RESTATED AMENDMENT
TO THE LINE OF CREDIT DATED DECEMBER 27, 2004
THIS RESTATED AMENDMENT TO A SECURED LINE OF CREDIT ("Amendment") is made
and entered into effective as of the 1st day of June 1, 2005, by and between
Dynasig Corporation, an Arizona corporation with a place of business at 00000 X.
00xx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000 ("Borrower"), Dynamic Biometric
Systems, Inc., which wholly owns the Borrower (the "Parent") and Visitalk
Capital Corporation, an Arizona corporation, with a place of business at 00000
X. 00xx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000 ("Lender"). Borrower, Parent
and Lender together are referred to as the "Parties."
RECITALS
A. WHEREAS, Maker and Lender entered into a secured line of credit on
December 27, 2004 (the "LOC").
B. WHEREAS, on June 1, 2005, the Parties amended the LOC to
significantly increase the amount of the funds available to the Borrower but
also intended to amend the LOC to allow for conversion rights and other equity
protection rights.
C. WHEREAS, the original amendment as executed contained an oversight
since it failed to include the terms the Parties had agreed to regarding
conversion of notes issued under the LOC and other equity protection rights.
D. WHEREAS, the Lender is a wholly owned subsidiary of the Parent and
the Parent has authorized a series of preferred stock designated as Series A
Preferred Stock (the "Series A Shares").
E. WHEREAS, the Certificate of Designation setting forth the terms of
the Series A Shares is attached hereto as Exhibit A (the "Certificate").
F. WHEREAS, the Series A Shares have an initial liquidation value of
$1.00 per share.
G. WHEREAS, all terms used herein, unless otherwise defined, have the
same meanings as in the Certificate and in the LOC.
AGREEMENTS
NOW THEREFORE, in consideration of the above recitals, the following
representations, warranties, covenants and conditions, and other good and
valuable consideration, the receipt of which is acknowledged, the Parties agree
as follows:
ARTICLE I - INCREASE IN THE LINE OF CREDIT AMOUNT
For purposes of this Amendment, the terms used herein shall have the same
meaning as in the LOC except as defined below:
1.1. Borrower and Lender agree that the line of Credit Amount referenced in
Section Two of the LOC shall be increased from $100,000 to $350,000.
1.2. Section 8, paragraph 14 of the LOC Agreement and Section 12 of the
Security Agreement entered into contemporaneously with the LOC (the "Security
Agreement") regarding assignments shall both be modified to allow the Lender or
the Secured Party, as the case may be, to assign any of the Notes issued in
accordance with the LOC or the Secured Party's rights under the Security
Agreement.
ARTICLE II - CONVERSION AND OTHER EQUITY RIGHTS
2.1 Voluntary Conversion. At any time prior to a Note Due Date, but not
thereafter, Note Holders shall have the right to convert the principal and
outstanding interest on the Notes into Series A Shares in accordance with the
following sections of this Article II.
2.2 Conversion Ratio. Upon conversion of the Notes, Note Holders shall
receive the number of Shares equal to the even dollar amount of the Notes and
any accrued and unpaid interest the outstanding.
2.3 Mechanics of Conversion. Each Note Holder who converts Notes into
Series A Shares shall surrender such Notes along with a conversion request.
Thereupon, the Parent shall promptly issue and deliver by overnight delivery to
such Note Holder a certificate or certificates for the number of Series A Shares
to which such Note Holder is entitled. Upon the surrender of any Note, the Note
Holder may elect through a written notice to have any unpaid interest paid in
cash within 5 days of surrender of such Note.
2.4 Fractional Shares. Any fractional Shares to be issued upon the
conversion of the Notes shall be rounded up to the next whole share of Series A
Preferred stock.
2.5 Anti-Dilution Adjustments. The Conversion Price of the Series A Shares
into the Parent's common stock (the "Common Stock") is specified in the
Certificate.
(a) Adjustment rights. In the event the Parent at any time or from time to
time prior to the exercise of the conversion rights of all the Notes makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in capital stock of the Parent
other than shares of Common Stock or Common Stock Equivalents, then and in each
such event provision shall be made so that the Note Holders shall receive upon
exercise of their conversion rights, in addition to the number of Series A
Preferred Shares, shares of Common Stock receivable thereupon, the amount of
securities which such Holders would have received had they exercised their
conversion rights prior to such effective record date.
