SECURITIES EXCHANGE AGREEMENT
Exhibit 10
Execution Copy
This SECURITIES EXCHANGE AGREEMENT (the “Agreement”), dated as of April 28, 2014, by
and between ABAKAN INC., a Nevada corporation, with headquarters located at 0000 X. Xxxxxxxx
Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000 (the “Company”), MESOCOAT, INC., a Nevada corporation,
with headquarters located at 00000 Xxxxxxxx Xxxxx, Xxxxxx, Xxxx 00000 (“MesoCoat”) and XXXXXX
TOWN ASSOCIATES S.A., a Panama corporation with headquarters located at Xxxxxx Xxxxx Ave. &
00xx Xxxxxx, Xxxxx Xxxxxxxx Xxxxxxxx, Xxxxxx, Xxxxxxxx of Panama (the “Lender”).
WHEREAS:
A.
As of the date hereof, MesoCoat, a majority owned subsidiary of the Company, has five
outstanding loans from Kyrtos Limited, a British Virgin Islands company (“Kyrtos”) in an aggregate
amount of $1,309,000, all of which plus accrued interested remains outstanding, all as evidenced by five
Secured Promissory Notes issued by MesoCoat to Kyrtos (collectively the “Existing Notes”).
B.
The Existing Notes have been assigned by Kyrtos to the Lender.
C.
The Company, MesoCoat and the Lender have agreed to exchange the Existing Notes for (1) a
new convertible note of the Company, in the form attached hereto as Exhibit A, in the principal amount of
$1,341,963.34 (together with any note(s) issued in replacement thereof or as a dividend thereon or
otherwise with respect thereto in accordance with the terms thereof, the “New Note”), convertible into
units consisting of shares of Company common stock, $0.0001 par value per share (the “Shares”), and
warrants to purchase shares of Company common stock (the “Warrants”), upon the terms and subject to
the limitations and conditions set forth in such New Note, and (2) a Subsidiary Guarantee by MesoCoat in
favor of the Lender, guarantying the satisfaction of all of the Company’s obligations under the New Note,
in the form attached hereto as Exhibit B (the “Subsidiary Guarantee”).
D.
In connection with the foregoing transactions, the Company and MesoCoat have agreed to amend
and restate that certain Security Agreement, dated as of October 30, 2013, by MesoCoat in favor of
Kyrtos, which has been heretofore assigned to the Lender, and such amended and restated Security
Agreement shall be in the from attached hereto as Exhibit C, and provide that the Company’s obligations
under the New Note and MesoCoat’s obligations under the Guarantee will be continue to be secured by
all of the assets of MesoCoat (the “Security Agreement”).
E.
The Company and the Lender are executing and delivering this Agreement in reliance upon
exemptions from securities registration afforded by the rules and regulations as promulgated by the
United States Securities and Exchange Commission (the “Commission”) under the Securities Act of
1933, as amended (the “Securities Act”).
NOW THEREFORE, in consideration of the foregoing and such other consideration as 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.
Exhibit 10
2.
Exchange of Existing Notes and Guarantee for New Note.
a.
Issuance of New Note. On the Closing Date (as defined below), the Company shall issue
and deliver the New Note to the Lender. The New Note shall be issued to the Lender, and the
Subsidiary Guarantee and Security Agreement shall be executed and delivered for the benefit of
the Lender, all in exchange for the Existing Notes, without the payment of any additional
consideration.
b.
Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set
forth in Sections 12 and 13 below, the date and time of the issuance and delivery of the New Note
and surrender of the Existing Notes pursuant to this Agreement (the “Closing Date”) shall be
12:00 noon, Eastern Standard Time on or before April 28, 2014, or such other mutually agreed
upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall
occur on the Closing Date.
c.
Expenses. At the Closing, the Company shall pay all expenses and costs of the Lender
(including, without limitation, the attorney fees and expenses of counsel for Lender, all as
reasonable incurred) in connection with the preparation, negotiation, execution and approval of
this Agreement and any and all other documents, instruments and things contemplated hereby,
whether or not such transactions are consummated.
3.
Lender’s Representations and Warranties. The Lender represents and warrants to the Company
and MesoCoat that:
a.
Investment Purpose. As of the date hereof, the Lender is acquiring the New Note and the
Shares and Warrants issuable upon conversion of or otherwise pursuant to the New Note
(including, without limitation, such additional Shares and Warrants, if any, as are issuable as a
result of the events described in the New Note or pursuant to this Agreement) (such Shares and
Warrants being collectively referred to herein as the “Conversion Units” and, collectively with
the New Note, the “Securities”) for its own account and not with a present view towards the
public sale or distribution thereof, except pursuant to sales registered or exempted from
registration under the Securities Act; provided, however, that by making the representations
herein, the Lender does not agree to hold any of the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any time in accordance with U.S. federal
and state securities laws applicable to such disposition.
b.
Lender Status.
(i)
The Lender is not a “U.S. person” as that term is defined in Rule 902 of
Regulation S under the Securities Act, and is not acquiring the Securities for the
account or benefit of any U.S. person;
(ii)
The Lender is not, and at Closing will not be, an affiliate of the Company;
(iii)
As of the date this Agreement was executed and delivered, and on the Closing
Date, Lender was outside the United States; no offer to purchase the Securities
was made in the United States and the transactions contemplated hereby have not
been and will not be pre-arranged by the Lender with a purchaser located in the
United States or who is a U.S. person;
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Exhibit 10
(iv)
All offers or sales of the Securities made before the expiration of the six month
“distribution compliance period” (which begins on the date of the final closing of
the offering and ending 180 days thereafter) shall not be made to a U.S. person or
for the account or benefit of a U.S. person (other than a distributor) unless such
Securities are registered under the Securities Act or a valid exemption can be
relied upon under both the appropriate U.S. state or federal securities laws;
(v)
Lender hereby agrees that Lender will resell the Securities only in accordance
with the provisions of Regulation S, pursuant to registration under the Securities
Act, or pursuant to an available exemption from registration, and Lender shall not
engage in hedging transactions with regard to such Securities unless in
compliance with the Securities Act;
(vi)
Lender is not an underwriter or dealer in the Securities and is not a distributor or
participating, pursuant to contractual agreement, in the distribution of such
Securities;
(vii)
Each distributor participating in offering the Securities, if any, has agreed in
writing that all offers and sales of the Securities prior to the expiration of the
“distribution compliance period” shall only be made in compliance with the safe
harbor contained in Rules 903 or 904 of Regulation S, pursuant to registration of
such Securities under the Securities Act, or pursuant to an exemption from
registration; and each distributor has further agreed in writing not to engage in
hedging transactions regarding the Securities unless in compliance with the
Securities Act;
(viii) All offering documents received by Lender include statements to the effect that
the Securities have not been registered under the Securities Act and may not be
offered or sold in the United States or to U.S. persons (other than distributors as
defined in Regulation S) during the “distribution compliance period” unless such
Securities are registered under the Securities Act or an exemption from the
registration requirements is available;
(ix)
Lender acknowledges that receipt of the Securities involves a high degree of risk
and further acknowledges that it can bear the economic risk of the acquiring of
such Securities, including the total loss of its investment;
(x)
Lender understands that the Securities are being offered and issued in reliance on
specific exemptions from the registration requirements of federal and state
securities laws and that the Company is relying on the truth and accuracy of the
representations, warranties, and agreements of Lender set forth herein in order to
determine the applicability of such exemptions and the suitability of Investor to
acquire such securities;
(xi)
Lender is sufficiently experienced in financial and business matters to be capable
of evaluating the merits and risks of receiving the Securities and to make an
informed decision relating thereto;
(xii)
In evaluating its investment, Lender has consulted its own investment and/or
legal and/or tax advisors; and
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Exhibit 10
(xiii) Lender understands that in the Commission’s view, the statutory basis for the
exemption claimed for this transaction would not be available if the offering,
though in technical compliance with Regulation S, is part of a plan or scheme to
evade the registration provisions of the Securities Act; and Lender confirms that
this transaction is not part of any such plan or scheme. Lender is acquiring the
New Note and the underlying Conversion Units for investment purposes and has
no present intention to sell such Securities in the United States or to a U.S.
person or for the account or benefit of a U.S. person either now or promptly after
the expiration of the “distribution compliance period.”
c.
Reliance on Exemptions. The Lender understands that the Securities are being offered
and sold to it in reliance upon specific exemptions from the registration requirements of U.S
federal and state securities laws and that the Company is relying upon the truth and accuracy of,
and the Lender’s compliance with, the representations and warranties, agreements,
acknowledgments and understandings of the Lender in this Section 3 in order to determine the
availability of such exemptions and the eligibility of the Lender to acquire the Securities.
d.
Information. The Lender and its advisors, if any, have been, and for so long as the New
Note remains outstanding will continue to be, furnished with all materials relating to the business,
finances and operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Lender or its advisors. The Lender and its advisors,
if any, have been, and for so long as the New Note remains outstanding will continue to be,
afforded the opportunity to ask questions of and receive answers from representatives of the
Company, its officers, directors, employees and agents concerning the Company in order for the
Lender to make an informed decision with respect to its investment in the Securities.
Notwithstanding the foregoing, the Company has not disclosed to the Lender any material
nonpublic information and will not disclose such information unless such information is disclosed
to the public prior to or promptly following such disclosure to the Lender. Neither such inquiries
nor any other due diligence investigation conducted by Lender or any of its advisors or
representatives shall modify, amend or affect Lender’s right to rely on the Company’s and
MesoCoat’s representations and warranties contained in Sections 4 and 5 below. The Lender is
not aware of any facts that may constitute a breach of any of the Company’s representations and
warranties made herein.
e.
Governmental Review. The Lender understands that no United States federal or state
agency or any other government or governmental agency has passed upon or made any
recommendation or endorsement of the Securities.
f.
Transfer or Re-sale. The Lender acknowledges that the Securities have not been and are
not being registered under the Securities Act and may not be transferred or resold without
registration under the Securities Act or unless pursuant to an exemption therefrom.
g.
Legends. The Lender understands that unless the Securities underlying the Conversion
Units have been registered under the Securities Act or the Securities may be sold pursuant to Rule
144 promulgated under the Securities Act (or a successor rule) (“Rule 144”) without any
restriction as to the number of Securities as of a particular date that can then be immediately sold,
the Securities shall bear a restrictive legend in substantially the following form:
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Exhibit 10
“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 (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.”
Notwithstanding the foregoing, the legend set forth above shall be removed and the Company
shall issue a certificate without such legend to the holder of any Securities upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a) such Securities are
registered for sale 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, or (b) such holder provides the Company
with an opinion of counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or transfer of such Securities may be
made without registration under the Securities Act, which opinion shall be accepted by the
Company so that the sale or transfer is effected. The Lender agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if any. In the event that the
Company does not accept the opinion of counsel provided by the Lender with respect to the
transfer of Securities pursuant to an exemption from registration, such as Rule 144, it will be
considered an Event of Default pursuant to Section 3.2 of the New Note.
h.
Authorization; Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Lender, and constitutes a valid and binding agreement of
the Lender enforceable in accordance with its terms.
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Exhibit 10
4.
Representations and Warranties of the Company. The Company and MesoCoat, jointly and
severally, represent and warrant to the Lender that:
a.
Organization and Qualification. The Company and each of its Subsidiaries (as defined
below) is a corporation duly organized, validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. The Company and each of its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in good standing would not
have a Material Adverse Effect. “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. “Subsidiaries” or
“Subsidiary” means any corporation or other organization, whether incorporated or
unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership
interest, which such entities are disclosed in the Commission Documents (defined below in
Section 4(g)).
b.
Authorization; Enforcement. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement and the Security Agreement, issue the New
Note and to consummate the transactions contemplated hereby and on conversion to issue the
Securities, in accordance with the terms hereof, (ii) the execution and delivery of this Agreement,
the Security Agreement, the New Note and the consummation by it of the transactions
contemplated hereby (including, without limitation, the issuance of the New Note and the
issuance and reservation for the issuance of the Securities underlying the Conversion Units
issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board
of Directors and no further consent or authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement and the Security Agreement have been duly
executed and delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign this Agreement and the
other documents executed in connection herewith and to bind the Company accordingly, and (iv)
this Agreement and the Security Agreement constitute, and upon execution and delivery by the
Company of the New Note, each of such instruments will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its terms.
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Exhibit 10
c.
Capitalization. As of the date hereof, the authorized capital stock of the Company
consists of 2,500,000,000 shares of common stock, $0.0001 par value per share, of which
66,254,815 shares are issued and outstanding, there are no authorized shares of preferred stock,
4,166,667 shares of common stock are reserved for issuance pursuant to the Company’s stock
option plan, 2,136,397 shares are reserved for issuance pursuant to outstanding warrants
exercisable or convertible into or exchangeable for shares, 3,300,000 shares are reserved for
issuance pursuant to outstanding convertible notes and 2,516,181 shares are reserved for issuance
upon conversion of the New Note into Shares and the exercise of the Warrants. All of such
outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued,
fully paid and non-assessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the Company. As of the date of
this Agreement, (i) except as disclosed above, there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii)
there are no agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of its or their securities under the Securities Act and (iii) there
are no anti-dilution or price adjustment provisions contained in any security issued by the
Company (or in any agreement providing rights to security holders) that will be triggered by the
issuance of the New Note or the securities underlying the Conversion Units. The Company has
furnished to the Lender true and correct copies of the Company’s Articles of Incorporation as in
effect on the date hereof (“Articles of Incorporation”), the Company’s By-laws, as in effect on
the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for
Shares of the Company and the material rights of the holders thereof in respect thereto.
d.
Issuance of Conversion Units. The Securities underlying the Conversion Units are duly
authorized and reserved for issuance and, upon conversion of the New Note in accordance with
its respective terms, will be validly issued, fully paid and non-assessable, and 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 Company and will not impose
personal liability upon the holder thereof.
e.
Acknowledgment of Dilution. The Company understands and acknowledges the
potentially dilutive effect of the Securities underlying the Conversion Units upon conversion of
the New Note. The Company further acknowledges that its obligation to issue the Securities
underlying the Conversion Units upon conversion of the New Note in accordance with this
Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may
have on the ownership interests of other shareholders of the Company.
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Exhibit 10
f.
No Conflicts. The execution, delivery and performance of this Agreement, the Security
Agreement, the New Note by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance of the Securities underlying the Conversion Units) will not (i) conflict
with or result in a violation of any provision of the Articles of Incorporation or By-laws, or (ii)
violate or conflict with, or result in a breach of any provision of, or constitute a default (or an
event which with notice or lapse of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture,
patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations and regulations of any self-regulatory organizations to
which the Company or its securities are subject) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound
or affected (except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Articles of
Incorporation, By-laws or other organizational documents and neither the Company nor any of its
Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under, and neither the Company nor
any of its Subsidiaries has taken any action or failed to take any action that would give to others
any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture
or instrument to which the Company or any of its Subsidiaries is a party or by which any property
or assets of the Company or any of its Subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be
conducted so long as the Lender owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity. Except as specifically contemplated by this Agreement
and as required under the Securities Act and any applicable state securities laws, the Company is
not required to obtain any consent, authorization or order of, or make any filing or registration
with, any court, governmental agency, regulatory agency, self-regulatory organization or stock
market or any third party in order for it to execute, deliver or perform any of its obligations under
this Agreement, the Security Agreement, the New Note in accordance with the terms hereof or
thereof or to issue the New Note in accordance with the terms hereof and to issue the Securities
upon conversion of the New Note. All consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence have been obtained
or effected on or prior to the date hereof. The Company is not in violation of the quotation
requirements of the OTC Market Group (the “OTCQB”) and does not reasonably anticipate that
the Shares will be no longer eligible for quotation on the OTCQB in the foreseeable future. The
Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.
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Exhibit 10
g.
