title: |
Chief
Financial Officer
|
|
15
EXHIBIT
D
REPRESENTATIONS
AND WARRANTIES OF LENDER
Lender
hereby represents and warrants to the Company as follows:
|
1.
|
Authorization.
When executed and delivered by the Lender, this Agreement will constitute
the valid and legally binding obligation of the Lender, enforceable
in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting the enforcement of creditors’ or
security holders’ rights.
|
|
2.
|
Purchase
for Own Account.
Lender is acquiring the Convertible Note for its own account and
for
investment purposes only and not with a view to, or for resale in
connection with, any “distribution” of all or any portion thereof within
the meaning of the Securities Act of 1933, as amended, subject,
nevertheless, to the condition that the disposition of the property
of
Lender shall at all times be within their
control.
|
|
3.
|
Disclosure
of Information.
Lender has been afforded an opportunity to ask such questions of
the
Company’s agents, accountants and other representatives concerning the
Company’s proposed business, operations, financial condition, assets,
liabilities and other relevant matters as he has deemed necessary
or
desirable, and has been given all such information as has been requested,
in order to evaluate the merits and risks of the investment contemplated
herein.
|
|
4.
|
Experience.
Lender is experienced in evaluating and investing in companies such
as the
Company. The Lender has no need for liquidity in the investment in
the
Convertible Note, has the ability to bear the economic risk of such
investment and can afford a complete loss of the purchase
price.
|
|
5.
|
Accredited
Investor.
Lender is an “accredited investor” as defined in Regulation D issued under
the Securities Act of 1933, as amended, and is familiar with the
requirements under said Regulation D for being deemed an accredited
investor.
|
|
6.
|
Restricted
Securities.
Lender understands that the Convertible Note being purchased hereunder
and
any shares acquired pursuant to the Conversion Right are characterized
as
“restricted securities” under the federal securities laws since 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 Securities
Act
only in certain limited circumstances. Lender represents that it
is
familiar with Rule 144 promulgated by the Securities and Exchange
Commission, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act of 1933, as amended. The
undersigned understands that the Company is relying on Section 4(2)
under
the Securities Act of 1933, as amended, which provides an exemption
from
registration under the Securities Act of 1933, as
amended.
|
Notwithstanding
the foregoing, as part of this transaction the Company has agreed to enter
into
a registration rights agreement (the “Registration Rights Agreement”) identical
in
form
to the Registration Rights Agreement attached to this Convertible Note as
Exhibit
H.
The
Registration Rights Agreement shall obligate the Company to register the
securities underlying (i) the Warrants, (ii) this Convertible Note, (iii) all
Pledged Securities and (iv) all warrants owned by Broidy as of the date of
this
Agreement, all within 150 days of the date hereof.
16
|
7.
|
Further
Limitations on Disposition.
Without in any way limiting the representations set forth above,
Lender
further agrees not to make any disposition of all or any portion
of the
Note being purchased hereunder or of any shares acquired pursuant
to the
Conversion Right except in compliance with applicable state securities
laws and unless and until:
|
|
a.
|
Registration
Statement.
There is then in effect a registration statement under the Securities
Act
covering such proposed disposition and such disposition is made in
accordance with such registration
statement;
|
|
b.
|
Rule
144.
Such disposition is made in accordance with Rule 144 under the Securities
Act; or
|
|
c.
|
Notified
Company.
Lender shall have notified the Company of the proposed disposition
and
shall have furnished the Company with a statement of the circumstances
surrounding the proposed disposition, and, if requested by the Company,
the Lender shall have furnished the Company with an opinion of counsel
acceptable to the Company, that such disposition will not require
registration under the Securities Act of 1933, as amended, and will
be in
compliance with applicable state securities
laws.
|
|
8.
|
Legends.
Lender understands and acknowledges that the certificates evidencing
the
Convertible Note purchased hereunder (or any certificate evidencing
(i)
any shares acquired pursuant to the Conversion Right, or (ii) any
other
securities issued with respect thereto pursuant to any stock split,
stock
dividend, merger or other form of reorganization or recapitalization)
shall bear, in addition to any other legends which may be required
by this
Agreement or applicable state securities laws the following
legend:
|
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (“ACT”), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES LAWS OF ANY STATE. NO TRANSFER OF SUCH SECURITIES WILL BE
PERMITFED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO
SUCH
TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR
IN
THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REGISTRATION
UNDER
THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND
WITH APPLICABLE STATE SECURITIES LAWS.
17
|
9.
|
Residence.
