DEBT CONVERSION AND RECAPITALIZATION AGREEMENT

 

THIS DEBT CONVERSION AND RECAPITALIZATION AGREEMENT (this “Agreement”) is made
as of the 28th day of September, 2012 by and among iSecureTrac Corp., a Delaware
corporation (the “Company”), IST Holdings, LLC, a Nebraska limited liability
company (“Holdings”) and each of the additional parties listed on Schedule 1
hereto (each a “Series C Holder”) acting in his or its individual capacity as a
holder of shares of the Company’s Series C Cumulative, Compounding Exchangeable
Preferred Stock, par value ($0.01) per share (the “Series C Preferred”).

 

RECITALS

 

A.           Holdings is the holder of that certain promissory note, dated
December 31, 2010, with a remaining principal balance as of the date hereof of
$2,000,000 and which is secured by a first priority security interest in all of
the assets of the Company subject to senior security interests held by other
lenders that have provided the Company with capital equipment financing and a
working capital line of credit (the “Note”). The Note was originally issued by
the Company to Crestpark LP, Inc. pursuant to that certain Credit and Security
Agreement, dated October 29, 2007 (the “Credit Agreement”), as modified by that
certain Debt Conversion Agreement, dated June 30, 2011, by and between the
Company and Crestpark LP, Inc. (the “Debt Conversion Agreement”). As of the date
hereof, a total of $241,722 of unpaid interest has accrued on the Note.
Principal and interest on the Note are due and payable at the maturity of the
Note on January 1, 2015. Holdings duly acquired the Note from Crestpark on
August 29, 2012 and holds all right, title and interest therein as the holder
thereof and as such pursuant to the Credit Agreement and Debt Conversion
Agreement.

 

B.           Holdings is also the holder of (i) 1,470,799 shares of Series C
Preferred, (ii) 1,438,359 shares of the Company’s Series D Cumulative,
Compounding Exchangeable Preferred Stock, par value ($0.01) per share (the
“Series D Preferred”) and (iii) warrants (“Warrants”) to acquire 564,253 shares
of the Company’s common stock. The shares of Series C Preferred held by Holdings
are exchangeable by their terms for a total 7,034,256 shares of the Company’s
common stock and additional warrants to purchase an additional 5,391,141 shares
of common stock at a purchase price of $2.30 per share for five years. The
shares of Series D Preferred held by Holdings are exchangeable by their terms
for a total of 26,816,865 shares of the Company’s common stock.

 

C.           Each Series C Holders hold (i) the number of shares of Series C
Preferred set forth with respect to him or it in Schedule 1 under the column
“Series C Preferred Shares” which are exchangeable by their terms into the
number shares of the Company’s common stock set forth in Schedule 1 with respect
to him or it under the column “Exchange Shares” and warrants to purchase
additional shares of common stock at a purchase price of $2.30 per share for
five years and (ii) Warrants to acquire additional shares of the Company’s
common stock.

 

 

 

 

D.           Subject to the terms and conditions set forth herein, Holdings
desires to (i) convert all but $525,000 of the remaining principal balance of
the Note and the $241,722 of interest accrued thereon through the date hereof
into 156,066 shares of Series D Preferred, (ii) exchange, in accordance with the
terms of the Amended and Restated Certificate of Designation, Preferences and
Rights of the Series C Cumulative, Compounding Exchangeable Preferred Stock,
dated June 30, 2011 (the “Series C Certificate of Designation”), all shares of
Series C Preferred held by it for 7,034,256 shares of the Company’s common
stock, (iii) cancel and terminate the Warrants and any warrants issuable to
Holdings upon the exchange of shares of Series C Preferred, and (iv) exchange,
in accordance with the terms of the Certificate of Designation, Preferences and
Rights of the Series D Cumulative, Compounding Exchangeable Preferred Stock,
dated June 30, 2011 (the “Series D Certificate of Designation”), all shares of
Series D Preferred held by it for 29,726,568 shares of the Company’s common
stock.

 

E.           Subject to the terms and conditions set forth herein, each Series C
Holder desires to (i) exchange, in accordance with the terms of the Series C
Certificate of Designation, all shares of Series C Preferred held by him or it
into the number of shares of the Company’s common stock set forth with respect
to him or it in Schedule 1 hereto under the column “Exchange Shares” and
(ii) cancel and terminate the Warrants held by him or it and any warrants
issuable to him or it upon the exchange of his or its shares of Series C
Preferred.

 

NOW, THEREFORE, in consideration of the mutual promises set forth herein and of
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Holdings, each Series C Holder and the Company, each
intending to be legally bound hereby, do agree as follows:

 

AGREEMENT

 

Section 1. Conversion of the Note.

 

1.1.          Conversion of Note into Series D Preferred Stock. Subject to the
terms and conditions hereof, Holdings hereby converts $1,475,000 of the
principal amount of the Note and the $241,722 of interest accrued on the Note as
of the date hereof into 156,066 shares of Series D Preferred.

 

1.2.          Issuance of Series D Preferred Stock. Upon surrender to the Note
by Holdings to the Company, the Company shall deliver a certificate issued in
the name of Holdings for a total of 156,066 shares of Series D Preferred in
connection with the conversion of debt described in Section 1.1. Such
certificate(s) may bear a legend indicating that the issuance thereof has not
been registered under the Securities Act of 1933 and applicable state securities
laws. Holdings may waive delivery of a certificate of the shares of Series D
Preferred issued pursuant to this Section 1 and accept a certificate for shares
of the Company’s common stock issued in lieu thereof in accordance with Section
2.1 hereof.

 

1.3           Substitute Note. The remaining $525,000 principal balance of the
Note shall remain outstanding and shall continue to be treated as indebtedness
of the Company under the Credit Agreement, as modified by the Debt Conversion
Agreement, and will be evidenced by a substitute promissory note, in the form
attached hereto as Exhibit A (the “Substitute Note”), which shall be issued by
the Company and delivered to Holdings with respect to the remaining $525,000
principal balance of the Note. All amounts owed by the Company pursuant to the
Substitute Note shall be secured by the security interest in the assets of the
Company created under the terms described in the Credit Agreement, subject to
the subordinations thereof currently in place, as if the Substitute Note had
been originally issued pursuant to the Credit Agreement. Notwithstanding the
foregoing, in the event the terms of the Substitute Note and the Credit
Agreement are inconsistent, the terms of the Substitute Note shall be deemed to
control.

 

2

 

 

Section 2. Exchange of Preferred Stock.

 

2.1.          Exchange of Series D Preferred by Holdings. Subject to the terms
and conditions hereof, Holdings hereby exchanges the 1,594,425 shares of Series
D Preferred held by it, including the 156,066 shares of Series D Preferred
issued to it pursuant to Section 1 hereof and all rights with respect to any
accrued dividends on all such shares of Series D Preferred, for a total of
29,726,568 shares of the Company’s common stock in accordance with the
provisions of Section 8 of the Series D Preferred Certificate of Designation.
Subject to Section 2.4 hereof, the Company shall deliver a certificate issued in
the name of Holdings for a total of 29,726,568 shares of its common stock in
connection with the exchange of the shares of Series D Preferred by Holdings
pursuant to this Section 2.1.

 

2.2.          Exchange of Series C Preferred by Holdings. Subject to the terms
and conditions hereof, Holdings hereby exchanges the 1,470,799 shares of Series
C Preferred held by it and all rights with respect to any accrued dividends on
such shares of Series C Preferred for a total of 7,034,256 shares of the
Company’s common stock in accordance with the provisions of Section 8 of the
Series C Preferred Certificate of Designation; provided, however, that Holdings
hereby waives the issuance of warrants to it pursuant to Section 8(b)(ii) of the
Series C Preferred Certificate of Designation and the Company shall not issue
any such warrants. Subject to Section 2.4 hereof, the Company shall deliver a
certificate issued in the name of Holdings for a total of 7,034,256 shares of
common stock in connection with the exchange of Series C Preferred by Holdings
pursuant to this Section 2.2.

 

2.3.          Exchange of Series C Preferred by the Series C Holders. Subject to
the terms and conditions hereof, each of the Series C Holders hereby exchanges
all shares of Series C Preferred held by such Series C Holder, as set forth in
Schedule 1 hereto, and all rights with respect to any accrued dividends on such
shares of Series C Preferred for that number of shares of the Company’s common
stock to be issued in accordance with the provisions of Section 8 of the
Series C Preferred Certificate of Designation; provided, however, that each
Series C Holder hereby waives the issuance of warrants to such Series C Holder
pursuant to Section 8(b)(ii) of the Series C Preferred Certificate of
Designation and the Company shall not issue any such warrants. The Company shall
deliver to each Series C Holder a certificate issued in the name of such Series
C Holder for a total of shares of Series C Preferred specified in Schedule 1
hereof under the column “Exchange Shares” in connection with the exchange of
Series C Preferred by such Series C Holder pursuant to this Section 2.3.