Commission Documents; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with the Commission
pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) (all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein, being hereinafter referred to herein as the
“Commission Documents”). Upon written request, the Company will deliver to the Lender true
and complete copies of the Commission Documents, except for such exhibits and incorporated
documents. As of their respective dates, the Commission Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder applicable to the Commission Documents, and none of the
Commission Documents, at the time they were filed with the Commission, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they
were made, not misleading. None of the statements made in any such Commission Documents is,
or has been, required to be amended or updated under applicable law (except for such statements
as have been amended or updated in subsequent filings prior the date hereof). As of their
respective dates, the financial statements of the Company included in the Commission
Documents complied as to form in all material respects with applicable accounting requirements
and the published rules and regulations of the Commission with respect thereto. Such financial
statements have been prepared in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved and fairly present in all material
respects the consolidated financial position of the Company and its consolidated Subsidiaries as
of the dates thereof and the consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).
Except as set forth in the financial statements of the Company included in the Commission
Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to February 28, 2014, and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in such financial statements,
which, individually or in the aggregate, are not material to the financial condition or operating
results of the Company. The Company is subject to the reporting requirements of the Exchange
Act.
h.
Absence of Certain Changes. Since February 28, 2014, there has been no material
adverse change and no material adverse development in the assets, liabilities, business, properties,
operations, financial condition, results of operations, prospects or Exchange Act reporting status
of the Company or any of its Subsidiaries.
i.
Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its Subsidiaries, or their officers or
directors in their capacity as such, that could have a Material Adverse Effect. The Company and
its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the
foregoing.
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Exhibit 10
j.
Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or possesses
the requisite licenses or rights to use all patents, patent applications, patent rights, inventions,
know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade
names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as
now operated (and, as presently contemplated to be operated in the future). There is no claim or
action by any person pertaining to, or proceeding pending, or, to the Company’s knowledge,
threatened, which challenges the right of the Company or of a Subsidiary with respect to any
Intellectual Property necessary to enable it to conduct its business as now operated (and, as
presently contemplated to be operated in the future). To the best of the Company’s knowledge,
the Company’s or its Subsidiaries’ current and intended products, services and processes do not
infringe on any Intellectual Property or other rights held by any person. The Company is unaware
of any facts or circumstances which might give rise to any of the foregoing. The Company and
each of its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of their Intellectual Property.
k.
No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries
is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule
or regulation which in the judgment of the Company’s officers has or is expected in the future to
have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company’s officers has or is expected to have
a Material Adverse Effect.
l.
Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state
and foreign income and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries
has set aside on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim. The Company has not executed a waiver with respect to the statute of
limitations relating to the assessment or collection of any foreign, federal, state or local tax. None
of the Company’s tax returns is presently being audited by any taxing authority.
m.
Certain Transactions. Except for arm’s length transactions pursuant to which the
Company or any of its Subsidiaries makes payments in the ordinary course of business upon
terms no less favorable than the Company or any of its Subsidiaries could obtain from third
parties and other than the grant of stock options disclosed in the Commission Documents, none of
the officers, directors, or employees of the Company is presently a party to any transaction with
the Company or any of its Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director, trustee or partner.
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Exhibit 10
n.
Disclosure. All information relating to or concerning the Company or any of its
Subsidiaries set forth in this Agreement and provided to the Lender in connection with the
transactions contemplated hereby is true and correct in all material respects and the Company has
not omitted to state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement by the Company
but which has not been so publicly announced or disclosed (assuming for this purpose that the
Company’s reports filed under the Exchange Act are being incorporated into an effective
registration statement filed by the Company under the Securities Act).
o.
Acknowledgment Regarding Lender’s Acquiring of Securities.
The Company
acknowledges and agrees that the Lender is acting solely in the capacity of an arm’s length
purchaser with respect to this Agreement and the transactions contemplated hereby. The
Company further acknowledges that the Lender is not acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by the Lender or any of its respective
representatives or agents in connection with this Agreement and the transactions contemplated
hereby is not advice or a recommendation and is merely incidental to the Lender’s acquiring of
the Securities. The Company further represents to the Lender that the Company’s decision to
enter into this Agreement has been based solely on the independent evaluation of the Company
and its representatives.
p.
No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or sales in any security or
solicited any offers to buy any security under circumstances that would require registration under
the Securities Act of the issuance of the Securities to the Lender. The issuance of the Securities
to the Lender will not be integrated with any other issuance of the Company’s securities (past,
current or future) for purposes of any shareholder approval provisions applicable to the Company
or its securities.
q.
No Brokers. The Company has taken no action which would give rise to any claim by
any person for brokerage commissions, transaction fees or similar payments relating to this
Agreement or the transactions contemplated hereby.
r.
Permits; Compliance. The Company and each of its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its properties and to carry
on its business as it is now being conducted (collectively, the “Company Permits”), and there is
no action pending or, to the knowledge of the Company, threatened regarding suspension or
cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is
in conflict with, or in default or violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Since February 28, 2014, neither the Company nor
any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material Adverse Effect.
Securities Exchange Agreement
Page 11
Exhibit 10
s.
Environmental Matters.
(i)
There are, with respect to the Company or any of its Subsidiaries or any
predecessor of the Company, no past or present violations of Environmental Laws (as
defined below), releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which may give
rise to any common law environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar federal,
state, local or foreign laws and neither the Company nor any of its Subsidiaries has
received any notice with respect to any of the foregoing, nor is any action pending or, to
the Company’s knowledge, threatened in connection with any of the foregoing. The term
“Environmental Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or threatened releases
of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands
or demand letters, injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved thereunder.
(ii)
Other than those that are or were stored, used or disposed of in compliance with
applicable law, no Hazardous Materials are contained on or about any real property
currently owned, leased or used by the Company or any of its Subsidiaries, and no
Hazardous Materials were released on or about any real property previously owned,
leased or used by the Company or any of its Subsidiaries during the period the property
was owned, leased or used by the Company or any of its Subsidiaries, except in the
normal course of the Company’s or any of its Subsidiaries’ business.
(iii)
There are no underground storage tanks on or under any real property owned,
leased or used by the Company or any of its Subsidiaries that are not in compliance with
applicable law.
t.
Title to Property. The Company and its Subsidiaries have good and marketable title to all
personal property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are
described in the Commission Documents or such as would not have a Material Adverse Effect.
Any real property and facilities held under lease by the Company and its Subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as would not have a
Material Adverse Effect.
Securities Exchange Agreement
Page 12
Exhibit 10
u.
Insurance. The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
reasonably sufficient and customary in the businesses in which the Company and its Subsidiaries
are engaged. As of the date hereof and as of the Closing Date, no notice of cancellation has been
received for any of such policies and the Company is in compliance in all material respects with
all of the terms and conditions thereof. Neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost. Upon written request, the Company
will provide to the Lender true and correct copies of all policies relating to directors’ and officers’
liability coverage, errors and omissions coverage, and commercial general liability coverage.
v.
Internal Accounting Controls. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the Company’s board of
directors, to provide reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
w.
Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any
director, officer, agent, employee or other person acting on behalf of the Company or any
Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in violation of any provision
of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic government
official or employee.
x.
Solvency. The Company (after giving effect to the transactions contemplated by this
Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to
pay its probable liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably conclude that the
Company would not, after giving effect to the transaction contemplated by this Agreement, have
the ability to, nor does it intend to take any action that would impair its ability to, pay its debts
from time to time incurred in connection therewith as such debts mature. The Company did not
receive a qualified opinion from its auditors with respect to its most recent fiscal year end and,
after giving effect to the transactions contemplated by this Agreement, does not anticipate or
know of any basis upon which its auditors might issue a qualified opinion in respect of its current
fiscal year.
y.
No Investment Company. The Company is not, and upon the issuance and sale of the
Securities as contemplated by this Agreement will not be an “investment company” required to be
registered under the Investment Company Act of 1940 (an “Investment Company”). The
Company is not controlled by an Investment Company.
Securities Exchange Agreement
Page 13
Exhibit 10
z.
Breach of Representations and Warranties by the Company. If the Company breaches
any of the representations or warranties set forth in this Section 4, in addition to any other
remedies available to the Lender pursuant to this Agreement, it will be considered an Event of
default under Section 3.4 of the New Note.
5.
Representations and Warranties of MesoCoat. The Company and MesoCoat, jointly and
severally, represent and warrant to the Lender that:
a.
MesoCoat has the requisite corporate power and authority to enter into this Agreement,
the Security Agreement, the Subsidiary Guarantee and all other agreements, documents and
instruments contemplated herein to which it is a party.
b.
All corporate action on the part of MesoCoat by its officers, directors and shareholders
necessary for the authorization, execution and delivery of, and the performance by MesoCoat of
its obligations in connection with this Agreement, including, without limitation, the issuance and
delivery of the Security Agreement and the Subsidiary Guarantee, has been duly and validly
taken.
c.
This Agreement and all other agreements, documents and instruments contemplated
herein to which MesoCoat is a party constitute, including, without limitation, the issuance and
delivery of the Security Agreement and the Subsidiary Guarantee, will constitute, valid and
legally binding obligations of MesoCoat, enforceable against MesoCoat in accordance with their
respective terms, subject 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 execution and performance of this Agreement, Security Agreement, the Subsidiary
Guarantee and all other agreements, documents and instruments contemplated herein to which
MesoCoat is a party do not conflict in any material respect with any other agreement to which
MesoCoat is a party or is bound, any court order or judgment applicable to MesoCoat or the
constituent documents of MesoCoat.
e.
MesoCoat has received fair value from the Company in consideration for the executing
the Security Agreement and Subsidiary Guarantee made part of this Agreement.
f.
The total indebtedness owed by MesoCoat to Huntington National Bank as of the date
hereof is $134,427.22. Without the prior written consent of the Lender, MesoCoat shall not incur
additional indebtedness from Huntington National Bank or any other lender, other than the
Company, after the date hereof, while the New Note remains outstanding. MesoCoat
acknowledges and agrees that the subordination of Lender’s security interest as set forth in the
Security Agreement is conditioned on the accuracy and compliance with this Section 5(f).
6.
Covenants.
a.
Best Efforts. The parties shall use their best efforts to satisfy timely each of the
conditions described in Sections 12 and 13 of this Agreement.
Securities Exchange Agreement
Page 14
Exhibit 10
b.
Financial Information. Upon written request, the Company agrees to send or make
available the following reports to the Lender until the Lender transfers, assigns, or sells all of the
Securities: (i) within ten (10) days after the filing with the Commission, a copy of its Annual
Report on Form 10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-
K; (ii) within one (1) day after release, copies of all press releases issued by the Company or any
of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the
shareholders of the Company, copies of any notices or other information the Company makes
available or gives to such shareholders.
c.
Listing. The Company shall maintain quotation of its common stock upon each
automated quotation system upon which its common stock is now quoted and, for so long as the
Lender owns any of the Securities, shall maintain such quotation for all Shares from time to time
issuable upon conversion of the New Note. The Company will obtain and, so long as the Lender
owns any of the Securities, maintain the trading of its common stock on the OTCQB or any
equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq
SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the
American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Financial Industry
Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall
promptly provide to the Lender copies of any notices it receives from the OTCQB and any other
exchanges or quotation systems on which its common stock are then listed regarding the
continued eligibility of its common stock for listing on such exchanges and quotation systems.
d.
Corporate Existence. So long as the Lender or any of its affiliates beneficially own the
New Note, the Company shall maintain its corporate existence and shall not sell all or
substantially all of the Company’s assets, except in the event of a merger or consolidation or sale
of all or substantially all of the Company’s assets, where the surviving or successor entity in such
transaction (i) assumes the Company’s obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded corporation whose
shares are listed for trading on the OTCQB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
e.
No Integration. The Company shall not make any offers or sales of any security (other
than the Securities) under circumstances that would require registration of the Securities being
offered or sold hereunder under the Securities Act or cause the offering of the Securities to be
integrated with any other offering of securities by the Company for the purpose of any
stockholder approval provision applicable to the Company or its securities.
f.
Breach of Covenants. If the Company breaches any of the covenants set forth in this
Section 6, in addition to any other remedies available to the Lender pursuant to this Agreement, it
will be considered an event of default under Section 3.4 of the New Note.
g.
Failure to Comply with the Exchange Act. So long as the New Note is outstanding, the
Company shall comply with the reporting requirements of the Exchange Act and the Company
shall continue to be subject to the reporting requirements of the Exchange Act.
h.
Trading Activities. Neither the Lender nor its affiliates has an open short position in the
common stock of the Company and the Lender agrees that it shall not, and that it will cause its
affiliates not to, engage in any short sales of or hedging transactions with respect to the common
stock of the Company.
Securities Exchange Agreement
Page 15
Exhibit 10
i.
Borrowings. So long as the Company shall have any obligation under the New Note, the
Company and MesoCoat shall not, without giving advance notice to the Lender and obtaining the
Lender’s prior written consent, which consent may not be unreasonably withheld, incur any
indebtedness, or otherwise assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable for the indebtedness of any other person, firm, partnership, joint venture
or corporation, or grant or suffer to exist any lien on its assets, except (a) the Ohio State Calf loan
that is currently committed as publically disclosed on February 18, 2014, (b) the Director of
Development of the State of Ohio lien, (c) the Huntington National Bank lien, (c) the County of
Cuyahoga, Ohio lien, or (d) indebtedness to trade creditors or financial institutions incurred in the
ordinary course of business and consistent with past practice.
j.
Issuances of Equity. So long as the Company shall have any obligation under the New
Note, the Company and MesoCoat shall not, without giving advance notice to the Lender and
obtaining the Lender’s prior written consent, which consent may not be unreasonably withheld,
issue any equity securities of the Company or MesoCoat, or any securities that are convertible,
exercisable or exchangeable into equity securities of the Company or MesoCoat, except shares of
common stock that are issuable (a) under any employee equity incentive plans in effect prior to
the date of the New Note, or (b) upon the exercise or conversion of securities that were
outstanding prior to the date of the New Note; provided that in each such case, issuances are
made in accordance with the terms of the underlying plan or securities documents as in effect
prior to the date of the New Note and not pursuant to terms that have been amended after the date
of the New Note.
k.
Advances and Loans. So long as the Company shall have any obligation under the New
Note, the Company and MesoCoat shall not, without giving advance notice to the Lender and
obtaining the Lender’s prior written consent, which consent may not be unreasonably withheld,
lend money, give credit or make advances to any person, firm, joint venture or corporation,
including, without limitation, officers, directors, employees, subsidiaries and affiliates of the
Company and MesoCoat.
7.
Preemptive Right.
a.
Right of Lender to Purchase Company Securities. The Company shall give the Lender
written notice (an “Issuance Notice”) of any proposed issuance by the Company of any shares of
capital stock of the Company, warrants, convertible notes or any other instruments exercisable,
convertible into or exchangeable for shares of capital stock of the Company (“Company
Securities”) at least 15 days prior to the proposed issuance date. The Issuance Notice shall
specify the number and class of such Company Securities, the price at which such Company
Securities are to be issued and the other material terms and conditions of the issuance. As used
herein, a “proposed issuance” means a proposal for which the Company has one or more third
party purchasers that are willing to purchase the Company Securities on the terms stated in the
Issuance Notice, all on an arm’s length basis. The Lender shall be entitled to purchase all or any
of the Company Securities proposed to be issued, at the price and on the other terms and
conditions specified in the Issuance Notice.
Securities Exchange Agreement
Page 16
Exhibit 10
b.
Exercise of Preemptive Right. The Lender may exercise its rights under this Section 7 by
delivering notice of its election to purchase such Company Securities to the Company, within 15
days of receipt of the Issuance Notice. A delivery of such notice (which notice shall specify the
number (or amount) of Company Securities to be purchased) by the Lender shall constitute a
binding agreement of the Company to sell, at the price and on the terms and conditions specified
in the Issuance Notice, the number of shares (or amount) of Company Securities specified in the
Lender’s notice.
c.
