Document:

EX-10.1

VALIDITY AND SUPPORT AGREEMENT

To: KELTIC FINANCIAL PARTNERS II, LP (“Lender”)

Pursuant to a Loan and Security Agreement between Lender and CASTLE BRANDS INC., a corporation
organized under the laws of the State of Florida (“CBI”) and CASTLE BRANDS (USA) CORP. a
corporation organized under the laws of the State of Delaware (“CBUSA”) (individually and
collectively, “Borrower”) (“Borrower”) dated on or about the date hereof (the “Loan Agreement”), by
one or more revolving notes and/or term notes (the “Senior Notes”), and other documents,
instruments and agreements executed and/or delivered to Lender in connection therewith
(collectively, the “Loan Documents”), Lender is, and after the date of this validity and support
agreement (the “Agreement”) will be, extending credit to Borrower. Capitalized terms used in this
Agreement that are not defined herein shall have the meanings given such terms in the Loan
Documents.

The undersigned currently serves as the        and will actively participate in
the preparation of financial reports, Notices of Borrowing, Borrowing Base Certificates, Compliance
Certificates and other reports relating to Borrower’s Receivables, Inventory, and other Collateral
required to be delivered to Lender pursuant to the Loan Document, and as Lender may otherwise
require pursuant to the Loan Documents (collectively, the “Borrower Reports”). In order to induce
Lender to extend credit to Borrower pursuant to the Loan Documents, the undersigned agrees with
Lender as follows:

1. The undersigned, solely in his capacity as        of the
Borrower, has read the Loan Documents and is familiar with the terms and conditions
thereof to the extent necessary for the execution and delivery of this Agreement.

2. At the time when made, the representations of Borrower in the Loan Documents
are, to the knowledge of the undersigned as        of the Borrower,
true, correct, and complete in all Material respects, and do not contain any Material
misstatement of fact or omit to state any Material facts necessary to make the
statements or information contained therein not misleading (except to the extent that
such representations expressly relate to an earlier date).

3. The undersigned will, as part of his duties as the
       of Borrower, supervise the actions of the employees of
Borrower for whom the undersigned is responsible, in compiling and reporting data to
Lender as will be contained in the Borrower Reports, and the undersigned will, in good
faith, as part of such duties undertake to verify at such times that the Borrower
Reports are submitted, that all information reported to Lender in the Borrower Reports
is true, accurate and complete in all Material respects. The undersigned’s signature on
any Borrower Report shall serve as the undersigned’s confirmation as
       of the Borrower to Lender that all information contained in
such Borrower Report is true, accurate and complete in all Material respects.

4. The undersigned shall use commercially reasonable efforts to promptly notify
Lender upon the undersigned’s obtaining actual knowledge (a) of any facts or
circumstances indicating that any representation of Borrower made to Lender pursuant to
any Loan Document is or was untrue in any Material respect or that would cause such
representation to be untrue in any Material respect, or (b) that Borrower has not
complied with any Material covenant of Borrower to Lender contained in any Loan
Document, or (c) that any information furnished to Lender in any Borrower Report is
inaccurate or incomplete in any Material respect.

5. The undersigned shall indemnify and hold Lender harmless from and against any
loss or liability Lender actually suffers that is directly attributable to the
undersigned’s failure to notify Lender as required by paragraph 4 herein. Additionally,
the undersigned agrees that in the event of the undersigned’s failure to notify Lender
as required by paragraph 4 herein, the undersigned shall, in addition to being subject
to Lender’s other rights and remedies set forth herein, be obligated to repay to Lender
in full upon demand by Lender any benefit received by the undersigned (e.g., the
proceeds of any action by Borrower in violation of the Loan Documents, or acceptance of
any prohibited dividend or distribution payment from Borrower), other than the salary,
other benefits, reimbursement of expenses and indemnification to which the undersigned
is entitled pursuant to the terms of the undersigned’s employment with Borrower.