If Lender is an individual, then Lender resides in the state or
province
identified in the address of the Lender set forth on the signature
page of
this Agreement; if Lender is an entity, then the office or offices
of
Lender in which its investment decision was made is located at
the address
of the Investor set forth on the signature page of this
Agreement.
|
| Broidy Capital Management | ||
|
|
||
| By: |
/s/ ▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
|
| Name: |
▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
|
| Title: |
Chairman
|
|
18
EXHIBIT
E
REPRESENTATIONS
AND WARRANTIES OF COMPANY
The
Company hereby represents and warrants to the Lender as follows:
|
1.
|
Organization
and Standing.
The Company is a corporation duly organized and existing under, and
by
virtue of, the laws of the State of Delaware and is in good standing
under
such laws. The Company has requisite corporate power and authority
to own
and operate its properties and assets and to carry on its business
as
presently conducted.
|
|
2.
|
Due
Qualification.
The Company and each of its subsidiaries shall be duly qualified
to do
business as a foreign company in good standing, and shall have obtained
all necessary licenses and approvals in all jurisdictions in which
the
ownership or lease of property or the conduct of its business shall
require such qualifications and where the failure to so qualify will
have
a material adverse effect on the ability of the Company or such subsidiary
to conduct its business or perform its obligations under this
Agreement.
|
|
3.
|
Corporate
Power and Authority.
The Company and each of its subsidiaries have all requisite legal
and
corporate power and authority to execute and deliver this Agreement
and
the Convertible Note (the “Transaction Documents”). All corporate action
on the part of the Company and its subsidiaries and their directors
and
stockholders necessary for the authorization, execution, delivery
and
performance of the Transaction Documents and the performance of the
Company’s obligations under the Transaction Documents has been taken or
will be taken prior to the Closing. The Transaction Documents, when
executed and delivered by the Company and its subsidiaries, shall
constitute valid and binding obligations of the Company, enforceable
in
accordance with their terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and
rules of
law governing specific performance, injunctive relief or other equitable
remedies.
|
|
4.
|
Subsidiaries.
The Company has one subsidiary and/or affiliated company, Trace
Technologies LLC, a Nevada limited liability company. Other than
Trace
Technologies it does not otherwise own or control, directly or indirectly,
any equity interest in any corporation, association or business
entity.
|
|
5.
|
Consent.
No consent, approval order or authorization of or registration,
qualification, designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with
the
valid execution, delivery and performance of the Transaction Documents,
except the qualification (or taking of such action as may be necessary
to
secure an exemption from qualification, if available) of the offer
and
sale of the Notes under applicable Blue Sky laws, which filings and
qualifications, if required, will be accomplished in a timely
manner.
|
|
6.
|
Conflicts.
The execution, delivery and performance of the Transaction Documents
by
the Company and the consummation of the transactions contemplated
hereby
and thereby do not and will not conflict with or result in a violation
of
any provision of the Company’s Certificate of Incorporation or Bylaws or
violate or conflict with any material agreements to which the Company
is a
party or, to the best of its knowledge, any law, rule or decree applicable
to the Company, except for such violations or conflicts which,
individually or in the aggregate, would not have a material adverse
effect
on the Company.
|
19
|
7.
|
Litigation.
There is no action, suit, claim, proceeding or investigation pending
or,
to the Company’s knowledge, threatened against the Company or any of its
officers or directors in writing at law or in equity or by any government
agency or instrumentality. The Company, its officers and its directors
have disclosed to Investor all prior litigation, investigations or
proceedings to which they have been a
party.
|
|
8.
|
Registration
of Securities.
Notwithstanding the foregoing, as part of this transaction the Company
has
agreed to enter into a registration rights agreement (the “Registration
Rights Agreement”) identical in form to the Registration Rights Agreement
attached to this Convertible Note as Exhibit
H.
The Registration Rights Agreement shall obligate the Company to register
the securities underlying (i) the Warrants, (ii) this Convertible
Note,
(iii) all Pledged Securities and (iv) all warrants owned by Broidy
as of
the date of this Agreement, all within 150 days of the date
hereof.
|
|
9.
|
Financial
Condition.
The Company has heretofore made available to Lender the financial
statements and information for the period ended September 30, 2005.
All
such statements, other than pro forma financial statements, were
prepared
in conformity with GAAP and fairly present, in all material respects,
the
financial position of the Company as at the respective dates thereof
and
the results of operations and cash flows of the Company for each
of the
periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end
adjustments. The Company has no contingent obligation, contingent
liability or liability for taxes, long-term lease or unusual forward
or
long-term commitment that, as of the Closing Date, is not reflected
in the
foregoing financial statements or the notes
thereto.
|
20
|
10.
|
Intellectual
Property.