 

2.4.          Additional Consideration to Series C Holders. As consideration to
each Series C Holder to exchange his or its shares of Series C Preferred for
shares of Common Stock pursuant to Section 2.3 hereof and, as a result thereof,
to surrender the liquidity preference and other rights and preferences provided
pursuant to the Series C Certificate of Designation, Holdings hereby directs
that a number of shares of common stock otherwise issuable in the name of
Holdings pursuant to Section 2 hereof, be issued by the Company in the name of
the respective Series C Holders as set forth in Schedule 1 hereto under the
column “Additional Shares” and the Company agrees to issue and deliver to each
Series C Holder a certificate for such additional shares of common stock and to
make a corresponding reduction in the total of number of shares of common stock
issued to Holdings pursuant to Section 2 hereof so that the total number of
shares of the Company’s common stock being issued to Holdings under Sections 1
and 2 of this Agreement is 34,018,620. Each Series C Holder shall be solely
responsible for all income taxes and other taxation applicable to it or him
relating to the issuance of such additional shares of common stock under this
Section 2.4 and all associated filing requirements applicable to it or him.

 

3

 

 

2.5.        Surrender of Preferred Stock Certificates. Shares of common stock
will be issued by the Company under this Section 2 only against surrender of the
certificates representing the shares of Series C Preferred or Series D Preferred
being exchanged for such common stock.

 

2.6.        Certificates. Any certificate for shares of common stock issued to
any party hereunder may be combined with any other certificate for common stock
issued to the same party hereunder. All certificates for common stock issued
hereunder shall bear a legend indicating that the issuance thereof has not been
registered under the Securities Act of 1933 and applicable state securities
laws.

 

Section 3. Additional Conditions. The following shall also be conditions to the
conversion of the Note and the exchange of shares of Series C Preferred and
Series D Preferred for shares of the Company’s common stock pursuant to Sections
1 and 2 hereof:

 

(a)          The execution and delivery of a Registration Rights Agreement by
and among the Company and Holdings in the form attached as Exhibit B hereto;

 

(b)          Holdings and each Series C Holder hereby cancels all Warrants held
by it or him and surrenders all certificates evidencing such Warrants to the
Company;

 

(c)          The Company issues and delivers to Holdings the Substitute Note in
a principal amount of $525,000 and Holdings cancels the Note and surrenders it
to the Company;

 

(d)          The Company will increase the number of directors making up the
Company’s entire board of directors to five (5) and shall cause David Pasahow to
be duly appointed as an additional director of the Company for a term ending on
the date of the Company’s 2013 annual meeting of shareholders; provided,
however, that this conditions shall be waived by all parties in the event Mr.
Pasahow declines to accept such appointment; and

 

(e)          Each of the representations and warranties of the Company and of
Holdings set forth in Sections 4 and 5 hereof, respectively, shall be true and
complete in all material respects.

 

Section 4. Representations and Warranties of the Company. The Company hereby
represents and warrants to Holdings and to each of the Series C Holders that:

 

4.1         Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business. The Company is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure so to qualify would
have a material adverse effect on its business or properties.

 

4

 

 

4.2           Authorization; No Conflicts; Valid Agreement. All corporate
actions on the part of the Company, its officers, directors and shareholders
necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance and delivery of the shares of common stock to Holdings
and the Series C Holders and the authorization, issuance and delivery of the
Substitute Note to Holdings pursuant to the terms hereof have been taken and the
delivery and performance of this Agreement does not (a) conflict with the
Articles of Incorporation, by-laws or any other organic documents of the Company
(b) does not constitute an event of default under or otherwise breach any
material agreement by which the Company is bound and (c) does not materially
violate or contravene any law, rule, regulation, order, writ or injunction
applicable to the Company. This Agreement constitutes the valid and legally
binding obligation of the Company and is enforceable against the Company in
accordance with the terms hereof, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, or any other laws
of general application affecting enforcement of creditors rights generally, and
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.

 

4.3           Capitalization; Valid Issuance of Shares. As of the date hereof,
the Company has 75,000,000 shares of common stock authorized, of which
10,944,765 shares of common stock are issued and outstanding. The shares of
common stock, when issued and delivered in accordance with the terms hereof for
the consideration expressed herein, will be duly and validly issued, fully paid
and nonassessable and free of restrictions on transfer other than restrictions
on transfer under applicable state and federal securities laws.

 

4.4           Disclosure of Information. All reports (each an “SEC Report” and
collectively, the “SEC Reports”) filed by the Company with the Securities and
Exchange Commission (the “SEC”), as of the filing date of such SEC Reports, (a)
complied in all material respects with the requirements of the rules and
regulations promulgated by the SEC with respect to the SEC Reports and (b) did
not contain any untrue statement of a material fact or omit a material fact
necessary in order to make the statements contained therein not misleading in
light of the circumstances in which such statements were made.

 

Section 5. Representations and Warranties of Holdings. Holdings hereby
represents and warrants to the Company that:

 

5.1          Organization, Good Standing. Holdings is duly organized, validly
existing and in good standing as a limited liability company under the laws of
the State of Nebraska.

 

5.2          Authorization; Valid Agreement. Holdings has full power and
authority to enter into this Agreement. All company or other actions on the part
of Holdings and its officers, managers, and members necessary for the
authorization, execution and delivery of this Agreement, and the performance of
all obligations of Holdings hereunder have been taken. This Agreement
constitutes the valid and legally binding obligation of Holdings and is
enforceable against Holdings in accordance with the terms hereof, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, or any other laws of general application affecting
enforcement of creditors rights generally, and as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies.

 

5

 

 

5.3           Acquiring Shares Entirely for Own Account. Holdings hereby
represents that the shares of the Company’s common stock to be issued to
Holdings hereunder will be acquired for investment for Holdings’ own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that Holdings has no present intention of selling the
same. Holdings further represents that it does not presently have any contract,
undertaking, agreement or arrangement with any person to sell to any of the
shares of common stock to be issued to it hereunder.

 

5.4           Accredited Investor. Holdings is an accredited investor as defined
in Rule 501(a) of Regulation D promulgated under the Securities Act and has such
knowledge and experience in financial and business matters to be capable of
evaluating the risks and merits of the Company’s common stock.

 

5.5           Disclosure of Information. Holdings has (i) had an opportunity to
discuss the Company’s business, management, financial affairs and the terms and
conditions of the issuance of the shares of the Company’s common stock hereunder
with the Company’s management; (ii) has reviewed the SEC Reports available on
the SEC's Electronic Data Gathering Analysis, and Retrieval system and conducted
such other investigations of the Company as it or he determined to be necessary,
(iii) acknowledges that an investment in the Company involves a number of
significant risks, including those normally associated with companies that are
in the early stages of their business and that have not operated profitably,
(iv) relied exclusively on the foregoing investigation and on the
representations and warranties contained in this Agreement in making its
investment decision and (v) has not been offered shares of the Company’s common
stock by any form of advertisement, notice, article or other solicitation,
whether broadcast over television, radio, seminar or Internet.

 

Section 6 Miscellaneous.

 

6.1           Further Actions. The Company, Holdings and each Series C Holder
agree that in case at any time after the Closing any further action is necessary
or desirable to carry out the purposes of this Agreement, each of the parties
hereto will take such further action (including without limitation, the
execution and delivery of such further instruments and documents) as any other
party hereto may reasonably request.

 

6.2           Transfer; Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and authorized assigns of the parties. In that regard, the Company
shall allow Holdings to assign its rights to receive common stock hereunder to
the individual members of Holdings provided that the representations of Holdings
in Sections 5.3, 5.4 and 5.5 are true with respect to each such member or the
Company, in its sole discretion, agrees to waive the applicability thereof. This
Agreement is not intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

 

6

 

 

6.3           Governing Law. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.

 

6.4           Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

 

6.5           Titles and Subtitles. The titles and subtitles used in this
Agreement are used or convenience only and are not to be considered in
construing or interpreting this Agreement.

 

6.6           Amendments. The terms of this Agreement may be amended or waived
only with the written consent of the each of the parties hereto.

 

6.7           Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof, and any and
all other written or oral agreements relating to the subject matter hereof
existing between the parties hereto are expressly cancelled. In addition, all
parties hereto hereby terminate and waive any rights with respect to the
registration of Company securities that they may have under that certain Amended
and Restated Registration Rights Agreement, dated June 30, 2011, by and among
the Company, Mykonos 6420 LP, a Texas limited partnership and Crestpark LP,
Inc., a Delaware corporation.

