EXHIBIT 10.1

 

EXTINGUISHMENT OF INDEBTEDNESS AGREEMENT MADE THIS 21ST DAY OF MARCH 2007
BETWEEN IVI SMART TECHNOLOGIES, INC., A DELAWARE CORPORATION WITH AN OFFICE AT
526 WEST 26TH STREET, SUITE 710, NEW YORK, NEW YORK 10001 (“IVI”), AND E-SMART
TECHNOLOGIES, INC., A NEVADA CORPORATION WITH OFFICES AT 526 WEST 26TH STREET,
SUITE 710, NEW YORK, NEW YORK 10001(“ESMT”). IVI AND ESMT ARE HEREINAFTER
INDIVIDUALLY REFERRED TO AS A “PARTY” AND COLLECTIVELY AS THE “PARTIES.”

W I T N E S S E T H:

WHEREAS, IVI is willing to extinguish the current indebtedness of ESMT on the
terms and subject to the conditions set forth in this agreement (the
“Agreement”).

NOW, THEREFORE, in consideration of licenses for additional patents filed by IVI
and other mutual benefits derived hereunder, the receipt and adequacy of which
is hereby accepted and acknowledged, the Parties agree as follows:

1. The Extinguishment of Indebtedness. IVI hereby covenants and agrees to
extinguish the current indebtedness of ESMT and ESMT hereby accepts and agrees
to the terms and subject to the conditions hereinafter set forth below in this
Agreement.

 

A. IVI shall forgive: (i) approximately $4,000,000 in working capital advances
made to the Registrant during the twelve months ended July 31, 2006; and
(ii) approximately $3,500,000 in working capital advances made to the Registrant
during the nine months ended April 30, 2007. The working capital advances during
the twenty one months ended April 30, 2007 were the Registrant’s sole source of
operating funds for that period, and IVI, to the extent possible, commits to
continue to provide working capital to the Registrant to operate its business
and implement its projects;

 

B. IVI shall forgive the Registrant’s obligation to originally issue an
aggregate of 100,000,000 shares of the Registrant’s common sock,$.001 par value
per share;

 

C. IVI shall forgive the Registrant’s obligation to issue an additional
estimated 221,846,668 shares of the Registrant’s common stock, $.001 par value
per share, and agrees to surrender for cancellation all other shares issued to
and held by IVI ;

 

D. Certain management executives of the Registrant shall surrender for
cancellation an aggregate of seventy five million stock options;

 

E. The Registrant shall originally issue to IVI and certain management
executives an aggregate of 17,500,000 shares of the Registrant’s Series A
Preferred Stock, $.01 par value per share, out of a total authorized
capitalization of 20,000,000 shares.

 

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F. Pursuant to the Rights and Designations of the Series A Preferred Shares, the
aggregate of 20,000,000 shares of the Registrant’s Series A Preferred Stock is
vested with and possesses ongoing 70% voting control of the Registrant; and

 

G. The Registrant’s Board of Directors was directed to adopt resolutions
enumerating the complete list of preferences, terms and other incidents of
ownership of Series A Preferred Shares consistent with the foregoing, after
which a Certificate of Designation of Rights and Preferences of the Preferred
Stock shall be filed with the Secretary of State of Nevada.

2. Representations and Warranties OF ESMT. ESMT represents and warrants to IVI
as follows:

A. Due Incorporation, Qualification, Etc. ESMT is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
is duly qualified and in good standing as a foreign corporation to do business
in the jurisdictions in which the failure to be so qualified would have a
material adverse effect on its business or financial condition, and it has full
corporate power and authority to own its properties and assets and to conduct
its business as presently conducted.

B. Capacity. ESMT has full corporate power and authority to execute and deliver,
and to perform and observe the provisions of this Agreement to which it is a
party and to carry out the transactions contemplated hereby and thereby.

C. Authority and Enforceability. The execution, delivery and performance by ESMT
of this Agreement to which it is a party has been or will be duly authorized by
all necessary corporate action. This Agreement (including the New York choice of
law) constitutes, or will constitute, legal, valid and binding obligations of
ESMT enforceable against it in accordance with its respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditor’ rights and remedies generally.

D. Governmental Approvals. No order, consent, approval, license, authorization,
or validation of, or filing, recording or registration with (other than any
routine filings which may be required after the date hereof with appropriate
governmental authorities required in connection with the perfection of the
security interests created by this Agreement), or exemption by, any governmental
agency, is required to authorize the execution, delivery and performance by ESMT
of this Agreement to which it is a party.

