Exhibit 10.3

MODIFICATION AND WAIVER AGREEMENT

 

This Modification and Waiver Agreement (“Agreement”) dated as of January 13,
2006 is entered into by and among Dyneco Corporation, a Minnesota corporation
(the “Company”) and the subscribers and Finders identified on the signature page
hereto (each herein a “Subscriber” and collectively “Subscribers” or the
“Parties”).

 

WHEREAS, the Company and the Subscribers are parties to Subscription Agreements
(“Subscription Agreements”) dated March 2, 2005 relating to an aggregate
investment of $327,000 by Subscribers in secured convertible notes (“Notes”)
convertible into Common Stock of the Company and Common Stock Purchase Warrants
(“Warrants”); and

 

WHEREAS, the Company is in default of material terms of the Transaction
Documents and the Subscribers may elect to exercise their rights to accelerate
the Maturity Date of the Notes and foreclose on the Collateral under the
Security Agreement; and

 

WHEREAS, the Company is contemplating a business combination with Dynamic
Leisure Group Inc. (the “Combination”); and

 

WHEREAS, the Company and Subscribers desire to restructure the terms of the
Transaction Documents to their mutual benefit.

 

NOW THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement, the Company and the Subscribers hereby agree as
follows:

 

1.          All the capitalized terms employed herein shall have the meanings
attributed to them in the Subscription Agreements and the documents and
agreements delivered therewith (“Transaction Documents”).

 

 

2.

The Note is amended as follows:

 

(a)        Interest shall be payable on March 31, 2006 and quarterly thereafter
on the last day of each calendar quarter.

 

(b)        The Fixed Conversion Price is $0.75.

 

(c)        The first Repayment Date shall be June 1, 2006 and the Monthly
Principal Amount shall be equal to one-eleventh (1/11th) of the Initial
Principal Amount.

 

3.           In exchange for Subscriber’s consent, hereby given, the Company may
obtain debt or equity financing (“Other Financing”) on condition that the Other
Financing must result in minimum gross proceeds to the Company of $1,500,000. In
the event the gross proceeds of the Other Financing are equal to or greater than
$1,500,000 but less than $3,000,000, then the Subscriber may demand and the
Company will repay up to one-half of the initial principal amount of the Note,
together with a premium of 50% of such amount of principal being paid. In the
event the gross proceeds of the Other Financing are $3,000,000 or more, then the
Subscriber may demand and the Company will repay up to the entire outstanding
Note principal together with a premium of 50% of such amount of principal being
paid. The Subscriber must be given not less than ten business days written
notice prior to the Closing of the Other Financing. The foregoing payments must
be made contemporaneously with the closing of the Other Financing.

 

4.          Provided an Event of Default has not occurred, the Subscribers will
release their security interest in the Collateral upon the closing of the Other
Financing.

 

 

5.

The Company is granted the following rights to prepay the Note:

 

Provided an Event of Default or an event which with the passage of time or the
giving of notice could become an Event of Default has not occurred, whether or
not such Event of Default has

 

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been cured, the Company will have the option of prepaying the outstanding
principal amount of the Notes (“Optional Redemption”), in whole or in part, by
paying to the Subscriber a sum of money equal to one hundred and fifty percent
(150%) of the principal amount of the Notes to be redeemed, together with
accrued but unpaid interest thereon and any and all other sums due, accrued or
payable to the Subscriber arising under the Note or any Transaction Document
through the Redemption Payment Date as defined below (the “Redemption Amount”).
The Company’s election to exercise its right to prepay must be by notice in
writing (“Notice of Redemption”). The Notice of Redemption shall specify the
date for such Optional Redemption (the “Redemption Payment Date”), which date
shall be not later than ten (10) business days after the date of the Notice of
Redemption (the “Redemption Period”). A Notice of Redemption shall not be
effective with respect to any portion of Note principal for which the Subscriber
has a pending election to convert, or for conversions initiated or made by the
Subscriber during the Redemption Period. On the Redemption Payment Date, the
Redemption Amount, less any portion of the Redemption Amount against which the
Subscriber has exercised its conversion rights, shall be paid in good funds to
the Subscriber. In the event the Company fails to pay the Redemption Amount on
the Redemption Payment Date as set forth herein, then (i) such Notice of
Redemption will be null and void, (ii) Company will have no right to deliver
another Notice of Redemption, and (iii) Company’s failure may be deemed by
Subscriber to be a non-curable Event of Default. A Redemption Notice may be
given only at a time a Registration Statement is effective. A Notice of
Redemption may not be given nor may the Company effectuate a Redemption without
the consent of the Subscriber, if at any time during the Redemption Period an
Event of Default or an Event which with the passage of time or giving of notice
could become an Event of Default (whether or not such Event of Default has been
cured), has occurred or the Registration Statement registering the Registrable
Securities is not effective each day during the Redemption Period.