 

6.8           Confidentiality. Holdings and each Series C Holder acknowledges
that any and all information made available to it or him in connection with its
review of the Company for purposes of the transactions described herein, to the
extent such information has not been publicly disclosed by the Company, is
proprietary and confidential, and Holdings and each Series C Holder hereby
agrees that it or he will neither use such information for purposes of buying or
selling any securities of the Company nor disclose such information to any third
party except (i) as may be required by law, (ii) for the performance of this
Agreement, or (iii) to its or his advisors, solely for the purpose of reviewing
the Company in consideration of the transactions described herein.

 

[Signatures appear on the following page]

 

7

 

 

IN WITNESS WHEREOF, the parties have executed this Debt Conversion and
Recapitalization Agreement as of the date first written above.

 

  ISECURETRAC CORP.           Lincoln Zehr, Chief Executive Officer       IST
HOLDINGS, LLC.           Joseph Schwaller, Manager       SERIES C HOLDERS      
    Bruce Leadbetter           Chris Bancroft           Stuart Bush          
David Pasahow           John Piggot       PIGGOT CHILDERN’ TRUST

 

  By:     Name: _________________________________ , Trustee           Peter
Michel

 

8

 

 

Schedule 1

 

Series C Holders

 

Name  Series C
Preferred
Shares  Exchange
Shares  Additional
Shares  Total Common
Shares Issued Bruce Leadbetter   80,046.00    382,829.00    952,909.00  
 1,335,738.00  John Piggot   60,583.00    289,745.00    721,226.00  
 1,010,971.00  Chris Bancroft   42,211.00    201,879.00    502,503.00  
 704,382.00  Peter Michel   28,140.00    134,583.00    335,002.00    469,585.00 
Pigott Children’s Trust   15,146.00    72,437.00    180,306.00    252,743.00 
David Pasahow   2,814.00    13,458.00    33,505.00    46,963.00  Stuart Bush 
 1,407.00    6,729.00    16,753.00    23,482.00  Total   230,347.00  
 1,101,660.00    2,742,204.00    3,843,864.00 

 

 

 

 

Exhibit A

 

PROMISSORY NOTE

 

$525,000.00 September 28, 2012

 

FOR VALUE RECEIVED, the undersigned, iSecureTrac Corp., a Delaware corporation
having its principal executive offices located at 5078 S. 111th Street, Omaha,
Nebraska 68137 (herein called "Maker"), hereby promises to pay to the order of
IST HOLDINGS, LLC, a Nebraska limited liability company (herein called "Payee"),
the principal sum of FIVE HUNDRED TWENTY-FIVE THOUSAND and 00/100 DOLLARS
($525,000.00), with interest on the unpaid balance thereof from the date hereof
until maturity at the rate hereinafter provided.

 

As used in this Note, the following terms shall have the meanings indicated
opposite them:

 

“Applicable Law.” Applicable Law shall mean the laws of the State of Nebraska or
the laws of the United States, whichever laws allow the greater rate of
interest, as such laws now exist or may be changed or amended or come into
effect in the future.

 

“Applicable Rate.” The Applicable Rate shall be six percent (6.0%) per annum.

 

“Business Day.” Business Day shall mean any day that is not a Saturday, Sunday
or a day on which banking institutions in Omaha, Nebraska are not required to be
opened.

 

“Default Rate.” The Default Rate shall be lesser of (a) the Maximum Rate and (b)
the Applicable Rate plus two percent (2%) per annum.

 

“Maturity Date.” March 31, 2017.

 

“Maximum Rate.” The maximum interest rate permitted under Applicable Law.

 

“Principal Amount.” The Principal Amount is $525,000 or the portion thereof that
remains outstanding hereunder at any particular time.

 

The Principal Amount of this Note shall be payable on the last day of each
calendar month, with the first such payment being due on October 31, 2013, in
accordance with the amortization schedule attached hereto. Any Principal Amount
remaining outstanding on the Maturity Date shall be due and payable on the
Maturity Date.

 

Maker shall have the right to prepay this Note, in whole or in part, without
premium or penalty upon written notice thereof given to Payee at least five (5)
days prior to the date to be fixed therein for prepayment, and upon the payment
of all accrued and unpaid interest on the amount prepaid (and any interest which
has accrued at the Applicable Rate, if applicable, and other sums that may be
payable hereunder) to the date so fixed.

 

 

 

 

The Principal Amount of this Note outstanding from time to time outstanding
shall bear interest at the Applicable Rate. Interest shall be payable as of the
last day of each calendar month through the Maturity Date. All interest accruing
under this Note shall be calculated on the basis of a 360-day year applied to
the actual number of days in each month.

 

Maker shall make all payments hereunder to Payee at the offices of Payee at
1207 N. 143rd Street, Omaha, Nebraska 68154, or at such other place as from time
to time may be designated by the holder of this Note. All payments shall be made
in lawful money of the United States of America and in immediately available
funds to Payee not later than 2:00 p.m., Omaha, Nebraska time, on the date such
payment becomes due and payable (or the date any voluntary prepayment is made).
Any payment received by Payee after such time will be deemed to have been made
on the next following Business Day. Any payment due on a date that is not a
Business Day, shall be due and payable on the next succeeding Business Day.

 

Notwithstanding anything to the contrary contained in this Note, at the option
of the holder of this Note and upon notice to Maker at any time after the
occurrence of a default hereunder, from and after such notice and during the
continuance of such default, the unpaid principal of this Note from time to time
outstanding and all past due interest shall, to the extent permitted by
Applicable Law, bear interest at the Default Rate, provided that in no event
shall such interest rate be more than the Maximum Rate.

 

Payee and Maker intend in the execution of this Note and all other instruments
now or hereafter securing this Note to contract in strict compliance with
applicable usury law. In furtherance thereof, Payee and Maker stipulate and
agree that none of the terms and provisions contained in this Note, or in any
other instrument executed in connection herewith, shall ever be construed to
create a contract to pay for the use, forbearance or detention of money,
interest at a rate in excess of the Maximum Rate; neither Maker nor any
guarantors, endorsers or other parties now or hereafter becoming liable for
payment of this Note shall ever be obligated or required to pay interest on this
Note at a rate in excess of the Maximum Rate that may be lawfully charged under
Applicable Law, and the provisions of this paragraph shall control over all
other provisions of this Note and any other instruments now or hereafter
executed in connection herewith which may be in apparent conflict herewith.
Payee, including each holder of this Note, expressly disavows any intention to
charge or collect excessive unearned interest or finance charges in the event
the maturity of this Note is accelerated. If the maturity of this Note shall be
accelerated for any reason or if the Principal Amount is paid prior to the end
of the term of this Note, and as a result thereof the interest received for the
actual period of existence of the Loan exceeds the amount of interest that would
have accrued at the Maximum Rate, Payee or other holder of this Note shall, at
its option, either refund to Maker the amount of such excess or credit the
amount of such excess against the Principal Amount and thereby shall render
inapplicable any and all penalties of any kind provided by Applicable Law as a
result of such excess interest. In the event that Payee or any other holder of
this Note shall contract for, charge or receive any amounts and/or any other
thing of value which are determined to constitute interest which would increase
the effective interest rate on this Note to a rate in excess of that permitted
to be charged by Applicable Law, all such sums determined to constitute interest
in excess of the amount of interest at the lawful rate shall, upon such
determination, at the option of Payee or other holder of this Note, be either
immediately returned to Maker or credited against the Principal Amount, in which
even any and all penalties of any kind under Applicable Law as a result of such
excess interest shall be inapplicable. By execution of this Note, Maker
acknowledges that it believes the Loan evidenced by this Note to be non-usurious
and agrees that if, at any time, Maker should have reason to believe that the
Loan is in fact usurious, it will give Payee or other holder of this Note notice
of such condition and Maker agrees that Payee or other holder shall have ninety
(90) days in which to make appropriate refund or other adjustment in order to
correct such condition if in fact such exists.

 

2

 

 

Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through any bankruptcy, receivership, probate
or other court proceedings or if this Note is placed in the hands of attorneys
for collection after default, Maker and all endorsers, guarantors and sureties
of this Note jointly and severally agree to pay to Payee or other holder of this
Note in addition to the principal and interest due and payable hereon reasonable
attorneys' and collection fees.

 

Maker and all endorsers, guarantors and sureties of this Note and all other
persons obligated or to become obligated on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and nonpayment
of this Note, notice of intention to accelerate the maturity of this Note,
protest and notice of protest, diligence in collecting, and the bringing of suit
against any other party, and agree to all renewals, extensions, modifications,
partial payments, releases or substitutions of security, in whole or in part,
with or without notice, before or after maturity.

