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EXHIBIT
10.3
OBLIGATION EXCHANGE
AGREEMENT AND RELEASE
THIS
OBLIGATION EXCHANGE AGREEMENT AND RELEASE (this “
Agreement
”) is made and entered into effective as of the 5th day
of May, 2008, by and between Gabriel Technologies Corporation,
a Delaware corporation (the “ Company
”), and TLR Consulting, LLC, a South Carolina limited
liability company (“ TLR
Consulting ”). The Company and TLR
Consulting are sometimes hereinafter referred to individually
as a “ Party
” and collectively as the “ Parties
”.
WHEREAS,
the Company has an outstanding Promissory Note dated January
23, 2007 in the original principal amount of $175,000, payable
to the order of TLR Consulting (the “ Note
”);
WHEREAS,
as of the date hereof, the Parties agree that the total
outstanding obligations (including principal and interest) of
the Company under the Note are $191,000; and
WHEREAS,
TLR Consulting desires to exchange the Note for stock
equivalent units of the Company (“ Units
”), a warrant to purchase Units (the “ Warrant
”), and certain other consideration provided for herein,
and the Company is willing to do so provided that such
exchange settles and releases all outstanding obligations,
debts, and liabilities with respect to the Note pursuant to
the terms of this Agreement.
NOW,
THEREFORE, for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged and confessed,
the Parties agree as follows:
1.
CONSIDERATION .
(a) Upon
the execution and delivery of this Agreement by TLR Consulting
to the Company and the cancellation and delivery of the Note
pursuant to Section 2 below, the Company shall
issue:
(i) 477,500
Units to TLR Consulting and, concurrent therewith, the Parties
shall enter into a Stock Equivalent Unit Participation
Agreement in the form of Exhibit A
attached hereto (the “ Participation
Agreement ”). The Units shall not be
certificated, will be governed by this Agreement and the
Participation Agreement, and will be represented solely by an
account to be maintained by the Company as set forth in the
Participation Agreement; and
(ii) a
Warrant to purchase up to 477,500 Units to TLR Consulting at
an exercise price of $0.40 per Unit (the “ Warrant
Consideration ”). The Warrant Consideration shall
be evidenced by a Warrant Certificate in the form of
Exhibit B
attached hereto (the “ Warrant
Certificate ”).
(b) In
addition to the Units and Warrant Consideration described
above, TLR Consulting shall receive one payment equal to 0.5%
of an IP Event (as defined below), within 10 business days
after the IP Event. For purposes of this Agreement, an “
IP
Event ” is defined as the receipt by the Company
or any of its subsidiaries of net proceeds of at least $10
Million (in cash or the fair market value of non-cash
consideration) from licensing, sale, transfer, settlement or
other transaction with one of more third parties relating to
intellectual property of the Company or its subsidiaries, or a
merger, consolidation, share exchange or sale of all or
substantially all of the stock or assets of the Company or its
Subsidiaries.
2.
DELIVERY AND CANCELLATION OF NOTE . Concurrent
with the execution of the Agreement, TLR Consulting shall deliver
to the Company the Note which shall be marked
“cancelled” by the Company. With such
delivery and cancellation, TLR Consulting agrees that all
obligations of the Company in respect to the Note (including
without limitation obligations triggered by an “IP
Event” as described in Section 2 of the Note which are
replaced and superseded by the consideration provided for in
Section 1(b) of this Agreement) are satisfied or waived and
released as herein provided. Notwithstanding the foregoing, the
warrants issued to TLR Consulting as provided for in the Note shall
remain in effect in accordance with the warrant certificate
delivered by the Company to TLR Consulting as specified in the
Note.
3.