 

6.          In the event the number of Warrant Shares issuable in the aggregate
to the Subscribers is reduced pursuant to the provisions of Section 4 of the
Warrants, such reduction will not be to fewer than 300,000 Warrant Shares in the
aggregate divided between the Subscribers proportionately to the amount of
Warrant Shares purchasable by them upon the initial issuance of the Warrants.
The Purchase Price per Warrant Share for all of the Warrants shall be $1.00. If
the Combination occurs, the Warrants will be exercisable until three years after
the filing date of Form 8-K including audited financial statements relating to
the Combination (“8-K Filing Date”). For purposes of this Section 6 and the
amount of Warrant Shares purchasable pursuant to the Warrants, Subscribers shall
not include the interests of the Finders.

 

7.          Section 11 of the Class C Warrant shall be applicable to all of the
Warrants except that the percent figure in Section 11(e) shall be changed to
“two hundred and fifty percent” and the Lookback Period shall be changed to
twenty consecutive trading days.

 

8.          The Company will file an amended Registration Statement to reflect
the terms of this Agreement not later than ninety days after the Modification
Effective Date (as defined in Section 10 below) and cause such amendment to be
declared effective by the Commission not later than 60 days after such amendment
filing date. Failure to comply with the foregoing filing and effective dates
shall be a Non-Registration Event in connection with which Liquidated Damages
shall accrue in the amounts set forth in Section 11.4 of the Subscription
Agreement. In the event an amendment to the registration statement may not be
filed to register securities which may be issuable pursuant to this Amendment,
then such additional securities, including the Additional Shares described
below, the Company agrees to file a Registration Statement in relation to such
securities pursuant to Section 11 of the Subscription Agreement and particularly
Section 11.1(iv) of the Subscription Agreement, except that in relation to such
securities the Filing Date and Effective Date shall respectively be 120 days and
180 days after the Modification Effective Date. Such additional securities and
Additional Shares are deemed Registrable Securities.

 

9.          The Excepted Issuances are deleted from Section 12(a) of the
Subscription Agreement.

 

10.        The effective date of this Agreement shall be the sooner of (i) the
receipt by the Company of the net proceeds of the Other Financing, or (ii) five
days after the execution of this Agreement by all parties hereto (“Modification
Effective Date”). If the 8-K Filing Date does not occur on or before April 5,
2006 then this Agreement shall be void and the Company and Subscribers shall be
restored to their respective positions as if this Agreement were not entered
into except that the Subscribers will retain the Additional Shares and the
rights granted to them in relation thereto.

 

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11.        Not later than fifteen days after the date of the date this Agreement
is executed by all the parties hereto, the Company will deliver 100,000 shares
of Common Stock, to each of Alpha Capital Aktiengesellschaft and JM Investors
Failure to timely deliver the Additional Shares is an Event of Default under the
Notes. (“Additional Shares”). The Additional Shares will contain the legend set
forth in Section 4(h) of the Subscription Agreement. For the benefit of the
parties hereto, the Company hereby makes all the representations, warranties,
covenants undertakings and indemnifications contained in the Transaction
Documents, as if such representations were made by the Company as of this date.
The Subscribers hereby make all of the representations, warranties, covenants,
indemnifications and undertakings contained in the Transaction Documents as if
such representations were made by the Subscribers as of this date. The Company
represents that the Additional Shares are fully paid and non-assessable. In
addition to the registration rights described in Paragraph 8 above, the
Subscribers are granted the rights described in Section 11.1(ii) of the
Subscription Agreement in relation to the Additional Shares.

 

12.        The amounts of Warrants, Warrant Shares, Warrant Exercise Price and
Conversion Price reflect a proposed thirty for one reverse split of the Common
Stock. In the event a stock split in a different proportion is approved, the
foregoing amounts shall be equitably adjusted except that the number of Warrant
Shares issuable to Alpha Capital Aktiengesellschaft and JM Investors LLC in the
aggregate may not be reduced below 300,000 as described in Section 6 of this
Agreement.

 

13.        The Subscribers waive exercise of the remedies and rights available
to them for Events of Default existing as of the Modification Effective Date and
the payment of liquidated or other damages related thereto.

 

14.        Within three business days after the date of this Agreement and as a
condition of this Agreement, the Company will pay to Grushko & Mittman, P.C. the
sum of $5,000 in payment of Subscribers legal fees in connection with this
Agreement.

 

15.         All other terms and conditions of the Transaction Documents,
including the accrual of regular interest shall remain in full force and effect
and payable.

 

16.         This Modification and Waiver Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to any other party, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were an original thereof. A copy of this Agreement annexed to the Note or
Warrants shall be sufficient to reflect the amendment thereto.

 

17.         Each of the undersigned states that he has read the foregoing
Agreement and understands and agrees to it.

 

 

DYNECO CORPORATION

 

the “Company”

 

 

 

By: /s/ Thomas C. Edwards, President

 

/s/ Konrad Ackerman

/s/ Jeffrey Rubin

 

ALPHA CAPITAL AKTIENGESELLSCHAFT

JM INVESTORS, LLC

(“Subscriber”)

(“Subscriber”)

 

 

/s/ Seymore Brau

/s/ Jeffrey Rubin

 

LIBRA FINANCE, S.A. (“Finder”)

JM INVESTORS, LLC (“Finder”)

 

/s/ Robert Prager

RJ PRAGER CORP. (“Finder”)

 

 

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