THIS AGREEMENT, dated as of the date of acceptance set forth below, is
entered into by and between VERIDIUM CORPORATION (formerly KBF POLLUTION
MANAGEMENT, INC.), a Delaware corporation, with headquarters located at 0 Xxxxxx
Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 (the "Company" or "Veridium"), CEDAR
CRESCENT HOLDINGS, LTD., a corporation organized under the laws of the Bahamas,
with headquarters located at Shirlaw House, 00 Xxxxxxx Xxxxxx, Xxxxxx Bahamas,
CASTLERIGG MASTER INVESTMENTS, LTD., a corporation organized under the laws of
the British Virgin Islands, with headquarters located at 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 and STRANCO INVESTMENTS, LTD., a corporation
organized under the laws of the British Virgin Islands, with headquarters
located at Xxxxxx Xxxxxxxx, 0xx Xxxxx, Xxxxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxx
Lebanon (Cedar Crescent, Castlerigg and Stranco are collectively referred to as
the "Lenders") and Xxxxx Xxxxxxxx, with respect to Sections 13 and 14.
W I T N E S S E T H:
WHEREAS, the Company and the Lenders executed and delivered Securities
Purchase Agreements dated as of May 20, 2003 and July 2, 2003 (the "Purchase
Agreements") for the purchase of 12% Secured Convertible Debenture of the
Company in the principal amount of an aggregate of $850,000 (the debentures,
including the amended and restated debentures to be delivered under this
Agreement, are referred to as the "Debentures"), which Debentures are
convertible into shares of common stock, $0.001 par value per share, of the
Company (the "Common Stock"), upon the terms and subject to the conditions of
such Debentures, together with the Warrants exercisable for the purchase of
shares of Common Stock;
WHEREAS, Xxxxx Xxxxxxxx, Xxxxxxxx Xxxxxxxx, Xxxxx Xxxxxxxx and Xxxxxxx
Xxxxxxxx executed personal guarantees (the "Guarantees") in favor of the Lenders
and pledged certain shares of Common Stock of the Company (the "Collateral")
pursuant to certain Pledge and Security Agreements, which guarantees are being
removed except for that of Xxxxx Xxxxxxxx (the "Pledge Agreements"); and,
WHEREAS, the Company has agreed to payoff the principal of the Debentures
in connection with Veridium's completion of funding with the Laurus Funds, and
the parties have agreed to amend the terms and conditions of the Purchase
Agreements (this Agreement, the Purchase Agreements, the Debentures, the
Warrants, the Guarantees, the Pledge Agreements, the Registration Rights
Agreements and other documents executed in connection with the delivery of the
Debentures are collectively referred to as the "Transaction Documents").
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Capitalized Terms: All capitalized terms shall have the meanings provided
in the Purchase Agreement unless other wise specified in this Agreement.
2. Closing Date: On or before June 2, 2004 (the "Closing Date"), Veridium
shall pay $250,000 (deposited by Veridium into the escrow account of
XxXxxxxxxx & Xxxxx, LLP (the "Escrow Agent") on or about April 5, 2004) in
payment of a portion of the principal amount of the Debentures, which
amount shall be applied pro-rata to the outstanding principal amount of the
Debentures. The payment shall be released by the Escrow Agent pursuant to
the terms of the Escrow Agreement attached as Exhibit A.
3. Conversion: On the Closing Date, the Lenders will convert a portion of the
principal amount of the Debentures into an aggregate of the sum of
1,079,583 shares of Common Stock as of May 28, 2004 (the "Initial Shares").
Veridium covenants that the certificates representing the Initial Shares
shall be issued without restrictive legend, shall not be subject to any
stop transfer restriction by its transfer agent and shall be transferable
without restriction under the Securities Act of 1933. The aggregate
principal amount of the Debentures to be converted shall equal to $342,600
plus $283 for each day commencing April 1, 2004 through the Closing Date
($358,750 through May28,2004). The Lenders shall convert the principal
amount of the Debentures on a pro-rata basis based upon the principal
amount of the Debentures owed to each Lender as of the Closing Date.