TLR CONSULTING REPRESENTATIONS AND WARRANTIES
. As of the date hereof, TLR Consulting represents and
warrants the following:
(a) It
has not assigned, pledged, or transferred in any manner to any
person or entity any right, title, or interest to the Note or any
of the TLR Consulting Claims (defined in Section 5
below);
(b) It
is free to enter into this Agreement and to perform each of
its terms and covenants;
(c) It
is not restricted or prohibited, contractually or otherwise,
from entering into and performing this Agreement;
(d) Its
execution and performance of this Agreement is not a violation
or breach of any other agreement between TLR Consulting and
any other person or entity;
(e) This
Agreement is a legal, valid and binding agreement of TLR
Consulting, enforceable in accordance with its
terms;
(f) It
recognizes that acquiring the Units and Warrant Consideration
involve a high degree of risk and is suitable only for persons
of adequate financial means who have no need for liquidity of
the Units and Warrant Consideration;
(g) It
(i) is competent to understand and does understand the nature
of the Units and Warrant Consideration, and (ii) is able to
bear the economic risk of the Units and Warrant
Consideration;
(h) It
is an accredited investor as defined in Rule 501 of Regulation
D promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the “
Act
”);
(i) It
has significant prior investment experience, including
investment in nonlisted and nonregistered securities, and
recognizes the highly speculative nature of the Units and
Warrant Consideration, and is able to bear the economic risk
hereby assumed;
(j) All
information regarding the Company which was requested or
desired by it has been furnished, all other documents which
could be reasonably provided have been made available for
inspection and review, and it believes that such information
is sufficient to make an informed decision with respect to its
acquiring the Units and Warrant Consideration;
(k) It
is acquiring the Units and Warrant Consideration for its own
account, for investment, and not for distribution or resale to
others; and
(l) It
may not assign or transfer the Units and/or Warrant
Consideration except by will, by the laws of descent and
distribution, or pursuant to a qualified domestic relations
order as defined in the Internal Revenue Code of 1986, as
amended .
4.
COMPANY REPRESENTATIONS AND WARRANTIES . As of
the date hereof, the Company represents and warrants the
following:
(a) It
is free to enter into this Agreement and to perform each of
its terms and covenants;
(b) It
is not restricted or prohibited, contractually or otherwise,
from entering into and performing this Agreement;
(c) Its
execution and performance of this Agreement is not a violation
or breach of any other agreement between the Company and any
other person or entity; and
(d) This
Agreement is a legal, valid and binding agreement of the
Company, enforceable in accordance with its
terms.
5.
RELEASE BY TLR CONSULTING . TLR Consulting, on
behalf of itself, its predecessors, successors, assigns, partners,
members, managers, affiliates, subsidiaries, officers, employees,
attorneys, and agents, past, present and future, hereby fully,
finally and completely RELEASE AND FOREVER DISCHARGE the Company
and its predecessors, successors, assigns, partners, affiliates,
subsidiaries, officers, shareholders, directors, employees,
attorneys, and agents, past, present and future (the “
Company
Released Parties ”), of and from any and all actions,
causes of action, suits, debts, disputes, damages, claims,
obligations, liabilities, and demands of any kind whatsoever, at
law or in equity, whether matured or unmatured, liquidated or
unliquidated, vested or contingent, known or unknown, with respect
to matters arising in connection with the Note (including
principal, any interest thereon or other fees or obligations
related thereto) that TLR Consulting had, now has, or hereafter may
have against the Company Released Parties or any of them (the
“ TLR
Consulting Claims ”). TLR Consulting hereby
agrees that it will not assert, and that it is estopped from
asserting, against any and all of the Company Released Parties, any
TLR Consulting Claims that are released in this
Agreement.
6.
INDEMNIFICATION . TLR Consulting agrees to hold
the Company, its subsidiaries, officers, directors, employees and
agents and their respective heirs, representatives, successors, and
assigns harmless and to indemnify them against all liabilities,
costs, and expenses (including reasonable attorneys’ fees)
incurred by them in connection with the transaction contemplated in
this Agreement or as a result of any sale or distribution of the
Units or Warrant Consideration by TLR Consulting in violation of
this Agreement, the Participation Agreement, the Warrant
Certificate or any applicable securities laws or any
misrepresentation by TLR Consulting herein, including without
limitation any claims made by any third persons in respect of any
right to the Note or the indebtedness represented
thereby.