Issuance of Company Securities Not Purchased by Lender. Subject to Section 6(i) of this
Agreement, the Company shall have 90 days from the date of the Issuance Notice to consummate
the proposed issuance of any or all of such Company Securities that the Lender has elected not to
purchase at the price and upon terms and conditions that are not materially less favorable to the
Company than those specified in the Issuance Notice, provided that, if such issuance is subject to
regulatory approval, such 90 day period shall be extended until the expiration of five business
days after all such approvals have been received, but in no event later than 120 days from the date
of the Issuance Notice. If the Company proposes to issue any class of Company Securities after
such 90 day period or on other terms materially less favorable to the Company, it shall again
comply with the procedures set forth in this Section 7.
d.
No Waiver. The election by the Lender not to exercise its preemptive rights in any one
instance shall not affect its rights under this Section 7 as to any future issuances of Company
securities. Any sale of Company Securities by the Company without first giving the Lender the
rights described in this Section 7 shall be void and of no force and effect.
8.
Transfer Agent Instructions. The Company shall issue instructions to its transfer agent to issue
certificates, registered in the name of the Lender or its nominee, for the Shares in such amounts as
specified from time to time by the Lender to the Company upon conversion of the New Note in
accordance with the terms thereof. Prior to any registration of the securities underlying the Conversion
Units under the Securities Act or the date on which the Shares 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, all
such certificates shall bear the restrictive legend specified in Section 3(g) of this Agreement. Nothing in
this Section shall affect in any way the Lender’s obligations and agreement set forth in Section 3(g)
hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the
Securities. If the Lender provides the Company with (i) an opinion of counsel in form, substance and
scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of
such Securities may be made without registration under the Securities Act and such sale or transfer is
effected or (ii) the Lender provides reasonable assurances that the Securities can be sold pursuant to Rule
144, the Company shall permit the transfer, and, in the case of the securities underlying the Conversion
Units, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in
such name and in such denominations as specified by the Lender. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the Lender, by vitiating the intent
and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 8 may be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of this Section, that the Lender
shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and
requiring immediate transfer, without the necessity of showing economic loss and without any bond or
other security being required.
Securities Exchange Agreement
Page 17
Exhibit 10
9.
Release. The Company and MesoCoat do hereby release, remise, acquit and forever discharge
the Lender, Kyrtos and the Lender’s and Kyrtos’ 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 Existing Notes, and the New Note
(all of the foregoing hereinafter called the “Released Matters”). The Company and MesoCoat
acknowledge that the agreements in this Section 9 are intended to be in full satisfaction of all or any
alleged injuries or damages arising in connection with the Released Matters. The Company and
MesoCoat represent and warrant to the Lender that it has not purported to transfer, assign or otherwise
convey any right, title or interest of the Company or MesoCoat in any Released Matter to any other
person and that the foregoing constitutes a full and complete release of all Released Matters.
10.
Renewal. To the extent that any payment or payments made to the Lender or Kyrtos under this
Agreement, the Existing Notes, or the New 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 or MesoCoat, 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 or MesoCoat 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
Lender or Kyrtos.
11.
No Cancellation. This Agreement evidences the same indebtedness as evidenced by the Existing
Notes and the same lien as evidenced by the UCC Financing Statement filed by Kyrtos in the State of
Nevada against MesoCoat on October 31, 2013 (the “UCC-1”). This Agreement is an extension,
modification and amendment of the prior documents and the execution hereof does not evidence a
cancellation of the indebtedness evidenced by the Existing Notes or the lien evidenced by the UCC-1.
The Company and MesoCoat agree that Kyrtos may assign the UCC-1 to the Lender and that the lien
evidenced by the UCC-1 is hereby continued.
12.
Conditions to the Company’s and MesoCoat’s Obligations Hereunder. The obligations of the
Company and MesoCoat to the Lender at the Closing are subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these conditions are for the Company’s
and MesoCoat’s sole benefit and may be waived by the Company and MesoCoat at any time in their sole
discretion:
a.
The Lender shall have executed this Agreement and delivered the same to the Company
and MesoCoat.
b.
The Lender shall have executed the Security Agreement and delivered the same to the
Company and MesoCoat.
c.
The Lender shall have delivered the Existing Notes to the Company.
Securities Exchange Agreement
Page 18
Exhibit 10
d.
The representations and warranties of the Lender in this Agreement shall be true and
correct in all material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a specific date), and
the Lender shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed, satisfied or
complied with by the Lender at or prior to the Closing Date.
e.
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.
13.
Conditions to the Lender’s Obligations Hereunder. The obligations of the Lender hereunder are
subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that
these conditions are for the Lender’s sole benefit and may be waived by the Lender at any time in its sole
discretion:
a.
The Company and MesoCoat shall have executed this Agreement and delivered the same
to the Lender.
b.
The Company and MesoCoat shall have executed the Security Agreement and delivered
the same to the Lender.
c.
MesoCoat shall have executed the Subsidiary Guarantee and delivered the same to the
Lender.
d.
The Company shall have delivered to the Lender the duly executed New Note.
e.
The representations and warranties of the Company and MesoCoat shall be true and
correct in all material respects as of the date when made and as of the Closing Date as though
made at such time (except for representations and warranties that speak as of a specific date) and
the Company and MesoCoat shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company and MesoCoat at or prior to the Closing Date.
f.
The Lender shall have received documentation as may be reasonably requested by the
Lender including, but not limited to, certificates signed by the Secretary of the Company and
MesoCoat dated as of the Closing Date with respect to the Company’s and MesoCoat’s Articles
of Incorporation, By-laws, board of directors’ resolutions relating to the transactions
contemplated hereby and the authority and incumbency of the officers executing this Agreement,
the New Note or any other documents required to be executed or delivered in connection
therewith.
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.
Securities Exchange Agreement
Page 19
Exhibit 10
h.
No event shall have occurred which could reasonably be expected to have a Material
Adverse Effect on the Company or MesoCoat.
i.
The Company’s common stock being eligible for quotation on the OTCBQ and trading in
the common stock of the Company on the OTCBQ shall not have been suspended by the
Commission or the OTCQB.
j.
The Company and MesoCoat shall have paid the expenses described in Section 2(c) of
this Agreement.
14.
Governing Law; Miscellaneous.
a.
Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflicts of laws. Any action
brought by any party against another party concerning the transactions contemplated by this
Agreement shall be brought only in the Supreme Court of the State of New York or the United
States District Court for the Southern District of New York located in New York County, New
York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and
venue of any action instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. The Company, MesoCoat and Lender
waive trial by jury. The prevailing party shall be entitled to recover from the other party its
reasonable attorney’s fees and costs. Each party hereby irrevocably waives personal service of
process and consents to process being served in any suit, action or proceeding in connection with
this Agreement, the Security Agreement, the Subsidiary Guarantee or the New 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 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, none of the parties hereto 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 all of
the parties hereto.
Securities Exchange Agreement
Page 20
Exhibit 10
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:
ABAKAN INC.
0000 Xxxxx 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 MesoCoat, to
MESOCOAT, INC.
00000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attn: Xxxxxx Xxxxxxx, President
Facsimile:
E-mail: xxxxxxxxx@xxxxxxxxxxx.xxx
If to the Lender:
XXXXXX TOWN ASSOCIATES S.A.
c/o JTE FINANCE XX
Xxxxxxxxxxxxxxxxxxxxx 00
XX 0000 Xxxxxx, Xxxxxxxxxxx
Facsimile:
E-mail:
With a Copy to:
Xxxxxx Song & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
E-mail: xxxxx@xxxxxxxxxx.xxx
Securities Exchange Agreement
Page 21
Exhibit 10
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. None of the parties hereto shall assign this
Agreement or any rights or obligations hereunder without the prior written consent of the other
parties. Notwithstanding the foregoing, subject to Section 3(f), the Lender may assign its rights
hereunder to any person that purchases Securities in a private transaction from the Lender 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.
i.
Survival. The representations and warranties of the Company and MesoCoat and the
agreements and covenants set forth in this Agreement shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of the Lender. The
Company and MesoCoat agree to indemnify and hold harmless the Lender and its 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 or MesoCoat of any of their representations, warranties and
covenants set forth in this Agreement.
j.
Publicity. The Company shall be entitled, without the prior approval of the Lender, to
make any press release or filing with the Commission, OTCQB (or other applicable trading
market) or FINRA with respect to such transactions as is required by applicable law and
regulations.
k.
Further Assurances. Each of the parties 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 and MesoCoat acknowledge that a breach by either party of
their obligations hereunder will cause irreparable harm to the Lender by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company and MesoCoat
acknowledge that the remedy at law for a breach of their obligations under this Agreement will be
inadequate and agree, in the event of a breach or threatened breach by the Company or MesoCoat
of the provisions of this Agreement, that the Lender 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 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
Securities Exchange Agreement
Page 22
Exhibit 10
n.
Conflict. In the event of a conflict between or among the terms, covenants, conditions or
provisions of this Agreement, the Existing Notes or the New Note, as each may be amended, the
Lender may elect to enforce from time to time those provisions that would afford the Lender the
maximum financial benefits and security for the obligations under the New Note and/or provide
the Lender the maximum assurance of payment of the obligations under the New Note in full.
[Signature Page Follows]
Securities Exchange Agreement
Page 23
Exhibit 10
IN WITNESS WHEREOF, the undersigned the Company, MesoCoat and Lender have caused this
Agreement to be duly executed as of the date first above written.
ABAKAN INC.
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
MESOCOAT, INC.
By: /s/ Xxxxxx Xxxxxxx
Name: Xxxxxx Xxxxxxx
Title: President
XXXXXX TOWN ASSOCIATES S.A.
By: /s/ Xxxxxxxxx Xxxxxxxxx
Name: Xxxxxxxxx Xxxxxxxxx
Title: Director
Securities Exchange Agreement
Page 24
Exhibit 10
Execution Copy
SECURED CONVERTIBLE PROMISSORY NOTE
Principal Amount: $1,341,963.34
Issue Date: April 28, 2014
FOR VALUE RECEIVED, ABAKAN INC., a Nevada corporation (hereinafter called the “Maker”),
hereby promises to pay to the order of XXXXXX TOWN ASSOCIATES S.A., a Panama corporation, or
its registered assigns (as the case may be, the “Holder”), the sum of $1,341,963.34 on April 27, 2015 (the
“Maturity Date”). Any amount of principal on this Secured Convertible Promissory Note (this “Note”)
which is not paid when due shall bear interest at the rate of eighteen percent (18%) per annum from the
due date thereof until the same is paid (“Default Interest”). Any payment 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 Maker 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. 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.
Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in
that certain Securities Exchange Agreement dated the date hereof pursuant to which this Note was
originally issued (the “Exchange Agreement”).
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 Maker and will not
impose personal liability upon the holder thereof.
The following terms shall apply to this Note:
2.
CONVERSION RIGHTS
A.
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 1.8(a) or Article
III, each in respect of the remaining outstanding principal amount of this Note to convert all or
any part of the outstanding and unpaid principal amount of this Note into Conversion Units (as
defined in Section 1.3(b)) at the Conversion Price (as defined in Section 1.3(a)). Each such
conversion is referred to herein as a “Conversion”. The number of Conversion Units to be issued
upon each Conversion 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 I (the “Notice of Conversion”), delivered to the Maker by
the Holder in accordance with Section 1.6 below; provided that the Notice of Conversion is
submitted by facsimile or e-mail (or by other means resulting in notice) to the Maker before
6:00 p.m., Miami, Florida time on such conversion date (the “Conversion Date”). The term
“Conversion Amount” means, with respect to a Conversion, the sum of (1) the principal amount
of this Note to be converted in such Conversion, plus (2) at the Holder’s option, Default Interest
(if any) on the amounts referred to in the immediately preceding clause (1), plus (3) at the
Holder’s option, any other fees, penalties or liquidated damage amounts owed to the Holder
pursuant to the terms of this Note (if any).
Secured Convertible Promissory Note
Page 1
Exhibit 10
Execution Copy
B.
Maker Conversion Right.
1.
Unit Conversion. The Maker shall have the right from time to time, and at any time following the
date of this Note and ending on the Maturity Date, in respect of the remaining outstanding principal
amount of this Note, in its sole discretion, to cause the conversion of all or any part of the outstanding and
unpaid principal amount of this Note into fully paid and non-assessable Conversion Units, or any shares
of capital stock or other securities of the Maker into which such Units shall hereafter be changed or
reclassified at the Conversion Price if (i) at any time the closing price for the Shares for each of ten (10)
consecutive trading days is greater than three times the Conversion Price then in effect, (ii) the Maker
shall have complied in all material respects with its obligations under this Note, and (iii) the Shares shall
at all times have been and continue to be listed or quoted on a trading market, then, subject to the
conditions set forth in this Section (the “Call Condition Period”) on the date that is five days after
written notice thereof (a “Call Notice”) is received by the Holder (such date shall be known as the “Call
Date”) at the address last shown on the records of the Maker for the Holder or given by the Holder to the
Maker for the purpose of notice; provided, that the conditions to giving such notice must be in effect at all
times during the Call Condition Period or any such Call Notice shall be null and void.
2.
Warrant Exercise. The Maker may further, in its sole discretion, require the exercise of all of the
then unexercised Warrants, if (i) at any time the closing price for the Shares for each of ten (10)
consecutive trading days is greater than five times the Conversion Price then in effect, (ii) the Maker shall
have complied in all material respects with its obligations under this Note, and (iii) the Shares shall at all
times have been and continue to be listed or quoted on a trading market, then, subject to the conditions set
forth in this Section on the date that is five (5) days after a Call Notice is received by the Holder on the
Call Date at the address last shown on the records of the Maker for the Holder or given by the Holder to
the Maker for the purpose of notice; provided, that the conditions to giving such notice must be in effect
at all times during the Call Condition Period or any such Call Notice shall be null and void. Should
Holder fail to exercise Warrants according to the terms and conditions hereinabove, such Warrants shall
expire within ten (10) days after a Call Notice is received.
C.
Conversion.
1.
Conversion Price. As used in this Note, the term “Conversion Price” shall equal $0.80, and shall
be subject to (i) equitable adjustments for stock splits, stock dividends or rights offerings by the Maker
relating to the Maker’s securities, combinations, recapitalization, reclassifications, extraordinary
distributions and similar events, and (ii) all other adjustments required under Section 1.8.
2.
Conversion Units
As used in this Note, the term “Conversion Unit” shall consist of one (1)
share of fully paid and non-assessable Share and one half (½) Warrant entitling the Holder to purchase an
additional Share at $1.20 (“Warrant Exercise Price”) for each whole Warrant. The Warrant Exercise
Price shall be subject to (i) equitable adjustments for stock splits, stock dividends or rights offerings by
the Maker relating to the Maker’s securities, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events, and (ii) all other adjustments required under Section 1.8
and under the terms of the Warrant. The exercise period of each Warrant shall be a period of two (2)
years following the applicable Conversion Date.
Secured Convertible Promissory Note
Page 2
Exhibit 10
Execution Copy
D.
Authorized Shares. The Maker covenants that during the period the conversion right
exists, and if converted, until the expiration or exercise of all Warrants, the Maker 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 issued pursuant to the Exchange Agreement (the “Reserved Amount”).
The Maker represents that upon issuance, the Shares will be duly and validly issued, fully paid
and non-assessable. In addition, if the Maker 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 Maker 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 the outstanding Note.
E.
Failure to Maintain Reserved Amount. If at any time the Maker does not maintain the
Reserved Amount, it will be considered an Event of Default under Article III.
F.
Method of Conversion.
1.
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 Maker 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 1.6(b),
surrendering this Note at the principal office of the Maker.
2.
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 Maker unless the entire unpaid principal amount of this Note is so
converted. The Holder and the Maker 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 Maker, 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 Maker 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 Maker, whereupon the Maker will 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.
3.
Payment of Taxes. The Maker 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 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 Maker 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 Maker the amount of any
such tax or shall have established to the satisfaction of the Maker that such tax has been paid.
Secured Convertible Promissory Note
Page 3
Exhibit 10
Execution Copy
4.
Delivery of Shares and Warrants Upon Conversion. Upon receipt by the Maker 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 conversion as provided in this Section 1.6, the Maker 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 Exchange Agreement.