As of the Closing Date, the Company owns or has the right to
use, all
Intellectual Property used in the conduct of its business, except
where
the failure to own or have such right to use in the aggregate
could not
reasonably be expected to result in a material adverse effect.
No claim
has been asserted and is pending challenging or questioning the
use of any
such Intellectual Property or the validity or effectiveness of
any such
Intellectual Property, nor does the Company know of any valid
basis for
any such claim, except for such claims that in the aggregate
could not
reasonably be expected to result in a material adverse effect.
The use of
such Intellectual Property by the Company does not infringe on
the rights
of any person, except for such claims and infringements that,
in the
aggregate, could not reasonably be expected to result in a material
adverse effect. All patents and patents-pending attributable
to the
Company have been appropriately filed and copies provided to
the
Investor.
|
|
▇▇▇▇▇▇▇
Technologies Corp.
|
||
| |
|
|
| By: |
|
|
| Name: |
|
|
| Title: |
Chief
Executive Officer
|
|
| By: |
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
|
| Name: |
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
|
| Title: |
Chief
Financial Officer
|
|
21
EXHIBIT
F
[Resilent
Option]
22
EXHIBIT
G
[Warrant
Agreement]
23
CLASS
A WARRANT OF
▇▇▇▇▇▇▇
TECHNOLOGIES CORPORATION
INCORPORATED
UNDER THE LAWS OF
THE
STATE OF DELAWARE
1.1 Basic
Terms. This certifies that, for value received, the registered owner
set forth below (“Registered Owner,” “Owner” or “Warrant holder”) is entitled,
subject to the terms and conditions of this Class A Warrant (“Class A Warrant”
or “Warrant”), until the expiration date set forth below, to purchase 1,000,000
shares of the Common Stock, par value $0.001 (“the Common Stock”), of ▇▇▇▇▇▇▇
Technologies Corporation (the “Corporation”) from the Corporation at the
purchase price shown below, on delivery of this Warrant to the Corporation
with
the exercise form duly executed and payment of the purchase price (in cash
or by
certified or bank cashier’s check payable to the order of the Corporation) for
each share purchased.
Registered
Owner: ▇▇▇▇▇▇▇
▇▇▇▇▇▇
Purchase
Price:
(until
November 30, 2009)
One Dollar ($1.00) a share
Expiration
Date:
3:00
p.m.
November 30, 2009, unless terminated sooner under this
Warrant.
1.2 Corporation’s
Covenants as to Common Stock. Shares deliverable on the exercise of
this Warrant shall, at delivery, be fully paid and non-assessable, free from
taxes, liens, and charges with respect to their purchase. The Corporation shall
take any necessary steps to assure that the par value per share of the Common
Stock is at all times equal to or less than the then current Warrant purchase
price per share of the Common Stock issuable pursuant to this Warrant. The
Corporation shall at all times reserve and hold available sufficient shares
of
Common Stock to satisfy all conversion and purchase rights of outstanding
convertible securities, options, and warrants.
1.3 Method
of Exercise; Fractional Shares. The purchase rights represented by this
Warrant are exercisable at the option of the Registered Owner within 60 days
upon receipt of written notice from the Corporation and holder shall have the
right to exercise this Warrant when written demand is received from the
Corporation, provided, however, that purchase rights are not exercisable with
respect to a fraction of a share of Common Stock. In lieu of issuing a fraction
of a share remaining after exercise of this Warrant as to all full shares
covered hereby, the Corporation shall either (a) pay therefor cash equal to
the
same fraction of the then current Warrant purchase price per share or, at its
option, (b) issue scrip for the fraction, in registered or bearer form approved
by the Board of Directors of the Corporation, which shall entitle the holder
to
receive a certificate for a full share of Common Stock on surrender of scrip
aggregating a full share. Scrip may become void after a reasonable period (but
not less than six months after the expiration date of this Warrant) determined
by the Board of Directors and specified in the scrip. In case of the exercise
of
this Warrant for less than all the shares available for purchase, the
Corporation shall cancel the Warrant and execute and deliver a new Warrant
of
like tenor and date for the balance of the shares purchasable.
24
1.4 Adjustment
of
Shares Available for Purchase. The number of shares available for
purchase hereunder and the purchase price per share are subject to adjustment
from time to time by the Corporation as specified in this Warrant.
1.5 Limited
Rights of Owner. This Warrant does not entitle the Registered Owner to
any voting rights or other rights as a Stockholder of the Corporation, or to
any
other rights whatsoever except the rights herein expressed. No dividends are
payable or will accrue on this Warrant or the shares available for purchase
hereunder until and except to the extent that this Warrant is
exercised.
