SETTLEMENT AGREEMENT
Exhibit 10.1
This SETTLEMENT AGREEMENT (the "Agreement”) dated as of May 15, 2015, is entered
into by and between ABAKAN, INC., a Nevada corporation, with headquarters located at 0000 X.
Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxx. j3133 (“Abakan”), and SONORO INVEST S.A., a Panama
corporation, with its address at Calle 53E, Urbanizacion XxxxxxXx, MMG Tower, Piso 16, Panama City,
Panama ("Sonoro").
WHEREAS:
A.
Abakan and Sonoro have been involved in business transactions with each other that led
to the execution of the following three promissory notes and an Amended and Restated Waiver and
Exchange Agreement:
(1) the Amended Convertible Promissory Note in the Principal Amount of
$1,500,000 dated March 17, 2011;
(2) the Amended Convertible Promissory Note in the Principal Amount of
$200,000 dated June 7, 2011; and
(3) the Promissory Note in the Principal Amount of $405,000 dated April 23,
2013.
These three promissory notes shall hereafter be referred to collectively as the "Promissory Notes."
(4) the Amended and Restated Waiver and Exchange Agreement by and between
Abakan and Sonoro dated as of April 23, 2013 (the "Amended Waiver
Agreement”).
B.
A dispute arose under the Promissory Notes and the Amended Waiver Agreement;
thereafter, on October 1, 2014, Sonoro filed a lawsuit in the United States District Court for the Southern
District of Florida in the Case styled Sonoro Invest S.A. v. Abakan. Inc., Case No.1:14-cv-23640, which is
currently pending (the "Litigation"), alleging defaults by Abakan under the Promissory Notes (the
"Claims"). Abakan has asserted various affirmative defenses to the Litigation in its Second Amended
Answer and Affirmative Defenses (the "Defenses").
C.
The parties seek to settle the Litigation on the terms set forth herein in order to avoid the
continued costs of Litigation.
NOW THEREFORE, in consideration of the foregoing and such other consideration I!S the
parties mutually agree, the parties hereto agree as follows:
1.
Recitals. The recitals set forth above are accurate, represent the intent of the parties
hereto and are incorporated herein by reference.
2.
Amended Promissory Note. Attached as Exhibit A is a duly executed Senior Convertible
Promissory Note (the "Amended Promissory Note") which shall replace the existing Promissory Notes.
The Promissory Notes are hereby deemed canceled. Attached as Exhibit B is a duly executed agreement
entitled "May 2015 Waiver Agreement” which shall supersede and replace the Amended Waiver
Agreement by and between Abakan and Sonoro. The Amended Waiver Agreement is deemed cancelled,
null, void, and without legal effect.
The following additional agreements are deemed cancelled, null, void, and without further effect:
(1)
$1.5 million Convertible Promissory Note issued March 17, 2011, by and
between Abakan and Sonoro;
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Exhibit 10.1
(2)
$200,000 Convertible Promissory Note Issued June 7, 201l; by and between
Abakan and Sonoro;
(3)
$2,105,877 Convertible Promissory Note issued March 17, 2013, by and between
Abakan and Sonoro (referred to by the Parties as the "Replacement Note"); and
(4)
the Waiver and Exchange Agreement dated April 11, 2013, by and between
Abakan and Sonoro.
3.
Governing Law; Dispute Resolution. The terms of this Settlement Agreement shall be
interpreted and governed by the laws of the State of Florida without regard to principles of conflicts of
laws. Any and all disputes, claims, or controversies arising out of or relating to this Agreement, the
Amended Promissory Note, the May 2015 Waiver Agreement, and/or any and all other disputes by and
between Abakan and Sonoro, or the breach; termination, enforcement interpretation or validity thereof,
including the determination of the scope or applicability of this agreement to arbitrate, shall be
exclusively determined by binding arbitration in New York, New York before one arbitrator. The
arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and
Procedures and in accordance with the Expedited Procedures in those Rules, and there shall be only
written discovery (i.e., no depositions shall be had). Judgment on the Award may be entered in any court
having jurisdiction. The parties expressly consent, agree, and acknowledge that the arbitrator has the
authority to provide provisional remedies to the parties. The prevailing party shall be entitled to recover
from the other party its reasonable attorneys' fees and costs. In addition, during the course of the
Litigation, Abakan has asserted that numerous person(s) are managing agents of Sonoro. Abakan hereby
acknowledges and agrees, and shall not otherwise assert or dispute; that the only managing agent of
Sonoro is Xx. Xxxxx Xxxx.
4.
Consent Award. In the event Abakan fails to pay the Amended Promissory Note in full
on or before maturity, Sonoro shall be entitled to, and Abakan hereby consents to, the filing of a Consent
Award via stipulation signed by all parties and their Legal counsel (a duly executed copy is annexed
hereto as Exhibit C, the "Consent Award'') with JAMS, Abakan hereby consents and agrees that the
Consent Award shall be made into an arbitration award and judgment. Judgment on the award may be
entered in any Court having jurisdiction including without limitation the State and Federal Courts located
in New York and/or Florida, Abakan hereby waives, and agrees not to assert, any and all defenses to the
Consent Award, and/or any arbitration award on the Consent Award (and the resulting judgment)
(including without limitations any and all Defenses it has raised in the Litigation), except only for the
defense that payment in full of the Amended Promissory Note has been made on or before maturity to
Sonoro. In the event Abakan appeals the arbitration award, confirmation of any arbitration award and/or
judgment on the award against it, Abakan shall be required to post bond in an amount not less than the
amount of the JAMS Arbitration Award pending its appeal of the confirmation. Abakan shall provide the
Consent Award to Sonoro's counsel, Robins Xxxxxx LLP, to be held in escrow by Robins Xxxxxx LLP.
5.
Dismissal of the Litigation. A stipulation of dismissal shall be filed in the Litigation three
(3) days after full execution of this Agreement, the Amended Promissory Note; and the May 2015 Waiver
Agreement. Upon full payment of the Amended Promissory Note on or before maturity, the Consent
Award shall be released to Abakan.
6.
Waiver of all Defenses. Abakan hereby waives any and all defenses it raised in the
Litigation, including, but not limited to, all defenses raised in its Answer and Affirmative Defenses,
Amended Answer and Affirmative Defenses, and Second Amended, Answer and Affirmative Defenses.
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Exhibit 10.1
7.
No Admission of Liability. The parties agree and acknowledge that this Agreement is not
and shall not be construed as an admission by the parties of any liability or any act or wrongdoing
whatsoever, including without limitation, any violation of (1) any federal, state or local law, statute,
regulation, code, or ordinance; or (2) of any legal, common law, or equitable duty owed by the parties to
anyone.
8.
Entire Agreement. This Settlement Agreement sets forth the entire agreement between
the parties hereto and fully supersedes all and all prior agreements or understandings between the parties
hereto pertaining to the settlement of the Litigation. The parties agree to execute all further documents
contemplated by this Settlement Agreement.
9.
Binding Nature of Agreement. This Agreement and the rights hereunder, may be
transferred to the successor in interest or the assignee of any party. This Agreement shall be binding upon
each of the parties and upon their respective heirs, administrators, representatives, executors, successors,
affiliates, subsidiaries, members, unit owners and assigns, and shall inure to the benefit of each party and
to their respective heirs, administrators, representatives, affiliates, subsidiaries, executors; successors, and
assigns.
10.
Modification of Agreement. This Agreement may be amended, revoked, changed, or
modified only upon a written agreement executed by all parties. No waiver of any provision of this
Agreement will be valid unless it is in writing and signed by the party against whom such waiver is
charged.
11.
Authority of Signatories. Each signatory below represents that he has been authorized to
sign on behalf of the respective party and to bind it to the terms of this Settlement Agreement, the May
2015 Waiver Agreement, Amended Promissory Note, and the Consent Award. Each party represents it
has the power and authority to perform its respective obligations as provided by this Settlement
Agreement, the May 2015 Waiver Agreement, and Amended Promissory Note.
12.
Miscellaneous.
a.
Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other
party. A facsimile copy of any signature to this Agreement and/or a copy of a signature sent by electronic
mail shall be deemed as legally bin9ing .as the original signatures,
b.
Headings. The headings of this Agreement are for convenience of reference only
and shall not form part of, or affect the interpretation of, this Agreement.
c.
Conflict.
(i)
In the event of a conflict between the terms of this Agreement and the
May 2015 Waiver Agreement, the terms of the May 2015 Waiver Agreement shall prevail.
(ii) In the event of a conflict between the terms of this Agreement and the
Amended Promissory Note, the terms of the Amended Promissory Note shall prevail.
d.
Severability. In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law; then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof
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Exhibit 10.1
e.
Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
f.
