Dutchess Private Equities Fund, II, L.P. August 18, 2006
EXHIBIT
10.1
Dutchess
Private Equities Fund, II, L.P.
August
18, 2006
Xxxxx
000, 000-00xx
Xxxxxx
XX
Xxxxxxx,
Xxxxxxx X0X 0X0
Attn:
Xx.
Xxxx Xxxxxxx
Dear
Xx.
Xxxxxxx:
Reference
is made to that certain Debenture Agreement, Security Agreement, Debenture
Registration Rights Agreement, Subscription Agreement and Escrow Agreement,
each
effective as of September 30, 2005 (as heretofore amended, the “Transaction
Documents”),
between Securac Corp. (the “Borrower”
or
“you”)
and
Dutchess Private Equities Fund, II, L.P. (the “Holder”
or
“we”)
(sometimes hereinafter the Borrower and the Holder are referred to collectively
as the "parties").
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Transaction Documents, and are incorporated
by reference. Copies of the Transaction Documents are attached as exhibits
10.1
through 10.4 and 10.8 to the Borrower’s Current Report on Form 8-K filed with
the Securities and Exchange Commission on October 6, 2005.
The
parties are entering into this agreement to settle a dispute regarding amounts
claimed to be owing by Borrower to Holder under the Transaction Documents and
to
avoid unnecessary expense associated with litigation and a protracted resolution
of such dispute.
The
Borrower and the Holder hereby agree that upon satisfaction of each of the
following (the “Closing Date”), which is anticipated to occur on or about
September 8, 2006:
(i)
payment in immediately available funds of $441,344.14, representing principal,
interest and redemption premium owing as of the date hereof on the Debenture,
plus interest accruing on the principal amount thereof from the date hereof
until the date of payment in the daily amount of $117.00 (the “Payout
Amount”)
by
wire transfer to Holder’s bank account: [intentionally omitted];
(ii)
delivery of instructions by the Borrower to the escrow agent under the Escrow
Agreement referred to above instructing the escrow agent to release all 909,090
shares of common stock of the Borrower held thereunder to the Holder (“Debenture
Shares”), it being understood that the Debenture is being
converted/recapitalized as of the Closing Date with respect to all penalties
and
other amounts owing under the Debenture in excess of the Payoff Amount and
that
such shares are being released to satisfy such conversion/recapitalization
(accompanied by a letter to Holder from Borrower’s counsel confirming its view
as to the commencement of the Rule 144 holding period with respect to such
shares beginning on October 31, 2006, and its willingness to deliver a Rule
144
opinion to that effect following receipt of reasonable and customary Rule 144
supporting documentation demonstrating compliance with the other provisions
of
the Rule (such letter and opinion also to cover the shares underlying the
warrants referred to below, assuming cashless exercise); and
(iii)
delivery of certificates evidencing an aggregate of 1,000,000 Pledged Shares
(as
defined under the above-referenced Security Agreement) registered in the name
of
the holders, accompanied by stock powers duly executed in blank, in form
sufficient to transfer the same to the Holder, (it being understood that we
shall be entitled to piggyback registration rights, for all Debenture Shares
and
Pledged Shares then held by us in excess of one percent of Borrower’s total
outstanding shares and not then saleable under Rule 144(k),with respect to
the
next registration statement filed by you on a form for which such shares are
eligible to be included, as determined by SEC rules and regulations;
all
of
your liabilities and obligations to us, including those arising under the
Transaction Documents, shall have been deemed satisfied and paid in full,
and:
(i) all
of
our liens on, and security interests in, all of the assets and properties of
the
Borrower and any other assets or properties pledged to us for the benefit of
the
Borrower, shall terminate automatically; and we hereby authorize you or any
person authorized by you to file termination statements for any Uniform
Commercial Code Financing Statements, or comparable forms, in any jurisdiction
listing the Holder as a secured party and the Borrower as a debtor without
any
further action by us; and we also hereby agree to promptly, but in any event
within three business days after the date hereof, deliver to you or as you
shall
direct any of your or such other person’s assets that we are holding as Pledged
Property;
(ii) all
of
your obligations to us under the Transaction Documents, shall terminate
automatically; and
(iii) the
warrants issued by you to us to purchase 181,819 shares of your common stock
pursuant to that certain warrant agreement dated as of September 30, 2005 (the
“Warrant
Agreement”)
shall
be deemed automatically amended such that (A) the Exercise Price shall be equal
to the closing bid price of your common stock on the business day preceding
the
Closing Date and the number of underlying shares shall remain at 181,819 and
(B)
you shall be relieved of any and all registration obligations with respect
to
the Warrant Agreement and, in lieu thereof, we shall be entitled to piggyback
registration rights, for the underlying shares in excess of one percent of
the
Borrower’s total outstanding shares and not then saleable under Rule 144(k)
assuming a cashless exercise, with respect to the next registration statement
filed by you on a form for which our shares are eligible to be included, as
determined by SEC rules and regulations. (Except as modified hereby, the terms
of the Warrant Agreement shall remain unchanged).