1.6 Exchange
for Other Denominations. This Warrant is exchangeable, on its surrender
by the Registered Owner to the Corporation, for new Warrants of like tenor
and
date representing in the aggregate the right to purchase the number of shares
available for purchase hereunder in denominations designated by the registered
owner at the time of surrender.
1.7 Transfer.
Except as otherwise above provided, this Warrant is transferable only on the
books of the Corporation by the Registered Owner or by attorney, on surrender
of
this Warrant, properly endorsed.
1.8 Recognition
of
Registered Owner. Prior to due presentment for registration of transfer
of this Warrant, the Corporation may treat the Registered Owner as the person
exclusively entitled to receive notices and otherwise to exercise rights
hereunder.
1.9 Effect
of Stock Split, Etc. If the Corporation, by stock dividend, split,
reverse split, reclassification of shares, or otherwise, changes as a whole
the
outstanding Common Stock into a different number or class of shares,
then:
(a) the
number and class of
shares so changed shall, for the purposes of this Warrant, replace the shares
outstanding immediately prior to the change; and
25
(b) the
Warrant purchase
price in effect, and the number of shares available for purchase under this
Warrant, immediately prior to the date upon which the change becomes effective,
shall be proportionately adjusted (the price to the nearest cent). Irrespective
of any adjustment or change in the Warrant purchase price or the number of
shares purchasable under this or any other Warrant of like tenor, the Warrants
theretofore and thereafter issued may continue to express the Warrant purchase
price per share and the number of shares available for purchase as the Warrant
purchase price per share and the number of shares available for purchase were
expressed in the Warrants when initially issued.
1.10
Effect of Merger, Etc. If the Corporation consolidates
with or merges into another corporation, the Registered Owner shall thereafter
be entitled on exercise to purchase, with respect to each share of Common Stock
purchasable hereunder immediately before the consolidation or merger becomes
effective, the securities or other consideration to which a holder of one share
of Common Stock is entitled in the consolidation or merger without any change
in
or payment in addition to the Warrant purchase price in effect immediately
prior
to the merger or consolidation. The Corporation shall take any necessary steps
in connection with a consolidation or merger to assure that all the provisions
of this Warrant shall thereafter be applicable, as nearly as reasonably may
be,
to any securities or other consideration so deliverable on exercise of this
Warrant. The Corporation shall not consolidate or merge unless, prior to
consummation, the successor Corporation (if other than the Corporation) assumes
the obligations of this paragraph by written instrument executed and mailed
to
the Registered Owner at the address of the owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily of securities is a consolidation or merger for the
foregoing purposes.
1.11 Notice
of Adjustment. On the happening of an event requiring an adjustment of
the Warrant purchase price or the shares available for purchase hereunder,
the
Corporation shall forthwith give written notice to the Registered Owner stating
the adjusted Warrant purchase price and the adjusted number and kind of
securities or other property available for purchase hereunder resulting from
the
event and setting forth in reasonable detail the method of calculation and
the
facts upon which the calculation is based. The Board of Directors of the
Corporation, acting in good faith, shall determine the calculation.
1.12 Notice
and Effect of Dissolution. In case a voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation (other than in
connection with a consolidation or merger covered by paragraph 1.10 above)
is at
any time proposed, the Corporation shall give at least a 30 day written notice
to the registered owner. Such notice shall contain: (a) the date on which the
transaction is to take place; (b) the record date (which shall be at least
30
days after the giving of the notice) as of which holders of Common Shares will
be entitled to receive distributions as a result of the transaction; (c) a
brief
description of the transaction; (d) a brief description of the distributions
to
be made to holders of Common Stock as a result of the transaction; and (e)
an
estimate of the fair value of the distributions. On the date of the transaction,
if it actually occurs, this Warrant and all rights hereunder shall
terminate.
26
1.13 Method
of Giving Notice; Extent Required. Notices shall be given by first
class mail, postage prepaid, addressed to the Registered Owner at the address
of
the Owner appearing in the records of the Corporation. No notice to Warrant
holders is required except as specified herein.
1.14 Warrant
is Restricted. Warrant and underlying shares represented by this
Warrant have not been registered under the Securities Act of 1933 (“the Act”);
and are “Restricted Securities” as that term is defined in Rule 144 under the
Act. The Warrants and underlying shares may not be offered for sale, sold or
otherwise transferred except pursuant to an effective Registration Statement
under the Act or pursuant to an exemption from registration under the Act,
the
availability of which is to be established to the satisfaction of the
Company.
1.15.