Review by Counsel: The parties have entered into this Agreement, the May 2015
Waiver Agreement, and the Amended Promissory Note based on their own independent judgment and on
the advice of their own legal counsel, financial advisors, and/or other advisors to the extent that they have
deemed necessary. In entering into this Agreement, the May 2015 Waiver Agreement, and the Amended
Promissory Note; the parties are not relying on any advice or representation of the other party (other than
the representations contained therein) and have not received any assurance or guarantee from the other
party as to the merits of entering into such agreements.
[signature page to follow]
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Exhibit 10.1
IN WITNESS WHEREOF, the undersigned Abakan and Sonoro have caused this Settlement
Agreement to be duly executed as of the date first above written.
SONORO INVEST S.A.
By: /s/ Xxxxxx X. Xxxxxx
By: /s/ Xxxxx Xxxx
Name: Xxxxxx X. Xxxxxx
Name: Xxxxx Xxxx
Title: Chief Executive Officer
Title: Managing Director
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Exhibit 10.1
EXHIBIT A
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS SINCE SAME ARE
BELIEVED TO BE EXEMPT FROM REGISTRATION UNDER REGULATION “S” THERETO, THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED TO
U.S. PERSONS (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT, OR (B) AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: S2,915,000
Issue Date: May 15, 2015
SENIOR CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, ABAKAN, INC. a Nevada corporation (hereinafter called the
“Borrower”), hereby promises to pay to the order of Sonoro Invest S.A., a Panamanian corporation or
registered assigns (hereinafter, called the “Holder” or “Sonoro”) the sum of $2,915,000 together with
any interest as set forth herein, on February 29, 2016 (the “Maturity Date”), and to pay interest on the
unpaid principal balance hereof at the rate of five percent (5%) (the “Interest Rate”) per annum from the
date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as
otherwise explicitly set forth herein, Any amount of principal or interest on this Note which is not paid
when due shall bear interest at the rate of ten percent (10%) per annum from the due date thereof until the
same is paid (“Default Interest”). Interest shall be computed on the basis of a 365-day year and the
actual number of days elapsed, All payments due hereunder (to the extent not converted into common
stock, $0,0001 par value per share (the “Shares”) and stock purchase warrants (the “Warrants”) in
accordance with the terms hereof shall be made in lawful money of the United States of America. All
payments shall be made at such address as the Holder shall hereafter give to the Borrower by written
notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by
the terms of this Note is due on any day which is not a business day, the same shall instead be due on the
next succeeding day which is a business day and, in the case of interest payment date which is not the
date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account
for purposes of determining the amount of interest due on such date. As used in this Note, the term
“business day” shall mean any day other than a Saturday. Sunday or a day on which commercial banks in
the city of Miami, Florida are authorized or required by law or executive order to remain closed. This
Note is issued pursuant to the May 2015 Waiver Agreement dated as of May 15, 2015 (the “Waiver
Agreement”) between the Borrower and Sonoro. Each capitalized term used herein, and not otherwise
defined; shall have the meaning ascribed thereto in those certain Securities Purchase Agreements dated
March 17, 2011 and June 7, 2011, by and among the Borrower and Sonoro (the “Purchase
Agreements”). In the event of a conflict between defined terms in the Purchase Agreements, the defined
term within the Securities Purchase Agreement dated June 7, 2011 (amended) by and between the
Borrower and Sonoro shall control.
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof
and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and
will not impose personal liability upon the Holder thereof.
The following terms shall apply to this Note:
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Exhibit 10.1
EXHIBIT A
ARTICLE I. HOLDER CONVERSION RIGHTS
1.1
Holder Conversion Right. The Holder shall have the right from time to time following the
date of this Note and ending on the later of (i) the Maturity Date and (ii) the date of payment of the
Default Amount (as defined in Article III) Pursuant to Section 1.6(a) of Article III, each in respect of the
remaining outstanding principal amount of this Note to convert all or any part of the outstanding an
unpaid principal amount of this Note into units consisting of fully paid and non-assessable Shares and
Warrants (the “Conversion Units”) (pursuant to Section 1.2(b)), or any shares of capital stock or other
securities of the Borrower into which such Conversion Units shall hereafter be changed or reclassified at
the conversion price (the “Conversion Price”) (pursuant to Section 1.2(a) determined as provided herein
(a “Conversion”); provided, however ,that in no event shall the Holder be entitled to convert any portion
of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of
Shares beneficially owned by the Holder and its affiliates ( other than the Shares or Warrants which may
be deemed beneficially owned through the ownership of the unconverted portion of the Note or the
unexercised or unconverted portion of any other security of the Borrower subject to a limitation on
conversion or exercise analogous to the limitations contained herein) and (2) the number of Shares
issuable upon the conversion of the portion of this Note with respect to which the determination of this
provision is being made, would result in beneficial ownership by the Holder and its affiliates of more than
4.99% of the outstanding shares of the Borrower. For purposes of the provision to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder,
except as otherwise provided in clause (1) of such provision, provided, further, however, that the
limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than
61 days' prior notice to the Borrower, and the provisions of the conversion limitation shall continue to
apply until such 61st day (or such later date as determined by the Holder, as may be specified in such
notice of waiver). The Conversion Units to be issued upon each conversion of this Note shall be
determined by dividing the Conversion Amount (as defined below) by the Conversion Price then in effect
on the date specified in the notice of conversion in the form attached hereto as Exhibit 1 (the “Notice of
Conversion”) delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided
that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in notice)
to the Borrower before 6:00 p.m. Miami, Florida time on such conversion date (the “Conversion Date”).
The term “Conversion Amount” means with respect to any conversion of this Note, the sum of (1) the
principal amount of this Note to be converted in such conversion plus (2) at the Holder's option, accrued
and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the
Conversion Date, plus (3) at the Holder's option, Default Interest; if any, on the amounts referred to in
the immediately preceding clauses (1) and/or (2) plus (4) at the Holder's option, any amounts owed to the
Holder pursuant to Sections 1.3 and 1.4(f) hereof.
1.2
Conversion.
(a)
Conversion Price. The Conversion Price for the Conversion Amount shall equal
$1.00 of the Conversion Amount for each (1) Conversion Unit (subject to equitable adjustments for stock
splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the
securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events).
(b)
Conversion Units. Each Conversion Unit shall consist of one (1) share of fully
paid and non-assessable Share and one half (1/2) Warrant entitling the Holder to purchase an additional
Share at $1.50 for each whole Warrant for a period of two (2) years following the Conversion Date.
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Exhibit 10.1
EXHIBIT A
1.3
Authorized Shares. The Borrower covenants that during the period the conversion right
exists the Borrower will reserve from its authorized and unissued capital a sufficient number of Shares
free from preemptive rights, to provide for the issuance of Shares and the exercise of the Warrants upon
the full conversion of this Note (the “Reserved Amount”). The Borrower represents that upon issuance,
the Shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower
shall issue any securities or make any change to its capital structure which would change the number of
Shares and Warrants into which the Note shall be convertible, the Borrower shall at the same time make
proper provision so that thereafter there shall be a sufficient number of shares authorized and reserved,
free from preemptive rights, for conversion of outstanding Notes.
If at any time the Borrower does not maintain the Reserved Amount, it will be considered an
Event of Default under Article III.
1.4
Method of Conversion.
(a)
Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by
the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the
Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication
dispatched on the Conversion Date prior to 6:00 p.m. Miami, Florida time), and (B) subject to Section
1.4(b), surrendering this Note at the principal office of the Borrower.
(b)
Surrender of Note Upon Conversion. Notwithstanding anything to the contrary
set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall
not be required to physically surrender this Note to the Borrower unless the entire unpaid principal
amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the
principal amount so converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this
Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower
shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the
foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note
unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower
forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder
(upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate
the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this
Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of
a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note
may be less than the amount stated on the face hereof.
(c)
Payment of Taxes. The Borrower shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of shares of Shares or other
securities or property on conversion of this Note in a name other than that of the Holder (or in street
name), and the Borrower shall not be required to issue or deliver any such shares or other securities or
property unless and until the person or persons (other than the Holder or the custodian in whose street
name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid
to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower
that such tax has been paid.
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Exhibit 10.1
EXHIBIT A
(d)
Delivery of Shares and Warrants Upon Conversion. Upon receipt by the
Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of
communication) of a Notice of Conversion meeting the requirements for communication as provided in
this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the
order of the Holder certificates for the Shares and Warrants issuable upon such conversion within three
(3) business days after such receipt (but in any event the fifth (5th) business day being hereinafter referred
to as the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof,
surrender of this Note) in accordance with the terms hereof and the Purchase Agreements.