In
furtherance of the foregoing, upon receipt of the Payout Amount and the other
deliveries referred to above, Holder and Borrower, and their respective
officers, directors, stockholders, attorneys, members, agents, representatives,
employees, subsidiaries, affiliates, partners, predecessors and successors
in
interest, and assigns and all other persons, firms or corporations with whom
any
of the former have been, or are now, affiliated (hereinafter “Releasors”) hereby
completely release and forever discharge each other and their respective
officers, directors, stockholders, attorneys, members, agents, representatives,
employees, subsidiaries, affiliates, partners, predecessors and successors
in
interest, and assigns and all other persons, firms, associations or corporations
with whom any of the former have been, or are now, affiliated (hereinafter
“Releasees”) of and from any and all past and present claims, demands, actions,
causes of action, debts and dues both in law and in equity of any nature or
description whatsoever, whether now known or unknown, anticipated or
unanticipated, asserted or unasserted, whether based on statute, contract,
tort,
or otherwise, on account of or in any way growing out of, related to, resulting
or to result from the Transaction Documents. Holder agrees to execute and
deliver from time to time after receipt of the Payoff Amount and other
deliveries referred to above any documents, at your expense, as shall be
reasonably requested by you to evidence such release and termination. This
letter agreement shall be a fully binding and complete settlement and release
between the Holder, Borrower and Releasees with respect to the matters addressed
herein upon receipt by Holder of the Payoff Amount and other deliveries referred
to above.
2
The
parties warrant and represent that:
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(i)
|
the
parties have been fully informed and have full knowledge of the terms,
conditions, and effects of this agreement, and have read this agreement
and are executing it under advice of
counsel;
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(ii)
|
the
parties have investigated, to each party’s satisfaction, all of the facts
surrounding the various claims, controversies, and disputes and are
satisfied with the terms and effects of this
agreement;
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(iii)
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the
parties have executed and agreed to this agreement as a complete
compromise of matters involving disputed issues of law and fact and
fully
assume the risk that the facts or law may be other than they believe;
and
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(iv)
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no
relative, or other person or entity, has or has had any interest
in the
claims, demands, obligations, or causes of action referred to in
this
agreement; that they have the sole right and exclusive authority
to
execute this agreement and pay or receive the sums specified in it;
and
that they have not sold, assigned, transferred, conveyed or otherwise
disposed of any of the claims, demands, obligations or causes of
actions
referred to in this agreement.
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The
Borrower acknowledges that its failure to timely (i) instruct it's consultants
including but not limited to: Borrower's Counsel and transfer agent ("Borrower's
Agents"), to use it's commercially reasonable best efforts to comply with the
Holder's Rule 144 sales and (ii) satisfy the piggyback registration obligations
referred to herein will cause the Holder to suffer irreparable harm and that
the
actual damage to the Holder will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this Settlement Agreement,
a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties’
good faith effort to quantify such damages and, as such, agree that the form
and
amount of such liquidated damages are reasonable and do not constitute a
penalty. The payment of liquidated damages shall not relieve the Borrower from
such obligations. The Holder shall have the right to charge the Borrower five
thousand dollars ($5,000) per day for failure by the Borrower or the Borrower's
Agents to act in a timely manner for the obligations described
herein.
We
hereby
acknowledge that all share calculations discussed herein shall include the
total
aggregate amount of Pledged Shares, Debenture Shares or shares underlying the
Warrant then held by us.
The
parties agree and acknowledge that this agreement is a full and complete
compromise of all matters involving disputed issues and that neither this
agreement nor the negotiations for this settlement (including all statements,
admissions or communications) by Holder or Borrower or their attorneys or
representatives shall be considered admissions by any of said parties, and
that
no past or present wrongdoing or liability on the part of any party shall be
implied by such settlement or negotiations.
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Please
indicate your agreement to the foregoing by signing in the space provided below.
This agreement may be executed in any number of counterparts, each of which
when
so executed and delivered shall be deemed to be but one and the same agreement.
Delivery by any party hereto of a signature page to this agreement by facsimile
shall be effective as delivery of a counterpart manually executed by such party
of this agreement. This agreement shall be governed by the laws of the State
of
New York without giving effect to its choice of law principles.
| Very truly yours, | |
| DUTCHESS PRIVATE EQUITIES FUND, II, L.P. | |
| BY: ITS GENERAL PARTNER DUTCHESS | |
|
CAPITAL
MANAGEMENT, LLC
|
|
| By: /s/ Xxxxxxx X. Xxxxxxxx | |
| Name: Xxxxxxx X. Xxxxxxxx | |
| Title: A Managing Member |
| AGREED: | |||
| SECURAC CORP. | |||
|
By: /s/
Xxxxx Xxxxx
Name:
Xxxxx Xxxxx
Title: CEO |
By: /s/
Xxxx Xxxxxxx Name: Xxxx Xxxxxxx Title: CFO |
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