 

Maker hereby unconditionally and irrevocably remises, acquits, and fully and
forever releases and discharges Payee and all respective affiliates and
subsidiaries of Payee, its officers, servants, employees, agents, predecessors,
attorneys, advisors, parents, subsidiaries, equity interest holders, loan
participants, principals, directors and shareholders, and its heirs, legal
representatives, successors and assigns (collectively, the "Released Lender
Parties") from any and all claims, demands, causes of action, obligations,
remedies, suits, damages and liabilities (collectively, the "Maker Claims") of
any nature whatsoever, whether now known, suspected or claimed, whether arising
under common law, in equity or under statute, which the Debtor ever had or now
has against the Released Lender Parties which may have arisen at any time on or
prior to the date of this Agreement and which were in any manner related to this
Note or any other documents related thereto or the enforcement or attempted
enforcement by Payee of rights, remedies or recourses related thereto. Maker
covenants and agree never to commence, voluntarily aid in any way, prosecute or
cause to be commenced or prosecuted against any of the Released Lender Parties
any action or other proceeding based upon any of the Maker Claims which may have
arisen at any time on or prior to the date of this Note and were in any manner
related to this Note or any other document related thereto.

 

3

 

 

THIS NOTE AND THE PARTIES' RIGHTS AND OBLIGATIONS HEREUNDER AND UNDER THE CREDIT
AGREEMENT (DESCRIBED BELOW) SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEBRASKA (WITHOUT
GIVING EFFECT TO NEBRAKSA'S PRINCIPLES OF CONFLICTS OF LAW OR SECTION 10(e) OF
THE CREDIT AGREEMENT) AND THE LAWS OF THE UNITED STATES APPLICABLE TO
TRANSACTIONS IN SUCH STATE. MAKER HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY NEBRASKA OR FEDERAL COURT SITTING IN DOUGLAS
COUNTY, NEBRASKA OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS NOTE, AND MAKER HEREBY AGREES AND CONSENTS THAT, IN ADDITION TO ANY
METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO MAKER AT THE ADDRESS OF
MAKER CONTAINED HEREIN, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS
AFTER THE SAME SHALL HAVE BEEN SO MAILED.

 

MAKER HEREBY EXPRESSLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY SUIT,
ACTION OR PROCEEDING BROUGHT BY THE HOLDER OF THIS NOTE IN CONNECTION WITH THE
LOAN, ANY AND EVERY RIGHT IT MAY HAVE TO (I) INJUNCTIVE RELIEF, (II) A TRIAL BY
JURY, (III) INTERPOSE ANY COUNTERCLAIM THEREIN (OTHER THAN A COMPULSORY
COUNTERCLAIM, AND (IV) HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR SEPARATE
SUIT, ACTION OR PROCEEDING. Nothing herein contained shall prevent or prohibit
Maker from instituting or maintaining a separate action against the holder of
this Note with respect to any asserted claim.

 

This Note amends, restates and replaces that certain Promissory Note, dated as
of December 18, 2007, in the original principal amount of $11,877,474.88,
executed by Maker in favor of Crestpark LP, Inc., the predecessor in interest to
Payee. The rights and obligations of Maker and Payee with respect hereto are
subject to the terms of that Certain Credit and Security Agreement, dated
December 18, 2007, by and between Maker and Crestpark LP, Inc., as modified by
that certain Debt Conversion Agreement, dated June 30, 2011, by and between
Maker and Crestpark LP, Inc. (collectively, the “Credit Agreement”), including,
specifically, the security interest created in the assets of Maker thereby.
Notwithstanding the foregoing, to the extent the terms of this Note are
inconsistent with the terms of the Credit Agreement, the terms of this Note
shall control and supersede such inconsistent terms.

 

NO ORAL AGREEMENTS. THIS NOTE AND THE CREDIT AGREEMENT EMBODY THE FINAL, ENTIRE
AGREEMENT OF MAKER AND PAYEE AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF MAKER AND PAYEE. THERE ARE NO ORAL AGREEMENTS BETWEEN MAKER AND
PAYEE. THE PROVISIONS OF THIS NOTE AND THE CREDIT AGREEMENT MAY BE AMENDED OR
REVISED ONLY BY A WRITTEN INSTRUMENT SIGNED BY MAKER AND PAYEE.

 

[SIGNATURE APPEARS ON FOLLOWING PAGE]

 

4

 

 

This Note has been duly executed by Maker as of the 28th day of September, 2012.

 

  MAKER:       ISECURETRAC CORP.,   a Delaware corporation       By:       
Lincoln Zehr, Chief Executive Officer       Federal ID#:  87-0347787

 

5

 

 

Exhibit B

 

REGISTRATION RIGHTS AGREEMENT

 

By and between

 

IST HOLDINGS, LLC

 

and

 

ISECURETRAC CORP.

 

Dated as of September 28, 2012

 

 

 

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into
as of September 28, 2012, between iSecureTrac Corp., a Delaware corporation
(the “Company”) and IST Holdings, LLC, a Nebraska limited liability company
(“Holdings”).

 

RECITALS

 

WHEREAS, pursuant to the terms of that certain Debt Conversion and
Recapitalization Agreement, dated as of September 28, 2012, by and among the
Company, Holdings and certain other holders of the Company’s Series C 8%
Cumulative, Compounding Exchangeable Preferred Stock (the “Conversion
Agreement”), the Company has issued a total of 34,018,620 shares of its common
stock, par value $.001 per share (“Common Stock”) to Holdings in exchange for
all shares of the Company’s Series C 8% Cumulative, Compounding Exchangeable
Preferred Stock and Series D 8% Cumulative, Compounding Exchangeable Preferred
Stock which were held by Holdings as of the date hereof, and in connection with
the conversion by Holdings of $1,495,000 of long-term debt, and accrued interest
thereon, of the Company, in each case without registration under the Securities
Act of 1933, as amended (the “Securities Act”) or applicable state securities
laws pursuant to an exemption therefrom.

 

WHEREAS, as a condition to closing the transaction contemplated by the
Conversion Agreement, the Company and Holdings have entered into this Agreement
in order to provide for the registration under the Securities Act of the resale
of the shares of Common Stock issued by the Company to Holdings pursuant to the
Conversion Agreement under the circumstances set forth herein.

 

NOW THEREFORE, in consideration of the mutual covenants herein contained and for
other good and valuable consideration, the Company and Holdings hereto agree as
follows:

 

Article I

 

DEFINITIONS

 

SECTION 1.1           DEFINITIONS. Capitalized terms used herein and not
otherwise defined herein have the meanings ascribed to them in the Conversion
Agreement. In addition, the following capitalized terms shall have the meanings
ascribed to them below:

 

“Affiliate,” as applied to any specified Person, shall mean any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person and, in the case of a Person who is an
individual, shall include (i) members of such specified Person’s immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the
Securities Act) and (ii) trusts, the trustee and all beneficiaries of which are
such specified Person or members of such Person’s immediate family as determined
in accordance with the foregoing clause (i). For the purposes of this
definition, “control,” when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms “controlling” and “controlled” have meanings correlative to the
foregoing.

 

 

 

 

“Business Day” means any day that is not a Saturday, Sunday or a day on which
banking institutions in Omaha, Nebraska are not required to be open.

 

“Common Stock” is defined in the preamble.

 

“Deferral Period” is defined in Section 2.1.

 

“Demand Notice” is defined in Section 2.1.

 

“Demand Registration” or “Demand Registration Statement” is defined in Section
2.1.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Holdings” is defined in the preamble.

 

“Person” means an individual, partnership, corporation, limited liability
company, trust or unincorporated organization, or a government or agency or
political subdivision thereof.

 

“Piggyback Registration” is defined in Section 2.2.

 

“Prospectus” means the prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.

 

“Public Distribution” shall mean any bona fide underwritten public distribution
of Stock pursuant to an effective registration statement under the Securities
Act or any other applicable law, or any bona fide public sale in an open market
transaction under Rule 144 of the Securities Act (or any successor rule) if such
sale is in compliance with the requirements of paragraphs (c), (d), (e), (f) and
(g) of such Rule (notwithstanding the provisions of paragraph (k) of such Rule).

 

“Public Offering” shall mean any bona fide underwritten public distribution of
Stock pursuant to an effective registration statement under the Securities Act
or any other applicable law.

 

“Registrable Securities” means all shares of Common Stock issued to Holdings
under the Conversion Agreement and outstanding on the date hereof or any shares
of Common Stock to which Holdings became entitled to receive due to a dividend
on, or other payment made to the holders of the Common Stock or issued in
connection with a split of the Common Stock or as a result of any exchange or
reclassification of the Common Stock or any reorganization, consolidation,
merger or recapitalization of the Company until (i) it has been effectively
registered under the Securities Act and disposed of by Holdings pursuant to an
effective registration statement, or (ii) it is sold by Holdings pursuant to
Rule 144 (or any similar provisions then in force) under the Securities Act.

 

Page 2

 

 

“Registration Statement” means any registration statement of the Company
relating to a Demand Registration pursuant to Section 2.1, a Piggyback
Registration pursuant to Section 2.2, or a Shelf Registration pursuant to
Section 2.3, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Shelf Registration” or “Shelf Registration Statement” is defined in Section
2.3.

