Exhibit 10.06
MODIFICATION AND DOCUMENTATION OF OBLIGATIONS
THIS MODIFICATION AND DOCUMENTATION OF OBLIGATIONS (this
"Modification") is entered into effective the 29th day of September, 2003, by
and between ARADYME CORPORATION, a Delaware corporation having its principal
place of business at 000 Xxxx 000 Xxxxx, Xxxxx 000, Xxxxxxxx Xxxx, Xxxx 00000
(hereinafter referred to as the "Company"); XXXXXX X. XXXXXXXXX, an individual
residing in Salt Lake County, Utah (hereinafter referred to as "Xxxxxxxxx"); and
Enviro Fresh, INC., an entity owned and controlled by Xxxxxxxxx, on the
following:
Premises:
X. Xxxxxxxxx, through Enviro Fresh, provided the Company with a line of
credit (the "Line of Credit") on April 15, 2002, in the amount of $200,000. This
Line of Credit has been earning interest at the rate of 8% per annum since
inception on April 15, 2002, and has been earning a default rate of interest of
15% per annum since April 15, 2003. The total amount due and owing by the
Company under the Line of Credit as of September 30, 2003, is approximately
$230,000.
B. As part of the consideration for extending the Line of Credit, the
Company agreed to assign to Xxxxxxxxx the nonexclusive demand right to all
database software developed by the Company. In addition, as part of the
collateral for the Line of Credit, the Company agreed to pledge 100,000 shares
of stock of Arkona, Inc. Notwithstanding this covenant, the shares of Arkona
were not pledged as collateral, but were in fact sold by the Company to cover
its ongoing operating expenses.
C. From time to time, Xxxxxxxxx, through Enviro Fresh, has also made
additional advances (the "Undocumented Loans") to the Company as follows:
Date Amount
April 22, 2003.........................................$10,000
June 20, 2003.......................................... 25,000
July 2, 2003........................................... 5,000
July 25, 2003.......................................... 35,000
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Total........................................$75,000
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Each of the foregoing advances bears interest at 8% per annum from the date
advanced.
D. While Enviro Fresh legally has the current right to demand immediate
repayment of the principal of and interest on the Line of Credit and the
Undocumented Loans, in recognition of the limited financial circumstances of the
Company, Enviro Fresh is prepared to grant certain forbearances and to provide
other accommodations on the terms and conditions provided in this Modification.
E. The Company desires to preserve its limited available cash as well
as the capital that it may obtain in the future by obtaining the forbearance of
Enviro Fresh on the terms set forth in this Modification.
NOW THEREFORE, upon these premises, which are incorporated herein by
reference, and for and in consideration of the mutual promises and covenants
hereinafter set forth, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
1. The Company hereby grants to Xxxxxxxxx the right, exercisable by
Enviro Fresh at any time between December 1, 2003, and five days after payment
in full of the amount due on the Line of Credit, by written notice to the
Company, to convert all or any part of the principal of and interest on the Line
of Credit, at a conversion price of $0.14 per share, the market price for the
common stock on the date of this Modification. Such conversion shall be in full
and complete satisfaction of the amount converted. Within five days after the
date of conversion, the Company shall deliver to Enviro Fresh one or more
certificates, as it may direct, evidencing the shares to be issued hereunder. As
evidence of Enviro Fresh's investment intent and acknowledgment of acquiring
restricted securities, as that term is defined in Rule 144 promulgated under the
Securities Act of 1933, Enviro Fresh's notice of conversion shall be accompanied
by an investment letter in the form attached hereto as Exhibit A and
incorporated herein by reference. Inasmuch as the Line of Credit is being
converted to common stock, there is no longer any need to pledge shares of
Arkona, Inc. as security for the Letter of Credit.
2. Provided that Enviro Fresh converts all of the Line of Credit to
common stock of the Company as provided above, if, at any time on or before May
1, 2007, Xxxxxxxxx returns to the Company his option to purchase 1,000,000
shares of common stock at $0.416 per share, the Company shall grant to Xxxxxxxxx
the nonexclusive, royalty-free right to use all of the then-existing, current
versions of source code, all then-current versions of all derivative works, and
all then-current intellectual properties for his own use and benefit and without
the participation of the Company. If the option has been exercised in whole or
in part, then, with respect to any shares for which the option has been
exercised, Xxxxxxxxx shall deliver the number of shares for which the option has
been exercised, and the Company shall pay to Xxxxxxxxx against such delivery the
$0.416 per share exercise price theretofore paid by him.
3. To evidence the obligations of the Company to repay the Undocumented
Loans in the aggregate principal amount of $75,000, contemporaneously with the
execution hereof, the Company is executing and delivering to Enviro Fresh the
Company's promissory note in the amount of $75,000, which is the aggregate of
the principal of such Undocumented Loans as of September 30, 2003, bearing
interest at 8% per annum from the date of the respective advance, payable 20
days after demand, and providing for a rate of interest after default of 15% per
annum, all as more particularly set forth in the form of promissory note
attached hereto as Exhibit B and incorporated herein by reference. As of
September 30, 2003, the amount of interest accrued on such Undocumented Loans
totaled $1,524.38, which shall be reflected on the books and records of the
Company.