5.
Obligation of Maker to Deliver Conversion Units. Upon receipt by the Maker 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 on this Note shall be
reduced to reflect such conversion, and, unless the Maker 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 Shares 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 Maker’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 Maker 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 Maker, and irrespective of any other circumstance
which might otherwise limit such obligation of the Maker 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 Maker before 6:00 p.m., Miami, Florida time, on such
date.
6.
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 1.4 above, which failure shall
be governed by Sections 1.4 and 1.5), the Maker shall pay to the Holder the greater of (x) $500 per day in
cash, for each day beyond the Deadline that the Maker fails to deliver such Shares and Warrants, and (y)
an amount in cash equal to (A) (N/360) multiplied by (B) the Conversion Amount multiplied by (C) the
Default Interest rate, where “N” equals the number of days beyond the Deadline that the Maker fails to
deliver such Shares and Warrants. Amounts payable pursuant to the preceding sentence shall be paid to the
Holder in immediately available funds on or before the second (2nd) business day following written notice
from the Holder to the Maker specifying the amount owed to it by the Maker. In the event that shares of
Maker’s common stock are purchased by or on behalf of the Holder in order to make delivery on a sale
effected in anticipation of receiving Shares upon conversion, and there is a conversion default with
respect thereto, the Holder shall have the right to receive from the Maker, in addition to the foregoing
amounts, (1) the aggregate amount paid by or on behalf of the Holder for such shares of common stock
minus (2) the aggregate amount of net proceeds, if any, received by the Holder from the sale of the Shares
as and when such Shares are delivered by the Maker to the Holder. At the Holder’s option, amounts
payable hereunder may be added to the principal amount of this Note, and such additional principal
amount shall be convertible into Conversion Units in accordance with the terms of this Note. The Maker
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.
Secured Convertible Promissory Note
Page 4
Exhibit 10
Execution Copy
Accordingly the parties acknowledge that the liquidated damages provision in this Section 1.6(f) are
justified.
G.
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 effective
registration statement under the Securities Act or (ii) the Maker 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 Holder who agrees to sell or otherwise transfer the
shares only in accordance with this Section 1.7 and who is not a U.S. Person (as defined in the
Exchange Agreement). Except as otherwise provided in the Exchange Agreement (and subject
to the removal provisions set forth below), until such time as the 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 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 substantially 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 Maker shall issue to the Holder a new certificate or
stock purchase warrant therefore free of any transfer legend if (i) the Maker 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, or (ii) in the case of securities issuable upon conversion of
this Note or exercise of Warrants, 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.
Secured Convertible Promissory Note
Page 5
Exhibit 10
Execution Copy
H.
Effect of Certain Events.
1.
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 Maker, the effectuation by the Maker of a
transaction or series of related transactions in which more than 50% of the voting power of the Maker is
disposed of, or the consolidation, merger or other business combination of the Maker with or into any
other Person (as defined below) or Persons when the Maker is not the survivor shall either: (i) be deemed
to be an Event of Default (as defined in Article III) pursuant to which the Maker 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 1.8(b) hereof. “Person”
shall mean any individual, corporation, limited liability company, partnership, association, trust or other
entity or organization.
2.
Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and
outstanding, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which securities of the Maker 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 Maker or
another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Maker
other than in connection with a plan of complete liquidation of the Maker, then the Holder of this Note
shall 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 or assets thereafter
deliverable upon the conversion hereof. The Maker shall not affect any transaction described in this
Section 1.8(b) unless (a) 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 (b) the resulting successor or
acquiring entity (if not the Maker) assumes by written instrument the obligations of this Section 1.8(b).
The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share
exchanges.
3.
Adjustment Due to Distribution. If the Maker 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 Maker’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 receive the amount of such assets on an “as-converted” basis; that is, the amount
which would have been payable to the Holder with respect to the Shares issuable if the Holder converted
this Note in full (without regard to any limitations on conversion contained herein) immediately prior to
the date of record for determining shareholders entitled to such Distribution.
Secured Convertible Promissory Note
Page 6
Exhibit 10
Execution Copy
4.
Purchase Rights. If, at any time when this Note is issued and outstanding, the Maker issues any
convertible securities or rights 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 acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights on an “as-converted”
basis; that is, the aggregate Purchase Rights such Holder would have acquired if such Holder converted
this Note in full (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.
5.
Dilutive Issuances. If the Maker issues or sells, or is deemed to have issued or sold, any Shares
for no consideration or for consideration on a per share basis less than the Conversion Price in effect on
the date of such issuance or sale (or deemed issuance or sale) (a “Dilutive Issuance”), then the
Conversion Price and the Warrant Exercise Price shall be adjusted so as to equal the consideration per
share received or receivable by the Maker (on a per share basis) for the additional Shares so issued, sold,
or deemed issued or sold in such Dilutive Issuance. If the Maker issues or sells, or is deemed to have
issued or sold, any Shares for consideration per share less than the Warrant Exercise Price and equal to or
greater than the Conversion Price in effect on the date of such issuance or sale (or deemed issuance or
sale), then the Warrant Exercise Price shall be adjusted so as to equal the consideration per share received
or receivable by the Maker (on a per share basis) for the additional Shares so issued, sold, or deemed
issued or sold in such issuance. For purposes of this Section 1.8(e), if the Maker issues, sells or amends
any options, warrants, convertible securities or other similar instruments whether or not immediately
convertible, exercisable or exchangeable, then the Shares issuable upon the exercise of such securities
shall, as of the date of the issuance, sale or amendment of such securities, be deemed to be outstanding
and to have been issued and sold by the Maker at the per share price for which Shares are issuable upon
the conversion, exercise or exchange of such securities.
6.
Notice of Adjustments. Upon the occurrence of each adjustment or readjustment as a result of the
events described in this Section 1.8, the Maker, 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
Maker shall, 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 this Note.
I.
Reserved
J.
Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the
Conversion Units covered thereby 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 Maker 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
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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 Maker) the Holder shall regain, retroactive
to the date the Notice of Conversion was submitted, the rights of a Holder of this Note with
respect to such unconverted portions of this Note and the Maker 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 Maker’s failure to convert this Note.
K.
Prepayment. Notwithstanding anything to the contrary contained in this Note, so long
as the Maker has not received a Notice of Conversion from the Holder, then at any time during
the period beginning on October 30, 2014 and ending on the Maturity Date, the Maker shall
have the right, exercisable on not less than five (5) business days prior written notice to the
Holder, to prepay the outstanding Note in full, in accordance with this Section 1.11. Any notice
of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder
of the Note at its registered addresses and shall state: (1) that the Maker is exercising its right
to prepay the Note, and (2) the date of prepayment which shall be not less than five (5)
business days from the date on which the Optional Prepayment Notice is delivered. On (and
not before) the date fixed for prepayment (the “Optional Prepayment Date”), the Maker shall
make payment of the Optional Prepayment Amount (as defined below) to or upon the order of
the Holder as specified by the Holder in writing to the Maker at least one (1) business day prior
to the Optional Prepayment Date. Notwithstanding the foregoing, the Holder shall have the
right to convert all or any portion of this Note even after an Optional Prepayment Notice has
been delivered, so long as the Holder submits a Notice of Conversion prior to actual
prepayment of this Note.
If the Maker exercises its right to prepay the Note, the Maker shall make payment to the Holder
of an amount (the “Optional Prepayment Amount”) in cash equal to 125% of the sum of: (x) the
then outstanding principal amount of this Note plus (y) Default Interest (if any) on the amount
referred to in clause (x), plus (z) all other fees, penalties or liquidated damage amounts owed
to the Holder pursuant to the terms of this Note (if any). The Maker shall also issue, for no
additional consideration, the number of Warrants equal to what the Holder would have
received if such Holder converted this Note in full (without regard to any limitations on
conversion contained herein) immediately before the date on which the Optional Prepayment
Notice is delivered. If the Maker delivers an Optional Prepayment Notice and fails to pay the
Optional Prepayment Amount due to the Holder on the Optional Prepayment Date, the Maker
shall forever forfeit its right to prepay the Note pursuant to this Section 1.11.
3.
CERTAIN COVENANTS
A.
Distributions on Capital Stock. So long as the Maker shall have any obligation under
this Note, the Maker shall not without the Holder’s written consent (a) pay, declare or set apart
for such payment, any dividend or other distribution (whether in cash, property or other
securities) on shares of capital stock other than dividends on Shares solely in the form of
additional Shares or (b) directly or indirectly or through any subsidiary make any other
payment or distribution in respect of its capital stock except for distributions pursuant to any
shareholders’ rights plan which is approved by a majority of the Maker’s disinterested
directors.
B.
Restriction on Stock Repurchases. So long as the Maker shall have any obligation under
this Note, the Maker 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
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otherwise) in any one transaction or series of related transactions any shares of capital stock
of the Maker or any warrants, rights or options to purchase or acquire any such shares.
C.
Borrowings. So long as the Maker shall have any obligation under this Note, the Maker
shall not, without giving advance notice to the Holder and obtaining the Holder’s prior written
consent, which consent shall not be unreasonably withheld, incur any indebtedness, or
otherwise assume, guarantee, endorse, contingently agree to purchase or otherwise become
liable for the indebtedness of any other person, firm, partnership, joint venture or corporation,
or grant or suffer to exist any lien on its assets, except (a) the Ohio State Calf loan that is
currently committed as publically disclosed on February 18, 2014, (b) the Director of
Development of the State of Ohio lien, (c) the Huntington National Bank lien, (d) the County of
Cuyahoga, Ohio lien or (e) indebtedness to trade creditors or financial institutions incurred in
the ordinary course of business and consistent with past practice.
D.
Issuances of Equity. So long as the Maker shall have any obligation under this Note, the
Maker shall not, without giving advance notice to the Holder and obtaining the Holder’s prior
written consent, which consent may not be unreasonably withheld, issue any equity securities
of the Maker, or any securities that are convertible, exercisable or exchangeable into equity
securities of the Maker, except shares of common stock that are issuable (a) under any
employee equity incentive plans in effect prior to the date of this Note, or (b) upon the exercise
or conversion of securities that were outstanding prior to the date of this Note; provided that in
each such case, issuances are made in accordance with the terms of the underlying plan or
securities documents as in effect prior to the date of this Note and not pursuant to terms that
have been amended after the date of this Note. Any issuances of equity securities consented to
by the Holder shall nonetheless remain subject to the provisions of Section 1.8 of this Note.
E.
Sale of Assets. So long as the Maker shall have any obligation under this Note, the
Maker shall not, without giving advance notice to the Holder and obtaining the Holder’s prior
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.
F.
Advances and Loans. So long as the Maker shall have any obligation under this Note,
the Maker shall not, without giving advance notice to the Holder and obtaining the Holder’s
prior written consent, which consent may not be unreasonably withheld, lend money, give
credit or make advances to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and affiliates of the Maker.
4.
EVENTS OF DEFAULT
If any of the following events of default (each, an “Event of Default”) shall occur:
A.
Failure to Pay Principal. The Maker fails to pay the principal hereof when due on this
Note, whether at maturity, upon acceleration or otherwise and such failure to pay shall
continue for a period of two (2) business days after written notice thereof to the Maker from
the Holder.
B.
Conversion and the Shares. The Maker 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
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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 Maker
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 obligations 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 Maker or MesoCoat, Inc. (“MesoCoat”), a majority owned
subsidiary of Maker, breaches any material covenant or other material term or condition
contained in this Note and any collateral documents including but not limited to the Exchange
Agreement, Security Agreement and such breach continues for a period of five (5) business
days after written notice thereof to the Maker from the Holder.
D.
Breach of Representations and Warranties. Any representation or warranty of the
Maker or MesoCoat made herein or in any agreement, statement or certificate given in writing
pursuant hereto or in connection herewith (including, without limitation, the Exchange
Agreement and Security 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 Exchange Agreement or the
Security Agreement.
E.
Receiver or Trustee. The Maker or any subsidiary of the Maker 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 Maker or any subsidiary of the Maker or any of its property or other assets for
more than $100,000, 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 Maker or any subsidiary of the
Maker.
H.
Delisting of Shares. The Maker shall fail to maintain the listing of the Shares on at least
one of the OTCQB or an equivalent replacement exchange, the Nasdaq National Market, the
Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange and
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such failure to maintain continues for a period of five (5) business days after written notice
thereof to the Maker from the Holder.
I.
Failure to Comply with the Exchange Act. The Maker shall fail to comply with the
reporting requirements of the Exchange Act; and/or the Maker shall cease to be subject to the
reporting requirements of the Exchange Act and such failure or ceasing continues for a period
of five (5) business days after written notice thereof to the Maker from the Holder.
J.
Liquidation. Any dissolution, liquidation, or winding up of Maker or any subsidiary of
the Maker or any substantial portion of their respective businesses.
K.
Cessation of Operations. Any cessation of operations by Maker or any subsidiary of
Maker, or Maker or any subsidiary of Maker admits it is otherwise generally unable to pay its
debts as such debts become due, provided however, that any disclosure of the Maker’s ability to
continue as a “going concern” shall not be an admission that the Maker cannot pay its debts as
such become due.
L.
Maintenance of Assets. The failure by Maker or any subsidiary of Maker 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) and such failure to maintain
continues for a period of five (5) business days after written notice thereof to the Maker from
the Holder.
M.
Financial Statement Restatement. The restatement of any financial statements filed by
the Maker 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
Exchange Agreement or the Security Agreement.
N.
Reverse Splits. The Maker 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 Maker proposes to replace its
transfer agent, the Maker fails to provide, prior to the effective date of such replacement, fully
executed Irrevocable Transfer Agent Instructions (including, but not limited to, the provision
to irrevocably reserve Shares in the Reserved Amount) signed by the successor transfer agent
to Holder.
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 Maker or any subsidiary of
the Maker of any covenant or other term or condition contained in any of the Other
Agreements (as defined below), after the passage of all applicable notice and cure or grace
periods, shall, at the option of the Holder, be considered a default under this Note and the
Other Agreements, in which event 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 Maker and any affiliate of the Maker, and, or for the benefit of, (2) the Holder and any
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affiliate of the Holder, however, the term “Other Agreements” shall not include the related or
companion documents to this Note.
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 upon delivery of written notice to the Maker by the
Holder (the “Default Notice”), in which case, the Maker shall pay to the Holder an amount equal to the
sum of:
(A) 125% times the greater of:
(1) the sum of (x) the outstanding principal amount of this Note plus (y) Default Interest (if any) on
the amount referred to in clause (x) plus (z) all other fees, penalties or liquidated damage amounts
owed to the Holder pursuant to the terms of this Note (if any) (collectively, the “Default Amount”);
and
(2) the product of (x) the quotient of (i) the Default Amount divided by (ii) the Conversion Price then
in effect multiplied by (y) the greater of (i) the Market Price and (ii) the VWAP; in each case,
calculated as of the date on which the Default Notice is delivered. “Market Price” means, as of a
particular date, the highest daily VWAP during the period of twenty (20) consecutive trading days
occurring immediately prior to (but not including) such date. “VWAP” means, as of a particular date,
the volume weighted average price of the Maker’s common stock for such date (provided if such date is
not a trading day, then as of the trading day immediately preceding such date) on its principal trading
market as reported by Bloomberg Financial Markets or, if Bloomberg Financial Markets is not then
reporting such prices, by a comparable reporting service of national reputation selected by the Holder and
reasonably satisfactory to the Maker.
plus
(B) all costs of collection, including, without limitation, legal fees and expenses reasonably incurred.
The Maker’s payment in full of the above amount shall be in full satisfaction of its obligations hereunder.
The Holder shall be entitled to exercise all other rights and remedies available at law or in equity. If the
Maker fails to pay the Default Amount as and when due, then the Holder shall have the right at any time,
so long as the Maker remains in default, to require the Maker, upon written notice, to immediately issue,
in lieu of the Default Amount, the number of Shares of the Maker equal to the Default Amount divided by
80% of the Conversion Price then in effect.
5.
MISCELLANEOUS
A.