On the Closing Date, Veridium shall deliver to the Escrow Agent, (i)
certificates representing the Initial Shares, (ii) certificates representing the
balance of the Collateral in accordance with Section 13, (iii) the amended and
restated Debentures as provided in Section 4.
On the Closing Date, the Lenders shall deliver to the Escrow Agent, (i) the
original Debentures, and (ii) certificates representing the Collateral.
4. Amended and Restated Debenture: On the Closing Date, Veridium shall deliver
to the Escrow Agent the amended and restated Debentures, each substantially
in the form of Exhibit B, in the aggregate outstanding principal amount of
$606,500. Veridium shall pay the outstanding amounts due under the
Debentures in cash, on a pro-rata basis, as follows:
i. $256,500 in cash 60 days after the Closing Date
ii. $350,000, and all accrued and unpaid interest thereon, no later than
120 days after the Closing Date.
The aggregate principal amounts of the Debentures shall be allocated
prorata amongst the Lenders and gives effect to (i) the conversion of a portion
of the original debentures for the Initial Shares, (ii) reducing the original
principal amount by the initial payment of $250,000 in cash on the Closing Date
and (iii) increasing the principal amount due under the Debentures to satisfy
Veridium's obligation to pay accrued interest on the Debentures owed through the
Closing Date under Section 5, the redemption amount payable in accordance with
Section 7, and $6,500 in legal fees due under Section 15.
Lenders agree to the waiver of fees due through the Closing Date under
Section 2(b) of the Registration Rights Agreement with respect to the filing and
effectiveness of the registration statement (the "Late Fees"). The Lenders agree
to waive Late Fees accruing after the Closing Date subject to Section 5 (b).
5. Interest and Fees:
(a) The parties acknowledge that accrued interest due under the Debentures
through March 31, 2004 is $87,600. The amount of such accrued interest
shall be added to the outstanding principal amount of the Debentures
and paid by Veridium in accordance with the terms of the Debentures.
(b) Each Lender waives any further Late Fees that would otherwise have
been payable with regard to any late filing or late effectiveness of
the Registration Statement after the Closing Date so long as no event
of default by Veridium has occurred under the Debentures and is cured
within 30 days of Veridium having been provided notice of such
default. In the event of any such default, Veridium shall be liable
for such Late Fees commencing as of such date of Default at the rate
of two percent per month or portion thereof until the earlier of (a)
the date such default is cured or (b) the Registration Statement
referred to in Section 9 is filed and two percent per month until the
earlier of (a) the date such default is cured or (b) the Registration
Statement is declared effective.
(c) Interest on the Debentures shall continue to accrue on the balance of
the outstanding principal of the Debentures until such time as the
Debentures are paid in full at the rate of 12% per year and not at the
rate of interest applicable in the event of a default under Section 14
of the Debentures so long as no event of Default is declared, is not
cured, and is continuing under the Debenture.
6. Allocation: All payments by Veridium to the Lenders shall be applied on a
pro-rata basis to each of the Lenders.
7. Redemption: On the Closing Date, in contemplation of the full redemption as
provided for herein, the Lenders shall receive a payment of $255,000, equal
to 30% of the original face value of their respective Debentures, in lieu
of receiving the 30% premium to the face amount otherwise due as part of
the Put Price under Section 4C of the Debentures. The $255,000 shall be
added to the outstanding principal amount of the Debentures and paid by
Veridium in accordance with the terms of the Debentures.
8. Warrants: On the Closing Date, the Lenders shall receive, on a pro-rated
basis, additional warrants to purchase an aggregate of 250,000 shares of
Veridium Common Stock at $0.40 per share for five years, which Warrants
shall be in the form of Exhibit C attached hereto.