(e)
Obligation of Borrower to Deliver Conversion Units. Upon receipt by the
Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Shares
issuable upon such conversion and the Warrants attached thereto, the outstanding principal amount and
the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and,
unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of
this Note being so converted shall forthwith terminate except the right to receive the and Warrants or
other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have
given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the
certificates for Shares and Warrants shall be absolute and unconditional, irrespective of the absence of
any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof,
the recovery of any judgment against any person or any action to enforce the same, any failure or delay in
the enforcement of any other obligation of the Borrower to the holder of record, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any
obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such
obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date
specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is
received by the Borrower before 6:00 p.m., Miami, Florida time, on such date.
(f)
Failure to Deliver Conversion Units Prior to Deadline. Without in any way
limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief the
parties agree that if delivery of the Shares and Warrants issuable upon conversion of this Note are not
delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above,
which failure shall be governed by such Section) the Borrower shall pay to the Holder $1,000 per day in
cash, for each day beyond the Deadline that the Borrower fails to deliver such Shares and Warrants. Such
cash amount shall be paid to Holder by the fifth (5th) day of the month following the month in which it
has accrued or, at the option of the Holder (by written notice to the Borrower by the fifth (5th) day of the
month following the month in which it has accrued), shall be added to the principal amount of this Note,
in which event interest shall accrue thereon in accordance with the terms of this Note and such additional
principal amount shall be convertible into Conversion Units in accordance with the terms of this Note.
The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting
from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible
to qualify. Accordingly the parties acknowledge that the liquidated damages provision in this Section
1.4(f) is justified.
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Exhibit 10.1
EXHIBIT A
1.5
Concerning the Conversion Units. The Shares and Warrants issuable upon conversion of
this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effect the
registration statement under the Securities Act or (ii) the Borrower or its transfer agent shall have been
furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may
be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or
transferred pursuant to Rule 144 under the Securities Act (or a successor rule) (“Rule 144”) or (iv) such
shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or
otherwise transfer the shares only in accordance with this Section 1.5 and who is not a U.S. Person (as
defined in the Purchase Agreements). Except as otherwise provided in the Purchase Agreements and the
Waiver Agreement (and subject to the removal provisions set forth below), until such time as the shares
of Shares issuable upon conversion of this Note have been registered under the Securities Act or
otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a
particular date that can then be immediately sold, each certificate for shares of Shares and the Warrants
issuable upon conversion of this Note that has not been so included in an effective registration statement
or that has not been sold pursuant to an effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantial in the following form, as appropriate:
“THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
(“COMMISSION”) OR THE SECURITIES COMMISSION OF ANY
STATE BECAUSE THEY ARE BELIEVED TO BE EXEMPT FROM
REGISTRATION UNDER REGULATION "S" PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”).
THESE SECURITIES MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS UNLESS THE SECURITIES
ARE REGISTERED UNDER THE SECURITIES ACT, OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT IS
AVAILABLE. HEDGING TRANSACTIONS INVOLVING THESE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH THE SECURITIES ACT. THESE SECURITIES SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN
OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.”
The legend set forth above shall be removed and the Borrower shall issue to the Holder a new
certificate or stock purchase warrant therefore free of any transfer legend if (i) the Borrower or its transfer
agent shall have received an opinion of counsel, to the effect that a public sale or transfer of such security
may be made without registration under the Securities Act, which opinion shall be accepted by the
Borrower so that the sale or transfer is effected or (ii) in the case of securities issuable upon conversion of
this Note, such securities are registered for sale by the Holder under an effective registration statement
filed under the Securities Act or otherwise may be sold pursuant to Rule 144 without any restriction as to
the number of securities as of a particular date that can then be immediately sold.
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Exhibit 10.1
EXHIBIT A
1.6
Effect of Certain Events.
(a)
Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale,
conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the
Borrower of a transaction or series of related transactions in which more than 50% of the voting power of
the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower
with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall
either (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower
shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an
amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b)
hereof. “Person” shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.
(b)
Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is
issued and outstanding and prior to conversion of all of the Notes, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of
which securities of the Borrower shall be changed into the same or a different number of shares and
warrants of another class or classes of stock or securities of the Borrower or another entity, or in case of
any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection
with a plan of complete liquidation of the Borrower, then the Holder of this Note shal1 thereafter have the
right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified
herein and in lieu of Shares and Warrants immediately theretofore issuable upon conversion, such stock,
securities or assets which the Holder would have been entitled to receive in such transaction had this Note
been converted in full immediately prior to such transaction (without regard to any limitations on
conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the
rights and interests of the Holder of this Note to the end that the provisions hereof shall thereafter be
applicable, as nearly as may be practicable in relation to any securities of assets thereafter deliverable
upon the conversion hereof. The Borrower shall not affect any transaction descried in this Section 1.6(b)
unless (i) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at
least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to
approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of
shares, recapitalization, reorganization or other similar event or sale of assets (during which time the
Holder shall be entitled to convert this Note) and (ii) the resulting successor or acquiring entity (if not the
Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c)
Adjustment Due to Distribution. If the Borrower shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of its shares as a dividend, stock
repurchase, by way of return of capital or otherwise (including any dividend or distribution to the
Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e.,
a spin-off) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this
Note after the date of record for determining shareholders entitled to such Distribution, to receive the
amount of such assets which would have been payable to the Holder with respect to the shares of Shares
issuable upon such conversion had such Holder been the holder of such shares of Shares on the record
date for the determination of shareholders entitled to such Distribution.
Page 6
Exhibit 10.1
EXHIBIT A
(d)
Purchase Rights. If, at any time when any Notes are issued and outstanding, the
Borrower issues any convertible securities or right to purchase stock, warrants, securities or other
property (the “Purchase Rights’’) pro rata to the record holders of any class of Shares, then the Holder of
this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such Holder could have acquired if such Holder had held the number of Shares
acquirable upon complete conversion of this Note (without regard to any limitations on conversion
contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights or, if no such record is taken, the date as of which the record holders of Shares are
to be determined for the grant, issue or sale of such Purchase Rights.
(e)
Notice of Adjustments. Upon the occurrence of each adjustment or readjustment
as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly
compute such adjustment or readjustment and prepare and furnish to the Holder of a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Borrower shalt upon the written request at any time of the Holder, furnish to
such Holder a like certificate setting forth (i) such adjustment or readjustment, and (ii) the number of
Shares, Warrants and the amount, if any, of other securities or property which at the time would be
received upon conversion of the Note.
1.7
Trading Market Limitations. Unless permitted by the applicable rules and regulations of
the principal securities market on which the Shares are then listed or traded, in no event shall the
Borrower issue upon conversion of or otherwise pursuant to this Note more than the maximum number of
shares of Shares that the Borrower can issue pursuant to any rule of the principal United States securities
market on which the Shares are then traded (the “Maximum Share Amount”) which shall be 4.99% of
the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to
equitable adjustment from time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Shares occurring after the date hereof. Once the
Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under
applicable law or the miles or regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s
ability to issue Shares in excess of the Maximum Share Amount, in lieu of any further right to convert
this Note, this will be considered an Event of Default under Article III.
1.8
Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the
Conversion Units covered thereby (other than the shares, if any, which cannot be issued because their
issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share
Amount) shall be deemed converted into Shares and Warrants and (ii) the Holder’s rights as a Holder of
such converted portion of this Note shall cease and terminate, excepting only the right to receive
certificates for such Shares and Warrants and to any remedies provided herein or otherwise available at
law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this
Note. Notwithstanding the foregoing, if a Holder has not received certificates for all Shares and all
Warrants prior to the tenth (10th) business day after the expiration of the Deadline with respect to a
conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its
status as a holder of Shares and Warrants by so notifying the Borrower) the Holder shall regain the rights
of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as
soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered,
adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder
shall retain all of its rights and remedies for the Borrower’s failure to convert this Note.
Page 7
Exhibit 10.1
EXHIBIT A
ARTICLE II. CERTAIN COVENANTS
2.1
Restriction on Stock Repurchases. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder’s written consent, redeem, repurchase or
otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any
one transaction or series of related transactions any shares of capital stock of the Borrower or any
warrants, rights or options to purchase or acquire any such shares.
2.2
Sale of Assets. So long as the Borrower shall have any obligation under this Note, the
Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any
significant portion of its assets outside the ordinary course of business. Any consent to the disposition of
any assets may be conditioned on a specified use of the proceeds of disposition. Notwithstanding the
foregoing, the Borrower need not obtain the Holder’s written consent to issue shares of the Borrower’s
stock at a price of forty cents ($0.40) or higher.
ARTICLE III. EVENTS OF DEFAULT
3.1
Events of Default. The occurrence of any of the following events shall be deemed an
“Event of Default”:
(a)
Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof
or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.