7.
ENTIRE AGREEMENT . This Agreement, the
Participation Agreement and the Warrant Certificate constitute the
entire agreement between the Parties as to the subject matter
hereof. There are no verbal understandings, agreements,
representations or warranties that are not expressly set forth
herein. This Agreement shall not be changed orally, but
only in writing signed by the Parties.
8.
SEVERABILITY . Any provision of this Agreement
which is for any reason prohibited or found or held invalid or
unenforceable by any court or governmental agency shall be
ineffective to the extent of such prohibition or invalidity or
unenforceability, without invalidating the remaining provisions
hereof in such jurisdiction or affecting the validity or
enforceability of such provision in any other
jurisdiction.
9.
BINDING EFFECT . This Agreement shall be binding
upon and inure to the benefits of the Parties, their respective
successors and assigns.
10.
GOVERNING LAW . This Agreement shall be governed
by and construed, enforced and interpreted in accordance with the
laws of the State of Nebraska (without regard to principles of
conflicts of laws). The Parties consent to the sole and
exclusive jurisdiction of the state courts and U.S. federal courts
having jurisdiction in Douglas County, Nebraska for any dispute
arising out of this Agreement.
11.
COUNTERPARTS; ELECTRONIC DELIVERY . This
Agreement may be executed in any number of original counterparts,
each of which having been so executed and delivered shall be deemed
an original and all of which, collectively, shall constitute one
agreement; it being understood and agreed that the signature pages
may be detached from one or more such counterparts and combined
with the signature pages from any other counterparts in order that
one or more fully executed originals may be assembled. A
copy of an executed counterpart signature page signed by a Party
may be delivered by facsimile or other electronic transmission and,
upon such delivery, a print out of the transmitted signature of
such Party will have the same effect as if a counterpart of this
Agreement bearing an original signature of that Party had been
delivered to the other Party.
[signature page follows]
IN
WITNESS WHEREOF, the Parties hereto have executed and
delivered this Agreement in Omaha, Nebraska effective as of
the day and year first above written.
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TLR CONSULTING,
LLC |
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By:
TLR Consulting
LLC
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Name:
/s/
Terry L
Rohlfing
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Title:
O
wner
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GABRIEL
TECHNOLOGIES CORPORATION |
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By:
/s/ Ronald
Gillum
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Name:
RONALD GILLUM |
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Title:
President |
EXHIBIT
A
FORM OF STOCK EQUIVALENT UNIT PARTICIPATION AGREEMENT
GABRIEL TECHNOLOGIES CORPORATION
STOCK EQUIVALENT UNIT
PARTICIPATION AGREEMENT
STOCK EQUIVALENT UNIT PARTICIPATION AGREEMENT (this “
Agreement
”) entered into this 5th day of May, 2008 (the “
Effective
Date ”), between GABRIEL TECHNOLOGIES
CORPORATION , a Delaware corporation (the “
Corporation
”), and TLR
CONSULTING, LLC, a South Carolina limited liability company
(the “ Holder
”).
WHEREAS, the Holder has loaned $175,000 to the Corporation,
evidenced by or resulting in a note payable or other obligation of
the Corporation to Holder (the “ Obligation
”), and has agreed to exchange the Obligation for 477,500
Units (as defined below), as well as certain other consideration,
under that certain Obligation Exchange Agreement and Release
between the Corporation and the Holder, dated as of May 5th, 2008
(the “ Obligation Exchange
Agreement ”); and
WHEREAS, the Corporation and the Holder desire to
memorialize and set out their respective rights and obligations
with respect to the Units.
NOW, THEREFORE , in consideration of the mutual premises and
undertakings set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1.
Definitions
. The following words have the following meanings for
purposes of this Agreement.