E. Compliance with Other Instruments. The execution and delivery of this
Agreement and compliance with its terms does not result in a breach of any of
the terms or conditions of, or result in the imposition of any lien, charge or
encumbrance (except those contemplated by this Agreement) upon any properties of
ESMT pursuant to, or constitute a default (with due notice or lapse of time or
both), or result in an occurrence of any event for which any holder or holders
of Indebtedness may declare the same due and payable under any indenture,
agreement, order, judgment or instrument under which ESMT is a party or to
ESMT’s knowledge, after due inquiry, by

 

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which ESMT or its property may be bound or affected, or under the Articles of
Incorporation or By-Laws of ESMT, and, to ESMT’s knowledge, after due inquiry,
do not violate any provision of applicable law, in each case, to the extent that
any such breach, imposition, event or violation could reasonably be expected to
have a material adverse effect.

3. Representations and Warranties of IVI. IVI hereby represents and warrants to
ESMT as follows:

A. Due Incorporation, Qualification, Etc. IVI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified and in good standing as a foreign corporation to do
business in the jurisdictions in which the failure to be so qualified would have
a material adverse effect on its business or financial condition, and it has
full corporate power and authority to own its properties and assets and to
conduct its business as presently conducted.

B. Capacity. IVI has full corporate power and authority to execute and deliver,
and to perform and observe the provisions of this Agreement to which it is a
party and to carry out the transactions contemplated hereby and thereby.

C. Authority and Enforceability. The execution, delivery and performance by IVI
of this Agreement to which it is a party has been or will be duly authorized by
all necessary corporate action. This Agreement (including the New York choice of
law) constitutes, or will constitute, legal, valid and binding obligations of
IVI enforceable against it in accordance with its respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditor’ rights and remedies generally.

D. Governmental Approvals. No order, consent, approval, license, authorization,
or validation of, or filing, recording or registration with (other than any
routine filings which may be required after the date hereof with appropriate
governmental authorities required in connection with the perfection of the
security interests created by this Agreement), or exemption by, any governmental
agency, is required to authorize the execution, delivery and performance by IVI
of this Agreement to which it is a party.

E. Compliance with Other Instruments. The execution and delivery of this
Agreement and compliance with its terms does not result in a breach of any of
the terms or conditions of, or result in the imposition of any lien, charge or
encumbrance (except those contemplated by this Agreement) upon any properties of
IVI pursuant to, or constitute a default (with due notice or lapse of time or
both), or result in an occurrence of any event for which any holder or holders
of Indebtedness may declare the same due and payable under any indenture,
agreement, order, judgment or instrument under which IVI is a party or to IVI ‘s
knowledge, after due inquiry, by which IVI or its property may be bound or
affected, or under the Articles of Incorporation or By-Laws of IVI, and, to
IVI’s knowledge, after due inquiry, do not violate any provision of applicable
law, in each case, to the extent that any such breach, imposition, event or
violation could reasonably be expected to have a material adverse effect.

 

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F. Investment Representations. IVI acknowledges, accepts and understands that:
(i) the Shares will be “restricted securities” as that term is defined under the
Securities Act of 1933 as amended (the “Securities Act”); (ii) IVI will be
acquiring the Shares solely for IVI’s own account, for investment purposes and
without a view towards the resale or distribution thereof and no other person,
firm or entity has any interest in the Shares; (iii) until and unless registered
under the Securities Act, IVI will hold the Shares for at least the applicable
one-year holding period proscribed by Rule 144 under the Securities Act; and
(iv) any sale of the Shares will be accomplished only in accordance with the
Securities Act or the rules and regulations of the SEC adopted thereunder. In
addition, IVI hereby consents to the imprinting of a standard form of
restrictive legend on all certificates representing the Shares as well as the
imposition of a standard form of stop transfer order against the Shares on the
books and records of the Company and/or its transfer agent;

G. IVI understands that ESMT is not under any obligation to register the Shares
under the Securities Act or to comply with the requirements for any exemption
which might otherwise be available, or to supply IVI with any information
necessary to enable IVI to make routine sales of the Shares under Rule 144 or
any other rule of the Rules and Regulations of the SEC adopted under the
Securities Act.

4. Miscellaneous. The following miscellaneous provisions shall be applicable to
this Agreement:

A. Entire Agreement. This Agreement with its schedules and exhibits embodies the
entire agreement and understanding between the Parties hereto and supersedes all
prior agreements and understandings relating to the subject matter hereof.

B. No Waiver. No failure to exercise, and no delay in exercising any right,
power or remedy hereunder or under any document delivered pursuant hereto shall
impair any right, power or remedy which IVI may have, nor shall any such delay
be construed to be a waiver of any of such rights, powers or remedies, or an
acquiescence in any breach or default under this Agreement or any document
delivered pursuant hereto, nor shall any waiver of any breach or default of ESMT
hereunder be deemed a waiver of any default or breach subsequently occurring.
The rights and remedies herein specified are cumulative and not exclusive of any
rights or remedies which IVI would otherwise have.