Right to Demand Registration. If at any time between
the period of six (6) months from the date of the Warrant and fourteen (14)
months from the date of the Warrant (the “Eligible Period”) the Warrant holder
requests in writing (the “Warrant holder Demand”) that the Company file a
registration statement on Form SB-2 (or any successor form to Form SB-2) for
a
public offering of the shares underlying the Warrants the Company shall, subject
to Company’s right to delay or suspend filing or effectiveness of a Registration
Statement for a period not to exceed sixty (60) days from receipt of Warrant
holder Demand due to Company’s determination that failure to delay or suspend
the filing would be seriously detrimental to the company or its stockholders,
file such Registration Statement with the SEC within forty-five (45) days after
its receipt of such request. The Company shall use commercially reasonable
efforts to cause such Registration Statement to be declared effective as soon
thereafter as practicable and keep such Registration Statement effective until
the Warrant holder notifies the Company in writing that the Company is no longer
required to keep such Registration Statement effective. In the event the
registration is proposed to be part of a firm commitment underwritten public
offering, the substantive provisions of Section 1.17 shall be applicable to
each
such registration initiated under this Section 1.15 and the piggyback
registration rights of Warrant holders (to the extent provided for in Section
1.16 of this Agreement) shall be applicable to a registration effected pursuant
to this Section 1.15.
27
1.16.
Piggyback Registration. If at any time during the
Eligible Period, the Company proposes to register (for its own account, on
behalf of its existing shareholders or warrant holders, or a combination of
the
foregoing) any of its common stock under the 1933 Act in connection with a
public offering of such common stock (other than a registration relating
primarily to the sale of securities to participants in a Company stock plan
of
employee benefit plan, a transaction covered by Rule 145 under the 1933 Act
or
the resale of securities issued in such a transaction, a registration in which
the only stock being registered is Common Stock issuable upon conversion or
exchange of debt securities which are also being registered, any registration
on
any form which does not include substantially the same information as would
be
required to be included in a registration statement covering the sale of the
registrable shares underlying the Warrant) the Company shall, at such time,
give
the Warrant holder notice of such registration. Upon the written request of
the
Warrant holder, given within ten (10) days after notice has been given by the
Company in accordance with this Section 1.16, the Company shall, subject to
Section 1.17, cause to be registered under the 1933 Act all of the registrable
shares underlying the Warrant that the Warrant holder has requested to be
registered.
1.17 Underwriting
Requirements. In connection with any underwritten public offering, the
Company shall not be required to include any of the shares underlying the
Warrants in such underwriting unless the Warrant holder accepts the terms of
the
underwriting as agreed upon between the Company and the underwriters for the
offering (which underwriters shall be selected by the Company).
1.18.
Most Favored Nation Clause. In the event that Company issues any option
or warrant that is exercisable into ▇▇▇▇▇▇▇ Common Stock with an expiration
date
later than that of the Class A Warrants, Company agrees to extend to expiration
dates of such Class A Warrants to the later date.
1.19. Anti-Dilution.
In the event
that Company issues any future options, warrants, or common stock with an
exercise price below $1.00 per share, the exercise price of the Class A Warrants
shall be reduced to the same price.
1.20. Cashless
Exercise. The Class A Warrants shall be eligible for “cashless
exercise,” meaning that the Class A Warrants may be converted into the
corresponding number of ▇▇▇▇▇▇▇ Common Shares without cash payment or other
remuneration by the Class A Warrant Holder, when the following circumstance
exists:
28
|
(a)
|
If
the Company fails to file a registration statement within 150 days
from
the date of this agreement with the Securities and Exchange Commission
covering the common shares underlying the Class A
Warrants.
|
|
(b)
|
If
at any time during the warrant exercise period the Company issues
a
dividend, the $1.00 warrant strike price shall be offset by the amount
of
the dividend, e.g., if a dividend of $0.25 per share were issued,
then the
warrant exercise price would be reduced by $0.25, such that the warrants
could be exercised for $0.75 per share. In the event that any such
dividend is $1.00, then a cashless exercise of the warrant would
be
permitted, and the underlying share will be delivered to the warrant
holder for no fee. If the dividend is in excess of the $1.00 strike
price
of the warrant, the underlying share and that amount of the dividend
in
excess of the $1.00 strike price will be delivered to the Warrant
Holder
for each warrant exercised.
|
WITNESS
the seal of the Corporation and the signatures of its authorized
Officers.
Dated
this — day of _________________,2006.
| ▇▇▇▇▇▇▇ TECHNOLOGIES CORPORATION | ||
| |
|
|
| By: | ____________________________________ | |
| Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | ||
| Title: CEO | ||
29
EXHIBIT
H
[Registration
Rights Agreement]
30
REGISTRATION
RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”)
is made
and entered into as of January 6, 2006, among ▇▇▇▇▇▇▇ Technologies Corp., a
Delaware corporation (the “Company”), and Broidy Capital Management, a
California sole proprietorship and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, an individual (together,
“Broidy”).