(b) Notices of Adjustment. Whenever the number of shares of Common Stock or
the Conversion Price is adjusted as herein provided, the Parent shall prepare
and deliver forthwith to the Note Holders a certificate signed by (i) its Chief
Executive Officer and President; and (ii) any Vice President, Treasurer or
Secretary. Such certificate shall set forth the adjusted number of Common
Shares purchasable upon the conversion of the Series A Shares and the Conversion
Price of such Series A Shares after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
(c) Cash Dividends. No adjustment in respect of any cash dividends paid
shall be made while the Notes are outstanding. However, the Note Holder's shall
receive a written notice of such declaration of such dividend payable at least
20 days prior to the Record Date. The Note Holders have the right to elect to
convert before the Record Date and thereby receive such Cash Dividend.
(d) Preservation of Purchase Rights in Certain Transactions. In case of any
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock (other than a subdivision or combination of the outstanding
Common Stock and other than a change in the par value of the Common Stock) or in
case of any consolidation or merger of the Parent with or into another
corporation (other than merger with a subsidiary in which the Parent is the
continuing corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon the conversion of the Series A Shares) or in the case of any
sale, lease, transfer or conveyance to another corporation of the property and
assets of the Parent as an entirety or substantially as an entirety, the Parent
shall, as a condition precedent to such transaction, cause such successor or
purchasing corporation, as the case may be, to execute an agreement granting all
Holders the right thereafter to convert the Notes into the kind and amount of
shares, and other securities and property which the Note Holder would have owned
or have been entitled to receive after the happening of such reclassification,
change, consolidation, merger, sale or conveyance had the conversion right been
exercised immediately prior to such action. Such agreement shall provide for
adjustments in respect of such shares of stock, and other securities and
property, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article. In the event that in connection with
any such reclassification, capital reorganization, change, consolidation,
merger, sale or conveyance, additional shares of Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for, or of,
a security of the Parent other than Common Stock, any such issue shall be
treated as an issue of Common Stock covered by the provisions of Article. The
provisions of this Section shall similarly apply to successive
reclassifications, capital reorganizations, consolidations, mergers, sales or
conveyances.
2.6 Right of First Refusal
(a) Rights. Excluding (i) a firmly underwritten stock offering with
proceeds exceeding $10,000,000; or (ii) the issuance of shares of Common Stock
upon the exercise of the series A through F warrants; or (iii) shares issued
under a qualified employee stock ownership plan; each Note Holder shall be given
the right to purchase such Note Holder's pro rata portion of any equity
securities offered by the Parent other than Common Stock shares issued in a
merger or in connection with obtaining a lease line, line of credit or a similar
financing transaction) on the same terms and conditions as the Parent offers
such securities to other potential investors. The pro rata portion to which
each Note Holder is entitled shall be calculated based upon such Note Holder's
percentage of ownership of the Parent's outstanding Common Stock assuming
conversion of all outstanding convertible securities and of the Notes. In the
event the Parent voluntarily reduces the Exercise Price of the A through F
Warrants, then upon exercise of such the Holders shall have the right to acquire
Common Shares at an identical price. Such Common Shares will not be registered.
(b) Notice and Exercise of Rights. Holders shall receive written notice
upon the actual issuance of the shares issued giving rise to the rights in this
Section. Holders shall have 20 days after the date of such notice to notify the
Parent of their election to acquire the Note Holders' pro rata portion of any
such equity securities and pay any required purchase amount.
ARTICLE III - MISCELLANEOUS
3.1 Controlling Law. This Amendment and all questions relating to its
validity, interpretation, performance and enforcement will be governed by, and
construed, interpreted and enforced in accordance with, the laws of the State of
Arizona, notwithstanding any other conflict of law rules to the contrary. The
parties hereto hereby agree that any action brought by any party hereto against
the other party hereto in connection with any rights or Post-Petition Claims
arising out of this Amendment or any transaction contemplated hereby will be
instituted properly in a federal or state court of competent jurisdiction with
venue only in the County of Maricopa, State of Arizona, or in the Federal
District for Arizona. The Parties each hereby agree to submit personally to the
jurisdiction of a court of competent subject matter jurisdiction located in such
County or Federal District.