C. Survival. All representations, warranties and agreements herein contained on
the part of ESMT shall survive the making of the Advances or the issuance of the
Collateral Advance hereunder and all such representations, warranties, and
agreements shall be effective as long as any amount arising pursuant to the
terms of this Agreement remains unpaid.

D. Notices. All notices, requests, consents, demands, and other communications
provided for or permitted hereunder shall be effective three (3) days after
being duly deposited in the mails, certified, return receipt requested, or upon
receipt if delivered to Federal Express or similar courier company or
transmitted by

 

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facsimile, addressed to the respective Party at the address set forth above, or
to such other addresses as the Parties hereto may notify.

E. Termination. This Agreement shall terminate on the tenth anniversary of the
execution of this Agreement.

F. Severability of Provisions. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.

G. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of ESMT, IVI and their respective successors and permitted assigns;
provided, however, that ESMT may not transfer its rights under this Agreement
without the prior written consent of IVI.

H. Assignment and Participation. Subject to compliance with the provisions of
this Section 10.8, IVI shall have the right to assign all or part of the
obligations of ESMT outstanding under this Agreement or of IVI or to any
foreign, federal or state banking institution, savings and loan association,
finance company, investment bank or investment partnership. IVI shall inform
ESMT in advance as to any proposed assignment by a bank and the identity of the
prospective assignee.

I. Counterparts. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any party hereto
may execute this Agreement by signing any such counterpart.

J. Jurisdiction. All actions or proceedings with respect to this Agreement and
the notes may be instituted in the courts of the State of New York or the United
States District Court for the Southern District of New York. By execution and
delivery of this Agreement IVI, and ESMT irrevocably and unconditionally submit
to the jurisdiction of each such court, and irrevocably and unconditionally
waive (i) any objection ESMT or IVI may now or hereafter have to the laying of
venue in any of such court, and (ii) any claims that any action or proceeding
brought in any of such court has been brought in an inconvenient forum;
provided, however, that nothing in this section 11.10 shall limit or restrict
the right of IVI to bring suit against ESMT anywhere in the world to enforce the
security provided in the security agreement.

K. Choice of Law. This Agreement and the notes issued hereunder and all issues
arising in connection with this Agreement and the transactions contemplated
hereby shall be governed by and construed in accordance with the internal laws
of the State of New York, except that with respect to the provisions of this
Agreement and the notes which provide for or relate to the payment of interest,
provisions of applicable federal law which permit IVI to charge the higher of
the rate permitted by such applicable law or by the laws of the state in which
the Banks are located shall be deemed governing and controlling.

L. Waiver of Jury Trial. ESMT hereby waives the right to trial by jury in any
judicial proceeding to which they is a party involving, directly or indirectly,
any

 

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matter (whether sounding in tort, contract or otherwise) in any way arising out,
related to, or connected with this Agreement, any of the loan documents or the
relationship established hereunder.

M. Amendment and Waiver. No amendment or waiver of any provision of this
Agreement, nor any consent to any departure by ESMT therefrom, shall in any
event be effective unless the same shall be agreed or consented to by IVI and
ESMT, and each such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, that no
amendment, waiver, or consent shall, unless in writing and signed by all of IVI
and ESMT, do any of the following: (a) increase the LC Facility or subject IVI
to any additional obligations; (b) reduce the principal of the Advances or any
fees or other amounts payable hereunder; (c) postpone any date fixed for any
payment of principal of, or interest on, the Advances or any fees or other
amounts payable hereunder (d) change the percentage of the LC Facility; or
(e) change any provision contained in this Section 10.13; (f) release any of the
Security.

N. No Oral Agreements. This written Agreement with its schedules and exhibits
represents the final agreement among the Parties concerning the subject matter
hereof and may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements of the Parties.

O. Headings, Etc. The table of contents of this Agreement and the headings of
various sections and subsections herein are for convenience of reference only
and shall not modify, define, expand or limit any of the terms or provisions
hereof.

P. Taxes. Any taxes payable or ruled payable by any government agency in respect
of this Agreement, other than any tax on or measured by the income of IVI, shall
be paid by ESMT, together with any interest and penalties.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first above written.

 

ESMT Smart Technologies, Inc. By:   /s/ Mary A. Grace   Mary A. Grace, President

 

IVI Smart Technologies, Inc. By:   /s/ Mary A. Grace   Mary A. Grace, President

 

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