6. In the event that Lender shall declare an Event of Default under the Loan
Documents and thereafter commence to liquidate and realize upon the Collateral, then,
upon notice in writing to the undersigned (the “Lender Notice”), the undersigned will
exercise commercially reasonable efforts in an appropriate manner and in accordance with
applicable law to assist Lender and/or its agents in disposing of the Collateral. To
this effect, if Borrower has ceased operations and if requested by Lender in the Lender
Notice, the undersigned will, at Lender’s option and direction, act as Lender’s agent in
the undersigned’s present capacity as        of the Borrower for a
period, in Lender’s discretion, of up to three (3) months from the date of such Lender
Notice. Such service will be on a full-time basis and shall be at a level of
compensation and other benefits equal to that in effect for the undersigned on the date
of such declaration of Event of Default. Lender shall have the right, in Lender’s sole
discretion, to terminate the engagement of the undersigned as Lender’s agent at any time
during such term and Lender agrees to indemnify the undersigned as an agent of the
Lender for any losses or liabilities incurred by the undersigned during such engagement.
Lender may make Loans or Advances under the Loan Documents to pay such compensation,
which loans or advances shall constitute Obligations thereunder and be secured by the
Collateral. The undersigned’s compensation described above shall be an obligation of
Borrower and Borrower hereby agrees to indemnify Lender for all amounts that Lender
shall pay to the undersigned under this paragraph 6.

7. The representations, covenants and obligations of the undersigned to Lender
under this Agreement shall terminate with respect to Advances and Loans made after the
date of the undersigned’s termination (whether voluntary or not) as
       of Borrower; provided, however, the undersigned acknowledges
and agrees that following such termination, the undersigned shall remain liable to
Lender to the extent provided for herein in connection with any breach of a
representation, and/or any failure to comply with or satisfy any covenant or obligation,
by the undersigned hereunder prior to such termination. This Agreement, and all duties,
obligations and liabilities of the undersigned hereunder shall terminate on the date on
which all Obligations have been finally and indefeasibly paid to Lender in full;
provided, however, this Agreement shall be reinstated if at any time any prepayment,
payment or other value received by Lender from any source, or any part thereof, of any
of the Obligations is rescinded or is otherwise required to be restored or returned by
Lender by reason of (i) any judgment, decree or order of any court or administrative
body having competent jurisdiction, (ii) any settlement or compromise of any such claim,
or (iii) otherwise, all as though such prepayment, payment or value had not been
delivered to Lender, notwithstanding any termination hereof or the cancellation of any
note or other agreement evidencing any of the Obligations. Notwithstanding the above,
in the event the undersigned and Borrower agree to engage the Durkin Group, LLC or any
other qualified auditing service provider (“Auditor”) acceptable to Lender in its
reasonable discretion, at Borrower’s cost and expense, to review the Borrower Reports
and the Auditor provides a favorable review of the Borrower Reports, then in such case
Lender shall have no cause of action or right of indemnification against the undersigned
under this Agreement up to and including the date of the Auditor’s review as set forth
herein.

8. General Provisions.

a. This Agreement has been delivered, shall be deemed to have been made in, and shall be
construed pursuant to, the internal laws of the State of New York without regard to the
principles of conflicts of laws.

b. This Agreement shall be binding upon the undersigned and his heirs, executors, successors
and assigns, and shall inure to Lender’s benefit and to the benefit of Lender’s successors and
assigns. Neither this Agreement nor any portion hereof may be assigned by the undersigned, and
any such attempted assignment shall be void and of no effect.

c. No delay on Lender’s part in exercising any rights hereunder, or taking any action to
collect or enforce any Obligation of Borrower, either as against Borrower or any other Person
primarily or secondarily liable with Borrower, shall operate as a waiver of any such right or in
any manner prejudice Lender’s rights against the undersigned. No waiver of any of Lender’s
rights hereunder and no modification or amendment to this Agreement shall be deemed to be made by
Lender unless the same shall be in writing, duly signed on Lender’s behalf by a duly authorized
officer and by the undersigned, and each such waiver, if any, shall apply only with respect to
the specific instance involved, and shall in no way impair Lender’s rights or the undersigned’s
obligations to Lender in any other respect at any other time.

d. THE UNDERSIGNED HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY LITIGATION OR
PROCEEDING RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. THE UNDERSIGNED HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE SUPREME COURT IN ANY COUNTY AND OF THE FEDERAL DISTRICT COURTS OF
THE STATE OF NEW YORK AND HEREBY AGREES THAT NO DEFENSE OF FORUM NON CONVENIENS SHALL BE RAISED
IN ANY ACTION BROUGHT IN SUCH COURT.

