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EXHIBIT
10.4
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 Wayzata, LLC, a South Dakota limited liability
company (“ Wayzata
”). The Company and Wayzata 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 $315,000, payable
to the order of Wayzata (the “ Note
”);
WHEREAS,
as of the date hereof, the Company has paid Wayzata $150,000
in partial satisfaction of its obligations under the Note;
and
WHEREAS,
Wayzata 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 Wayzata 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 Wayzata 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 Wayzata 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, Wayzata shall receive one payment equal to 1% 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, Wayzata shall deliver to the
Company the Note which shall be marked “cancelled” by
the Company. With such delivery and cancellation,
Wayzata 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 Wayzata as provided for in the Note shall remain
in effect in accordance with the warrant certificate delivered by
the Company to Wayzata as specified in the Note.
3.
WAYZATA REPRESENTATIONS AND WARRANTIES . As of
the date hereof, Wayzata 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 Wayzata 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 Wayzata and any other
person or entity;
(e)
This
Agreement is a legal, valid and binding agreement of Wayzata,
enforceable in accordance with its terms;
(f)
It
recognizes that acquiring the Units and Warrant Consideration
involves 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 the 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 WAYZATA . Wayzata, 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 Wayzata had, now has, or hereafter may have
against the Company Released Parties or any of them (the “
Wayzata
Claims ”). Wayzata hereby agrees that it
will not assert, and that it is estopped from asserting, against
any and all of the Company Released Parties, any Wayzata Claims
that are released in this Agreement.
6.
INDEMNIFICATION . Wayzata 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 Wayzata in violation of this
Agreement, the Participation Agreement, the Warrant Certificate or
any applicable securities laws or any misrepresentation by Wayzata
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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Wayzata, LLC |
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By:
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/s/
[illegible signature] |
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Name: |
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Title: |
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GABRIEL TECHNOLOGIES CORPORATION |
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By:
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/s/
Ronald Gillum |
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Name:
RONALD GILLUM |
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Title:
President |
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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 Wayzata,
LLC, a South Dakota limited liability company (the “
Holder
”).
WHEREAS, the Holder has loaned an original principal amount
of $315,000 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 other consideration, under
that certain Obligation Exchange Agreement and Release between the
Corporation and the Holder, dated as of May 5, 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)
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