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.
B.
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
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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 Maker, to:
ABAKAN INC.
0000 X. 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:
XXXXXX TOWN ASSOCIATES S.A.
Xxxxxx Xxxxx Ave. & 00xx Xxxxxx
Xxxxx Xxxxxxxx Xxxxxxxx,
Xxxxxx, Xxxxxxxx of Panama
Attn: _____________________
Facsimile: _________________
E-mail: ___________________
and
JTE FINANCE XX
Xxxxxxxxxxxxxxxxxxxxx 00
XX 0000 Xxxxxx, Xxxxxxxxxxx
With a copy to:
Xxxxxx Song & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Song
Facsimile: 000-000-0000
E-mail: xxxxx@xxxxxxxxxx.xxx
C.
Amendments. This Note and any provision hereof may only be amended by an
instrument in writing signed by the Maker 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.
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D.
Assignability. This Note shall be binding upon the Maker and its successors and
assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Except
as otherwise permitted, 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 501(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.
E.
Cost of Collection. If default is made in the payment of this Note, the Maker shall pay the
Holder hereof costs of collection, including reasonable attorneys’ fees.
F.
Governing Law. This Note shall be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the transactions contemplated by this
Note shall be brought only in the state courts of New York or in the federal courts located in
New York County. The parties to this Note hereby irrevocably waive any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum non conveniens. The Maker and
Holder waive trial by jury. The prevailing party shall be entitled to recover from the other
party its reasonable attorney's 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 suit, action or 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.
G.
Certain Amounts. Whenever pursuant to this Note the Maker 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 Default Interest, the Maker 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 Maker 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 Maker 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.
H.
Exchange Agreement. By its acceptance of this Note, each party agrees to be bound by
the applicable terms of the Exchange Agreement.
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4.9
Security Agreement.
The Note shall be secured by a security interest in the assets of
MesoCoat, as evidenced by the Exchange Agreement and the Security Agreement that includes a UCC
Financing Statement Amendment perfecting and continuing Holder’s lien on MesoCoat’s assets.
Notice of Corporate Events. Except as otherwise provided herein, the Holder of this Note shall
have no rights as an owner of Shares unless and only to the extent that it converts this Note
into Shares. The Maker shall provide the Holder with prior notification of any meeting of the
Maker’s shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Maker 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 in connection with any proposed sale, lease or
conveyance of all or substantially all of the assets of the Maker or any proposed liquidation,
dissolution or winding up of the Maker, the Maker 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 Maker 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 4.10.
I.
Remedies. The Maker 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 Maker 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 Maker 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.
[Signature Page Follows]
Secured Convertible Promissory Note
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IN WITNESS WHEREOF, Maker has caused this Note to be signed in its name by its duly authorized
officer as of the date first written above.
ABAKAN INC.
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Chief Executive Officer
Secured Convertible Promissory Note
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EXHIBIT I: NOTICE OF CONVERSION
Capitalized terms that are used and not defined in this Notice of Conversion that are defined in the
secured convertible promissory note of ABAKAN INC., a Nevada corporation, dated April 28, 2014 (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 $__________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 Maker 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 Maker 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:
Secured Convertible Promissory Note
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SUBSIDIARY GUARANTEE
This SUBSIDIARY GUARANTEE (the “Guarantee”), dated as of April 28, 2014, is made by
MESOCOAT, INC., a Nevada corporation (the “Guarantor”), for and on behalf of XXXXXX TOWN
ASSOCIATES S.A., a Panama corporation (the “Lender”). This Guarantee is being executed and
delivered by the Guarantor in connection with that certain Securities Exchange Agreement, dated as of
April 28, 2014 (the “Exchange Agreement”), between Abakan, Inc., a Nevada corporation (the
“Company”), the Guarantor and the Lender. Capitalized terms used herein and not otherwise defined
herein have the respective meanings set forth in the Exchange Agreement.
WHEREAS:
A.
The Guarantor shall derive substantial direct and indirect benefits from the transactions
contemplated by the Exchange Agreement; and
B.
It is a condition to the transactions contemplated by the Exchange Agreement that the Guarantor
execute and deliver this Guarantee to the Lender.
NOW, THEREFORE, in consideration of the foregoing, the covenants set forth herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor
hereby agrees as follows:
1.
Guarantee.
a.
Guarantee of Guaranteed Obligations. The Guarantor hereby unconditionally guarantees
to the Lender, its successors, endorsees, transferees and assigns, the prompt payment (whether at
stated maturity, by acceleration or otherwise) and performance of any and all indebtedness
(whether principal or interest), liabilities and other obligations of the Company under the New
Note now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several or joint and several, and to pay all fees,
indemnities, costs and expenses (including reasonable attorneys’ fees) provided for in this
Guarantee (collectively, the “Guaranteed Obligations”). The Guarantor agrees that this
Guarantee is a guaranty of payment and performance and not of collection, and that its
obligations under this Guarantee shall be primary, absolute and unconditional, irrespective of, and
unaffected by:
i.
the genuineness, validity, regularity, enforceability or any future amendment of,
or change in this Guarantee or any other document now existing or hereafter arising;
ii.
the absence of any action to enforce this Guarantee or any other document, or the
waiver or consent by the Lender with respect to any of the provisions thereof;
iii.
the existence, value or condition of, or failure to perfect a lien against, any
collateral (“Collateral”) for the Guaranteed Obligations or any action, or the absence of
any action, by the Lender in respect thereof (including, without limitation, the release of
any such security);
iv.
the insolvency of the Company, the Guarantor or any other party; or
Exhibit 10
v.
any other action or circumstances which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor;
it being agreed by the Guarantor that its obligations under this Guarantee shall not be discharged
until the satisfaction of the Guaranteed Obligations in full. The Guarantor shall be regarded, and
shall be in the same position, as principal debtor with respect to the Guaranteed Obligations.
b.
Enforcement of Guarantee. In no event shall the Lender have any obligation (although it
is entitled, at its option) to proceed against the Company or any Collateral before seeking
satisfaction from Guarantor, and the Lender may proceed, prior or subsequent to, or
simultaneously with, the enforcement of its rights hereunder, to exercise any right or remedy
which it may have against any Collateral, as a result of any liens it may have as security for all or
any portion of the Guaranteed Obligations.
c.
Waiver. The Guarantor (i) waives, and agrees that it shall not at any time insist upon,
plead or in any manner whatsoever claim or take the benefit or advantage of, any appraisal,
valuation, stay, extension, marshaling of assets or redemption laws, or exemption, whether now
or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by
the Guarantor of its Guaranteed Obligations under, or the enforcement by the Lender of, this
Guarantee, (ii) waives diligence, presentment and demand (whether for non-payment or protest or
of acceptance, maturity, extension of time, change in nature or form of the Guaranteed
Obligations, acceptance of further security, release of further security, composition or agreement
arrived at as to the amount of, or the terms of, the Guaranteed Obligations, notice of adverse
change in the Company’s financial condition or any other fact which might increase the risk to
the Guarantor) with respect to any of the Guaranteed Obligations or all other demands
whatsoever, (iii) represents, warrants and agrees that to its knowledge, as of the date of this
Guarantee, its obligations under this Guarantee are not subject to any offsets or defenses against
the Company or the Lender and (iv) agrees that its obligations under this Guarantee shall not be
subject to any counterclaims, offsets or defenses against the Company or the Lender which may
arise in the future, except those counterclaims, offsets or defenses related to the satisfaction in
whole or part of the Guaranteed Obligations.
d.
Benefit of Guarantee. The provisions of this Guarantee are for the benefit of the Lender
and its successors, transferees, endorsees and assigns, and nothing herein contained shall impair,
as between the Guarantor and the Lender, the obligations of the Guarantor under this Guarantee.
In the event all or any part of the Guaranteed Obligations are transferred, indorsed or assigned by
the Lender to any person or entity, any reference to the Lender herein shall be deemed to refer
equally to such person or entity.
e.
Modification of Guaranteed Obligations, Etc. The Guarantor hereby acknowledges and
agrees that the Lender may at any time or from time to time, with or without the consent of, or
notice to, the Guarantor:
i.
change or extend the manner, place or terms of payment of, or renew or alter all
or any portion of, the Guaranteed Obligations in accordance with the terms therein;
ii.
take any action under or in respect of the Exchange Agreement or any document
executed thereunder in the exercise of any remedy, power or privilege contained therein
or available to it at law, equity or otherwise, or waive or refrain from exercising any such
remedies, powers or privileges;
Subsidiary Guarantee
Page 2
Exhibit 10
iii.
amend or modify, in any manner whatsoever, the Exchange Agreement, the New
Note or any document executed thereunder in accordance with the terms therein;
iv.
extend or waive the time for the Company’s performance of, or compliance with,
any term, covenant or agreement on its part to be performed or observed under the
Exchange Agreement, the New Note or any document executed thereunder, or waive
such performance or compliance or consent to a failure of, or departure from, such
performance or compliance in accordance with the terms therein;
v.
take and hold Collateral for the payment of the Guaranteed Obligations
guaranteed hereby or sell, exchange, release, dispose of, or otherwise deal with, any
property pledged, mortgaged or conveyed, or in which the Lender has been granted a
lien, to secure any Guaranteed Obligations or any other obligations in accordance with
the terms therein;
vi.
release anyone who may be liable in any manner for the payment of any amounts
owed by Guarantor or the Company to the Lender; and/or
vii.
apply any sums by whomever paid or however realized to any amounts owing by
Guarantor or the Company to the Lender in such manner as the Lender shall determine in
its discretion;
and the Lender shall not incur any liability to the Guarantor as a result thereof, and no such
action, except satisfaction of the Guaranteed Obligations, shall impair or release the Guarantor or
any of the Guaranteed Obligations under this Guarantee.
f.
Deferral of Subrogation, Etc. Notwithstanding anything to the contrary in this Guarantee
or any other document, the Guarantor hereby:
i.
expressly and irrevocably waives, on behalf of itself and its successors and
assigns (including any surety) until the satisfaction of the Guaranteed Obligations in full,
any and all rights at law or in equity to subrogation, to reimbursement, to exoneration, to
contribution, to indemnification, to set off or to any other rights that could accrue to a
surety against a principal, to a guarantor against a principal, to a guarantor against a
maker or obligor, to an accommodation party against the party accommodated, to a
holder or transferee against a maker, or to the holder of any claim against any person or
entity, and which Guarantor may have or hereafter acquire against the Company in
connection with or as a result of Guarantor’s execution, delivery and/or performance of
this Guarantee, or any other documents to which such Guarantor is a party or otherwise;
and
ii.
acknowledges and agrees (x) that this waiver is intended to benefit the Lender
and shall not limit or otherwise affect the Guarantor’s liability hereunder or the
enforceability of this Guarantee, and (y) that the Lender and its successors and assigns
are intended third party beneficiaries of the waivers and agreements set forth in this
Section 1(f).
Subsidiary Guarantee
Page 3
Exhibit 10
g.
Election of Remedies. If the Lender may, under applicable law, proceed to realize
benefits under the Exchange Agreement, New Note or any document executed thereunder, giving
such Lender a lien upon any Collateral, either by judicial foreclosure or by non-judicial sale or
enforcement, the Lender may, at its sole option, determine which of such remedies or rights it
may pursue without affecting any of such rights and remedies under this Guarantee. If, in the
exercise of any of its rights and remedies, the Lender shall forfeit any of its rights or remedies,
including its right to enter a deficiency judgment against the Guarantor or the Company, whether
because of any applicable laws pertaining to “election of remedies” or the like, the Guarantor
hereby consents to such action by the Lender and waives any claim based upon such action, even
if such action by the Lender shall result in a full or partial loss of any rights of subrogation which
the Guarantor might otherwise have had but for such action by the Lender. Any election of
remedies which results in the denial or impairment of the right of the Lender to seek a deficiency
judgment against the Guarantor or the Company shall not impair, reduce or limit the Guarantor’s
obligation to pay the full amount of the Guaranteed Obligations. In the event the Lender shall bid
at any foreclosure or trustee’s sale or at any private sale permitted by law or the Exchange
Agreement, New Note or any document executed thereunder, such Lender may bid all or less
than the amount of the Guaranteed Obligations and the amount of such bid need not be paid by
the Lender but shall be credited against the Guaranteed Obligations. The amount of the
successful bid at any such sale shall be conclusively deemed to be the fair market value of the
Collateral and the difference between such bid amount and the remaining balance of the
Guaranteed Obligations shall be conclusively deemed to be the amount of the Guaranteed
Obligations guaranteed under this Guarantee, notwithstanding that any present or future law or
court decision or ruling may have the effect of reducing the amount of any deficiency claim to
which the Lender might otherwise be entitled but for such bidding at any such sale.
2.
Representations and Warranties. The Guarantor hereby represents and warrants to the Lender as
follows:
a.
Organization, Good Standing. The Guarantor is duly and validly organized, validly existing
and in good standing under the laws of its formation and has all requisite power and authority to
carry on its business as now conducted.
b.
Authorization; Consents. The Guarantor has the requisite power and authority to enter into
and perform its obligations under this Guarantee. All action on the part of the Guarantor necessary
for the authorization, execution and delivery of, and the performance of its obligations under, this
Guarantee has been taken, and no further consent or authorization of the Guarantor, its board of
directors, equity holders or, to its knowledge, any Governmental Authority or any other Person is
required in connection therewith.
c.
Due Execution; Enforceability. This Guarantee has been duly executed and delivered by the
Guarantor. This Guarantee constitutes the valid and legally binding obligation of the Guarantor,
enforceable against it in accordance with its terms, subject to (i) 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 (ii) general principles of equity.
Subsidiary Guarantee
Page 4
Exhibit 10
d.
No Conflict with Other Instruments. The execution, delivery and performance of this
Guarantee will not result in any material violation of any provisions of the Guarantor’s articles of
incorporation or any other governing document or in a default under any provision of any instrument
or contract to which it is a party or by which it or any of its assets or properties are bound, or in any
violation of any provision of any laws, regulations or permits applicable to the Guarantor or be in
conflict with or constitute, with or without the passage of time and giving of notice, either a default
under any material provision, instrument or contract or an event which results in the creation of any
lien upon any assets of the Guarantor.
3.
Further Assurances. The Guarantor agrees, upon the written request of the Lender, to execute and
deliver to the Lender, from time to time, any additional instruments or documents reasonably considered
necessary by the Lender to cause this Guarantee to be, become or remain valid and effective in
accordance with its terms.
4.
Reinstatement. This Guarantee shall remain in full force and effect and continue to be effective
should any petition be filed by or against the Guarantor or the Company for liquidation or reorganization,
should the Guarantor or the Company become insolvent or make an assignment for the benefit of any
creditor or creditors or should a receiver or trustee be appointed for all or any significant part of the
Guarantor’s or the Company’ assets, and shall continue to be effective or be reinstated, as the case may
be, if at any time payment and performance of the Guaranteed Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by
any obligee of the Guaranteed Obligations, whether as a “voidable preference,” “fraudulent conveyance,”
or otherwise, all as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the Guaranteed Obligations shall
be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or
returned.
5.
Miscellaneous.
a.
Survival; Severability. In the event that any provision of this Guarantee becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Guarantee shall
continue in full force and effect without said provision; provided that in such case the parties shall
negotiate in good faith to replace such provision with a new provision which is not illegal,
unenforceable or void, as long as such new provision does not materially change the economic
benefits of this Guarantee to the parties.
b.
Successors and Assigns. The terms and conditions of this Guarantee shall inure to the
benefit of and be binding upon the respective successors and permitted assigns of the parties.
Nothing in this Guarantee, express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Guarantee, except as expressly provided in this Guarantee. The
Lender may assign its rights and obligations hereunder in connection with any private sale or transfer
of the New Note, in which case the term “Lender” shall also be deemed to refer to such transferee.
The Guarantor may not assign its obligations under this Guarantee.
Subsidiary Guarantee
Page 5
Exhibit 10
c.