e. The undersigned hereby waives notice of acceptance of the granting of security interests
to Lender in Borrower’s Receivables, Inventory or any other Collateral, and other assets and the
granting or extension of loans and advances by Lender to Borrower, and also waives notice of
default, non-payment, partial payment, presentment, demand, protest and all other notices to
which the undersigned might otherwise be entitled.

f. This Agreement shall not be construed to be a guaranty of the collectability of any
Collateral or of the Obligations.

g. This Agreement shall continue to be effective following any amendment, modification,
restatement or other change to any of the Loan Documents, and if any Obligations of Borrower is
also guaranteed by any other Person by guaranty of payment and performance, validity guaranty or
by endorsement of any note of Borrower or otherwise, the release by Lender of any such other
guarantor, or settlement with such other Person, or the revocation or impairment of any other
such Person, shall not operate to prejudice Lender’s rights against the undersigned.

IN WITNESS WHEREOF, the undersigned has caused this Agreement to be executed the day and year
first written above.

KELTIC FINANCIAL PARTNERS II, LP

By Keltic Financial Services, LLC, its general partner

     

Name:

By:

Title:       

Name:

Title:

ACKNOWLEDGED AND AGREED:

CASTLE BRANDS, INC.

By:

Name:

Title:

CASTLE BRANDS (USA) CORP.

By:

Name:

Title:ex4-1.htm

EXHIBIT 4.1

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF OR IN ACCORDANCE WITH APPLICABLE LAW.

WARRANT TO PURCHASE STOCK

 

	
Corporation: 

	
ACCELERIZE NEW MEDIA, INC.

	
Number of Shares: 

	
See below.

	
Class of Stock: 

	
Common

	
Initial Exercise Price: 

	
See below.

	
Issue Date: 

	
August 23, 2011

	
Expiration Date: 

	
August 23, 2016

 

THIS WARRANT CERTIFIES THAT AGILITY CAPITAL II, LLC or registered assignee (“Holder”) is entitled to purchase the number of fully paid and nonassessable shares (the “Shares”) of Common Stock of ACCELERIZE NEW MEDIA, INC. (the “Company”), in the number, at the price, and for the term specified above.  The number of Shares that may be purchased is equal to 600,000.  The Warrant Price is equal to the lower of (i) $0.35 and (ii) the price per share at which the Company sells or issues its capital stock after the Issue Date in a transaction or series of transactions in which the Company receives at least $500,000, provided that such price per share shall in no case be less the price per share of the Company’s Series B Preferred Stock including any adjustments provided for therein.

 

ARTICLE 1.           EXERCISE

 

1.1           Method of Exercise.  Holder may exercise this Warrant by delivering this Warrant and a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company.  Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.

 

1.2           Conversion Right.  In lieu of exercising this Warrant as specified in Section 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share.  The fair market value of the Shares shall be determined pursuant to Section 1.3.

 

1.3           Fair Market Value.  The fair market value of the Shares shall be the closing price of the Shares reported for the business day immediately before Holder delivers its Notice of Exercise to the Company.

 

1.4           Delivery of Certificate and New Warrant.  Promptly after Holder exercises or converts this Warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.

 

1.5           Replacement of Warrants.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, or surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

 

ARTICLE 2.           ADJUSTMENTS TO THE SHARES.

 

2.1           Stock Dividends, Splits, Etc.  If the Company declares or pays a dividend on its common stock payable in common stock, or other securities, subdivides the outstanding common stock into a greater amount of common stock, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.

 

  

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2.2           Reclassification, Exchange or Substitution.  Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event.

 

2.3           Adjustments for Combinations, Etc.  If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased.

 

2.4           Price Adjustment.  If the Company issues additional common shares (including shares of common stock ultimately issuable upon conversion of a security convertible into common stock) after the date of the Warrant and the consideration per additional common share is less than the Warrant Price in effect immediately before such issue, the Warrant Price shall be reduced, concurrently with such Issue, to such lower price.  Upon each adjustment of the Warrant Price, the number of Shares issuable upon exercise of the Warrant shall be increased to equal the quotient obtained by dividing (a) the product resulting from multiplying (i) the number of Shares issuable upon exercise of the Warrant and (ii) the Warrant Price, in each case as in effect immediately before such adjustment, by (b) the adjusted Warrant Price.  Notwithstanding any provision of this Section 2.4, neither the Warrant Price nor the number of Shares shall be adjusted for any options issued to employees, directors, or officers under any stock option plan of the Company.