9. Registration: If, at any time after the Closing Date, Veridium proposes to
register any of its securities under the Securities Act, it will include in
the Registration Statement, the shares of Common Stock (the "Remainder
Shares") (i) issuable to the Lenders under Section 3 of this Agreement,
(ii) the Collateral and the shares of Common Stock issuable under the
Warrants previously issued to the Lenders, FCIM Corp. and Vestcom as
contemplated by the Registration Rights Agreement, (iii) the shares
underlying the warrants issuable under Sections 8 and 17 and (iv) any other
shares of Common Stock issuable under this Agreement other than the
Debenture Shares (as hereinafter defined). Veridium shall register the
Registrable Securities (as hereinafter defined) with the shares to be
registered by Veridium and purchased by the Laurus Fund (the "Laurus
Shares"). The Registration Statement shall also include the shares issuable
upon conversion of any unpaid principal and interest under the Debentures
(the "Debenture Shares") in the event of default under the Debenture (the
Remainder Shares and the Debenture Shares shall be referred to collectively
as the "Registrable Securities").
So long as Veridium is not in default under the Transaction Documents, the
Required Filing Date (as defined in the Registration Rights Agreement) and the
Required Effective Date (as defined in the Registration Rights Agreement) with
respect to the Registrable Shares shall be 45 and 145 days after the Closing
Date, respectively. Veridium covenants to keep the Registration Statement
effective at all times during the period continuing until the earlier of (i) the
date when the Lenders may sell all Registrable Securities under Rule 144 without
volume or other restrictions or limits or (ii) the date the Lenders no longer
own any of the Registrable Securities. Except as specified in this Agreement,
the Registration Rights Agreements shall remain in full force and effect.
The Lenders agree to waive the restriction under Section 4(h) (entitled
"Restrictions on Filing Registration Statements") of the Purchase Agreements on
Veridium's filing of registration statements with respect to the Laurus Shares
so long as Veridium registers the Registrable Securities in the first
Registration Statement filed with respect to the Laurus shares.
10. Liquidation: Notwithstanding the provisions of Section 10, the Lenders
agree to not sell their Registrable Securities (other than the Initial
Shares) for a period of 90 days commencing with the effectiveness of the
Registration Statement. Each Lender agrees that each of their sales of the
Registrable Securities, including the Initial Shares, in any week shall not
exceed their pro-rata share (based on their share of the aggregate
principal amount of the Debentures) of 10% of the prior week's aggregate
trading volume of Veridium's Common Stock. The provisions of this Section
10 shall supercede the provisions of Section 4(i) (entitled "Leakage") of
the Purchase Agreements so long as no event of default has occurred under
any of the Debentures and shall be binding on any transferees of the
Registrable Securities.
In the event that Veridium does not exercise its right of first refusal
under Section 11 with respect to a private sale and such sale is consummated
with a third party, each Lender shall deliver to Veridium the written consent of
the transferee to be bound by the provisions of Section 10 as a condition
precedent to such transfer.
If a Lender does not sell his pro-rata share of the 10% of the prior week's
trading volume in any one week as provided in Section 10, the amount of such
deficiency (up to 5% of such prior month's trading volume) shall be added to the
number of shares of Common Stock that such Lender may sell during the 30 days
following the end of such prior week. Such amount shall not be cumulative; for
example, if a Lender does not sell any shares in month 1, each Lender will have
the option of selling its pro-rata share of an additional 5% of the prior
month's trading volume in month 2 in addition to his pro-rata share of the
normal 10% of the prior month's trading volume; in the event a Lenders does not
use its share of the 5% additional allocation but sells its share of the normal
10%, the Lender will be able to sell no more than its pro-rata share of 10% of
the prior month's trading volume in month 3. Each Lender agrees to advise
Veridium in writing of the amount of shares of Common Stock that such Lender may
sell from time to time.
11. Right of First Refusal: The Lenders each agree that they shall give
Veridium the right of first refusal to purchase any Registrable Securities
(including the Initial Shares) that such Lender intends to sell. Such right
of first refusal shall not apply to transfers for no consideration.
The right of first refusal shall be exercised as follows: each Lender shall
provide notification to Veridium, either by facsimile or email (with
confirmation of receipt), of their intention to sell a specified number of
shares and of the average between the bid and asked price on the date and at the
time of such notice. Such Lender shall not sell such shares should Veridium
notify Xxxxx Xxxxxx, as agent for the Lenders, of its agreement to purchase such
shares by facsimile or email (with confirmation of delivery) within 24 hours of
receipt of such notification by the Lender and to make a wire transfer of the
purchase price of such shares at such price to the Escrow Agent no later than
the third business day following delivery of such notice by the Lender. The
Escrow Agent shall not disburse the funds to the Lender until delivery of the
stock certificate representing the shares with a stock power with medallion
signature guarantee to the Escrow Agent.
