AMENDMENT
AMENDMENT
This
AMENDMENT (this “Amendment”),
dated
effective as of June 22, 2006, is entered into by and between GVI SECURITY
SOLUTIONS, INC., a Delaware corporation (the “Company”), and
LAURUS MASTER FUND, LTD., a Cayman Islands company (“Laurus”),
for
the purpose of amending the terms of that certain Term Note, dated as of May
27,
2004 in the original principal amount of $5,000,000 issued by the Company to
Laurus (as amended, modified and/or supplemented from time to time, the
“Term
Note”).
The
Note, the Securities Purchase Agreement together with the Related Agreements
(as
defined in the Securities Purchase Agreement) are referred to herein as the
“Loan
Documents”.
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Securities Purchase Agreement.
WHEREAS,
the Company and Laurus have agreed to make certain changes to the Loan Documents
as set forth herein; and
NOW,
THEREFORE, in consideration of the above, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereto agree as follows:
1. Amendment
to Secured Convertible Term Note.
(a)
Section 2.1(a) of the Note is hereby amended by deleting the last sentence
appearing therein in its entirety and inserting the following new sentence
in
lieu thereof:
“For
purposes hereof, the initial “Fixed
Conversion Price”
means
$1.91; provided, however, that in respect of the first Three Hundred Thousand
Dollars ($300,000) of aggregate principal amount (the “Post-June
2006 Converted Amount”)
of the
Note converted into shares of Common Stock on and after June 22, 2006, the
Fixed
Conversion Price in respect of such Post-June 2006 Converted Amount (and the
interest and fees associated therewith to the extent converted) shall be equal
to $0.15.”
(b)
The
following new Section 5.10 is hereby inserted into the Note immediately
following existing Section 5.09 of the Note:
“Section
5.10 Registered
Obligation.
This
Note is intended to be a registered obligation within the meaning of Treasury
Regulation Section 1.871-14(c)(1)(i) and the Note shall be registered as to
both
principal and any stated interest with the Borrower. Notwithstanding any
document, instrument or agreement relating to this Note to the contrary,
transfer of this Note (or the right to any payments of principal or stated
interest thereunder) may only be effected by (i) surrender of this Note and
either the reissuance by the Borrower of this Note to the new holder or the
issuance by the Borrower of a new instrument to the new holder, or (ii) transfer
through a book entry system maintained by the Borrower (or its agent), within
the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).”
2. Laurus
hereby agrees with the Company that it shall convert into shares of Common
Stock
as soon as practicable after the Amendment Effective Date (but in no event
later
than June 30, 2006), Three Hundred Thousand Dollars ($300,000) of aggregate
principal amount of the Note. The principal so converted shall be applied to
the
next payments of principal otherwise due under the Term Note.
3. The
Company understands that it has an affirmative obligation to make prompt public
disclosure of material agreements and material amendments to such agreements.
It
is the Company’s determination that this Amendment is material. The Company
agrees to file an 8-K within 2 days of the date hereof and in the form otherwise
prescribed by the SEC.
4. The
amendment set forth herein shall be effective as of the date first above written
(the “Amendment
Effective Date”)
on the
date when each of the Company and Laurus shall have executed and the Company
shall have delivered to Laurus its respective counterpart to this
Amendment.
5. Except
as
specifically set forth in this Amendment, there are no other amendments,
modifications or waivers to the Loan Documents, and all of the other forms,
terms and provisions of the Loan Documents remain in full force and
effect.
6.
The
Company hereby represents and warrants to Laurus that (i) no Event of Default
exists on the date hereof, after giving effect to this Amendment, (ii) on the
date hereof all representations, warranties and covenants made by the Company
in
connection with the Loan Documents are true, correct and complete and (iii)
on
the date hereof all of the Company’s and its Subsidiaries’ covenant requirements
have been met.
7. From
and
after the Amendment Effective Date, all references in the Loan Documents to
the
Securities Purchase Agreement shall be deemed to be references to the Securities
Purchase Agreement as modified hereby.
8. This
Amendment shall be binding upon the parties hereto and their respective
successors and permitted assigns and shall inure to the benefit of and be
enforceable by each of the parties hereto and their respective successors and
permitted assigns. THIS
AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
THE
LAW OF THE STATE OF NEW YORK.
This
Amendment may be executed in any number of counterparts, each of which shall
be
an original, but all of which shall constitute one instrument.
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remainder of this page is intentionally left blank]
IN
WITNESS WHEREOF,
each of
the Company and Laurus has caused this Amendment to the Loan Documents to be
signed in its name effective as of this 22nd day of June 2006.
| GVI SECURITY SOLUTIONS, INC. | ||
| By:____________________________ | ||
| Name: | ||
| Title: | ||
| LAURUS MASTER FUND, LTD. | ||
| By:___________________________ | ||
| Name: | ||
| Title: |