 

“Stock” means the following securities (i) the Common Stock or (ii) any security
or other instrument (a) received as a dividend on, or other payment made to the
holders of, the Common Stock (or any other security or instrument referred to in
this definition) or (b) issued in connection with a split of the Common Stock
(or any other security or instrument referred to in this definition) or as a
result of any exchange or reclassification of the Common Stock (or any other
security or instrument referred to in this definition), reorganization,
consolidation, merger or recapitalization.

 

“Underwritten Registration” or “Underwritten Offering” means a registration in
which Stock of the Company is sold to an underwriter for re-offering to the
public.

 

Article II

 

REGISTRATION RIGHTS

 

SECTION 2.1            DEMAND REGISTRATIONS.

 

(a)          Request for Registration. At any time and from time to time on or
after the 180th day following the date hereof Holdings may make a written
request of the Company for registration with the SEC (which may be shelf
registrations under Section 2.3) under and in accordance with the provisions of
the Securities Act, of all or part of its or their Registrable Securities (a
“Demand Registration”) by giving written notice to the Company of such demand (a
“Demand Notice”), provided that the Company shall be required to effect only one
Demand Registration during any six-month period. Each such Demand Notice will
specify the number of Registrable Securities proposed to be sold pursuant to
such Demand Registration and will also specify the intended method of
disposition thereof.

 

Page 3

 

 

(b)          Deferrals. Promptly after receipt of any Demand Notice, but in no
event later than 60 days after receipt of such Demand Notice, the Company shall
file a Registration Statement with the SEC with respect to the Registrable
Securities included in the Demand Notice and shall use its reasonable best
efforts to have such Registration Statement declared effective as promptly as
practicable; provided, however, that the Company may postpone the filing of such
Registration Statement for a period of up to 90 days (a “Deferral Period”) if
the Board of Directors reasonably determines that (i) such a filing would
adversely affect any proposed financing, acquisition, divestiture or other
material transaction by the Company or (ii) such a filing (including the expense
thereof) would otherwise represent an undue hardship for the Company. The
Company shall not be entitled to request more than one such deferral (two in the
case of events of the type described in clause (i) above) with respect to any
Demand Registration within any 365-day period. If the Company does elect to
defer any such Demand Registration, Holdings may, at its election by written
notice to the Company, (i) confirm the request to proceed with such Demand
Registration upon the expiration of the Deferral Period or (ii) withdraw the
request for such Demand Registration in which case no such request for a Demand
Registration shall be deemed to have occurred for purposes of this Agreement.

 

(c)          Effective Registration. Except as provided in subsection (d) below,
a registration will not be deemed to have been effected as a Demand Registration
unless it has been declared effective by the SEC; provided that if, after it has
become effective, the offering of Registrable Securities pursuant to such
registration is or becomes the subject of any stop order, injunction or other
order or requirement of the SEC or any other governmental or administrative
agency, or if any court prevents or otherwise limits the sale of Registrable
Securities pursuant to the registration (for any reason other than the acts or
omissions of Holdings), such registration will be deemed not to have been
effected. If (i) a registration requested pursuant to this Section 2.1 is deemed
not to have been effected in accordance with the provisions of the preceding
sentence or (ii) the registration requested pursuant to this Section 2.1does not
remain continuously effective for a period of at least 90 days beyond the
effective date thereof (or such shorter period as is required to complete the
distribution by Holdings of the Registrable Securities included in such
registration statement) (the “Demand Registration Statement”), then such Demand
Registration Statement shall not count as a Demand Registration that may be
requested by Holdings and the Company shall continue to be obligated to effect a
registration pursuant to this Section 2.1.

 

(d)          Withdrawal. Holding may withdraw all or any part of the Registrable
Securities from a Demand Registration at any time (whether before or after the
filing or effective date of the Demand Registration Statement), and if all such
Registrable Securities are withdrawn before the filing of the Demand
Registration Statement, Holdings may withdraw the demand related thereto.

 

(e)          Selection of Underwriter. If Holdings so elects, the offering of
Registrable Securities pursuant to a Demand Registration shall be in the form of
an Underwritten Offering. Holdings and the Company shall jointly select one or
more nationally recognized firms of investment bankers to act as the managing
underwriter or underwriters in connection with such offering and shall select
any additional investment bankers and managers to be used in connection with
such offering; provided that in the event that the Company and Holdings are
unable to jointly agree on such investment bankers and managers, such investment
bankers and managers shall be selected by Holdings and shall be reasonably
satisfactory to the Company. The Company shall (together with Holdings) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting in the manner set forth above.

 

Page 4

 

 

(f)          Priority on Demand Registrations. If, in any Demand Registration
involving an Underwritten Offering the managing underwriter or underwriters
thereof advise Holdings or the Company in writing that in its or their
reasonable opinion the number of Registrable Securities proposed to be sold by
Holdings in such Demand Registration exceeds the number that can be sold in such
offering or will adversely affect the success of such offering (including,
without limitation, an impact on the selling price or the number of Registrable
Securities that any participant may sell), the Company shall include in such
registration only the number of Registrable Securities, if any, which in the
opinion of such underwriter or underwriters can be sold without having an
adverse effect on the success of the offering. If all Registrable Securities
requested to be sold in the Underwritten Offering are included therein, the
Company may include other shares of Stock in such offering in accordance with
the following priority, but not to exceed the number recommended by the managing
underwriter or underwriters: (x) first, pro rata among any other stockholders of
the Company having piggyback or other similar registration rights and (y)
second, shares of Stock proposed to be sold by or for the account of the
Company.

 

SECTION 2.2           PIGGYBACK REGISTRATIONS.

 

(a)          Right to Participate in Registration. If at any time the Company
proposes to file a registration statement under the Securities Act with respect
to an offering by the Company for its own account or for the account of any
holders of any class of common equity securities (other than (i) a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
SEC) or (ii) a registration statement filed in connection with a Demand
Registration or a Shelf Registration or (iii) a registration statement filed in
connection with an offering of securities solely to the Company’s existing
securityholders), then the Company shall give written notice of such proposed
filing to Holdings as soon as practicable (but in no event less than 20 days
before the anticipated filing date), and such notice shall offer Holdings the
opportunity to register such number of shares of Registrable Securities as
Holdings may request, which request shall specify the Registrable Securities
intended to be disposed of by Holdings and the intended method of distribution
thereof (or, if the offering is a proposed Underwritten Offering, that Holdings
elects to have the number of Registrable Securities so specified included in
such Underwritten Offering) (a “Piggyback Registration”). The Company shall use
its reasonable best efforts to cause the managing underwriter or underwriters of
a proposed Underwritten Offering to permit the Registrable Securities requested
by Holdings thereof to be included in a Piggyback Registration to be included on
the same terms and conditions as any similar securities of the Company or any
other securityholder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. No registration effected under this Section 2.2
and no failure of Holdings to seek registration under this Section 2.2(a), shall
relieve the Company of its obligations pursuant to Section 2.1, and no failure
of Holdings to seek registration under this Section 2.2(a) and complete the sale
of shares in connection therewith shall relieve the Company of any other
obligation under this Agreement (including, without limitation, the Company’s
obligations under Sections 3.2 and 4.1).

 

(b)          Priority on Piggyback Registrations. Unless the registration
statement is being filed pursuant to a Demand Registration (in which case the
priority of piggyback rights shall be as provided in Section 2.1(e) above), if
the managing underwriter or underwriters advise the Company in writing that in
its or their reasonable opinion the number of equity securities of the Company
proposed to be sold in such registration (including Registrable Securities to be
included pursuant to subsection (a) above) will adversely affect the success of
such offering (including, without limitation, an impact on the selling price or
the number of equity securities of the Company that any participant may sell),
the Company shall include in such registration the number of equity securities
of the Company, if any, which in the opinion of such underwriter or underwriters
can be sold without having an adverse effect on the offering and in accordance
with the following priority: (i) first, the securities the Company proposes to
sell for its own account, and (ii) second, pro rata based on the number of
Registrable Securities that Holdings shall have requested to be included
therein.

 

Page 5

 

 

(c)          Withdrawal. Holdings may withdraw all or any part of the
Registrable Securities from a Piggyback Registration at any time (before but not
after the effective date of such registration statement), by delivering written
notice of such withdrawal request to the Company, unless such Piggyback
Registration is underwritten, in which case Registrable Securities may not be
withdrawn after the effective date of the Registration Statement.

 

(d)          Termination of Registration by the Company. If the Company shall
determine for any reason (x) not to register or (y) to delay a registration
which includes Registrable Securities pursuant to this Section 2.2, the Company
may, at its election, give written notice of such determination to Holdings and,
thereupon (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses (as
defined below) in connection therewith), without prejudice, however, to the
rights, if any, of Holdings to request that such registration be effected as a
Demand Registration under Section 2.1, and (ii) in the case of a delay in
registering, shall be permitted to delay registering any Registrable Securities
for the same period as the delay in registering such other shares.