3.2 Equitable Remedies. The parties hereto hereby agree that the remedies
at law may be inadequate to protect against an Event of Default, and therefore,
the parties hereto hereby agree and consent to the granting of injunctive relief
or other forms of equitable relief by a court of competent jurisdiction or a
similar judicial body, whether temporary, preliminary or final, whether or not
actual damages can be shown.
3.3 Assignment. This Amendment may be assigned by the Note Holders, in
whole or in part, without the express prior written consent of the other
Borrower or the Parent. The Borrower or the Parent may not assign their
obligations hereunder without consent, except that this Section is in no way
intended to impede any merger or acquisition of either the Parent or the
Borrower.
3.4 Notices. Unless otherwise specifically stated herein, all notices,
payments, requests, demands and other communications required or permitted under
this Amendment will be in writing and will be deemed to have been duly given,
made and received when delivered against receipt, or 24 hours after being sent
by fax or 72 hours after being sent by registered or certified mail, postage
prepaid.
3.5 Terms. Words not otherwise expressly defined herein will have their
everyday meaning; provided, however, no meaning will be given to a word that is
inconsistent with the intent of the parties hereto.
3.6 Entire Amendment. This Amendment contains the entire understanding and
agreements between the parties hereto with respect to the secured liabilities in
question and supersedes all prior amendments or understandings, written or oral,
between the parties hereto with respect to the secured liabilities except as
specified in the LOC and the Security Agreement and the related Notes issued
there under. This Amendment may not be modified or amended except by a written
instrument signed by the parties hereto.
3.7 Provisions Severable. The provisions of this Amendment are independent
of and severable from each other, and no provision will be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part. Further, if
a court of competent jurisdiction determines that any provision of this
Amendment is invalid or unenforceable as written, the court may interpret,
construe, rewrite or revise such provision, to the fullest extent allowed by
law, so as to make it valid and enforceable, consistent with the intent of the
parties hereto.
3.8 Construction. The parties hereto hereby acknowledge and agree that each
party has participated in the drafting of this Amendment and that this Amendment
has been, to the extent it was felt necessary, reviewed by the respective legal
counsel for the parties hereto and that the rule of construction to the effect
that any ambiguities are to be resolved against the drafting party will not be
applied to the interpretation of this Amendment. No inference in favor of, or
against, any party will be drawn from the fact that one party has drafted any
portion hereof.
3.9 Advice of Counsel. Each Party hereby acknowledges that they are
entitled to and have been afforded the opportunity to consult legal counsel of
their choice regarding the terms and conditions and legal effects of this
Amendment, as well as the advisability and propriety thereof. Each party hereby
further acknowledges that having so consulted with legal counsel of their
choosing or having chosen not to consult, hereby waives any right to such legal
representation or effective representation and any right to raise or rely upon
the lack of representation or effective representation in any future proceedings
or in connection with any future claim.
3.10 Attorney Fees. In the event of any claim or controversy between the
parties hereto relating to this Amendment, or the breach of this Amendment, and
action by one party hereto is taken against the other party, the prevailing
party in such action will be entitled to recover from the other party its
expenses, including reasonable attorneys fees, incurred in taking or defending
such action.
3.11 Recitals, Schedules and Exhibits. The Recitals, Schedules and Exhibits
referred to in this Amendment shall be construed with and are an integral part
of this Amendment to the same extent as if the same had been set forth verbatim
herein.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers as of the date first above
written.
DynaSig Corporation ("Borrower") Visitalk Capital Corporation dba
Aztore Capital ("Lender")
__/s/ Xxxxxxx X. Kim_____________ __/s/ Xxxxx X. Lang_____________
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By: Xxxxxxx X. Xxx By: Xxxxx X. Xxxx
Its: President Its: Secretary and Treasurer
Date: _12/30/05_________________ Date: _12/30/05_________________
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Dynamic Biometric Systems, Inc.
("Parent")
__/s/ Xxxxxxx X. Kim_____________
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By: Xxxxxxx X. Xxx
Its: President
Date: _12/30/05_________________
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