4. This Modification shall be governed by and construed under and in
accordance with the laws of the state of Utah, without regard to its governing
principles of conflicts of law.
5. This Modification represents the entire agreement between the
parties relating to the subject matter hereof, and no other course of dealing,
understanding, employment or other agreement, covenant, representation, or
warranty, written or oral, except as set forth herein or in the documents to be
delivered in connection with the transactions contemplated hereby, copies of the
forms of which are attached hereto as exhibits, shall be of any force or effect.
Any previous agreement, arrangement, understanding, or course of dealing is
expressly merged into this Modification. No amendment or modification hereof
shall be effective until and unless the same shall have been set forth in
writing and signed by the parties hereto.
6. Any notice, demand, request, or other communication permitted or
required under this Modification shall be in writing and shall be deemed to have
been given as of the date so delivered, if personally served; as of the date so
sent, if transmitted by facsimile and receipt is confirmed by the facsimile
operator of the recipient; as of the date so sent, if sent by electronic mail
and receipt is acknowledged by the recipient; one day after the date so sent, if
delivered by overnight courier service; or three days after the date so mailed,
if mailed by certified mail, return receipt requested, addressed as follows:
If to the Company, to: Aradyme Corporation
Attention: Corporate Counsel
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxx 00000
Facsimile: 000-000-0000
If to Xxxxxxxxx, to: Xxxxxx X. Xxxxxxxxx
0000 Xxxxx 0000 Xxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Facsimile: 000-000-0000
If to Enviro Fresh, to: Enviro Fresh, Inc.
c/o Xxxxxx X. Xxxxxxxxx
0000 Xxxxx 0000 Xxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Facsimile: 000-000-0000
or such other addresses, facsimile numbers, or electronic mail address as shall
be furnished in writing by any party in the manner for giving notices hereunder.
7. In the event a party commences a legal proceeding to enforce any of
the terms of this Modification, the prevailing party in such action shall have
the right to recover reasonable attorneys' fees and costs from the other party
to be fixed by the court in the same action. The term "legal proceedings" as
used above shall be deemed to include appeals from a lower court judgment and it
shall include proceedings in the Federal Bankruptcy Court, whether or not they
are adversary proceedings or contested matters. The term "prevailing party" as
used above in reference to proceedings in the Federal Bankruptcy Court shall be
deemed to mean the prevailing party in any adversary proceeding or contested
matter, or any other actions taken by the nonbankrupt party that are reasonably
necessary to protect its rights under the terms of this Modification.
8. Each of the parties shall cooperate in good faith and with diligence
and dispatch in preparing any additional or confirmatory documents requested by
the other in order to effectuate the terms and conditions of this Modification.
9. This Modification shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
10. This Modification may be executed in multiple counterparts of like
tenor, and all copies taken together shall be construed as a single instrument.
IN WITNESS WHEREOF, the parties have executed this Modification
effective as of the day and year first written above.
ARADYME CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
------------------------
Its CEO
Enviro Fresh, INC.
By /s/ Xxxxxx X. Xxxxxxxxx
------------------------
XXXXXX X. XXXXXXXXX
Its President
/s/ Xxxxxx X. Xxxxxxxxx
------------------------
XXXXXX X. XXXXXXXXX
Exhibit A
INVESTMENT LETTER
_____________, 2004
Aradyme Corporation
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxx 00000
Re: Acquisition of Common Stock
Gentlemen:
In connection with the acquisition by the undersigned of shares of
common stock of Aradyme Corporation (the "Securities"), the undersigned
represents that the Securities are being acquired without a view to, or for,
resale in connection with any distribution of such Securities or any interest
therein without registration or other compliance under Securities Act of 1933,
as amended (the "Securities Act"), and that the undersigned has no direct or
indirect participation in any such undertaking or in the underwriting of such an
undertaking.
In order to provide documentation for reliance upon exemptions from the
registration and prospectus delivery requirements for the issuance of the
Securities, the undersigned represents, acknowledges, and warrants as follows:
1. The undersigned acknowledges that neither the Securities and
Exchange Commission ("SEC") nor the securities commission of any state or other
federal agency has made any determination as to the merits of acquiring the
Securities, and that the transactions contemplated herein involve certain risks.
2. The undersigned has received and read the Company's periodic reports
filed with the SEC since its most recently completed fiscal year, including its
most recent annual report on Form 10-K or 10-KSB and its subsequent quarterly
reports on Form 10-Q or 10-QSB, as well as any current reports on Form 8-K.
3. The undersigned has such knowledge and experience in business and
financial matters that such party is capable of evaluating the Securities and
the Company.