(b)
Conversion and the Shares. The Borrower fails to issue Shares and Warrants to
the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon
exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note,
fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any
certificate for Shares and Warrants issued to the Holder upon conversion of or otherwise pursuant to this
Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays,
impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form)
any certificate for Shares or Warrants to be issued to the Holder upon conversion of or otherwise pursuant
to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to
remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any certificate for any Shares or warrants
issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this
Note (or makes any written announcement, statement or threat that it does not intend to honor the
obligation described in this paragraph) and any such failure shall continue uncured (or any written
announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three
(3) business days after the Holder shall have delivered a Notice of Conversion.
(c)
Breach of Covenants. The Borrower breaches any material covenant or other
material term or condition contained in this Note and any collateral documents including, but not limited
to, the Purchase Agreements and the Waiver Agreement.
(d)
Breach of Representations and Warranties. Any representation or warranty of the
Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in
connection herewith (including, without limitation, the Purchase Agreements and the Waiver Agreement),
shall be false or misleading in any material respect when made and the breach of which has (or with the
passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note,
the Purchase Agreements or the Waiver Agreement.
Page 8
Exhibit 10.1
EXHIBIT A
(e)
Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make
an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or
trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall
otherwise be appointed.
(f)
Judgments. Any money judgment, writ or similar process shall be entered or
filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for
more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days
unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
(g)
Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
(h)
Delisting of Shares. The Borrower shall fail to maintain the listing of the Shares
on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the
Nasdaq Small Cap Market, the New York Stock Exchange, or the American Stock & Exchange.
(i)
Failure to Comply with the Exchange Act. The Borrower shall fail to comply
with the reporting requirements of the Exchange Act, and/or the Borrower shall cease to be subject to the
reporting requirements of the Exchange Act.
(j)
Liquidation. Any dissolution, liquidation, or winding up of Borrower or any
substantial portion of its business.
(k)
Cessation of Operations. Any cessation of operations by Borrower or Borrower
admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that
any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that
the Borrower cannot pay its debts as they become due.
(l)
Maintenance of Assets. The failure by Borrower to maintain any material
intellectual property rights, personal, real property or other assets which are necessary to conduct its
business (whether now or in the future).
(m)
Financial Statement Restatement. The restatement of any financial statements
filed by the Borrower with the Securities and Exchange Commission for any date or period from two
years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the unrestated financial statement, have constituted a material
adverse effect on the rights of the Holder with respect to this Note, the Purchase Agreements or the
Waiver Agreement.
(n)
Reverse Splits. The Borrower effectuates a reverse split of its Shares without
twenty (20) days prior written notice to the Holder.
(o)
Replacement of Transfer Agent. In the event that the Borrower proposes to
replace its transfer agent, the Borrower fails to provide prior to the effective date of such replacement,
fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the
Purchase Agreements (including but not limited to the provision to irrevocably reserve Shares in the
Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
Page 9
Exhibit 10.1
EXHIBIT A
(p)
Cross Default. Notwithstanding anything to the contrary contained in this Note or
the other related or companion documents, a breach or default by the Borrower of any covenant or other
term or condition contained in any of the Other Agreements (as defined below), shall immediately, at the
option of the Holder, be considered a default under this Note and the Other Agreements in which the
Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the
terms of this Note and the Other Agreements by reason of a default under said Other Agreement or
hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or
by: (1) the Borrower, and, or for the benefit of (2) the Holder, Sonoro and any affiliate of the Holder or
Sonoro, including, without limitation, promissory notes; provided, however, the term ‘‘Other
Agreements” shall not include the related or companion documents to this Note. Each of the loan
transactions will be cross-defaulted with each other loan transaction and with all other existing and future
debt of Borrower to the Holder and/or Sonoro.
3.2
Default Amount. Upon the occurrence and during the continuation of an Event of Default
specified in this Article III, the Note shall become immediately due and payable and the Borrower shall
pay to the Holder an amount equal to the Default Amount (as defined below) effective immediately in full
satisfaction of its obligations hereunder, an amount equal to (w) the then outstanding principal amount of
this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of
payment plus (y) the sum of $300,000 plus (z) Default Interest, if any, on the amounts referred to in
clauses (w), (x) and/or (y) (the amounts referred to in clauses (w), (x), (y) and (z) shall collectively be
known as the “Default Amount”) and all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of which hereby are expressly waived,
together with all costs, including, without limitation, legal fees and expenses, of collection, and the
Holder shall be entitled to exercise all other rights and remedies available in binding arbitration.
3.3
Shares in Lieu of Default Amount. If the Borrower fails to pay the Default Amount when
such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower
remains in default (and so long and to the extent that there are sufficient authorized shares), to require the
Borrower, to immediately issue, in lieu of the Default Amount, the number of Shares of the Borrower
equal to the Default Amount divided by the Conversion Price then in effect.
ARTICLE IV. MISCELLANEOUS
4.1
Seniority of this Note. Except with respect to only those secured creditors who have duly
filed a UCC-1 Financing Statement prior to the Issue Date, this Note shall rank senior to any and all
indebtedness, promissory notes, loans, and debentures the Borrower has incurred prior to, including, and
subsequent to the Issue Date, unless the Borrower receives the prior written consent of the Holder (which
may be withheld for any reason whatsoever) to otherwise incur any such indebtedness senior to or on
parity with this Note. The Borrower agrees that the Holder shall have no obligation to review or consent
to any proposed indebtedness that would be senior to this Note unless and until such time as the Borrower
has advanced the estimated costs and expenses, including attorneys’ fees, for the Holder to review the
proposed new indebtedness. Each person taking or holding this Note accepts and agrees to be bound by
the provisions of this Section 4.1.
a.
Notwithstanding the provisions of this Section 4.1, the Holder hereby consents to
the Borrower entering into a secured loan on substantially the same terms as the Borrower has with its
current secured lender, (Xxxxxx Town Associates S.A.), if the proceeds of the loan are used to pay Xxxxxx
Town Associates S.A. in full and the lender is only one of the following direct parties (and not for the
benefit of or as the nominee of a third-party):
Page 10
Exhibit 10.1
EXHIBIT A
i.
Hanwha Group of South Korea;
ii.
UP Scientech Materials Corp. of Taiwan
iii.
a recognized United States institutional investor that is registered with
the U.S. Securities and Exchange Commission and has more than Five Hundred Million U.S.
Dollars (US$500,000,000 million) under management; or
iv.
a United States FDIC Commercial Bank with assets on deposit in excess
of Five Hundred Million U.S. Dollars (US$500,000,000 million)
4.2
Prepayment. The Borrower shall have the right to prepay this Note without penalty in the
reduced amount of $2,700,000, plus accrued interest, only if such sum is received by the Holder, in full,
on or before July 31, 2015. If the Borrower elects to prepay this Note in accordance with the terms of this
Section 4.2, the Borrower shall be deemed to have satisfied all of the Borrower’s obligations hereunder.
4.3
Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the
exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
4.4
Notices. All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage
prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall
have specified most recently by written notice. Any notice or other communication required or permitted
to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the address or number
designated below (if delivered on a business day during normal business hours where such notice is to be
received), or the first business day following such delivery) (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid, addressed to such address or upon
actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall
be:
If to the Borrower, to:
000X. Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Chief Executive Officer
facsimile: (000) 000-0000
e-mail: xxxxxx.xxxxxx@xxxxxxxxx.xxx
If to the Holder:
Sonoro Invest X.X.
Xxxxx 53E, Urbanizacion Marbella
MMG Tower, Piso 16
Panama City, Panama
Attn.: Anton Xxxxxx Xxxx
Page 11
Exhibit 10.1
EXHIBIT A
with simultaneous copies to
Robins Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxx Xxxxxx
4.5
Amendments. This Note and any provision hereof may only be amended by an
instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto,
as used throughout this instrument, shall mean this instrument as originally executed, or if later amended
or supplemented, then as so amended or supplemented.
4.6
Assignability. This Note shall be binding upon the Borrower and its successors and
assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of
this Note must not be a “U.S. Person” (as that term is defined in Rule 902 of Regulation S, and is not
acquiring the securities for the account or benefit of any U.S. person, as defined in Rule 50l(a) of the
Securities Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as
collateral in connection with a bona fide margin account or other lending arrangement.
4.7
Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay
the Holder hereof costs of collection, including reasonable attorneys’ fees.
4.8
Governing Law. This Note shall be governed by and construed in accordance with the
laws of the State of Florida without regard to principles of conflicts of laws. Any and all disputes, claims
or controversies arising out of or relating to this Note and/or any other disputes by and between the
Borrower and the Holder, or the breach, termination, enforcement, interpretation or validity hereof,
including the determination of the scope or applicability of this agreement to arbitrate in this Section 4.8,
shall be exclusively determined by binding arbitration in New York, New York before one arbitrator. The
arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and
Procedures and in accordance with the Expedited Procedures in those Rules, and there shall be only
written discovery (i.e., no depositions shall be had). Judgment on the Award may be entered in any court
having jurisdiction. The parties expressly consent, agree, and acknowledge that the arbitrator has the
authority to provide provisional remedies to the parties. The prevailing party shall be entitled to recover
from the other party its reasonable attorneys’ fees and costs. In the event that any provision of this Note or
any other agreement delivered in connection herewith is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision
which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement. Each party hereby irrevocably waives personal service of process
and consents to process being served in any proceeding in connection with this Note by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at
the address in effect for notices to it under this Note and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by law.