This
Agreement is made in connection with the related Convertible Senior Promissory
Note Subscription Agreement and Warrant Agreement, both dated as of January
6,
2006 among the Company and Broidy (the “Convertible Note”).
The
Company and Broidy hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein that are defined in
the
Convertible Note shall have the meanings given such terms in the Convertible
Note. As used in this Agreement, the following terms shall have the following
meanings:
“Effectiveness
Date”
means,
with respect to the Registration Statement required to be filed hereunder,
the
150th
calendar
day following the date hereof; provided,
however,
in the
event the Company is notified by the Commission that the Registration Statement
will not be reviewed or is no longer subject to further review and comments,
the
Effectiveness Date as to such Registration Statement shall be the fifth Trading
Day following the date on which the Company is so notified if such date precedes
the date required above.
“Effectiveness
Period”
shall
have the meaning set forth in Section 2(a).
“Event”
shall
have the meaning set forth in Section 2(b).
“Event
Date”
shall
have the meaning set forth in Section 2(b).
“Holder”
or
“Holders”
means
the holder or holders, as the case may be, from time to time of Registrable
Securities.
“Indemnified
Party”
shall
have the meaning set forth in Section 5(c).
“Indemnifying
Party”
shall
have the meaning set forth in Section 5(e).
“Losses”
shall
have the meaning set forth in Section 5(a).
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether
commenced or threatened.
“Prospectus”
means
the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
31
“Registrable
Securities”
means
all of the shares of the Company’s Common Stock (i) issuable upon conversion of
the Convertible Note, (ii) the 675,000 shares currently owned by Broidy; (iii)
the 3,000,000 shares of the Company’s Common Stock pledged as collateral under
Section 4.2 of the Convertible Note; (iv) the shares of the Company’s Common
Stock issuable upon exercise of the 1,000,000 share warrant issued to Broidy
pursuant to Section 7 of the Convertible Note and (v) the warrant for 477,500
shares held by Broidy currently, together with any shares of Common Stock issued
or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing held by Broidy
or his assignee, which are not eligible for sale pursuant to Rule 144(k) as
of
the Filing Date, or which cannot be publicly sold absent a Registration
Statement.
“Registration
Statement”
means
the registration statements required to be filed hereunder, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement.
“Rule
415” means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.
“Rule
424”
means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.
2. Consequences
of Not Going Effective Timely.
(a) The
Company shall promptly prepare and file with the Commission a Registration
Statement covering the resale of 100% of the Registrable Securities for an
offering to be made by Holder on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in
which
case such registration shall be on another appropriate form in accordance
herewith). Subject to the terms of this Agreement, the Company shall use its
commercially reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event prior to the applicable Effectiveness Date,
and
shall use its commercially reasonable efforts to keep such Registration
Statement continuously effective under the Securities Act until all Registrable
Securities covered by such Registration Statement have been sold or may be
sold
without volume restrictions pursuant to Rule 144(k) as determined by the counsel
to the Company pursuant to a written opinion letter to such effect, addressed
and acceptable to the Company’s transfer agent and the Holder (the “Effectiveness
Period”).
32
(b) If
a
Registration Statement filed or required to be filed hereunder is not declared
effective by the Commission by its Effectiveness Date, or after the
Effectiveness Date and during the Effectiveness Period, a Registration Statement
ceases for any reason to remain continuously effective as to all Registrable
Securities for which it is required to be effective, or the Holder is not
permitted to utilize the Prospectus therein to resell such Registrable
Securities for 15 consecutive Trading Days but no more than an aggregate of
25
Trading Days during any 12-month period (which need not be consecutive Trading
Days) (any such failure or breach being referred to as an “Event”),
then,
in addition to any other rights the Holder may have hereunder or under
applicable law, on each monthly anniversary of each Event Date beginning with
the first monthly anniversary of the applicable Event Date (if the applicable
Event shall not have been cured by such date) until the applicable Event is
cured, the exercise price of the 1,000,000 share warrant issued pursuant to
Section 7 of the Convertible Note shall be reduced by 10%.
3. Registration
Procedures
In connection with the Company’s registration obligations hereunder, the Company
shall:
(a) Not
less
than five Trading Days prior to the filing of each Registration Statement or
any
related Prospectus or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), the Company shall, (i) furnish to the Holder copies of the “Selling
Stockholders” and “Plan of Distribution” sections of the Registration Statement
documents proposed to be filed, which documents (other than those incorporated
or deemed to be incorporated by reference) will be subject to the review of
such
Holder, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of counsel to Holder to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file a Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holder of the Registrable Securities shall
reasonably object in good faith, provided that, the Company is notified of
such
objection in writing no later than 3 Trading Days after the Holders have been
so
furnished copies of such documents.