Governing Law; Jurisdiction. This Guarantee shall be governed by and construed under the
laws of the State of New York applicable to contracts made and to be performed entirely within the
State of New York. The Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in the City and County of New York for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The
Guarantor hereby irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to the Guarantor at the
address in effect for notices to it under this Guarantee 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 manner permitted by law.
d.
Waiver of Jury Trial. The parties hereto waive all right to trial by jury in any action, suit
or proceeding brought to resolve any dispute, whether sounding in contract, tort, or otherwise,
between the Guarantor and the Lender arising out of, connected with, related to, or incidental to
the relationship established in connection with, this Guarantee or the transactions related hereto.
e.
Headings. The headings used in this Guarantee are used for convenience only and are not to
be considered in construing or interpreting this Guarantee.
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 Guarantor, to:
MESOCOAT, INC.
00000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attn: Xxxxxx Xxxxxxx, President
Facsimile:
E-mail: xxxxxxxxx@xxxxxxxxxxx.xxx
Subsidiary Guarantee
Page 6
Exhibit 10
If to the Lender, to:
XXXXXX TOWN ASSOCIATES S.A.
c/o JTE FINANCE XX
Xxxxxxxxxxxxxxxxxxxxx 00
XX 0000 Xxxxxx, Xxxxxxxxxxx
Facsimile:
E-mail:
With a Copy to:
Xxxxxx Song & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
E-mail: xxxxx@xxxxxxxxxx.xxx
Each party shall provide notice to the other party of any change in address.
g.
Entire Agreement; Amendments. This Guarantee constitutes the entire agreement between
the parties with regard to the subject matter hereof, superseding all prior agreements or
understandings, whether written or oral, between or among the parties. Except as expressly provided
herein, neither this Guarantee nor any term hereof may be amended or waived except pursuant to a
written instrument executed by the Guarantor and the Lender, and no provision hereof may be
waived other than by a written instrument signed by the Lender. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which given.
h.
No Waiver; Cumulative Remedies. The Lender shall not by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder. No failure to
exercise, nor any delay in exercising on the part of the Lender, any right, power or privilege
hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or future exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies hereunder provided are cumulative and
may be exercised singly or concurrently, and are not exclusive of any rights and remedies
provided by law.
i.
Limitation by Law. All rights, remedies and powers provided in this Guarantee may be
exercised only to the extent that the exercise thereof does not violate any applicable provision of
law, and the provisions of this Guarantee are intended to be subject to all applicable mandatory
provisions of law that may be controlling and to be limited to the extent necessary so that they
shall not render this Guarantee invalid, unenforceable, in whole or in part, or not entitled to be
recorded, registered or filed under the provisions of any applicable law.
[Signature Page Follows]
Subsidiary Guarantee
Page 7
Exhibit 10
IN WITNESS WHEREOF, the undersigned have executed this Guarantee as of the date first-above
written.
MESOCOAT, INC.
By: /s/ Xxxxxx Xxxxxxx
Name: Xxxxxx Xxxxxxx
Title: President
Signature Page
Exhibit 10
Execution Copy
AMENDED AND RESTATED SECURITY AGREEMENT
This AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”), dated as of April
28, 2014, is by and between ABAKAN INC., a Nevada corporation (the “Parent”), MESOCOAT, INC., a
Nevada corporation (the “Company”), and XXXXXX TOWN ASSOCIATES S.A., a Panama corporation
(the “Secured Party”).
WHEREAS:
A.
The Company and Kyrtos Limited, a British Virgin Islands company (“Kyrtos”) are party to a
Security Agreement, dated as of October 30, 2013 (the “Existing Agreement”), pursuant to which the
Company granted to Kyrtos a security interest in its assets to secure the obligations of the Company under
(i) a Secured Promissory Note dated October 30, 2013, issued by the Company to Kyrtos in the principal
amount of $689,000, (ii) a Secured Promissory Note dated October 30, 2013, issued by the Company to
Kyrtos in the principal amount of $80,000; (iii) a Secured Promissory Note dated November 12, 2013,
issued by the Company to Kyrtos in the principal amount of $180,000; (iv) a Secured Promissory Note dated
December 10, 2013, issued by the Company to Kyrtos in the principal amount of $180,000; and (v) a
Secured Promissory Note dated January 10, 2014, issued by the Company to Kyrtos in the principal amount
of $180,000 (collectively, the “Existing Notes”).
B.
Pursuant to an Assignment of Promissory Notes and Security Agreement dated April 28, 2014,
Kyrtos assigned the Existing Notes and the Existing Agreement to the Secured Party.
C.
Pursuant to a Securities Exchange Agreement dated as of April 28, 2014, by and between the
Company, the Parent and the Secured Party (the “Exchange Agreement”), the Parent has agreed to issue a
Secured Convertible Promissory Note (the “New Note”) to the Secured Party in exchange for the Existing
Notes.
D.
It is a condition precedent to the transactions contemplated by the Exchange Agreement that the
parties hereto amend and restate the Existing Agreement as contemplated by this Agreement.
E.
The Company will directly or indirectly benefit from the extension of credit to the Parent
represented by the issuance of the New Note and the other transactions contemplated by the Exchange
Agreement and the other agreements contemplated therein.
NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that
the Existing Agreement is hereby amended and restated as follows:
1.
CERTAIN DEFINITIONS.
Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the
Exchange Agreement. Terms used herein that are defined in Article 9 of the UCC but not otherwise defined
in this Agreement (such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”,
“document”, “equipment”, “fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”,
“investment property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have
the respective meanings given such terms in Article 9 of the UCC. As used in this Agreement, the following
terms shall have the meanings set forth in this Section 1:
Exhibit 10
“Collateral” means the collateral in which the Secured Party is granted a perfected security interest by this
Agreement which shall include all assets and properties of the Company, (except those assets and properties
described in Schedule I hereto (the “Excluded Collateral”)), including the following personal property
presently owned or hereafter acquired by the Company, wherever situated, and all additions and accessions
thereto and all substitutions and replacements thereof, and all proceeds, products and accounts thereof,
including, without limitation, all proceeds from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith, and all dividends, interest, cash, notes,
securities, equity interest or other property at any time and from time to time acquired, receivable or
otherwise distributed in respect of, or in exchange for, any or all of the Pledged Securities (as defined
below):
(i)
All goods, including, without limitation, (A) all machinery, equipment, computers, motor vehicles,
trucks, tanks, boats, ships, appliances, furniture, special and general tools, fixtures, test and quality control
devices and other equipment of every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto, replacements therefor, all
parts therefor, and all substitutes for any of the foregoing and all other items used and useful in connection
with the Company’s businesses and all improvements thereto; and (B) all inventory;
(ii)
All contract rights and other general intangibles, including, without limitation, all partnership
interests, membership interests, stock or other securities, rights under any of the Organizational Documents,
agreements related to the Pledged Securities, licenses, distribution and other agreements, computer software
(whether “off-the-shelf”, licensed from any third party or developed by the Company), computer software
development rights, leases, franchises, customer lists, quality control procedures, grants and rights, goodwill,
trademarks, service marks, trade styles, trade names, patents, patent applications, copyrights, Intellectual
Property, and income tax refunds;
(iii)
All accounts, together with all instruments, all documents of title representing any of the foregoing,
all rights in any merchandising, goods, equipment, motor vehicles and trucks which any of the same may
represent, and all right, title, security and guaranties with respect to each account, including any right of
stoppage in transit;
(iv)
All documents, letter-of-credit rights, instruments and chattel paper;
(v)
All commercial tort claims;
(vi)
All deposit accounts and all cash (whether or not deposited in such deposit accounts);
(vii)
All investment property;
(viii) All supporting obligations;
(ix)
All files, records, books of account, business papers, and computer programs;
(x)
All fiber-optic cable runs and networks with respect to which the Company has an ownership
interest; and
(xi)
the products and proceeds of all of the foregoing Collateral set forth in clauses (i)-(x) above.
Amended and Restated Security Agreement
Page 2
Exhibit 10
Without limiting the generality of the foregoing, the term “Collateral” shall include all investment property
and general intangibles respecting ownership and/or other equity interests in each Subsidiary, including,
without limitation, the shares of capital stock and the other equity interests listed on Schedule II (as the same
may be modified from time to time pursuant to the terms hereof), and any other shares of capital stock
and/or other equity interests of any other direct or indirect subsidiary of the Company obtained in the future,
in each case, all certificates representing such shares and/or equity interests and, in each case, all rights,
options, warrants, stock, other securities and/or equity interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the foregoing (all of the foregoing being referred to herein
as the “Pledged Securities”) and all rights arising under or in connection with the Pledged Securities,
including, but not limited to, all dividends, interest and cash.
Notwithstanding the foregoing, nothing herein shall be deemed to constitute an assignment of any asset
which, in the event of an assignment, becomes void by operation of applicable law or the assignment of
which is otherwise prohibited by applicable law (in each case to the extent that such applicable law is not
overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law); provided,
however, that to the extent permitted by applicable law, this Agreement shall create a valid security interest
in such asset and, to the extent permitted by applicable law, this Agreement shall create a valid security
interest in the proceeds of such asset.
“Event of Default” means the occurrence of any of the following: (i) Parent’s failure to repay the full
outstanding principal balance of the New Note when due, whether at maturity, upon acceleration or
otherwise; (ii) Company’s breach of the Subsidiary Guarantee dated as of April 28, 2014 (the “Guarantee”)
executed by it in favor of the Secured Party; or (iii) any provision of this Agreement shall at any time for any
reason be declared to be null and void, or the validity or enforceability thereof shall be contested by the
Company or Parent, or a proceeding shall be commenced by the Company or Parent, or by any
governmental authority having jurisdiction over the Company or Parent, seeking to establish the invalidity or
unenforceability thereof, or the Company or Parent shall deny that the Company or Parent has any liability
or obligation purported to be created under this Agreement.
“Intellectual Property” means the collective reference to all existing rights, priorities and privileges
relating to intellectual property, whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, (i) all copyrights arising under the laws of the United States, any
other country or any political subdivision thereof, whether registered or unregistered and whether published
or unpublished, all registrations and recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and applications in the United States Copyright
Office, (ii) all letters patent of the United States, any other country or any political subdivision thereof, all
reissues and extensions thereof, and all applications for letters patent of the United States or any other
country and all divisions, continuations and continuations-in-part thereof, (iii) all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade dress, service marks,
logos, domain names and other source or business identifiers, and all goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country or any political subdivision thereof, or
otherwise, and all common law rights related thereto, (iv) all trade secrets arising under the laws of the
United States, any other country or any political subdivision thereof, (v) all rights to obtain any reissues,
renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, and (vii) all causes of
action for infringement of the foregoing.
“Necessary Endorsement” shall mean undated stock powers endorsed in blank or other proper instruments
of assignment duly executed and such other instruments or documents as the Secured Party may reasonably
request.
Amended and Restated Security Agreement
Page 3
Exhibit 10
“Obligations” means (i) all of the Company’s and Parent’s obligations under this Agreement, (ii) all of the
Company’s and Parent’s obligations under the Exchange Agreement, (iii) all of the Parent’s obligations
under the New Note and (iv) all of the Company’s obligations under the Guarantee, in each case, whether
now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities
that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from
the Secured Party as a preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time. Without limiting the generality of the
foregoing, the term “Obligations” shall include, without limitation: (i) principal of the New Note and the
loan extended pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations and liabilities of
the Company and the Parent from time to time under or in connection with this Agreement, the New Note,
Guarantee or the Exchange Agreement; and (iii) all amounts (including, but not limited to, post-petition
interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such
amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Company.
“Organizational Documents” means with respect to an entity, the documents by which such entity was
organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization,
and including, without limitation, any certificates of designation for preferred stock or other forms of
preferred equity) and which relate to the internal governance of such entity (such as bylaws, a partnership
agreement or an operating, limited liability or members agreement).
“Person” means any individual, corporation, trust, association, company, partnership, joint venture, limited
liability company, joint stock company, governmental authority or other entity.
“Subsidiary” means, with respect to any Person, any corporation or other entity of which at least a majority
of the outstanding shares of stock or other ownership interests having by the terms thereof ordinary voting
power to elect a majority of the board of directors (or Persons performing similar functions) of such
corporation or entity (regardless of whether or not at the time, in the case of a corporation, stock of any other
class or classes of such corporation shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by such Person or one or more of its
Subsidiaries or by such Person and one or more of its Subsidiaries.
“UCC” means the Uniform Commercial Code of the State of New York and or any other applicable law of
any state or states which has jurisdiction with respect to all, or any portion of, the Collateral or this
Agreement, from time to time. It is the intent of the parties that defined terms in the UCC should be
construed in their broadest sense so that the term “Collateral” will be construed in its broadest sense.
Accordingly if there are, from time to time, changes to defined terms in the UCC that broaden the
definitions, they are incorporated herein and if existing definitions in the UCC are broader than the amended
definitions, the existing ones shall be controlling.
2.
GRANT OF SECURITY INTEREST.
As an inducement for the Secured Party to extend the loan as evidenced by the New Note and to secure the
complete and timely payment, performance and discharge in full, as the case may be, of all of the
Obligations, the Company hereby unconditionally and irrevocably pledges, grants and hypothecates to the
Secured Party a continuing perfected security interest in and to, a lien upon and a right of set-off against all
of its right, title and interest of whatsoever kind and nature in and to, the Collateral (the “Security
Interest”).
Amended and Restated Security Agreement
Page 4
Exhibit 10
3.
DELIVERY OF CERTAIN COLLATERAL.
Contemporaneously or prior to the execution of this Agreement, the Company shall deliver or cause to be
delivered to the Secured Party (a) any and all certificates and other instruments representing or evidencing
the Pledged Securities, and (b) any and all certificates and other instruments or documents representing any
of the other Collateral, in each case, together with all Necessary Endorsements. The Company is,
contemporaneously with the execution hereof, delivering to the Secured Party, or has previously delivered to
the Secured Party, a true and correct copy of each Organizational Document governing any of the Pledged
Securities.
4.
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE COMPANY
AND THE PARENT.
The Company and the Parent, jointly and severally, represent and warrant to, and covenants and agrees with,
the Secured Party, as follows:
4.1
Good Standing; Due Authorization; Enforceability.
(a)
The Company and the Parent are duly organized and in good standing in the jurisdiction of their
formation. The Company and the Parent shall at all times preserve and keep in full force and effect its valid
existence and good standing and any rights and franchises material to its business.
(b)
The Company and the Parent have the requisite corporate, partnership, limited liability company or
other power and authority to enter into this Agreement and otherwise to carry out their obligations
hereunder. The execution, delivery and performance by the Company and Parent of this Agreement and the
filings contemplated therein have been duly authorized by all necessary action on the part of the Company
and the Parent and no further action is required by the Company or the Parent. This Agreement has been
duly executed and delivered by the Company and the Parent.
(c)
This Agreement constitutes the legal, valid and binding obligations of the Company and the Parent,
enforceable against the Company and the Parent in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application
relating to or affecting the rights and remedies of creditors and by general principles of equity.
4.2
No Conflicts. The execution, delivery and performance of this Agreement by the Company and
the Parent does not (i) violate any of the provisions of any Organizational Documents of the Company or the
Parent or any judgment, decree, order or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to the Company or the Parent or (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any agreement, credit facility, debt or other instrument (evidencing the Company’s or
Parent’s debt or otherwise) or other understanding to which the Company or the Parent is a party or by
which any property or asset of the Company or Parent is bound or affected. No consent (including, without
limitation, from stockholders or creditors of the Company or the Parent) is required for the Company or
Parent to enter into and perform its obligations hereunder.
Amended and Restated Security Agreement
Page 5
Exhibit 10
4.3
Information; Validity, Subordination, Perfection and Maintenance of Security Interests.
(a)
All of the information set forth on Schedule III, including, without limitation, the Company’s name,
jurisdiction of organization and location of Collateral, are true, correct and complete in all respects. The
Company shall not change their name, type of organization, jurisdiction of organization, organizational
identification number (if it has one), legal or corporate structure, or identity, or add any new fictitious name
unless it provides at least 30 days’ prior written notice to the Secured Party of such change and, at the time
of such written notification, the Company provides any financing statements or fixture filings necessary to
perfect and continue the Security Interest granted, continued and evidenced by this Agreement.