Page 12
Exhibit 10.1
EXHIBIT A
4.9
Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an
amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that
time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult
to determine and the amount to be so paid by the Borrower represents stipulated damages and not a
penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note
and to earn a return from the sale of Shares acquired upon conversion of this Note at a price in excess of
the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such
amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the
receipt of a cash payment without the opportunity to convert this Note into Shares.
4.10
Waiver Agreement. By its acceptance of this Note, each party agrees to be bound by the
applicable terms of the Waiver Agreement.
4.11
Notice of Corporate Event. Except as otherwise provided below, the Holder of this Note
shall have no rights as a Holder of Shares unless and only to the extent that it converts this Note into
Shares. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s
shareholder (and copies of proxy materials and other information sent to shareholders). In the event of
any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders
who are entitled to receive payment of any dividend or other distribution, any right to subscribe for,
purchase or otherwise acquire (including by way of merger, consolidation, reclassification or
recapitalization) any share of any class or any other securities or property, or to receive any other right or
for the purpose of determining shareholders who are entitled to vote m connection with any proposed
sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed
liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at
least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the
consummation of the transaction or event, whichever is earlier), of the date on which any such record is to
be taken for the purpose of such dividend, distribution, right or other event and a brief statement
regarding the amount and character of such dividend, distribution, right or other event to the extent known
at such time. The Borrower shall make a public announcement of any event requiring notification to the
Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the
terms of this Section 4.11.
4.12
Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its
obligations under this Note will be inadequate and agrees in the event of a breach or threatened breach by
the Borrower of the provisions of this Note that the Holder shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the
terms and provisions thereof, without the necessity of showing economic loss and without any bond or
other security being required. The Borrower expressly consents, agrees, and acknowledges that a JAMS-
appointed arbitrator has the authority to provide such relief as described in this Section 4.12.
4.13
Usury. This Note is subject to the express condition that at no time shall the Borrower be
obligated or required to pay interest hereunder at a rate which could subject the Holder to either civil or
criminal liability as a result of being in excess of the maximum interest rate which the Borrower is
permitted by applicable law to contract or agree to pay. If by the terms of this Note, the Borrower is at
any time required or obligated to pay interest hereunder at a rate in excess of such maximum rate, the rate
of interest under this Note shall be deemed to be immediately reduced to such maximum rate and the
interest payable shall be computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal
balance of this Note.
[signature page to follow]
Page 13
Exhibit 10.1
EXHIBIT A
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly
authorized officer this May 15, 2015.
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Chief Executive Officer
Page 14
Exhibit 10.1
EXHIBIT A
EXHIBIT 1: NOTICE OF CONVERSION
Capitalized terms that are used and not defined in this Notice of Conversion that are defined in
the senior convertible promissory note of ABAKAN, INC., a Nevada corporation, dated May 15, 2015
(the “Note”) to which this Notice of Conversion is attached, shall have the respective definitions set forth
in the Note.
The undersigned hereby elects to convert a principal amount of $ ___________ and an accrued
interest amount of $ __________ from the Note into that number of Shares and Warrants to be issued
pursuant to the conversion of the Note, as set forth below, according to the conditions of the Note, as of
the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes,
if any.
Check box as to applicable instructions:
[ ] The Borrower shall electronically transmit the Shares issuable pursuant to this Notice of
Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal
Agent Commission system (“DWAC Transfer”) and deliver the Warrants in the name(s) specified below
or, if additional space is necessary, on an attachment hereto.
Name of DTC Prime Broker: ______________________________________________
Account Number: _______________________________________________________
[ ] The undersigned hereby requests that the Borrower issue a certificate or certificates for the
Shares set forth below (which numbers are based on the Holder’s calculation attached hereto) in the
name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:
Attention: Certificate Delivery
Date of Conversion:
______________
Applicable Conversion Price:
$ ______________
Number of Shares to be issued pursuant to Conversion of the Note
______________
Number of Warrants to be issued pursuant to Conversion of the Note
______________
Amount of principal balance due remaining under the Note after this conversion:
______________
By: ___________________________________________________
Name: _________________________________________________
Title: __________________________________________________
Date: __________________________________________________
Page 15
Exhibit 10.1
EXHIBIT B
MAY 2015 WAIVER AGREEMENT
This MAY 2015 WAIVER AGREEMENT (the "Agreement") dated as of May 15, 2015, is by
and between ABAKAN, INC., a Nevada corporation, with headquarters located at 0000 X. Xxxxxxxx
Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000 (the "Company"), and SONORO INVEST S.A., a Panamanian
corporation, with its 'address at Calle 53E, Urbanizacion Marbella; XXX Xxxxx, Xxxx 00, Xxxxxx Xxxx,
Xxxxxx (the “Buyer”).
WHEREAS:
A. The Company and the Buyer are parties to that certain Securities Purchase Agreement by and
between the Company and the Buyer dated March 17, 2011 (as amended, restated, or otherwise
modified from time to time, the “March Purchase Agreement”), pursuant to which the
Company issued a $1,500,000 Convertible Promissory Note dated March 17, 2011 (the “March
Note”) to the Buyer.
B. The Company and the Buyer are parties to that certain Securities Purchase Agreement by and
between the Company and the Buyer dated June 7, 2011 (as amended, restated, or otherwise
modified from time to time, the “June Purchase Agreement”, and together with the March
Purchase Agreement, the “Purchase Agreements”), pursuant to which the Company issued a
$200,000 Convertible Promissory Note dated June 7, 2011 (the “June Note”, and together
with the March Note, the “Initial Promissory Notes”) to the Buyer.
C. The Company defaulted under the Initial Promissory Notes as a result of the Company’s failure
to redeem the March Note on March 16, 2013.
D. Pursuant to a Waiver and Exchange Agreement between the parties dated as of April 10, 2013
(the “Waiver and Exchange Agreement”), the Buyer agreed to waive such defaults of
the Initial Promissory Notes in exchange for a $2,105,877 Convertible Promissory Note issued
March 17, 2013, that revised and replaced the Initial Promissory Notes (the
“Replacement
Note”).
E. The Company later requested an amendment to the Waiver and Exchange Agreement
pursuant to which, instead of having deemed to have issued the Replacement Note, it issued
the Amended Convertible Promissory Note in the Principal Amount of $1,500,000 dated March
17, 2011, the Amended Convertible Promissory Note in the Principal Amount of $200,000 dated
June 7, 2011, and the Promissory Note in the Principal Amount of $405,000
dated April 23,
2013 (together, the “Promissory Notes”), and the Buyer agreed to such request on the terms set
forth in an Amended and Restated Waiver and Exchange Agreement
between the parties
dated as of April 23, 2013 (the “Amended and Restated Waiver and Exchange
Agreement”).
F. The Company is in default under the Promissory Notes as a result of the Company’s failure to
redeem the Promissory Notes on September 15, 2014 (the “Specific Default”).
G. As a result of the Company’s Specific Default of the Promissory Notes, on October 1, 2014,
the Buyer filed a lawsuit in the United States District Court for the Southern District of Florida
in the case styled Sonoro Invest S.A. v. Abakan, Inc., Case No. 1:14-cv-23640, which
is
currently pending (the “Litigation”).
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Exhibit 10.1
EXHIBIT B
H. The Company has requested and the Buyer has agreed to waive the Specific Default of the
Promissory Notes in exchange for a new Senior Convertible Promissory Note as annexed hereto
as Exhibit 1 (the “Amended Note”) on the terms set forth therein; a duly executed
stipulation for a consent award to be held in escrow by the Buyer and to be filed in an
arbitration tribunal only in the event of the Company’s default of the Amended Note (the
“Stipulation of Consent Award”); cancellation of the Initial Promissory Notes, Waiver and
Exchange Agreement, Replacement Note, Promissory Notes, and Amended and Restated Waiver
and Exchange Agreement; and entry of a stipulation of dismissal in the Litigation.
NOW THEREFORE, in consideration of the foregoing and such other consideration as the
parties mutually agree, the parties hereto agree as follows:
1. Recitals; Definitions. The recitals set forth above are accurate, represent the intent of the parties
hereto, and are incorporated by reference herein. Subject to Section 9 herein, all capitalized
terms not defined herein shall have the respective meanings ascribed thereto in the
Purchase
Agreements. In the event of a conflict between defined terms in the Purchase
Agreements,
the defined terms within the June Purchase Agreement (as amended) shall
control.