In the event that Veridium does not make such payment, the Lender is free
to sell such shares on the open market or privately thereafter. In the event
that Veridium agrees to exercise a right of first refusal but fails to make
payment, Veridium shall waive any further rights of first refusal with respect
to any future sales by the Lenders. With respect to sales of shares by any
Lender under Rule 144, Veridium covenants that, to the extent permissible by
law, it will cause delivery to the Lenders' broker(s) and to the transfer agent
of an opinion letter stating that such sales are in compliance with Rule 144 and
such other documents as the transfer agent may request for the issuance of
certificates without restrictive legend within two (2) days of receipt of copies
of any required Form 144 and representation letters signed by a Lender and its
broker to Veridium.
12. Collateral: The Lenders currently possess 683,061, 483,033, 356,215 and
109,504 (after giving effect to the 20 to one reverse stock split) shares
of Xxxxx Xxxxxxxx'x, Xxxxxxxx Xxxxxxxx'x, Xxxxx Xxxxxxxx'x and Xxxxxxx
Xxxxxxxx'x, respectively, Common Stock in Veridium (the "Collateral"),
which shares are the security under the Pledge Agreements for Veridium's
obligations under the Debentures and for any obligations of Veridium under
this Agreement. The Collateral shall be released as follows:
a. Upon the payment by Veridium of the initial $250,000, the initial
conversion of the Debentures by the Lenders under Section 3 and the
delivery by Veridium to the Escrow Agent of the certificates
representing the Initial Shares, and the shares which will represent
the balance of the Collateral, Xxxxx Xxxxxxxx (683,061shares) Xxxxxxxx
Xxxxxxxx (483,504shares), Xxxxx Xxxxxxxx (356,215shares) and Xxxxxxx
Xxxxxxxx (109,504shares).
Xxxxx Xxxxxxxx agrees to deliver a stock certificate representing 1,132,284
shares of Common Stock as Collateral. Xxxxx Xxxxxxxx represents that his
affiliate has beneficially owned such Collateral for a minimum of two years.
Xxxxx Xxxxxxxx agrees that the aggregate of 1,132,284 shares deposited as
Collateral shall be considered collateral under the Pledge and Security
Agreements previously delivered to the Lenders. The Collateral is pledged as
follows: Castlerigg (666,049 shares), Cedar Crescent (333,025 shares) and
Stranco (133,210 shares.
b. Upon the payment by Veridium of $256,500 in accordance with Section
4(i) and the delivery to the Escrow Agent of certificates for shares
which will represent the balance of the Collateral remaining after
such payment: the Lenders shall release shares of Common Stock to Xx.
Xxxxxxxx on the basis of the greater of $0.50 per share or the
then-current market price based upon the closing bid price on the date
of such payment is received by the Escrow Agent.
c. Upon the payment by Veridium of the full balance of its obligations
under the Debentures: the Lenders shall release the balance of the
Collateral.
d. Veridium shall deliver at Closing an opinion of counsel to Veridium to
the transfer agent that upon request by the Lenders, certificates
representing the Collateral may be issued without registration and
without restriction against transferability under the Securities Act
of 1933.
13. Guarantors: Xxxxx Xxxxxxxx agrees that his obligations under the Guarantees
and the Pledge Agreements shall remain in full force and effect so long as
Veridium has any outstanding obligations under the Transaction Documents.
The Lenders agree to terminate the Guarantees with respect to the other
Guarantors on the Closing Date.