(b) Furnish
to Holder, without charge, at least one conformed copy of each such Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein
by
reference to the extent requested by such Holder, and all exhibits to the extent
requested by such Holder (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the
Commission.
33
(c) Promptly
deliver to Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Holder may reasonably request in connection with
resales by the Holder of Registrable Securities. Subject to the terms of this
Agreement, the Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by the Holder in connection with the offering
and sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto, except after the giving on any notice pursuant
to Section 3(c).
(d) If
NASDR
Rule 2710 requires any broker-dealer to make a filing prior to executing a
sale
by a Holder, make an Issuer Filing with the NASDR, Inc. Corporate Financing
Department pursuant to NASDR Rule 2710(b)(10)(A)(i) and respond within five
Trading Days to any comments received from NASDR in connection therewith, and
pay the filing fee required in connection therewith.
(e) Prior
to
any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from the
Registration or qualification) of such Registrable Securities for the resale
by
the Holder under the securities or Blue Sky laws of such jurisdictions within
the United States as any Holder reasonably requests in writing, to keep each
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things reasonably
necessary to enable the disposition in such jurisdictions of the Registrable
Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any material tax
in
any such jurisdiction where it is not then so subject or file a general consent
to service of process in any such jurisdiction.
(f) If
requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Convertible Note,
of
all restrictive legends, and to enable such Registrable Securities to be in
such
denominations and registered in such names as any such Holders may
request.
(g) Upon
the
occurrence of any event contemplated by this Section 3, as promptly as
reasonably possible under the circumstances taking into account the Company’s
good faith assessment of any adverse consequences to the Company and its
stockholders of the premature disclosure of such event, prepare a supplement
or
amendment, including a post-effective amendment, to a Registration Statement
or
a supplement to the related Prospectus or any document incorporated or deemed
to
be incorporated therein by reference, and file any other required document
so
that, as thereafter delivered, neither a Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
34
(h) Comply
with all applicable rules and regulations of the Commission until the end of
the
Effectiveness Period.
4. Registration
Expenses.
All
fees and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the
Trading Market on which the Common Stock is then listed for trading, (B) in
compliance with applicable state securities or Blue Sky laws reasonably agreed
to by the Company in writing (without limitation, fees and disbursements of
counsel for the Company in connection with Blue Sky qualifications or exemptions
of the Registrable Securities and determination of the eligibility of the
Registrable Securities for investment under the laws of such jurisdictions
as
requested by the Holder) and (C) if not previously paid by the Company in
connection with an Issuer Filing, with respect to any filing that may be
required to be made by any broker through which a Holder intends to make sales
of Registrable Securities with NASD Regulation, Inc. pursuant to the NASD Rule
2710, so long as the broker is receiving no more than a customary brokerage
commission in connection with such sale, (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
and of printing prospectuses if the printing of prospectuses is reasonably
requested by the Holder, and (iii) fees and disbursements of counsel for the
Company. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries
and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit and the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder. In no event shall the Company be responsible for any broker
or similar commissions or, except to the extent provided for in the Transaction
Documents, any legal fees or other costs of the Holder.
5. Indemnification
(a) Indemnification
by the Company.
The
Company shall, notwithstanding any termination of this Agreement, indemnify
and
hold harmless Holder, the officers, directors, agents, brokers (including
brokers who offer and sell Registrable Securities as principal as a result
of a
pledge or any failure to perform under a margin call of Common Stock),
investment advisors and employees of each of them, each person who controls
any
such Holder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, agents and employees of
each such controlling Person, to the fullest extent permitted by applicable
law,
from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable attorneys’ fees) and expenses
(collectively, “Losses”), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in a Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to
be
stated therein or necessary to make the statements therein (in the case of
any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (i) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in a Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (ii) the use by such Holder of an outdated or defective Prospectus after
the
Company has notified such Holder in writing that the Prospectus is outdated
or
defective and prior to the receipt by such Holder of the Advice contemplated
in
Section 6(d). The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding arising from or in connection with the
transactions contemplated by this Agreement of which the Company is
aware.
35
(b) Indemnification
by Holder.
Holder
shall indemnify and hold harmless the Company, its directors, officers, agents
and employees, each person who controls the Company (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based solely upon: (x) such Holder’s
failure to comply with the prospectus delivery requirements of the Securities
Act or (y) any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, any Prospectus, or any form of prospectus, or
in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such untrue statement
or omission is contained in any information so furnished in writing by such
Holder to the Company specifically for inclusion in such Registration Statement
or such Prospectus or (ii) to the extent that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished
in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder’s proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in a Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (2) the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder
of
the Advice contemplated in Section 6(d). In no event shall the liability of
any
selling Holder hereunder be greater in amount than the dollar amount of the
net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
6. Miscellaneous
(a) Remedies.