4. The undersigned has been provided with all materials and information
requested by the undersigned or its representatives, including any information
requested to verify any information furnished (to the extent such information is
available or can be obtained without unreasonable effort or expense), and the
undersigned has been provided the opportunity for direct communication with the
Company and its representatives regarding the transactions contemplated hereby.
5. All information that the undersigned has provided to the Company or
its agents or representatives concerning the undersigned's suitability to hold
shares in the Company following the transactions contemplated hereby is
complete, accurate, and correct.
6. The undersigned has not offered or sold any interest in the
Securities and has no present intention of dividing the Securities to be
received with others or of reselling or otherwise disposing of any portion of
such stock or rights, either currently or after the passage of a fixed or
determinable period of time or on the occurrence or nonoccurrence of any
predetermined event or circumstance.
7. The undersigned was at no time solicited by any leaflet, public
promotional meeting, circular, newspaper or magazine article, radio or
television advertisement, or any other form of general advertising or
solicitation in connection with the offer, sale, or purchase of the Securities.
8. As a result of the acquisition of the Securities, the undersigned
believes that its financial prospects resulting from its ownership in the
Company will not be materially less favorable than its retained ownership in the
consideration exchanged for such Securities. The undersigned anticipates no need
in the foreseeable future to sell the Securities to be acquired pursuant hereto.
The undersigned is able to bear the economic risks of this investment, and
consequently, without limiting the generality of the foregoing, is able to hold
the Securities to be received for an indefinite period.
9. The undersigned understands that the Securities have not been
registered, but are being acquired by reason of a specific exemption under the
Securities Act, as well as under certain state statutes, for transactions by an
issuer not involving any public offering and that any disposition of the subject
Securities may, under certain circumstances, be inconsistent with this exemption
and may make the undersigned an "underwriter" within the meaning of the
Securities Act. It is understood that the definition of an "underwriter" focuses
on the concept of "distribution" and that any subsequent disposition of the
subject Securities can only be effected in transactions that are not considered
distributions. Generally, the term "distribution" is considered synonymous with
"public offering" or any other offer or sale involving general solicitation or
general advertising. Under present law, in determining whether a distribution
occurs when Securities are sold into the public market, under certain
circumstances one must consider the availability of public information regarding
the issuer, a holding period for the Securities sufficient to assure that the
persons desiring to sell the Securities without registration first bear the
economic risk of their investment, and a limitation on the number of Securities
that the stockholder is permitted to sell and on the manner of sale, thereby
reducing the potential impact of the sale on the trading markets. These criteria
are set forth specifically in Rule 144 promulgated under the Securities Act.
After one year after the date the Securities were last acquired from the issuer
or an affiliate of the issuer and are fully paid for as determined in accordance
with Rule 144(d), sales of the Securities in reliance on Rule 144 can only be
made in limited amounts in accordance with the terms and conditions of that
rule. After two years from the date the Securities were so last acquired and
fully paid for, as determined in accordance with Rule 144(d), they can generally
be sold without meeting these conditions, provided the holder is not (and has
not been for the preceding three months) an affiliate of the issuer.
10. The undersigned acknowledges that the Securities must be held and
may not be sold, transferred, or otherwise disposed of for value unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available; the issuer is under no obligation to register the
Securities under the Securities Act or under Section 12 of the Securities
Exchange Act of 1934, as amended, except as may be expressly agreed to by it in
writing; if Rule 144 is available, and no assurance is given that it will be,
initially only routine sales of such Securities in limited amounts can be made
in reliance on Rule 144 in accordance with the terms and conditions of that
rule; the issuer is under no obligation to the undersigned to make Rule 144
available, except as may be expressly agreed to by it in writing; in the event
Rule 144 is not available, compliance with Regulation A promulgated under the
Securities Act or some other disclosure exemption may be required before the
undersigned can sell, transfer, or otherwise dispose of such Securities without
registration under the Securities Act; the issuer's registrar and transfer agent
will maintain a stop-transfer order against the registration of transfer of the
Securities; and the certificate representing the Securities will bear a legend
in substantially the following form so restricting the sale of such Securities:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144
PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING
WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER
COMPLIANCE UNDER THE SECURITIES ACT.
11. The issuer may refuse to register transfer of the Securities in the
absence of compliance with Rule 144 unless the undersigned furnishes the issuer
with a "no-action" or interpretative letter from the SEC or an opinion of
counsel reasonably acceptable to the issuer stating that the transfer is proper;
further, unless such letter or opinion states that the Securities are free of
any restrictions under the Securities Act, the issuer may refuse to transfer the
Securities to any transferee that does not furnish in writing to the issuer the
same representations and agree to the same conditions with respect to such
Securities as set forth herein. The issuer may also refuse to transfer the
Securities if any circumstances are present reasonably indicating that the
transferee's representations are not accurate.
Very truly yours,
Enviro Fresh, Inc.
By
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Xxxxxx X. Xxxxxxxxx,
duly authorized officer
0000 Xxxxx 0000 Xxxx
Xxxx Xxxx Xxxx, Xxxx 00000