 

SECTION 2.3           SHELF REGISTRATION.

 

(a)          Filing and Effectiveness. Subject to Section 2.1 hereof, upon the
request of Holdings after the 180th day following the date hereof, the Company
shall cause to be filed with the SEC as promptly as practicable after such
request, but in no event later than 90 days thereafter, a shelf registration
statement pursuant to Rule 415 under the Securities Act (a “Shelf Registration”
or a “Shelf Registration Statement”), which Shelf Registration Statement shall
provide for resales of Registrable Securities held by Holdings. The Company
shall use its reasonable best efforts to have such Shelf Registration declared
effective, subject to Section 2.3(c) below, and to keep such Shelf Registration
Statement continuously effective, supplemented and amended to the extent
necessary to ensure that it is available for resales of Registrable Securities
by Holdings, and to ensure that it conforms with the requirements of this
Agreement, the Securities Act and the policies, rules and regulations of the SEC
as announced from time to time, for a period of at least two (2) years following
the date on which such Shelf Registration Statement becomes effective under the
Securities Act. A request under this Section 2.3(a) shall be deemed to be a
request for a Demand Registration under Section 2.1 above.

 

(b)          Effective Registration. A registration will not be deemed to have
been effected as a Shelf Registration unless it has been declared effective by
the SEC and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided that if, after
it has become effective, the offering of Registrable Securities pursuant to such
registration is or becomes the subject of any stop order, injunction or other
order or requirement of the SEC or any other governmental or administrative
agency, or if any court prevents or otherwise limits the sale of Registrable
Securities pursuant to the registration (for any reason other than the acts or
omissions of Holdings), such registration will be deemed not to have been
effected. If (i) the Shelf Registration is deemed not to have been effected in
accordance with the provisions of the preceding sentence or (ii) the Shelf
Registration does not remain continuously effective for the period described in
subsection (a) above, then such Shelf Registration Statement shall not count as
a Shelf Registration and the Company shall continue to be obligated to effect a
registration pursuant to this Section 2.3.

 

Page 6

 

 

(c)          Suspension. With respect to any Shelf Registration that has been
declared effective (i) the Company may suspend use of such Shelf Registration at
any time if the continued effectiveness thereof would require the Company to
disclose a material financing, acquisition or other corporate transaction, which
disclosure the Board of Directors of the Company shall have determined in good
faith is not in the best interests of the Company and its stockholders, and (ii)
the Company may suspend use of such Shelf Registration during any period if each
of the Company and Holdings consents in writing to such suspension for such
period.

 

Article III

 

REGISTRATION PROCEDURES

 

SECTION 3.1           REGISTRATION PROCEDURES.

 

(a)          General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement to permit the sale or
resale of Registrable Securities, the Company shall:

 

(1)         prepare and file with the SEC a registration statement with respect
to such Registrable Securities within the time periods specified herein, make
all required filings with the NASD and use its best efforts to cause such
registration statement to become effective as promptly as practicable (subject
to the Company’s right to withdraw the registration statement under the
circumstances described in Sections 2.1(d) or 2.2(c));

 

(2)         promptly prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set forth in
Sections 2.1, 2.2 or 2.3, as applicable, or such shorter period as will
terminate when all Registrable Securities covered by such Registration Statement
have been sold (subject to Section 2.3(c)); cause the Prospectus to be
supplemented by a required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act, and to comply fully with
the applicable provision of Rules 424 and 430A under the Securities Act in a
timely manner; and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in such Registration Statement
or supplement to the Prospectus;

 

Page 7

 

 

(3)         use its reasonable best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for the
period specified in Sections 2.1, 2.2 or 2.3, as applicable (subject to Section
2.3(c)); upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for resale of
Registrable Securities during the period required by this Agreement, the Company
shall file as promptly as practicable an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B), use its
reasonable best efforts to cause such amendment to be declared effective and
such Registration Statement and related Prospectus to become usable for their
intended purposes(s) as soon as practicable thereafter;

 

(4)         provide (A) Holdings, (B) the underwriters (which term, for purposes
of this Agreement, shall include a Person deemed to be an underwriter within the
meaning of Section 2(11) of the Securities Act), if any, of the Registrable
Securities to be registered, (C) the sale or placement agent therefor, if any,
(D) counsel for such underwriters or agent, and (E) counsel for Holding, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each amendment or
supplement thereto, and for a reasonable period prior to the filing of such
registration statement, and throughout the period specified in Section 3.4(b)
hereof, make available for inspection by the parties referred to in (A) through
(E) above such financial and other information and books and records of the
Company, provide access to properties of the Company and cause the officers,
directors, employees, counsel and independent certified public accountants of
the Company to respond to such inquiries as shall be reasonably necessary to
conduct a reasonable investigation within the meaning of Section 11 of the
Securities Act;

 

(5)         advise the underwriters, if any, and Holdings promptly and, if
requested by such Persons, to confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any request by the
SEC for amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement under the Securities Act or of the suspension by any
state securities commission of the qualification of the Registrable Securities
for offering or sale in any jurisdiction, or the initiation of any proceeding
for any of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement thereto, or
any document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at any
time the SEC shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Registrable Securities under state securities or Blue Sky
laws, the Company shall use its reasonable best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time;

 

Page 8

 

 

(6)         furnish to Holdings and each of the underwriter(s) in connection
with such sale, if any, such number of copies of any Registration Statement or
Prospectus included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents incorporated by
reference after the initial filing of such Registration Statement and all
exhibits filed therewith), reasonably requested by such Person;

 

(7)         if requested by Holdings or the underwriter(s) in connection with
such sale, if any, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as Holdings and such underwriter(s), if any, may reasonably request
to have included therein, including, without limitation, information relating to
the “Plan of Distribution” of the Registrable Securities, information with
respect to the principal amount of Registrable Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other terms of
the offering of the Registrable Securities to be sold in such offering, and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;

 

(8)         deliver to Holdings and each of the underwriter(s), if any, without
charge, as many copies of the Prospectus (including each preliminary prospectus)
and any amendment or supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use of the Prospectus and any amendment or
supplement thereto by Holdings and each of the underwriter(s), if any, in
connection with the offering and the sale of the Registrable Securities covered
by the Prospectus or any amendment or supplement thereto;

 

(9)         in connection with any Underwritten Offering pursuant to a Demand
Registration, enter into an underwriting agreement with one or more underwriter
designated in accordance with this Agreement, such agreement to be of the form,
scope and substance as is customary in underwritten offerings, and take all such
other actions as are reasonably requested by the managing underwriter(s) in
order to expedite or facilitate the disposition of such Registrable Securities
and in such connections (i) make such representations and warranties to the
underwriters in form, scope and substance as are customarily made by issuers to
underwriters in underwritten offerings with respect to the business of the
Company; (ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriter(s)) addressed to the managing
underwriter(s) covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
the underwriters; (iii) obtain “comfort” letters and updates thereof from the
Company’s independent certified public accountants addressed to the
underwriters, such “comfort” letters to be in customary form and covering
matters of the type customarily covered in “comfort” letters in connection with
underwritten offerings; (iv) deliver such documents and certificates as may be
reasonably requested by the managing underwriter(s) to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company. The above shall be done at each closing
under such underwriting or similar agreement;

 

Page 9

 

 

(10)        prior to any public offering of Registrable Securities, cooperate
with Holdings, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Registrable Securities
under the securities or Blue Sky laws of such jurisdictions as Holdings or
underwriter(s), if any, may request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions or the
Registrable Securities covered by the applicable Registration Statement;
provided, however, that the Company shall not be required to register or qualify
as a foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to taxation, except
as is required as a result of the Registration Statement, in any jurisdiction
where it is not now so subject;

 

(11)        in connection with any sale of Registrable Securities that will
result in such securities no longer being Registrable Securities, cooperate with
Holdings and the underwriter(s), if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends; and to register such Registrable Securities
in such denominations and such names as Holdings or the underwriter(s), if any,
may request at least two Business Days prior to such sale of Registrable
Securities;

 

(12)        if requested by Holding, provide a CUSIP number for all Registrable
Securities not later than the effective date of the Registration Statement
covering such Registrable Securities and provide the Company’s transfer agent(s)
and registrar(s) for the Registrable Securities with printed certificates for
the Registrable Securities;

 

(13)        if applicable, cooperate and assist in any filings required to be
made with the FINRA or any stock exchange on which the Company’s stock are then
listed (each, a “Relevant Exchange”); and in the performance of any due
diligence investigation by any underwriter (including any “qualified independent
underwriter”) that is required to be retained in accordance with the rules and
regulations of any Relevant Exchange, and use their best efforts to cause such
Registration Statement to become effective and approved by such governmental
agencies or authorities as may be necessary to enable Holdings or underwriters,
if any, to consummate the disposition of such Registrable Securities;

 

(14)        otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make generally available to its security
holders, as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 under the Securities Act (which need not be audited)
covering a period of at least twelve month periods, but not more than eighteen
months, beginning with the first month of the Company’s first quarter commencing
after the effective date of the Registration Statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act; and

 

Page 10

 

 

(15)        cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange on which securities of the
same class issued by the Company are then listed if requested by Holdings.