(b)
This Agreement creates in favor of the Secured Party a valid, security interest in the Collateral,
securing the payment and performance of the Obligations. Upon filing of a UCC-3 financing statement
amendment, in the form attached hereto as Exhibit A, with the secretary of state’s office of the state in which
the Company is organized (the “Financing Statement”), and payment of the applicable filing fees, all
security interests created hereunder in any Collateral in favor of the Secured Party which may be perfected
by filing UCC financing statements shall have been duly perfected. No consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for (i) the execution, delivery and performance of this Agreement, (ii) the
creation or perfection of the Security Interest created hereunder in the Collateral, or (iii) the enforcement of
the rights of the Secured Party hereunder.
(c)
The Security Interest in the Collateral, securing payment and performance of the Obligations is
subordinated to that security interest in the Collateral granted to The Huntington National Bank dated
October 20, 2009, attached hereto as Exhibit B. The Company (i) represents that the total indebtedness
owed to Huntington National Bank as of the date hereof is $134,427.22, (ii) agrees that it will not obtain
further loans from, or otherwise incur additional indebtedness owing to, Huntington National Bank or any
other party after the date hereof, while the New Note remains outstanding, and (iii) acknowledges and agrees
that subordination of the Secured Party’s security interest is conditioned on the foregoing clauses (i) and (ii).
(d)
The Company hereby authorizes the Secured Party to file the Financing Statement and any other
financing statements under the UCC with respect to the Security Interest with the proper filing and recording
agencies in any jurisdiction deemed proper by them. The Company shall, at the Company’s sole cost and
expense, promptly execute and/or deliver to the Secured Party, such further deeds, mortgages, assignments,
security agreements, financing statements or other instruments, documents, certificates and assurances and
take such further action as the Secured Party may from time to time request and may in their reasonable
discretion deem necessary to perfect, protect or enforce its security interest in the Collateral including,
without limitation, if applicable, the execution and delivery of a separate security agreement with respect to
the Company’s Intellectual Property in which the Secured Party have been granted a security interest
hereunder, substantially in a form reasonably acceptable to the Secured Party.
(e)
The Company shall at all times maintain the liens and Security Interest provided for hereunder as
valid liens and security interests in the Collateral in favor of the Secured Party until this Agreement and the
Security Interest hereunder shall be terminated pursuant to Section 13.
Amended and Restated Security Agreement
Page 6
Exhibit 10
4.4
Collateral.
(a)
Except as set forth on Schedule IV, the Company is the sole owner of the Collateral (except for non-
exclusive licenses granted by the Company in the ordinary course of business), free and clear of any liens
(other than as set forth in Schedule IV), security interests (other than as set forth in Schedule IV),
encumbrances, rights or claims, and is fully authorized to grant the Security Interest. There has been no
adverse decision that would materially affect the Company’s claim of ownership rights in or exclusive rights
to use the Collateral in any jurisdiction or to the Company’s right to keep and maintain such Collateral in
full force and effect, and there is no proceeding involving said rights pending or, to the best knowledge of
the Company, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority that could reasonably be expected to have such material adverse effect.
(b)
The Company shall keep and preserve its equipment, inventory and other tangible Collateral in good
condition, repair and order, ordinary wear and tear excepted. The Company shall take all steps reasonably
necessary to diligently pursue and seek to preserve, enforce and collect any rights, claims, causes of action
and accounts receivable in respect of the Collateral.
(c)
The Company shall at all times maintain its tangible Collateral at the locations set forth under its
name on Schedule III and may not relocate such Collateral unless it delivers to the Secured Party at least 30
days prior to such relocation (i) written notice of such relocation and the new location thereof (which must
be within the United States) and (ii) evidence that appropriate financing statements under the UCC and other
necessary documents have been filed and recorded and other steps have been taken to perfect the Security
Interest to create in favor of the Secured Party a valid, perfected and continuing perfected lien in the
Collateral. The Company shall not transfer, pledge, hypothecate, encumber, license, sell or otherwise
dispose of any of the Collateral (except for non-exclusive licenses granted by the Company in its ordinary
course of business and sales of inventory by the Company in its ordinary course of business) without the
prior written consent of the Secured Party. The Company shall not operate or locate any such Collateral (or
cause to be operated or located) in any area excluded from insurance coverage.
(d)
Except as set forth on Schedule IV, to the Company’s knowledge there is not on file in any
governmental or regulatory authority, agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing (other than those that will be filed in
favor of the Secured Party pursuant to this Agreement) covering or affecting any of the Collateral. So long
as this Agreement shall be in effect, the Company shall not execute and shall not knowingly permit to be on
file in any such office or agency any such financing statement or other document or instrument (except as set
forth on Schedule IV or to the extent filed or recorded in favor of the Secured Party pursuant to the terms of
this Agreement).
(e)
The capital stock and other equity interests listed on Schedule I represent all of the capital stock and
other equity interests of the Company’s Subsidiaries, and represent all capital stock and other equity
interests owned, directly or indirectly, by the Company. All of the Pledged Securities are validly issued,
fully paid and non-assessable, and the Company is the legal and beneficial owner of the Pledged Securities,
free and clear of any lien, security interest or other encumbrance except for the security interests created by
this Agreement or otherwise set forth on Schedule IV. The ownership and other equity interests in
partnerships and limited liability companies (if any) included in the Pledged Securities (the “Pledged
Interests”) by their express terms do not provide that they are securities governed by Article 8 of the UCC
and are not held in a securities account or by any financial intermediary. The Company shall vote the
Pledged Securities to comply with the covenants and agreements set forth herein and the Exchange
Agreement (if any).
Amended and Restated Security Agreement
Page 7
Exhibit 10
(f)
The Company shall, within ten (10) days of obtaining knowledge thereof, advise the Secured Party,
promptly, in sufficient detail, of any substantial change in the Collateral, and of the occurrence of any event
which would have a material adverse effect on the value of the Collateral or on the Secured Party’ security
interest therein. The Company shall permit the Secured Party and their representatives and agents to inspect
the Collateral at any time during normal business hours and to make copies of records pertaining to the
Collateral as may be requested by a Secured Party from time to time.
(g)
The attached Schedule V contains a complete and accurate list of all material (a) patented or
registered Intellectual Property{xe "Intellectual Property Rights"} owned or used by the Company{xe
"Parent"} or any Subsidiary{xe "Subsidiary"}, (b) pending patent applications and applications for
registrations of other Intellectual Property filed by the Company or any Subsidiary, and (c) unregistered
Intellectual Property Rights owned or used by the Company or any Subsidiary.
(h)
All information heretofore, herein or hereafter supplied to the Secured Party by or on behalf of the
Company with respect to the Collateral is accurate and complete in all material respects as of the date
furnished.
4.5
Insurance. The Company shall maintain with financially sound and reputable insurers, insurance
with respect to the Collateral against loss or damage of the kinds and in the amounts sufficient to cover the
full replacement cost thereof. Upon the written request of the Secured Party, the Company shall cause each
insurance policy issued in connection herewith to provide, and the insurer issuing such policy to certify to
the Secured Party, that (a) if such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Secured Party, and such cancellation or change
shall not be effective for at least thirty (30) days after receipt by the Secured Party, of such notice, unless the
effect of such change is to extend or increase coverage under the policy; and (b) the Secured Party will have
the right (but no obligation) at its election to remedy any default in the payment of premiums within thirty
(30) days of notice from the insurer of such default.
5.
EFFECT OF PLEDGE ON CERTAIN RIGHTS.
If any of the Collateral subject to this Agreement consists of nonvoting equity or ownership interests
(regardless of class, designation, preference or rights) that may be converted into voting equity or ownership
interests upon the occurrence of certain events (including, without limitation, upon the transfer of all or any
of the other stock or assets of the issuer), it is agreed that the pledge of such equity or ownership interests
pursuant to this Agreement or the enforcement of any of the Secured Party’ rights hereunder shall not be
deemed to be the type of event which would trigger such conversion rights notwithstanding any provisions
in the Organizational Documents or agreements to which the Company or any of the Collateral is subject or
to which the Company is party.
6.
DUTY TO HOLD IN TRUST.
6.1
Cash and Payment Obligations. Upon the occurrence of an Event of Default and at any time
thereafter, the Company shall, upon receipt of any revenue, income, dividend, interest or other sums subject
to the Security Interest, whether payable pursuant to the New Note or otherwise, or of any check, draft, note,
trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust for
and on behalf of and for the benefit of the Secured Party, and shall forthwith endorse and transfer any such
sums or instruments, or both (to the extent permitted by law), to the Secured party for application to the
satisfaction of the obligations.
Amended and Restated Security Agreement
Page 8
Exhibit 10
6.2
Securities and Other Assets. If the Company shall become entitled to receive or shall receive any
securities or other property (including, without limitation, shares of Pledged Securities or instruments
representing Pledged Securities acquired after the date hereof, or any options, warrants, rights or other
similar property or certificates representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or issued in connection with any
reorganization of any of its direct or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or otherwise), the Company agrees
to (i) accept the same as the agent of the Secured Party; and (ii) hold the same in trust on behalf of and for
the benefit of the Secured Party.
7.
RIGHTS AND REMEDIES UPON DEFAULT.
7.1
Scope of Rights and Remedies. Upon the occurrence of any Event of Default and at any time
thereafter, the Secured Party, acting through any agent appointed by it for such purpose, shall have the right
to exercise all of the remedies conferred hereunder and under the New Note, and the Secured Party, shall
have all the rights and remedies of a secured party under the UCC. Subject to the provisions of Section
4.3(c), the Secured Party shall have the following rights and powers:
(a)
The Secured Party shall have the right to take possession of the Collateral and, for that purpose,
enter, with the aid and assistance of any person, any premises where the Collateral, or any part thereof, is or
may be placed and remove the same, and the Company shall assemble the Collateral and make it available to
the Secured Party at places which the Secured Party shall reasonably select, whether at the Company’s
premises or elsewhere, and make available to the Secured Party, without rent, all of the Company’s premises
and facilities for the purpose of the Secured Party taking possession of, removing or putting the Collateral in
saleable or disposable form.
(b)
Upon notice to the Company by the Secured Party, all rights of the Company to exercise the voting
and other consensual rights which it would otherwise be entitled to exercise and all rights of the Company to
receive the dividends and interest which it would otherwise be authorized to receive and retain, shall cease.
Upon such notice, the Secured Party shall have the right to receive any interest, cash dividends or other
payments on the Collateral and, at the option of the Secured Party, to exercise in the Secured Party’s
discretion all voting rights pertaining thereto. Without limiting the generality of the foregoing, the Secured
Party shall have the right (but not the obligation) to exercise all rights with respect to the Collateral as if it
were the sole and absolute owner thereof, including, without limitation, to vote and/or to exchange, at its
sole discretion, any or all of the Collateral in connection with a merger, reorganization, consolidation,
recapitalization or other readjustment concerning or involving the Collateral or the Company or any of its
direct or indirect subsidiaries.
(c)
The Secured Party shall have the right to operate the business of the Company using the Collateral
and shall have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the
Collateral, at public or private sale or otherwise, either with or without special conditions or stipulations, for
cash or on credit or for future delivery, in such parcel or parcels and at such time or times and at such place
or places, and upon such terms and conditions as the Secured Party may deem commercially reasonable, all
without (except as shall be required by applicable statute and cannot be waived) advertisement or demand
upon or notice to the Company or right of redemption of the Company, which are hereby expressly waived.
Upon each such sale, lease, assignment or other transfer of Collateral, the Secured Party may, unless
prohibited by applicable law which cannot be waived, purchase all or any part of the Collateral being sold,
free from and discharged of all trusts, claims, right of redemption and equities of the Company, which are
hereby waived and released.
Amended and Restated Security Agreement
Page 9
Exhibit 10
(d)
The Secured Party shall have the right (but not the obligation) to notify any account debtors and any
obligors under instruments or accounts to make payments directly to the Secured Party and to enforce the
Company’s rights against such account debtors and obligors.
(e)
The Secured Party may (but is not obligated to) direct any financial intermediary or any other person
or entity holding any investment property to transfer the same to the Secured Party or its designee.
(f)
The Secured Party may (but is not obligated to) transfer any or all Intellectual Property registered in
the name of the Company at the United States Patent and Trademark Office and/or Copyright Office into the
name of the Secured Party or any designee or any purchaser of any Collateral.
7.2
Disposition of Collateral. The Secured Party may comply with any applicable law in connection
with a disposition of Collateral and such compliance will not be considered to adversely affect the
commercial reasonableness of any sale of the Collateral. Subject to the provisions of Section 4.3(c), the
Secured Party may sell the Collateral without giving any warranties and may specifically disclaim such
warranties. If the Secured Party sells any of the Collateral on credit, the Company and Parent will only be
credited with payments actually made by the purchaser. In addition, the Company and Parent waive any and
all rights that they may have to a judicial hearing in advance of the enforcement of any of the Secured
Party’s rights and remedies hereunder, including, subject to the provisions of Section 4.3(c), its right
following an Event of Default to take immediate possession of the Collateral and to exercise its rights and
remedies with respect thereto.
7.3
License to Use Intellectual Property. For the purpose of enabling the Secured Party to further
exercise rights and remedies under this Section 7 or elsewhere provided by agreement or applicable law, the
Company hereby grants to the Secured Party an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to the Company) to use, license or sublicense, following an Event
of Default, any Intellectual Property now owned or hereafter acquired by the Company, and wherever the
same may be located, and including in such license access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the compilation or printout
thereof.
8.
APPLICATIONS OF PROCEEDS.
Subject to the provisions of Section 4.3(c), the proceeds of any such sale, lease or other disposition of the
Collateral hereunder shall be applied first, to the expenses of retaking, holding, storing, processing and
preparing for sale, selling, and the like (including, without limitation, any taxes, fees and other costs incurred
in connection therewith) of the Collateral, to the reasonable attorneys’ fees and expenses incurred by the
Secured Party in enforcing their rights hereunder and in connection with collecting, storing and disposing of
the Collateral, and then to satisfaction of the Obligations, and to the payment of any other amounts required
by applicable law, after which the Secured Party shall pay to the Company any surplus proceeds. If, upon
the sale, license or other disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts
to which the Secured Party is legally entitled, the Parent and Company will be jointly and severally liable for
the deficiency, together with interest thereon, at an interest rate equal to the lower of eighteen percent (18%)
and the maximum rate permitted by applicable law (the “Default Rate”), and the reasonable fees of any
attorneys employed by the Secured Party to collect such deficiency. To the extent permitted by applicable
law, the Company and Parent waive all claims, damages and demands against the Secured Party arising out
of the repossession, removal, retention or sale of the Collateral, unless due solely to the gross negligence or
willful misconduct of the Secured Party as determined by a final judgment (not subject to further appeal) of
a court of competent jurisdiction.
Amended and Restated Security Agreement
Page 10
Exhibit 10
9.
SECURITIES LAW PROVISION.
The Company recognizes that the Secured Party may be limited in its ability to effect a sale to the public of
all or part of the Pledged Securities by reason of certain prohibitions in the Securities Act of 1933, as
amended, or other federal or state securities laws (collectively, the “Securities Laws”), and may be
compelled to resort to one or more sales to a restricted group of purchasers who may be required to agree to
acquire the Pledged Securities for their own account, for investment and not with a view to the distribution
or resale thereof. The Company agrees that sales so made may be at prices and on terms less favorable than
if the Pledged Securities were sold to the public, and that the Secured Party has no obligation to delay the
sale of any Pledged Securities for the period of time necessary to register the Pledged Securities for sale to
the public under the Securities Laws. The Company shall cooperate with the Secured Party in its attempt to
satisfy any requirements under the Securities Laws (including, without limitation, registration thereunder if
requested by the Secured Party) applicable to the sale of the Pledged Securities by the Secured Party.