In the
event of a breach by the Company or by a Holder, of any of their obligations
under this Agreement, Holder or the Company, as the case may be, in addition
to
being entitled to exercise all rights granted by law and under this Agreement,
including recovery of damages, will be entitled to specific performance of
its
rights under this Agreement. The Company and Holder agree that monetary damages
would not provide adequate compensation for any losses incurred by reason of
a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect
of
such breach, it shall waive the defense that a remedy at law would be
adequate.
(b) No
Piggyback on Registrations.
Neither
the Company nor any of its security holders (other than the Holder in such
capacity pursuant hereto) may include securities of the Company in the initial
Registration Statement other than the Registrable Securities.
36
(c) Compliance.
Holder
covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to a Registration Statement.
(d) 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 Convertible
Note.
(e) 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. Each may assign his respective rights
hereunder in the manner to any person to whom it transfers its rights or the
Registrable Securities.
(f) No
Inconsistent Agreements.
Neither
the Company nor any of its subsidiaries has entered, as of the date hereof,
nor
shall the Company or any of its subsidiaries, during the period beginning on
or
after the date of this Agreement and ending at the end of the Effectiveness
Period, enter into any agreement with respect to its securities, that would
have
the effect of impairing the rights granted to the Holder in this Agreement
or
otherwise conflicts with the provisions hereof. Neither the Company nor any
of
its subsidiaries has previously entered into any agreement granting any
registration rights with respect to any of its securities to any person that
have not been satisfied in fall.
(g) Execution
and Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(h) Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be determined with the provisions of the Convertible
Note.
37
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as
of the date first written above.
| ▇▇▇▇▇▇▇ TECHNOLOGIES CORP. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | ||
| Title: CEO | ||
|
|
||
|
HOLDER:
BROIDY
CAPITAL MANAGEMENT AND
▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
||
38
EXHIBIT
I
[Side
Letter Regarding Warrants]
39
January
6, 2006
Mr.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Chief
Executive Officer
Broidy
Capital Management
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Side
Letter Concerning Warrant Agreement
Dear
▇▇.
▇▇▇▇▇▇:
This
letter agreement (“Agreement”) will confirm the agreement between ▇▇▇▇▇▇▇
Technology Corp., a Delaware corporation (“▇▇▇▇▇▇▇”), yourself, and Broidy
Capital Management (collectively “Broidy”) concerning that certain warrant
agreement dated as of January 6, 2006 (the “Warrant Agreement”).
Pursuant
to the Warrant Agreement, Broidy acquired the right to purchase a total of
1,000,000 shares of ▇▇▇▇▇▇▇ common stock at an exercise price (the “Exercise
Price”) of $1.00 per share. The parties agree that in addition to the other
terms and conditions set forth in the Warrant Agreement, the following two
terms
shall also govern the warrants referred to in the Warrant
Agreement.
1. ▇▇▇▇▇▇▇
agrees that the Exercise Price of the warrants shall be reduced by the same
percentage that Gabriel’s pretax earnings in accordance with GAAP for the twelve
month period ending December 31, 2006 are below $2,500,000. Thus, by way of
example, if Gabriel’s 2006 pretax earnings are $2,000,000 (a 20% difference from
$2,500,000), then the Exercise Price will be reduced by 20% to
$0.80.
2. ▇▇▇▇▇▇▇
agrees that it will register all common stock of the company associated with
and
underlying (i) the Warrant Agreement, (ii) the Senior Convertible Promissory
Note between ▇▇▇▇▇▇▇ and Broidy dated as of ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇, (▇▇▇) all Pledged
Securities under the Senior Convertible Promissory Note and (iv) all warrants
currently owned by Broidy within 150 days of date first set forth above (the
“Last Registration Date”). ▇▇▇▇▇▇▇ agrees that if such stock of the Company is
not registered by the Last Registration Date, and for every month thereafter
that the stock is not registered, the Exercise Price set forth in the Warrant
Agreement shall be reduced ten per cent (10%) until all of such stock is
registered.
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This
Agreement represents a 1~nding obligation of ▇▇▇▇▇▇▇ Technologies Corp.
Furthermore, the undersigned hereby represent and warrant that they have the
requisite power and authority to enter into this Agreement, and further
represent that all necessary actions have been taken by the Company’s Board of
Directors to execute this agreement.
Sincerely
/s/
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
President
and Chief Executive Officer
/s/
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Chief
Financial Officer
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