(a)
“
Change of
Control ” means the earliest date upon which one of
the following events occurs:
(i) Acquisition
by any individual, entity, or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “ Exchange
Act ”) (a “ Person
”) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 35% or more of
either (A) the Shares (as defined below) or (B) the combined
voting power of the then-outstanding voting securities of the
Corporation entitled to vote generally in the election of
directors of the Corporation; provided, however, that for
purposes of this Subsection (i), the following acquisitions
shall not constitute a Change of Control: (A) any acquisition
directly from the Corporation, (B) any acquisition by the
Corporation, (C) any acquisition by any
employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any affiliated company, or
(D) any acquisition by any corporation pursuant to a
transaction that complies with clauses (A), (B), or (C) of
Subsection (ii) below);
(ii) Consummation
of a reorganization, merger, consolidation or sale or other
disposition of all or a significant part of the assets (other
than in the ordinary course of business) of the Corporation or
of any of the Corporation’s wholly or partly owned
subsidiary companies, including without limitation Trace
Technologies, LLC, a Nebraska limited liability company (a
“ Business
Combination ”), in each case, unless ,
following such Business Combination, (A) all or substantially
all of the individuals and entities that were the beneficial
holders of the Shares (as defined below) immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 60% of the then-outstanding shares of
common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation that, as a
result of such Business Combination, owns the Corporation or
all or substantially all of the Corporation‘s assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership of the
Shares immediately prior to such Business Combination, (B) no
Person (excluding any corporation resulting from such Business
Combination or any
employee
benefit plan (or related trust) of the Corporation or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 35% or more of,
respectively, the then-outstanding shares of common stock of
the corporation resulting from such Business Combination or
the combined voting power of the then-outstanding voting
securities of such corporation, except to the extent that such
ownership existed prior to the Business Combination, and (C)
at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination
were members of the Corporation’s Board at the time of
the execution of the initial agreement or of the action of the
Board providing for such Business Combination; or
(iii) Approval
by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(b)
“
Dividend
Distribution Date ” means the date on which the
Corporation pays a cash dividend to the holder of a
Share.
(c)
“
Settlement
Date ” means the date upon which the Stockholders of
the Corporation receive proceeds resulting from a Change of
Control.
(d)
“
Share ”
means one share and “ Shares ”
means more than one share of the Corporation’s issued and
outstanding common stock, $0.001 par value, as the same is
constituted from time to time.
(e)
“
Stockholder
” means a holder of Shares.
(f)
“
Unit ”
means a contractual right of the Holder to receive a certain amount
or value of property from the Corporation equal to a certain amount
or value of property received by a Stockholder with respect to a
Share, in accordance with the terms and conditions of this
Agreement.
2. Acknowledgement of
Receipt of Units and Cancellation of Obligation
.
(a)
The Holder
hereby acknowledges receipt of 477,500 Units from the
Corporation under the Obligation Exchange Agreement and agrees
that such Units shall be subject to the terms and conditions
of this Agreement. Holder further acknowledges and
agrees that such Units were received in exchange for the
cancellation of the Corporation’s Obligation, as
described in the Obligation Exchange Agreement.
(b) The
Corporation hereby acknowledges the issuance of 477,500 Units
to the Holder under the
Obligation Exchange Agreement and agrees that such Units
shall be subject to the terms and conditions of this
Agreement. The
Corporation further acknowledges and agrees that such Units
were issued in exchange for the cancellation of the
Corporation’s Obligation, as described in the
Obligation Exchange Agreement.
3.