2. Issuance of the Amended Note.
a)
Exchange. Subject to satisfaction (or waiver) of the conditions set forth in Sections 16
and 17 herein, on the Closing Date (as defined below), the Buyer shall surrender the
Promissory Notes to the Company and the Company shall issue and deliver the Amended
Note to the Buyer. The Amended Note shall be issued to the Buyer in exchange for the
Promissory Notes without the payment of any additional consideration.
b)
Closing Date. The date and time of the closing (the “Closing Date”) shall be 12:00 noon,
Eastern Standard Time, on the date hereof, subject to notification of satisfaction (or
waiver) of the conditions set forth in Sections 16 and 17 herein (or such earlier or later
date as is mutually agreed to by the Company and the Buyer). The closing shall occur on
the Closing Date at such place as the parties may agree.
c)
Holding Period. For the purposes of Rule 144 (or a successor rule) (“Rule 144”)
promulgated under the Securities Act of 1933, as amended (the “Securities Act”), the
Company acknowledges that the holding period of the Amended Note (including the
Conversion Units, as defined in the Amended Note) may be tacked onto the holding
period of the Initial Promissory Notes, Replacement Note, and Promissory Notes
(including the corresponding Conversion Units), and the Company agrees not to take any
position contrary to this Section 2(c). The Company agrees to take all actions, including,
without limitation, the issuance by its legal counsel of any necessary legal opinions
required by its transfer agent or otherwise, necessary to (i) issue the Conversion Units
upon conversion of the Amended Note without restriction and not containing any
restrictive legends without the need for any action by the Buyer, and (ii) remove any
restrictive legends from the Amended Note and/or the Conversion Units upon any sales
pursuant to Rule 144.
3. Cancellation of Agreements. While the parties hereby affirm that the Purchase Agreements shall
continue to be in full force and effect as set forth in Section 9 herein, the following agreements
are hereby deemed cancelled, null, void, and without further effect:
a) Initial Promissory Notes;
b) Waiver and Exchange Agreement;
Page 2
Exhibit 10.1
EXHIBIT B
c) Replacement Note;
d) Promissory Notes; and
e) Amended and Restated Waiver and Exchange Agreement.
4. Issuance of the Stipulation of Consent Award. On the Closing Date, the Company shall provide
the Buyer a duly executed Stipulation of Consent Award to be held in escrow by the Buyer’s
legal counsel. The Buyer agrees to file the Stipulation of Consent Award in an arbitration tribunal
administered by JAMS in New York, New York only in the event of the Company’s default of
the Amended Note. The Stipulation of Consent Award shall encompass all amounts due and
owing on the Amended Note, assuming the Company’s default thereof. The Company expressly
agrees to waive any and all defenses it may have on, before, or at any time after the Closing Date
as to the Consent Award, except only as to the Company’s payment in full of the Amended Note
upon maturity.
5. Settlement and Dismissal of the Litigation. The parties agree that subject to complete performance
of all obligations hereunder, the parties will duly execute a separate settlement agreement and
enter a stipulation of dismissal of the Litigation.
6. Waiver of all Defenses. The Company hereby waives any and all defenses it raised in the
Litigation, including, but not limited to, all defenses raised in its Answer and Affirmative
Defenses, Amended Answer and Affirmative Defenses, and Second Amended Answer and
Affirmative Defenses. In addition, during the course of the Litigation, the Company has asserted
that numerous person(s) are managing agents of Sonoro. The Company hereby acknowledges and
agrees, and shall not otherwise assert or dispute, that the only managing agent of the Buyer is Xx.
Xxxxx Xxxx.
7. Waiver of Specific Default. The Company acknowledges the existence of the Specific Default
of the Promissory Notes and upon the effectiveness of the Closing Date, the Buyer hereby waives
the Specific Default. The Company acknowledges and agrees that the Buyer is not
waiving,
and expressly reserves all rights and remedies in respect of any and all Events of Default (as
defined in the Promissory Notes or the Amended Note) other than the Specific Default. The
Company hereby represents and warrants to the Buyer that it is not aware of any Events
of
Default other than the Specific Default.
8. Expenses. The Company shall pay all expenses and costs of the Buyer (including, without
limitation, the attorneys’ fees and expenses of counsel for the Buyer) in connection with the
preparation, negotiation, execution, and approval of this Agreement and any and all other
documents, instruments, and things contemplated costs have been and shall be added to the
principal amount of the Amended Note.
9. Amendments to Purchase Agreements; Ratification; Reaffirmation.
a) Except as otherwise expressly provided herein, the Purchase Agreements are, and shall
continue to be, in full force and effect and are hereby ratified and confirmed in all respects,
except that on and after the date of this Agreement, all references in the Purchase Agreements
to “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referencing to
the Purchase Agreements shall mean the Purchase Agreements as amended by this Agreement.
b) The following terms of the Purchase Agreements are hereby reinforced as follows:
i.
The defined term “Note” is hereby amended to include the Amended Note.
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Exhibit 10.1
EXHIBIT B
ii.
The defined term “Conversion Units” is hereby amended to include
additionally the applicable Conversion Units.
iii.
The defined term “Securities” is hereby amended to include additionally the
Amended Note and the applicable Conversion Units.
iv.
The following additional covenants are deemed to remain in Section 4 of the
Purchase Agreements:
A. No later than September 15, 2013, the Company shall be DTC
eligible and the Shares shall be electronically deliverable via
DWAC. The Company's Shares must remain DTC eligible and
deliverable via DWAC for as long as any amount of the New
Notes and/or Warrant(s) is outstanding. Failure to remain DWAC
eligible will be an
event
of default under the New Notes,
whereupon the Buyer may demand immediate repayment of the New
Notes, with no cure period.
B. All Shares that are issued upon conversion of the New Notes and
Warrant(s) must be freely tradable and electronically deliverable via
DWAC. Prior to September 15, 2013, the Company must obtain and
deliver to its transfer agent all necessary opinions to enable the
issuance of freely tradable Shares to the Buyer, with copies of such
opinions delivered to the Buyer.
c) The Company hereby reaffirms to the Buyer each of the representations, warranties, covenants,
and agreements set forth in the Purchase Agreements with the same force and effect as if each
were separately stated herein and made as of the date hereof and as of the Closing Date to the
Buyer.
10. Representations of the Company. The Company hereby represents and warrants to the Buyer
that:
a) The Company has the requisite corporate power and authority to enter into this Agreement and
to issue and deliver the Amended Note as described herein;
b) All corporate action on the part of the Company by its officers, directors and shareholders
necessary for the authorization, execution, and delivery of, and the performance by the
Company of its obligations in connection with this Agreement, including, without limitation,
the issuance and delivery of the Amended Note, has been taken;
c) This Agreement constitutes, and upon issuance and delivery by the Company, the Amended
Note will constitute, a valid and legally binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject only to (a) applicable bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization or other similar laws of general
application relating to or affecting the enforcement of creditors’ rights generally, and (b)
general principles of equity;
d) The Amended Note is duly authorized and, when issued and delivered in accordance with the
terms of this Agreement, will be duly and validly issued, free and clear of any liens, claims or
encumbrances imposed by or through the Company;
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Exhibit 10.1
EXHIBIT B
e) The Conversion Units issuable upon conversion of the Amended Note, when issued and
delivered in accordance with the terms of the Amended Note, will be duly and validly issued,
fully paid and non-assessable, free and clear of any liens, claims or encumbrances imposed by
or through the Company;
f) There are no counterclaims, defenses or offsets of any nature whatsoever to this Agreement, the
Purchase Agreements, and the Amended Note;
g) No Event of Default (other than the Specific Default) has occurred or exists under the
Promissory Notes;
h) Subject to the accuracy of the Buyer’s representations in Section 11 herein, the exchange
contemplated hereby (the “Exchange”) is exempt from the registration requirements of the
Securities Act, pursuant to Section 3(a)(9) thereof. The Company will, upon request, execute
and deliver any additional documents deemed by the Buyer to be reasonably necessary or
desirable to complete the Exchange;
i) The Buyer is not an affiliate of the Company as such term is defined in Rule 144;
j) The Company has not disclosed, directly or indirectly, any material non-public information
regarding the Company or any of its subsidiaries to the Buyer;
k) The Company has not paid to any person, directly or indirectly, any commission or other
remuneration for soliciting the Exchange;
l) In entering into this Agreement, the Company (i) is not relying on any advice or
representation of the Buyer or any of its affiliates ( other
than
the
representations of the Buyer contained herein), (ii) has not received from the Buyer or any of
its affiliates any assurance or guarantee as to the merits (whether legal, regulatory, tax,
financial or otherwise) of the Exchange or entering into this Agreement, (iii) has consulted
with its own legal, regulatory, tax, business, investment, financial and accounting advisors to
the extent that it has deemed necessary, and (iv) has entered into this Agreement based on its
own independent judgment and on the advice of its advisors as it has deemed necessary, and
not on any view (whether written or oral) expressed by the Buyer or any of its affiliates; and
m) Neither the Buyer nor any of its affiliates is now or has ever been a financial advisor to, or
other fiduciary with respect to, the Company.