 

Holdings, upon receipt of any notice from the Company of the happening of any
event described in subsection (5)(B), (C), or (D) of Section 3.1(a) or in
Section 2.3(c) (a “Suspension Notice”), shall forthwith discontinue disposition
of the Registrable Securities pursuant to the Registration Statement relating
thereto until Holdings receives copies of the supplemented or amended Prospectus
contemplated hereby or until it is advised in writing (the “Advice”) by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemented filings that are incorporated by reference in
the Prospectus, and, if so directed by the Company, Holdings will, or will
request the managing underwriter or underwriters, if any, to deliver to the
Company (at the Company’s expense) all copies, other than permanent file copies
then in Holding’ possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. The period from the
date on which Holdings receives a Suspension Notice to the date on which
Holdings receives either the Advice or copies of the supplemented or amended
Prospectus contemplated hereby relating to such notice shall hereinafter be
referred to as the “Suspension Period.” If the Company shall give any Suspension
Notice, (i) the Company shall use its reasonable best efforts and take such
actions as are reasonably necessary to render Advice and end the Suspension
Period as promptly as practicable and (ii) the time periods for which a
Registration Statement is required to be kept effective pursuant to Sections
2.1, 2.2 or 2.3, as the case may be, shall be extended by the number of days
during the period from and including the date of the giving of such Suspension
Notice to and including the date when Holdings shall have received (A) the
copies of the supplemented or amended Prospectus contemplated by Section 3.1 (a)
or (B) the Advice.

 

(b)          Provision by Holdings of Certain Information. Holdings shall not
include any of its Registrable Securities in any Registration Statement pursuant
to this Agreement unless and until Holdings furnishes to the Company in writing,
within 20 days after receipt of a request therefor, such information as the
Company may reasonably request specified in item 507 of Regulation S-K under the
Securities Act for use in connection with any Registration Statement or
Prospectus or preliminary Prospectus included therein. Holdings agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by Holdings
not materially misleading.

 

SECTION 3.2     REGISTRATION EXPENSES.

 

(a)          All expenses incident to the Company’s performance of or compliance
with this Section 3.2 will be paid by the Company, regardless of whether any
registration statement required hereunder becomes effective, including, without
limitation:

 

(1)         all registration and filing fees;

 

(2)         fees and expenses of compliance with securities or blue sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities and
determination of their eligibility for investment under the laws of such
jurisdictions as the managing underwriters or Holdings may designate);

 

Page 11

 

 

(3)         printing (including, without limitation, expenses of printing or
engraving certificates for the Registrable Securities in a form eligible for
trading on any Relevant Exchange or for deposit with the Depository Trust
Company and of printing prospectuses), messenger, telephone and delivery
expenses;

 

(4)         reasonable fees and disbursements of counsel for the Company;

 

(5)         reasonable fees and disbursements of all independent certified
public accountants of the Company (including, without limitation, the expenses
of any special audit and “cold comfort” letters required by or incident to such
performance);

 

(6)         fees and expenses of other Persons retained by the Company; and

 

(7)         fees and expenses associated with any filing required to be made by
any Relevant Exchange in connection with the registration of the Registrable
Securities, including, if applicable, the reasonable fees and expenses of any
“qualified independent underwriter” (and its counsel) that is required to be
retained in accordance with the rules and regulations of any Relevant Exchange
(all such expenses being herein called “Registration Expenses”); provided,
however, nothing herein imposes any obligation on the Company to seek to have
the Common Stock listed for trading on the Nasdaq or any other stock exchange.

 

(b)          The Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
Registrable Securities to be registered on any Relevant Exchange and the fees
and expenses of any Person, including special experts, retained by the Company.

 

SECTION 3.3     PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. Holdings may not
participate in any Underwritten Registration hereunder unless Holdings (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, underwriting agreements, hold-back agreements letters and
other documents customarily required under the terms of such underwriting
arrangements. Notwithstanding the foregoing, (x) Holdings shall not be required
to make any representations or warranties except those which relate solely to
Holdings and its intended method of distribution, and (y) the liability of
Holdings to any underwriter under such underwriting agreement will be limited to
liability arising from misstatements or omissions regarding Holdings and its
intended method of distribution and any such liability shall not exceed an
amount equal to the amount of net proceeds Holdings derives from such
registration; provided, however, that in an offering by the Company in which
Holdings requests to be included in a Piggyback Registration, the Company shall
use its best efforts to arrange the terms of the offering such that the
provisions set forth in clauses (x) and (y) of this Section 3.3 are true.
Nothing in this Section 3.3 shall be construed to create any additional rights
regarding the registration of Registrable Securities in any Person otherwise
than as set forth herein.

 

Page 12

 

 

SECTION 3.4     HOLD-BACK AGREEMENTS.

 

(a)          Restrictions on Public Distribution by Holder of Registrable
Securities. Upon the written request of the managing underwriter or underwriters
of a Public Offering, Holdings shall not effect any Public Distribution of such
securities, or any securities convertible into or exchangeable or exercisable
for such securities, including a sale pursuant to Rule 144 under the Securities
Act (except as part of such Public Offering), during the 14-day period prior to,
and during the 90-day period following, the offering date for each Public
Offering made pursuant to such registration statement (as identified by such
underwriter or underwriters or the Company in good faith). The foregoing
provisions shall not apply to Holdings if it is prevented by applicable statute
or regulation from entering into any such agreement; provided, however, that
Holdings shall undertake not to effect any Public Distribution of the class of
securities covered by such registration statement (except as part of such
Underwritten Offering) during such period unless it has provided 60 days’ prior
written notice of such Public Distribution to the managing underwriter.

 

(b)          Restrictions on Public Distribution by the Company and Others. The
Company agrees and it shall use its reasonable best efforts to cause its
Affiliates to agree: (1) not to effect any Public Distribution of any securities
being registered in accordance with Article II hereof, or any securities
convertible into or exchangeable or exercisable for such securities, during the
14-day period prior to, and during the 90-day period following, the offering
date for each Public Offering made pursuant to a registration statement filed
under Article II hereof, if requested in writing by the managing underwriters
(except as part of such Public Offering or pursuant to registrations in
connection with mergers, acquisitions, exchange offers, subscription offers,
dividend reinvestment plans or stock options or other employee benefit plans);
and (2) to use its reasonable best efforts to cause each holder of its privately
placed Registrable Securities that are issued by the Company at any time on or
after the date of this Agreement to agree not to effect any Public Distribution,
including a sale pursuant to Rule 144 under the Securities Act, of any
Registrable Securities during the period set forth in clause (1) above (except
as part of such Public Offering, if and to the extent permitted).

 

Article IV

 

INDEMNIFICATION AND CONTRIBUTION

 

SECTION 4.1      INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless Holdings, each person, if any, who controls Holdings (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) (hereinafter referred to as a “controlling person”), the respective
officers, directors, partners, employees, representatives and agents of Holdings
or any controlling person, solely in their capacities as such (each an
“Indemnified Holder”), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to Holdings furnished
in writing to the Company by Holdings expressly for use therein.

 

Page 13

 

 

SECTION 4.2     INDEMNIFICATION BY HOLDINGS. Holdings agrees to indemnify and
hold harmless the Company and its directors, officers and any person controlling
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) the Company and its respective officers, directors, partners,
employees, representatives and agents of each such person, to the same extent as
the foregoing indemnity from the Company to each of the Indemnified Holders, but
only with respect to losses, claims, damages, liabilities, judgments, actions
and expenses (including without limitation and as incurred, reimbursement of all
reasonable costs of investigating, preparing, pursuing or defending any claim or
action, or any investigation or proceeding by any governmental agency or body,
commenced or threatened, including the reasonable fees and expenses of counsel
to the Company) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue statement or omission is contained in any
information relating to Holdings furnished in writing by Holdings expressly for
use in any Registration Statement or Prospectus. In case any action or
proceeding shall be brought against the Company or its directors or officers or
any such controlling person in respect of which indemnity may be sought against
Holding, Holdings shall have the rights and duties given the Company, and the
Company or its directors or officers or such controlling person shall have the
rights and duties given to Holdings by the preceding paragraph. Holdings also
agrees to indemnify and hold harmless each underwriter participating in the
distribution on substantially the same basis as that of the indemnification of
the Company provided in this Section 4.2. In no event shall the liability of
Holdings hereunder be greater in amount than the dollar amount of the proceeds
received by Holdings upon the sale of the Registrable Securities giving rise to
such indemnification obligation. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as provided above with respect to information so furnished in writing by
such Persons specifically for inclusion in any Registration Statement or
Prospectus.