Rights
of Holders of Units . In accordance with the
terms of this Agreement, on the Settlement Date and each Dividend
Distribution Date, if any, the Holder of a Unit, with respect to
each Unit held, shall be entitled to receive an amount equal to the
value of the amount paid or distributed to each Stockholder with
respect to each Share, in the form of cash or, at the election of
the Corporation, other property with a value equal to the property
otherwise distributable or payable under the terms of this
Agreement. Any such amount or
distribution
to which a Holder becomes entitled shall be paid or made by
the Corporation to such Holder within five (5) Business Days
(as defined below) of such Settlement Date or Dividend
Distribution Date. By way of illustration of the
amounts or distributions to which a Holder may become
entitled, if on the Settlement Date, a Stockholder of the
Corporation receives $1.00 for each Share held by such
Stockholder, then Holder will receive a cash payment equal to
$1.00 times the number of Units held by
Holder. Similarly, if on the Settlement Date, each
Stockholder of the Corporation receives 5 shares of common
stock of the acquiring company, with a value of $2.00, for
each Share held by such Stockholder, then Holder will receive,
at the Corporation’s election, either (a) a cash payment
equal to $2.00 times the number of Units held by Holder, or
(b) 5 shares of common stock of the acquiring company for each
Unit held by Holder. Likewise, if on the Dividend
Distribution Date, each Stockholder of the Corporation
receives a Dividend Distribution Payment of $0.25 per Share in
cash, then Holder will receive a cash payment equal to $0.25
times the number of Units held by the Holder. The
Corporation shall have the right to deduct, from any payment
or distribution hereunder, any taxes required by law to be
withheld from the Holder with respect to such payment or
distribution and, in furtherance thereof, Holder shall provide
any documentation or completed form as may be requested by
Corporation related to or in connection with the determination
of any such withholding. For the avoidance of
doubt, amounts will only be payable or distributable under
this Agreement upon the occurrence of an event specifically
described herein and, further, no amount shall be payable or
distributable to a Holder upon the mere change in value of a
Share in the absence of such occurrence.
4.
No
Rights as a Stockholder . The
Holder, in its capacity as a Holder of Units, shall have no rights
as a Stockholder of the Corporation. No Shares or other
equity interest in the Corporation shall be issued pursuant to this
Agreement.
5.
Adjustments to Units;
No Limitation on Corporation Action .
(a) In
the event of a change in the number of Shares by reason of the
Corporation implementing any stock dividend or split,
recapitalization, merger, consolidation, spin-off,
reorganization, combination or exchange of shares or other
similar corporate change, so long as such change does not
result in a Change of Control, the Corporation shall adjust
the number of Units issued to Holder in the Holder’s
Account (as defined in Section 7) as is necessary and
appropriate and, further, any such adjustment made shall be
conclusive and binding on the parties hereto.
(b) Notwithstanding
the foregoing, the issuance by the Corporation of shares of
its capital stock of any class, or securities convertible into
shares of capital stock of any class, either in connection
with a direct sale or upon the exercise of rights or warrants
to subscribe therefor, or upon conversion of shares or
obligations of the Corporation convertible into such shares or
other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number of
Units covered by this Agreement.
(c) For
the avoidance of doubt and without limiting the generality of
the foregoing, the existence of the Units shall not affect in
any manner the right or power of the Corporation to make,
authorize or consummate (i) any or all adjustments,
recapitalizations, reorganizations or other changes in the
Corporation’s capital structure or its business; (ii)
any merger or consolidation of the Corporation; (iii) the
dissolution or liquidation of the Corporation; (iv) any sale,
transfer or assignment of all or any part of the assets or
business of the Corporation; or (v) any other corporate act or
proceeding, whether of a similar character or
otherwise.
6.
Representations
and Warranties of Holders of Units . As
of the Effective Date and the date of execution of the
Obligation Exchange Agreement, the Holder represents and
warrants that:
(a) The
Holder has had access to all information regarding the
Corporation and its present and prospective business, assets,
liabilities and financial condition that the Holder
reasonably considers important in connection with the Units,
this Agreement, and the Obligation Exchange Agreement, and
the Holder has had ample opportunity to ask questions of the
Corporation’s representatives (and any such questions
have been answered to Holder’s satisfaction) concerning
such matters.
(b) The
Holder is fully aware of: (i) the highly speculative nature of
the future potential financial returns on or from the Units,
(ii) the financial risks and hazards involved in the future
potential financial returns on or from the Units, and (iii)
the tax consequences of executing and participating in this
Agreement and the Obligation Exchange Agreement.
(c) &nbs
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