11. Representations of the Buyer. The Buyer hereby represents and warrants to the Company that:
a) The Buyer has the requisite corporate power and authority to enter into this Agreement;
b) All corporate action on the part of the Buyer by its officers, directors and shareholders
necessary for the authorization, execution and delivery of, and the performance by the Buyer
of its obligations in connection with this Agreement has been taken;
c) This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms, subject only to (a) applicable bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization or other similar laws of general
application relating to or affecting the enforcement of creditors’ rights generally, and (b)
general principles of equity;
Page 5
Exhibit 10.1
EXHIBIT B
d) Neither the Buyer nor anyone acting on its behalf has received any commission or
remuneration directly or indirectly in connection with or in order to solicit or facilitate the
Exchange;
e) Prior to the occurrence of the Specific Default, neither the Company nor anyone acting on the
Company’s behalf approached or solicited the Buyer regarding the Exchange;
f) The Buyer has sufficient knowledge and experience in business, financial and investment
matters to be able to bear the economic risks of participating in the Exchange and to evaluate
the merits and risks involved in participating in the Exchange;
g) The Buyer is not an affiliate of the Company as such term is defined in Rule 144;
h) The Buyer is not in possession of any material, non-public information regarding the Company
or any of its subsidiaries.
12. Form 8-K. On or prior to 5:00 p.m., Eastern Standard Time, on the fourth (4th) business day
following the Closing Date, the Company shall file with the Commission a Current Report on
Form 8-K disclosing the material terms of and including as exhibits this Agreement and the
Amended Note and the transactions contemplated hereby and thereby; provided, however, that the
Buyer shall have a reasonable opportunity to review and comment on such Form 8-K prior to the
issuance or filing thereof; and provided, further, that if the Company fails to file a Form 8-K
disclosing the material terms of this Agreement and the Amended Note within the time frames
described herein, the Buyer may issue a press release disclosing such information without any
notice to or consent by the Company. Thereafter, the Company shall timely file any filings and
notices required by the Commission or applicable law with respect to the transactions
contemplated hereby.
13. Release. The Company does hereby release, remise, acquit and forever discharge the Buyer and
the Buyer’s employees, agents, representatives, consultants, attorneys, fiduciaries, servants,
officers, directors, partners, predecessors, successors and assigns, subsidiary corporations, parent
corporation, and related corporate divisions (all of the foregoing hereinafter called the “Released
Parties”), from any and all action and causes of action, judgments, executions, suits, debts,
claims, demands, liabilities, obligations, damages and expenses of any and every character,
known or unknown, direct and/or indirect, at law or in equity, of whatsoever kind or nature,
whether heretofore or hereafter arising, for or because of any matter or things done, omitted or
suffered to be done by any of the Released Parties prior to and including the Closing Date, and in
any way directly or indirectly arising out of or in any way connected to this Agreement, the
Purchase Agreements, the Initial Promissory Notes, the Waiver and Exchange Agreement,
Replacement Note, Promissory Notes, the Amended and Restated Waiver and Exchange
Agreement, and the Amended Note, including, but not limited to, any and all claims, defenses,
and affirmative defenses the Company asserted in the Litigation (all of the foregoing hereinafter
called the “Released Matters”). The Company acknowledges that the agreements in this
paragraph are intended to be in full satisfaction of all or any alleged injuries or damages arising in
connection with the Released Matters. The Company represents and warrants to the Buyer that it
has not purported to transfer, assign or otherwise convey any right, title or interest of the
Company in any Released Matter to any other person and that the foregoing constitutes a full and
complete release of all Released Matters.
Page 6
Exhibit 10.1
EXHIBIT B
14. Renewal. To the extent that any payment or payments made to the Buyer under this Agreement,
the Purchase Agreements, the Initial Promissory Notes, Replacement Note, Promissory Notes, or
the Amended Note, as each may be amended, are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee, to the Company,
whether directly or indirectly as a debtor-in-possession, or to a receiver or any other party under
any bankruptcy law, or other state or federal law, then the portion of the indebtedness of the
Company intended to have been satisfied by such payment or payments will be revived and will
continue in full force and effect as if such payment or payments had never been received by the
Buyer.
15. No Cancellation of Indebtedness. This Agreement evidences the same indebtedness as evidenced
by the Purchase Agreements and the Initial Promissory Notes, Replacement Note, and Promissory
Notes (as modified hereby). This Agreement is an extension, modification, and amendment of the
prior indebtedness and the execution hereof does not evidence a cancellation of the indebtedness
evidenced by the prior documents, notwithstanding the cancellation of the Initial Promissory
Notes, Replacement Note, and Promissory Notes as set forth herein.
16. Conditions to Company’s Obligations Hereunder. The obligations of the Company to the Buyer
hereunder are subject to the satisfaction, at or before the Closing Date, of each of the following
conditions thereto, provided that these conditions are for the Company’s sole benefit and may be
waived by the Company at any time in its sole discretion:
a) The Buyer shall have executed this Agreement and delivered the same to the Company.
b) The Buyer shall have delivered to the Company the Promissory Notes for cancellation.
c) The representations and warranties of the Buyer shall be true and correct in all material
respects as of the date when made and as of the Closing Date, except for representations and
warranties that are expressly made as of a particular date, which shall be true and correct in
all material respects as of such date.
c) No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by or in any court or governmental authority
of competent jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
17. Conditions to Buyer’s Obligations Hereunder. The obligations of the Buyer hereunder are subject
to the satisfaction, at or before the Closing Date, of each of the following conditions thereto,
provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer
at any time in its sole discretion:
a) The Company shall have executed this Agreement and delivered the same to the Buyer.
b) The Company shall have executed and delivered to the Buyer the Amended Note.
c) The Company shall have executed and delivered to the Buyer the Stipulation of Consent
Award.
d) The representations and warranties of the Company in this Agreement and the Purchase
Agreements shall be true and correct in all respects as of the date when made, as of the date
of this Agreement, and as of the Closing Date, except for representations and warranties that
speak as of a particular date, which shall be true and correct in all respects as of such date.
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Exhibit 10.1
EXHIBIT B
e) The Company shall have paid all expenses and costs of the Buyer in accordance with Section
8 of this Agreement.
f) The Company's common stock (i) shall be designated for quotation on the OTCQB Market
Group (the “OTCQB”) and (ii) shall not have been suspended, as of the Closing Date, by the
Securities and Exchange Commission (the “Commission”) or the OTCQB nor shall
suspension by the Commission or the OTCQB have been threatened, as of the Closing Date,
either (A) in writing by the Commission or the OTCQB or (B) by falling below the minimum
quotation maintenance requirements of the OTCQB.
g) No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by or in any court or governmental authority
of competent jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
h) The Company shall have delivered to the Buyer a certificate, signed by the Secretary of the
Company and dated as of the Closing Date, as to (i) the resolutions adopted by its board of
directors approving the transactions contemplated hereby, (ii) its charter, as in effect at the
Closing Date, (iii) its bylaws, as in effect at the Closing Date, and (iv) the authority and
incumbency of the officers executing this Agreement, the Amended Note or any other
documents required to be executed or delivered in connection therewith.
i) No event shall have occurred which could reasonably be expected to have a Material Adverse
Effect on the Company including, but not limited to, a change in the reporting status of the
Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or
the failure of the Company to be timely in its Exchange Act reporting obligations. For
purposes of this Section 13(h), the term “Material Adverse Effect” means any material
adverse effect on the business, operations, assets, financial condition or prospects of the
Company or its subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection herewith.
