AMENDMENT
This
AMENDMENT (this “Amendment”),
dated
effective as of May 26, 2006, is entered into by and between GVI SECURITY
SOLUTIONS, INC., a Delaware corporation (the “Company”), and
LAURUS MASTER FUND, LTD., a Cayman Islands company (“Laurus”),
for
the purpose of amending the terms of (i) that certain Secured Convertible
Term
Note, dated as of May 27, 2004 in the original principal amount of $5,000,000
issued by the Company to Laurus (as amended, modified and/or supplemented
from
time to time, the “Term
Note”);
(ii)
that certain Common Stock Purchase Warrant for the purchase of 940,000 shares
of
the Company’s Common Stock, dated as of May 27, 2004 (“Warrant
1”);
(ii)
that certain Common Stock Purchase Warrant for the purchase of 150,000 shares
of
the Company’s Common Stock, dated as of August 19, 2004 (“Warrant
2”);
and
(iii) that certain Common Stock Purchase Warrant for the purchase of 250,000
shares of the Company’s Common Stock, dated as of December 1, 2004 (“Warrant
3”,
and
together with Warrant 1 and Warrant 2, the “Warrants”).
The
Warrants, together with the Related Agreements (as defined in the Securities
Purchase Agreement, dated as of May 27, 2004, between the Company and Laurus
(the “Securities
Purchase Agreement”))
are
referred to herein as the “Loan
Documents”.
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Securities Purchase Agreement.
WHEREAS,
the Company and Laurus have agreed to make certain changes to the Loan Documents
as set forth herein; and
NOW,
THEREFORE, in consideration of the above, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereto agree as follows:
1. Section
1.2 of the Term Note is hereby deleted and replaced in its entirety with
the
following:
1.2 Minimum
Monthly Principal Payments.
Amortizing payments of the aggregate principal amount outstanding under this
Note at any time (the “Principal
Amount”)
shall
begin on the first business day in September, 2004 and shall recur and be
due
and payable on the first business day of each succeeding month thereafter
until
the Maturity Date (each, an “Amortization
Date”)
as set
forth in the table below:
|
Month
|
Principal
Amount
|
Month
|
Principal
Amount
|
|
9/04
|
$75,000
|
4/06
|
$150,000
|
|
10/04
|
$75,000
|
5/06
|
$150,000
|
|
11/04
|
$75,000
|
6/06
|
$100,000
|
|
12/04
|
$75,000
|
7/06
|
$100,000
|
|
1/05
|
$75,000
|
8/06
|
$100,000
|
|
2/05
|
$75,000
|
9/06
|
$100,000
|
|
3/05
|
$75,000
|
10/06
|
$100,000
|
|
4/05
|
$75,000
|
11/06
|
$100,000
|
|
5/05
|
$75,000
|
12/06
|
$100,000
|
|
6/05
|
$150,000
|
1/07
|
$190,000
|
|
7/05
|
$150,000
|
2/07
|
$190,000
|
|
8/05
|
$150,000
|
3/07
|
$190,000
|
|
9/05
|
$150,000
|
4/07
|
$190,000
|
|
10/05
|
$150,000
|
5/07
|
$1,065,000
|
|
11/05
|
$150,000
|
||
|
12/05
|
$150,000
|
||
|
1/06
|
$150,000
|
||
|
2/06
|
$150,000
|
||
|
3/06
|
$150,000
|
2. Section
(d) in the preamble of each Warrant is hereby deleted in its entirety and
replaced with the following new sentence in lieu thereof:
The
"Exercise Price" applicable under this Warrant shall be $0.60.
3. The
amendment set forth herein shall be effective as of the date first above
written
(the “Amendment
Effective Date”)
on the
date when each of the Company and Laurus shall have executed and the Company
shall have delivered to Laurus its respective counterpart to this
Amendment.
4. Except
as
specifically set forth in this Amendment or other written Amendments previously
entered into by the Company and Laurus, there are no other amendments,
modifications or waivers to the Loan Documents, and all of the other forms,
terms and provisions of the Loan Documents remain in full force and
effect.
2
5.
The
Company hereby represents and warrants to Laurus that (i) no Event of Default
exists on the date hereof, after giving effect to this Amendment, (ii) on
the
date hereof all representations, warranties and covenants made by the Company
in
connection with the Loan Documents are true, correct and complete and (iii)
on
the date hereof all of the Company’s and its Subsidiaries’ covenant requirements
have been met.
6. From
and
after the Amendment Effective Date, all references in the Loan Documents
to any
of the Loan Documents shall be deemed to be references to such Loan Documents
as
modified hereby.
7. From
and
after the Amendment Effective Date, and at least until December 31, 2006,
(i)
Laurus’s current dilution reserve imposed against Accounts Availability (as
defined in the Security Agreement, dated as of May 27, 2004, between the
Company
and Laurus (the “Security
Agreement”))
shall
not be greater than 7% and (ii) Laurus’s current reserves imposed against
Inventory Availability (as defined in the Security Agreement) shall not be
greater than $2,000,0000 in the aggregate.
8. This
Amendment shall be binding upon the parties hereto and their respective
successors and permitted assigns and shall inure to the benefit of and be
enforceable by each of the parties hereto and their respective successors
and
permitted assigns. THIS
AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
BY THE
LAW OF THE STATE OF NEW YORK.
This
Amendment may be executed in any number of counterparts, each of which shall
be
an original, but all of which shall constitute one instrument.
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remainder of this page is intentionally left blank]
3
IN
WITNESS WHEREOF,
each of
the Company and Laurus has caused this Amendment to the Loan Documents to
be
signed in its name effective as of this 26th day of May, 2006.
|
GVI
SECURITY SOLUTIONS, INC.
|
|
|
By:________________________________
|
|
|
Name:
|
|
|
Title:
|
|
|
LAURUS
MASTER FUND, LTD.
|
|
|
By:______________________________
|
|
|
Name:
|
|
|
Title:
|