 

Page 14

 

 

SECTION 4.3     CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder (an “Indemnified Party”) will (i) promptly give notice
of any claim, action or proceeding (including any governmental or regulatory
investigation or proceeding) or the commencement of any such action or
proceeding to the Person against whom such indemnity may be sought (an
“Indemnifying Party”); provided that the failure to give such notice shall not
relieve the Indemnifying Party of its obligations pursuant to this Agreement
except to the extent that such Indemnifying Party has been prejudiced in any
material respect by such failure, and (ii) permit the Indemnifying Party to
assume the defense of such claim with counsel reasonably satisfactory to such
Indemnified Party; provided that the Indemnified Party shall have the right to
employ separate counsel and participate in the defense of such claim, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless (a) the Indemnifying Party has agreed to pay for such fees and
expenses, or (b) the Indemnifying Party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such Indemnified
Party or (c) in the reasonable judgment of such Indemnified Party, based upon
advice of its counsel, a conflict of interest may exist between such Indemnified
Party and the Indemnifying Party with respect to such claims which make it
unreasonable for the defense of such claim on behalf of the Indemnified Party to
be conducted by the Indemnifying Party. If such defense is not assumed by the
Indemnifying Party, the Indemnifying Party will not be subject to any liability
for any settlement of any such claim effected without the Indemnifying Party’s
prior written consent, which consent shall not be unreasonably withheld. The
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Party agrees to
indemnify and hold harmless any Indemnified Party from and against any loss,
claim damage, liability or expense by reason of any settlement of any such claim
or action. No Indemnifying Party shall, without the prior written consent of
each Indemnified Party, settle or compromise or consent to the entry of judgment
in or otherwise seek to terminate any pending or threatened action, claim,
litigation or proceeding in respect of which indemnification or contribution may
be sought hereunder (whether or not any Indemnified Party is a party thereto),
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Party from all liability arising out
of such action, claim, litigation or proceeding. An Indemnifying Party who is
not entitled to, or elects not to, assume the defense of the claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such Indemnifying Party with respect to such claim, unless in the
reasonable judgment of any Indemnified Party a conflict of interest may exist
between such Indemnified Party and any other such Indemnified Parties with
respect to such claim which make it unreasonable for the defense of such claim
on behalf of both such Indemnified Parties to be conducted by a single counsel,
in which event the Indemnifying Party shall be obligated to pay the fees and
expenses of such additional counsel.

 

SECTION 4.4     CONTRIBUTION. If the indemnification provided for in this
Article IV is unavailable to an Indemnified Party (other than by reason of
exceptions provided in those Sections) in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then each applicable
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall have a
joint and severable obligation to contribute to the amount paid or payable by
such Indemnified Party as a result of such losses, claims, damages, liabilities
or expenses in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party, on the one hand, and of the Indemnified Party, on the
other, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party, on the
one hand, and of the Indemnified Party, on the other, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 4.1, any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.

 

Page 15

 

 

The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, Holdings shall not be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds received by Holdings with respect to the Registrable
Securities exceeds the greater of (A) the amount paid by Holdings for its
Registrable Securities and (B) the amount of any damages which Holdings has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

 

For purposes of this Article IV, each controlling person of Holdings shall have
the same rights to contribution as Holding, and each officer, director, and
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act shall have the same rights
to contribution as the Company, subject in each case to the limitations set
forth in the immediately preceding paragraph. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Article IV, notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from who
contribution may be sought from any obligation it or they may have under this
Article IV or otherwise except to the extent that it has been prejudiced in any
material respect by such failure. No party shall be liable for contribution with
respect to any action or claim settled without its written consent; provided,
however, that such written consent was not unreasonably withheld.

 

SECTION 4.5      ADDITIONAL INDEMNITY. The indemnity, contribution and expense
reimbursement obligations under this Article IV shall be in addition to any
liability each Indemnifying Party may otherwise have; provided, however, that
any payment made by the Company which results in an Indemnified Party receiving
from any source(s) indemnification, contribution or reimbursement for an amount
in excess of the actual loss, liability or expense incurred by such Indemnified
Party, shall be refunded to the Company by the Indemnified Party receiving such
excess payment.

 

Page 16

 

 

Article V

MISCELLANEOUS

 

SECTION 5.1     RULE 144. The Company agrees it will file in a timely manner all
reports required to be filed by it pursuant to the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder and
will take such further action as Holdings may reasonably request in order that
Holdings may effect sales of Registrable Securities without registration within
the limitations of the exemptions provided by Rule 144, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC. At any reasonable time and upon the request of Holdings, the Company
will furnish Holdings with such information as may be necessary to enable
Holdings to effect sales of Registrable Securities pursuant to Rule 144 under
the Securities Act and will deliver to Holdings a written statement as to
whether it has complied with such information and requirements. Holdings shall
not have a right to demand registration of Registrable Securities pursuant to
Article II hereof if Holdings is otherwise able to sell such Registrable
Securities pursuant to Rule 144 without registration under the Securities Act
without limitation.

 

SECTION 5.2     SPECIFIC PERFORMANCE. Holdings, in addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
liquidated or other damages, will be entitled to specific performance of its
rights under this Agreement. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.

 

SECTION 5.3     OTHER AGREEMENTS. The Company will not on or after the date of
this Agreement enter into any agreement with respect to its securities that is
inconsistent with the rights granted to Holdings in this Agreement or otherwise
conflicts with the provisions hereof.

 

SECTION 5.4    CHARTER AMENDMENTS AFFECTING THE COMPANY’S COMMON STOCK. The
Company will not amend its Certificate of Incorporation in any respect that
would materially and adversely affect the rights of Holdings hereunder.

 

SECTION 5.5     AMENDMENTS AND WAIVERS. This Agreement may be amended by the
parties hereto by an instrument in writing signed by the parties hereto at any
time prior to closing.

 

SECTION 5.6     NOTICES. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the others
shall be made in writing, by hand-delivery, telegraph, telex, telecopier,
registered first-class mail or air courier guaranteeing overnight delivery as
follows:

 

If to Holdings:IST Holdings, LLC
1207 N. 143rd Street
Omaha, Nebraska 68102
Attention: Joseph Schwaller

 

If to the Company:iSecureTrac Corp.
5078 S. 111th Street
Omaha, NE 68137
Attention: Lincoln Zehr

 

Page 17

 

 

With a copy to:

 

Kutak Rock LLP
1650 Farnam Street
Omaha, NE 68102
Attention: Steven P. Amen

 

or to such other place and with such other copies as any party hereto may
designate as to itself by written notice to the others. All such notices and
communications shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied: and on the next Business Day if timely delivered to
an air courier guaranteeing overnight delivery.

 

SECTION 5.7    SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent holders of Registrable Securities, provided that the
Company may not assign its rights or obligations under this Agreement to any
other person or entity without the written consent of Holdings. If Holdings
transfer Registrable Securities to its members, such Member shall be entitled to
the rights of Holdings hereunder provided that any demand for registration made
on the Company under this Agreement may only be made by such members controlling
not less than 25% of the Registrable Securities.

 

SECTION 5.8     COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

SECTION 5.9     HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

 

SECTION 5.10  GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nebraska, without regard to the
choice of law provisions thereof.

 

SECTION 5.11  SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.

 

Page 18

 

 

SECTION 5.12     ENTIRE AGREEMENT. This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Registrable Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

 

SECTION 5.13     PRONOUNS. Whenever the context may require, any pronouns used
herein shall be deemed also to include the corresponding neuter, masculine or
feminine forms.

 

SECTION 5.14    ATTORNEY’S FEES. In any action or proceeding brought to enforce
any provision of this Agreement, the successful party shall be entitled to
recover reasonable attorney’s fees in addition to its costs and expenses and any
other available remedy.

 

SECTION 5.15     FURTHER ASSURANCES. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.

 

SECTION 5.16    TERMINATION. Unless sooner terminated in accordance with its
terms or as otherwise herein provided, including specifically in Section 2.3(a),
this Agreement shall terminate upon the earlier to occur of (i) the mutual
agreement by the parties hereto, (ii) Holdings ceasing to own any Registrable
Securities, or (iii) the tenth anniversary of the date of this Agreement.

 

[signature page follows]

 

Page 19

 

 

IN WITNESS HEREOF, each of the parties hereto have executed and delivered this
Registration Rights Agreement as of the date first written above.

 

  ISECURETRAC CORP.         By:     Lincoln Zehr, Chief Executive Officer      
  IST HOLDINGS, LLC         By:       Joseph Schwaller, Manager

 

Page 20