14. Default: The failure by Veridium to make any required payment under the
Debentures or under this Agreement or to observe any other term of the
Transaction Documents shall constitute an event of default, provided that
Veridium shall have 30 days after written notice from a Lender to cure any
default under the Transaction documents other than a failure to make any
required payment under the Debentures. Veridium shall have 5 days after
written notice to cure any default with respect to a failure to make any
required payment of principal and 10 days after written notice to cure any
default with respect to any required payment of interest under the
Debentures. The parties acknowledge that Xxxxx Xxxxxx may send notice of
any such default, as representative for the Lenders. For so long as the
Debentures remain unpaid, and in the event of any other default by Veridium
under the Transaction Documents, the Lenders shall have the right to
control, administer, otherwise deal with the Collateral and to sell or
otherwise dispose of the Collateral in accordance with the Pledge
Agreements.
15. Expenses: Veridium shall pay Lenders fees for their legal expenses s to
XxXxxxxxxx & Xxxxx LLP up to a maximum of $10,000 incurred by the Lenders
in connection with this transaction and the transactions contemplated
hereby. Ofsuch amount, $3,500 shall be delivered to the Escrow Agent on the
Closing Date and the balance shall be added to the principal amount of the
Debenture and paid to the Lenders in accordance with Section 4(i). Other
than the $10,000 payment, each party shall pay the fees and expenses of its
advisers, counsel, accountants, and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Lenders agree
that their legal fees and expenses payable to XxXxxxxxxx & Xxxxx LLP in
excess of $10,000 shall be deducted from any amounts distributed by the
Escrow Agent to the Lenders.
16. Finder's Fees: FCIM shall receive warrants to purchase 50,000 shares of
Veridium common stock at $0.40 per share in connection with its services
regarding the execution of this Agreement. Such Warrant shall be
substantially in the form of Exhibit C.
17. Warrants: The Warrants previously issued to the Lenders, FCIM and to
Vestcom Ltd. shall be amended to provide for an exercise price of $0.50 per
share.
18. Governing Law; Miscellaneous:
a. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed
in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the
exclusive jurisdiction of the federal courts whose districts encompass
any part of the City of New York, New York or the state courts of the
State of New York sitting in the City of New York in connection with
any dispute arising under this Agreement and hereby waives, to the
maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. To the extent determined by such
court, the Company shall reimburse the Lenders for any reasonable
legal fees and disbursements incurred by the Lenders in enforcement of
or protection of any of its rights under this Agreement
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.
f. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.
g. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this
Agreement.
h. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any
other jurisdiction.
i. This Agreement may be amended only by an instrument in writing signed
by the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof;
provided, however, that except as set forth herein, the Transaction
Documents delivered in May and July 2003 shall remain in full force
and effect.
k. The parties acknowledge that the Lenders are not acting as a "group"
with respect to the restructuring of Veridium's obligations as such
term is defined under the Securities Exchange Act of 1934.
19. Notices. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of:
(a) the date delivered, if delivered by personal delivery as against
written receipt therefore or by confirmed facsimile transmission,
(b) the third business day after deposit, postage prepaid, in the United
States Postal Service by registered or certified mail, or
(c) the date delivered after mailing by domestic or international express
courier, with delivery costs and fees prepaid,
(d) by email, with confirmation of delivery
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate to
each of the other parties hereto):
Company: Veridium Corporation
at its address at the head of this Agreement
Attn: Xxxxx Xxxxxxxx, Chairman and CEO
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
Lender: At the address set forth on the signature page of the
Purchase Agreements with a copy to:
Xxxxx Xxxxxx
000 X. 00xx Xxxxxx, Xxxxx 00X
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
and with a copy to:
XxXxxxxxxx & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx, Esq.
Telephone No: (000) 000-0000
Telecopier No: (000) 000-0000
IN WITNESS WHEREOF, this Agreement has been duly executed by the Lenders
and the Company as of May ______, 2004.
CASTLERIGG MASTER INVESTMENTS, LTD.
By: ___________________________________
Name: _________________________________
Title: _________________________________
.
CEDAR CRESCENT HOLDINGS, LTD
By:___________________________________
Name: _________________________________
Title: _________________________________
STRANCO INVESTMENTS, LTD.
By: ___________________________________
Name: _________________________________
Title: _________________________________
VERIDIUM CORPORATION
By: _____________________________
Name: _________________________________
Title: _________________________________
As to Sections 13 and 14:
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Xxxxx Xxxxxxxx