10.
COSTS AND EXPENSES.
The Company and Parent agree to pay all reasonable out-of-pocket fees, costs and expenses incurred in
connection with any filing required hereunder, including, without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or termination statements related thereto
or any expenses of any searches reasonably required by the Secured Party. The Company and Parent shall
also pay all other claims and charges which in the reasonable opinion of the Secured Party might prejudice,
imperil or otherwise affect the Collateral or the Security Interest therein. The Company and Parent will also,
upon demand, pay to the Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which the Secured Party may
incur in connection with (i) the enforcement of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Collateral, or (iii) the exercise or enforcement
of any of the rights of the Secured Party under the New Note or this Agreement. Until so paid, any fees
payable hereunder shall be added to the principal amount of the New Note and shall bear interest at the
Default Rate.
11.
RESPONSIBILITY FOR COLLATERAL.
The Company assumes all liabilities and responsibility in connection with all Collateral, and the Obligations
shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the
Collateral or its unavailability for any reason. The Secured Party agrees to act in accordance with
commercially reasonable standards and the UCC. Without limiting the generality of the foregoing, (a) the
Secured Party (i) has no duty (either before or after an Event of Default) to collect any amounts in respect of
the Collateral or to preserve any rights relating to the Collateral, or (ii) has any obligation to clean-up or
otherwise prepare the Collateral for sale, and (b) the Company shall remain obligated and liable under each
contract or agreement included in the Collateral to be observed or performed by the Company thereunder.
The Secured Party shall not have any obligation or liability under any such contract or agreement by reason
of or arising out of this Agreement or the receipt by the Secured Party of any payment relating to any of the
Collateral, nor shall the Secured Party be obligated in any manner to perform any of the obligations of the
Company under or pursuant to any such contract or agreement, to make inquiry as to the nature or
sufficiency of any payment received by the Secured Party in respect of the Collateral or as to the sufficiency
of any performance by any party under any such contract or agreement, to present or file any claim, to take
any action to enforce any performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which it may be entitled at any time or times.
Amended and Restated Security Agreement
Page 11
Exhibit 10
12.
SECURITY INTEREST ABSOLUTE.
All rights of the Secured Party shall be absolute and unconditional, irrespective of: (a) any lack of validity or
enforceability of this Agreement, the New Note or any agreement entered into in connection with the
foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place of payment or
performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of
or any consent to any departure from the New Note or any other agreement entered into in connection with
the foregoing; (c) any exchange, release or nonperfection of any of the Collateral, or any release or
amendment or waiver of or consent to departure from any other collateral for, or any guaranty, or any other
security, for all or any of the Obligations; (d) any action by the Secured Party to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in connection with the
Collateral; or (e) any other circumstance which might otherwise constitute any legal or equitable defense
available to the Company, or a discharge of all or any part of the Security Interest granted hereby. Until the
Obligations shall have been paid and performed in full, the rights of the Secured Party shall continue even if
the Obligations are barred for any reason, including, without limitation, the running of the statute of
limitations or bankruptcy. The Company and Parent expressly waive presentment, protest, notice of protest,
demand, notice of nonpayment and demand for performance. In the event that at any time any transfer of
any Collateral or any payment received by the Secured Party hereunder shall be deemed by final order of a
court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the
bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any party
other than the Secured Party, then, in any such event, the Company’s and Parent’s obligations hereunder
shall survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment
thereof and/or cancellation of this Agreement, but shall remain a valid and binding obligation enforceable in
accordance with the terms and provisions hereof. The Company and Parent waive all right to require the
Secured Party to proceed against any other person or entity or to apply any Collateral which the Secured
Party may hold at any time, or to marshal assets, or to pursue any other remedy. The Company and Parent
waive any defense arising by reason of the application of the statute of limitations to any obligation secured
hereby.
13.
TERM OF AGREEMENT.
This Agreement and the Security Interest shall terminate on the date on which all payments under the New
Note have been indefeasibly paid in full and all other Obligations have been paid or discharged; provided,
however, that all indemnities of the Company and the Parent contained in this Agreement shall survive and
remain operative and in full force and effect regardless of the termination of this Agreement.
Amended and Restated Security Agreement
Page 12
Exhibit 10
14.
POWER OF ATTORNEY.
The Company authorizes the Secured Party, and does hereby make, constitute and appoint the Secured Party
and its officers, agents, successors or assigns with full power of substitution, as the Company’s true and
lawful attorney-in-fact, with power, in the name of the Secured Party or the Company, to, after the
occurrence and during the continuance of an Event of Default, (i) endorse any note, checks, drafts, money
orders or other instruments of payment (including payments payable under or in respect of any policy of
insurance) in respect of the Collateral that may come into possession of the Secured Party; (ii) to sign and
endorse any financing statement pursuant to the UCC or any invoice, freight or express xxxx, xxxx of lading,
storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to the Collateral; (iii) to pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened against the Collateral; (iv) to
demand, collect, receipt for, compromise, settle and xxx for monies due in respect of the Collateral; (v) to
transfer any Intellectual Property or provide licenses respecting any Intellectual Property; and (vi) generally,
at the option of the Secured Party, and at the expense of the Company, at any time, or from time to time, to
execute and deliver any and all documents and instruments and to do all acts and things which the Secured
Party deems necessary to protect, preserve and realize upon the Collateral and the Security Interest granted
therein in order to effect the intent of this Agreement and the New Note all as fully and effectually as the
Company might or could do; and the Company hereby ratifies all that said attorney shall lawfully do or
cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be
outstanding. The designation set forth herein shall be deemed to amend and supersede any inconsistent
provision in the Organizational Documents or other documents or agreements to which the Company or any
of the Pledged Securities is subject or to which the Company is a party. Without limiting the generality of
the foregoing, after the occurrence and during the continuance of an Event of Default, the Secured Party is
specifically authorized to execute and file any applications for or instruments of transfer and assignment of
any patents, trademarks, copyrights or other Intellectual Property with the United States Patent and
Trademark Office and the United States Copyright Office. This power of attorney is coupled with an interest
and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall
be outstanding.
15.
OTHER SECURITY.
To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by
the guarantee, endorsement or property of any other person, firm, corporation or other entity, then the
Secured Party shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take
any other action with respect thereto, without in any way modifying or affecting the Secured Party’s rights
and remedies hereunder.
16.
RESERVED.
Amended and Restated Security Agreement
Page 13
Exhibit 10
17.
INDEMNIFICATION.
The Company and the Parent shall, jointly and severally, indemnify, reimburse and hold harmless the
Secured Party and its partners, members, shareholders, officers, directors, employees and agents (each, an
“Indemnitee”) from and against any and all losses, claims, liabilities, damages, penalties, suits, costs and
expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the
foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from
or alleged to arise from this Agreement or the Collateral, except any such losses, claims, liabilities, damages,
penalties, suits, costs and expenses which result from the gross negligence or willful misconduct of the
Indemnitee as determined by a final, nonappealable decision of a court of competent jurisdiction. This
indemnification provision is in addition to, and not in limitation of, any other indemnification provision in
the Exchange Agreement.
18.
MISCELLANEOUS.
18.1
Severability. In the event that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that in such case the parties shall negotiate in good faith to replace
such provision with a new provision which is not illegal, unenforceable or void, as long as such new
provision does not materially change the economic benefits of this Agreement to the parties.
18.2
Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the respective successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. The Secured Party may assign its rights hereunder
in connection with any private sale or transfer of the New Note, in which case the term “Secured Party” shall be
deemed to refer to such transferee as though such transferee were an original signatory hereto. The Company
and Parent may not assign their rights or obligations under this Agreement.
18.3
Injunctive Relief. The Company and Parent acknowledge and agree that a breach by them of their
obligations hereunder will cause irreparable harm to the Secured Party and that the remedy or remedies at law
for any such breach will be inadequate and agree, in the event of any such breach, in addition to all other
available remedies, the Secured Party shall be entitled to an injunction restraining any breach and requiring
immediate and specific performance of such obligations without the necessity of showing economic loss or the
posting of any bond.
18.4
Governing Law; Jurisdiction. This Agreement shall be governed by and construed under the laws of the
State of New York applicable to contracts made and to be performed entirely within the State of New York.
Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York and County of New York for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof 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 manner permitted by law.
Amended and Restated Security Agreement
Page 14
Exhibit 10
18.5
Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same instrument. This Agreement
may be executed and delivered by facsimile transmission.
18.6
Headings. The headings used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
18.7
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:
MESOCOAT, INC.
00000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attn: Xxxxxx Xxxxxxx, Chief Executive Officer
Facsimile: (000) 000-0000
E-mail: xxxxxxxx@xxxxxxxx.xxx
If to the Parent:
ABAKAN INC.
0000 Xxxxx 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 Secured Party:
XXXXXX TOWN ASSOCIATES S.A.
c/o JTE FINANCE XX
Xxxxxxxxxxxxxxxxxxxxx 00
XX 0000 Xxxxxx, Xxxxxxxxxxx
Facsimile:________________
E-mail:__________________
Amended and Restated Security Agreement
Page 15
Exhibit 10
With a copy to:
Xxxxxx Song & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
E-mail: xxxxx@xxxxxxxxxx.xxx
(or, in the case of a successor to a Secured Party in connection with a valid transfer of the New Note, the
address of such successor designated in a notice given to the Company and signed by the original secured
party and such successor), or as shall be designated by such party (or successor) in writing to the other
parties hereto in accordance with this Section 18.7.
18.8
Entire Agreement; Amendments. This Agreement and the Exchange Agreement constitute the entire
agreement between the parties with regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the parties. No (i) amendment to this
Agreement or (ii) waiver of any agreement or other obligation of the Company or Parent under this Agreement
may be made or given except pursuant to a written instrument executed by the Company, Parent and the
Secured Party. Any waiver given pursuant hereto shall be effective only in the specific instance and for the
specific purpose for which given.
[Signature Page Follows]
Amended and Restated Security Agreement
Page 16
Exhibit 10
IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Security Agreement
to be duly executed on the day and year first above written.
MESOCOAT, INC.
By:
/s/ Xxxxxx Xxxxxxx
Name: Xxxxxx Xxxxxxx
Title: President
ABAKAN INC.
By:
/s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
XXXXXX TOWN ASSOCIATES S.A.
By:
/s/ Xxxxxxxxx Xxxxxxxxx
Name: Xxxxxxxxx Xxxxxxxxx
Title: Director
Amended and Restated Security Agreement
Page 17
Exhibit 10
Exhibit A to the
Amended and Restated Security Agreement
UCC-3 Financing Statement Amendment
Attached
Amended and Restated Security Agreement
Page 18
Exhibit 10
Exhibit B to the
Amended and Restated Security Agreement
The Huntington National Bank Commercial Security Agreement
Attached
Amended and Restated Security Agreement
Page 19
Exhibit 10
SCHEDULE I
COLLATERAL DEFINITION EXCEPTION
The following assets and property of the Company are not included in the definition of Collateral in which
the Secured Party has been granted a Security Interest as described in this Agreement.
§ All of the Project Equipment, as defined in the Loan Agreement dated as of July 20, 2012 (the
“Loan Agreement”) between the Director of Development of the State of Ohio and MesoCoat, Inc.,
acquired with the proceeds of the R & D Loan (as defined in the Loan Agreement), including
without limitation the following (as such list may be supplemented or amended from time to time):
One CermaClad™ system and automated pipe blasting equipment used for high speed metal
cladding, as described more fully below:
A system purchased from Xxxxxxx Technology consisting of an arc lamp, an automated blasting
system, power supply, and a pipe manipulation system for the application of corrosion resistant
coatings to pipe. The blasting system removes mill scale from the pipe before treatment. The system
includes a “stinger” 2-D 80 foot robot which controls the fusion process, a robot that applies slurry
to the pipe, a robot that holds the inspections tools and a pipe handling system.
Amended and Restated Security Agreement
Page 20
Exhibit 10
SCHEDULE II
PLEDGED SECURITIES
Issuer
Shares/Interests Pledged
MesoCoat Coating Services, Inc.
100%
PT MesoCoat Indonesia
100%
Amended and Restated Security Agreement
Page 21
Exhibit 10
SCHEDULE III
COMPANY INFORMATION
Name of the Company:
MesoCoat Inc.
Jurisdiction of Organization:
Nevada
Organizational Identification Number:
EIN – 00-0000000
Trade names and other names used by the Company MesoCoat
during the past five years:
Each location where Collateral or the Company’s 00000 Xxxxxxxx Xxxxx, Xxxxxx, Xxxx 00000
books of account and records are located:
Name and location of each consignee, bailee, None
warehouseman, agent or processor in possession of
any Collateral owned by the Company:
Amended and Restated Security Agreement
Page 22
Exhibit 10
SCHEDULE IV
EXISTING LIENS AND ENCUMBRANCES
Lienholder
Type of Lien
Amount of Debt
1.
The Director of Development of the State of Ohio
Loan
$1,000,000.00
2.
The Huntington National Bank
Loan
$ 134,427.22
3.
County of Cuyahoga, Ohio
Loan
$ 40,819.54
Amended and Restated Security Agreement
Page 23
Exhibit 10
SCHEDULE V
INTELLECTUAL PROPERTY
Licensed
Current
MesoCoat IP
No.
Title
Patent Number
Assignee
to
IP Status
Rights
Lockheed Xxxxxx
1
Rapid infrared heating of a
Energy Research
surface
6174388 B1
Corp., U.T.
MesoCoat
Issued
Exclusive
Battelle LLC,
Inc.
patent
rights
Oak Ridge, TN
Abrasive particles with
2
metallurgically bonded metal
6540800 B2
Powdermet Inc.
MesoCoat
Issued
Exclusive
coatings
Inc.
patent
rights
3
Method of producing fine coated
tungsten carbide particles
6641918 B1
Powdermet Inc.
MesoCoat
Issued
Exclusive
Inc.
patent
rights
Combined liquid phase and
4
activated sintering of refractory
7041250 B2
Powdermet Inc.
MesoCoat
Issued
Exclusive
metals
Inc.
patent
rights
Pulse thermal processing of
UT-Battelle,
5
functional materials using
7220936 B2
LLC, Oak Ridge, MesoCoat
Issued
Exclusive
directed plasma arc
TN
Inc.
patent
rights
6
Powder friction forming
7560067 B2
Powdermet Inc.
MesoCoat
Issued
Exclusive
Inc.
patent
rights
Heterogeneous composite bodies
7
with isolated lenticular shaped
7635515 B1
Powdermet Inc.
MesoCoat
Issued
Exclusive
cermet regions
Inc.
patent
rights
Heterogeneous composite bodies
8
with isolated lenticular shaped
7681622 B2
Powdermet Inc.
MesoCoat
Issued
Exclusive
cermet regions
Inc.
Patent
rights
Coatings, Composition and
9
method related to non-spalling
US2010/020325
low density hardface coatings
5A1
MesoCoat Inc.
N/A
Filed Full
US Patent
Owned
Coatings, Composition and
Filed PCT
10
method related to non-spalling
N/A
MesoCoat Inc.
N/A
Patent
Owned
low density hardface coatings
Application
Article and method of
Filed PCT
11
manufacturing related to
N/A
MesoCoat Inc.
N/A
Patent
Owned
nanocomposite overlays
Application
Article and method of
12
manufacturing related to
US2010/029743
nanocomposite overlays
2A1
MesoCoat Inc.
N/A
Filed Full
US Patent
Owned
Filed
13
Method and Apparatus for
forming clad metal products
61/451,114
MesoCoat Inc.
N/A
Provisional
Patent
Owned
Application
Applied for
14
Thin Metal Coatings
MesoCoat Inc.
N/A
a
Provisional Owned
Patent
Ternary Ceramic Thermal
15
Spraying Powder and Method of
Filed
Manufacturing Thermal Sprayed
61/798,032
MesoCoat Inc.
N/A
Provisional Owned
Coating Using Said Powder
Patent
Amended and Restated Security Agreement
Page 24