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Exhibit 10.1
EXHIBIT B
18. Governing Law; Miscellaneous.
a) Governing Law; Dispute Resolution. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to principles of conflicts of
laws. Any and all disputes, claims or controversies arising out of or relating to this
Agreement and/or any other disputes by and between the Company and the Buyer, or the
breach, termination, enforcement, interpretation or validity hereof, including the
determination of the scope or applicability of this agreement to arbitrate in this Section 18(a),
shall be exclusively determined by binding arbitration in New York, New York before one
arbitrator. The arbitration shall be administered by JAMS pursuant to its Comprehensive
Arbitration Rules and Procedures and in accordance with the Expedited Procedures in those
Rules, and there shall be only written discovery (i.e., no depositions shall be had). Judgment
on the Consent Award may be entered in any court having jurisdiction including without
limitation the State and Federal Courts located in New York and/or Florida. The parties
expressly consent, agree, and acknowledge that the arbitrator has the authority to provide
provisional remedies to the parties. The prevailing party shall be entitled to recover from the
other party its reasonable attorneys’ fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and shall be deemed modified
to conform with such statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of any other
provision of any agreement. Each party hereby irrevocably waives personal service of process
and consents to process being served in any proceeding in connection with this Agreement by
mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law.
b) Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same agreement and
shall become effective when counterparts have been signed by each party and delivered to the
other party.
c) Headings. The headings of this Agreement are for convenience of reference only and shall not
form part of, or affect the interpretation of, this Agreement.
d) Severability. In the event that any provision of this Agreement is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed inoperative
to the extent that it may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other provision hereof.
e) Entire Agreement; Amendments. This Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the Company nor the
Buyer makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the Buyer.
Page 9
Exhibit 10.1
EXHIBIT B
f) Notices. All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise specified herein,
shall be (i) personally served, (ii) deposited in the mail, registered, or certified, return receipt
requested, postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or number
designated below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be received) or
(b) on the second business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall
first occur. The addresses for such communications shall be:
If to the Company, to:
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Chief Executive Officer
Facsimile: (000) 000-0000
E-mail: xxxxxx.xxxxxx@xxxxxxxxx.xxx
If to the Buyer:
Sonoro Invest X.X.
Xxxxx 53E, Urbanizacion Marbella
MMG Tower, Piso 16
Panama City, Panama
Attn.: Anton Xxxxxx Xxxx
with simultaneous copies to
Robins Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxx Xxxxxx
Each party shall provide notice to the other party of any change in address.
g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. Neither the Company nor the Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior written consent of the
other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person
that purchases securities in a private transaction from the Buyer or to any of its “affiliates,” as
that term is defined under the Exchange Act without the consent of the Company.
h) Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
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Exhibit 10.1
EXHIBIT B
i)
Survival. The representations and warranties of the Company and the agreements and
covenants set forth in this Agreement shall survive the execution of this Agreement
notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The
Company agrees to indemnify and hold harmless the Buyer and all their officers, directors,
employees and agents for loss or damage arising as a result of or related to any breach or
alleged breach by the Company of any of its representations, warranties, and covenants set
forth in this Agreement or any of its covenants and obligations under this Agreement,
including advancement of expenses as they are incurred.
j) Publicity. The Company shall be entitled, upon the prior approval of the Buyer (which shall
not be unreasonably delayed or withheld), to make any press release or filing with the
Commission, the OTCQB (or other applicable trading market) or the Financial Industry
Regulatory Authority with respect to this Agreement as is required by applicable law and
regulations.
k) Further Assurances. Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
l) No Strict Construction. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
m) Remedies. The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this Agreement, that the
Buyer shall be entitled, in addition to all other available remedies the penalties assessable
herein, to an arbitrator’s authority to provide for provisional remedies restraining, preventing
or curing any breach of this Agreement and to enforce specifically the terms and provisions
hereof, without the necessity of showing economic loss and without any bond or other
security being required.
n) Conflict. In the event of a conflict between or among the terms, covenants, conditions or
provisions of this Agreement, the Purchase Agreements, and the Amended Note, as each may
be amended, the Buyer may elect to enforce from time to time those provisions that would
afford the Buyer the maximum financial benefits and security for the obligations under the
Amended Note and/or provide Buyer the maximum assurance of payment of the obligations
under the Amended Note in full.
[signature page to follow]
Page 11
Exhibit 10.1
EXHIBIT B
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement
to be duly executed as of the date first above written.
ACCEPTED AND AGREED:
DATED: May 18, 2015
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Chief Executive Officer
DATED: May 19, 2015
SONORO INVEST S.A.
By: /s/ Xxxxx Xxxxxx Xxxx
Xxxxx Xxxxxx Xxxx
Director
Page 12
Exhibit 10.1
EXHIBIT B
EXHIBIT 1
[Senior Convertible Promissory Note Attached as EXHIBIT A above]
Page 13
Exhibit 10.1
EXHIBIT C
JAMS NEW YORK
Arbitration Matter between:
SONORO INVEST S.A.,
Reference Number:
Plaintiff/Claimant,
v.
Defendant/Respondent.
STIPULATION FOR CONSENT AWARD
This Stipulation for Consent Award is made by and between Plaintiff/Claimant Sonoro Invest
S.A., a Panamanian corporation, Calle 53E, Urbanizacion Marbella, MMG Tower, Piso 16, Panama City,
Panama (“Sonoro”), on the one hand, and Defendant/Respondent Abakan, Inc., a Nevada corporation,
0000 X. Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000 (“Abakan”) (and together with Sonoro, the
“Parties”). The Parties have agreed to settle and fully and finally dispose of this matter by agreement, and
therefore, enter into this Stipulation for Consent Award setting forth the terms and conditions of such
settlement (the “Stipulation”).
IT IS STIPULATED AND AGREED by the Parties and their respective attorneys that this matter
shall be settled on the merits, with prejudice, on the following terms and conditions:
1. The Parties to this Stipulation are Sonoro and Abakan.
2. The arbitration tribunal set forth above has jurisdiction over the parties and the subject matter
herein.
3.
Abakan issued a Senior Convertible Promissory Note to Sonoro in the principal amount
of $2,915,000 on May 15, 2015, bearing a maturity date of February 29, 2016 (the “Promissory Note”).
4.
Abakan defaulted on the Promissory Note by failing to redeem it on or before its maturity
date.
Page 1
Exhibit 10.1
EXHIBIT C
5.
Abakan hereby confirms that it has no defenses, counterclaims, or offsets whatsoever to
the Promissory Note, including, but not limited to, fraud, misrepresentation, and/or usury.
6.
Abakan consents to entry of the Consent Award accompanying this Stipulation against
Abakan, and in favor of Sonoro, in the total amount of $3,215,000.00, consisting of $2,915,000 in
principal and $300,000 under the default provision of Article III. Interest shall continue to accrue
pursuant to the terms of the Promissory Note.
7.
This Stipulation shall apply to and be binding on the Parties and their successors and
assigns. No change in ownership or corporate or partnership status shall in any way alter the
responsibilities of the Parties hereunder.
8.
The arbitrator is directed to enter an award in favor of Sonoro and against Abakan in the
amount of $3,215,000.00. The Parties acknowledge that this Stipulation sets forth the entire
understanding of the Parties with respect to the subject matter hereto, other than the defense of timely
payment.
Dated this 15th day of May, 2015.
SONORO INVEST S.A.
By: /s/ Xxxxxx X. Xxxxxx
By: /s/ Xxxxx Xxxx
Xxxxxx X. Xxxxxx
Xxxxx Xxxx
Chief Executive Officer
Director
HALL, LAMB AND HALL, P.A.
ROBINS XXXXXX LLP
By: /s/ Xxxxxx X. Xxxx
By: /s/ Xxxxx Xxxxxx
Xxxxxx X. Xxxx
Xxxxx Xxxxxx
Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Offices at Grand Bay Plaza
601 Lexington Avenue, Suite 3400
Penthouse Xxx
Xxx Xxxx, Xxx Xxxx 00000-0000
0000 Xxxxx Xxxxxxxx Xxxxx
Telephone: (000) 000-0000
Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Attorneys for Sonoro Invest S.A.
Attorneys for Abakan, Inc.
Page 2
Exhibit 10.1
EXHIBIT C
JAMS NEW YORK
Arbitration Matter between:
SONORO INVEST S.A.,
Reference Number:
Plaintiff/Claimant,
v.
ABAKAN, INC.,
Defendant/Respondent.
CONSENT AWARD
WHEREAS, Plaintiff/Claimant Sonoro Invest S.A. and Defendant/Respondent Abakan, Inc.
entered into a Stipulation for Consent Award, the terms of which are incorporated into this Award in their
entirety;
WHEREAS, Defendant/Respondent Abakan, Inc. consents to an award against it in the amount of
$3,215,000.00. This sum is comprised from the principal amount, accrued and unpaid interest, and default
amount due and owing under the Senior Convertible Promissory Note that Defendant/Respondent
Abakan, Inc. defaulted by failing to redeem it on or before its Maturity Date; and
WHEREAS, Defendant/Respondent Abakan, Inc. guarantees payment of the $3,200,000.00
award;
NOW THEREFORE, IT IS HEREBY AWARDED AS FOLLOWS:
1. The arbitration tribunal set forth above has jurisdiction over the parties and the
subject matter herein.
2. An award is hereby entered in favor of Plaintiff/Claimant Sonoro Invest S.A. and against
Defendant/Respondent Abakan, Inc. in the amount of $3,215,000.00.
3. This award is final.
ENTERED: ____________
BY:___________________________________
Page 3