 

2.5           Loan Default.  Upon the occurrence of an Event of Default under the Loan Agreement between the Company and the Holder dated as of January 3, 2011, as amended (the “Loan Agreement”) and notice to the Company, the number of Shares that Holder may acquire under this Warrant shall increase by 50,000, and shall increase by an additional 75,000 Shares on the thirtieth day thereafter, and on each thirtieth day after that for so long as the Event of Default is continuing, up to a maximum additional Shares of 350,000.  The Warrant Price from and after the occurrence of an Event of Default shall be the lesser of (a) the Warrant Price that would otherwise be applicable and (b) the average closing price of Borrower’s common stock for the 15 day period immediately prior to such occurrence.

 

2.6           No Impairment.  The Company shall not, by amendment of its Certificate of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article against impairment.  If the Company takes any action affecting the Shares or its common stock other than as described above that adversely affects Holder’s rights under this Warrant, the Warrant Price shall be adjusted downward and the number of Shares issuable upon exercise of this Warrant shall be adjusted upward in such a manner that the aggregate Warrant Price of this Warrant is unchanged.

 

2.7           Certificate as to Adjustments.  Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based.  The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

 

ARTICLE 3.           REPRESENTATIONS AND COVENANTS OF THE COMPANY.

 

3.1           Representations and Warranties.  The Company hereby represents and warrants to the Holder that all Shares that may be issued upon the exercise of the purchase right represented by this Warrant, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

 

  

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3.2           Notice of Certain Events.  If the Company proposes at any time (a) to declare any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) to effect any reclassification or recapitalization of common stock; (d) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up unless the Company shall be the Surviving Entity; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the company’s securities for cash (except to the extent such offer occurs within 30 days of the Issue Date of this Warrant), then, in connection with each such event, the Company shall give Holder (1) at least 20 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; (2) in the case of the matters referred to in (c) and (d) above at least 20 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.

 

3.3           Registration Rights. The Shares, or the common stock into which the Shares are convertible, shall be “Registrable Securities”, and Holder shall have the rights of a “Holder” in respect of piggyback and S-3 registrations under such registration rights agreement or investor rights agreement as may be entered into from time to time among the Company and the Purchasers named therein.

 

3.4           Information Rights.  So long as the Holder holds this Warrant and/or any of the Shares, the Company shall deliver to the Holder (a) within one hundred twenty (120) days after the end of each fiscal year of the Company, the annual audited financial statements of the Company certified by independent public accountants of recognized standing and (b) within forty-five (45) days after the end of each of the first three quarters of each fiscal year, the Company’s quarterly, unaudited financial statements, provided Company need not provide such information for any period in which Company has filed Form 10Q with the Securities and Exchange Commission.

 

ARTICLE 4.           MISCELLANEOUS.

 

4.1           Term.  This Warrant is exercisable, in whole or in part, at any time and from time to time on or before the Expiration Date set forth above.

 

4.2           Legends.  This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR IN ACCORDANCE WITH APPLICABLE LAW.

 

4.3           Compliance with Securities Laws on Transfer.  This Warrant and the Shares issuable upon exercise this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee.

 

4.4           Transfer Procedure.  Subject to the provisions of Section 4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving the Company notice of the portion of the Warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable), provided that no such notice shall be required for a transfer to an affiliate of Holder.

 

  

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4.5           Notices.  All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time.

 

4.6           Waiver.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

4.7           Attorneys’ Fees.  In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

4.8           Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.

 

	  	ACCELERIZE NEW MEDIA, INC.
	  	  	  
	  	  	  
	  	By:	
 /s/ Brian Ross                                                             

	  	  	  
	  	Name:	
 Brian Ross                                                             

	  	  	  
	  	Title: 	
CEO                                                             

  

4

  

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.           The undersigned hereby elects to purchase ______________ shares of the Common Stock of ACCELERIZE NEW MEDIA, INC. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full.

 

1.           The undersigned hereby elects to convert the attached Warrant into Shares in the manner specified in the Warrant.  This conversion is exercised with respect to ______________ of the Shares covered by the Warrant.

 

[Strike paragraph that does not apply.]

 

2.           Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:

 

Agility Capital II, LLC

____________________

____________________

Or Registered Assignee

 

3.           The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws.

 

	
Agility Capital II, LLC or Registered Assignee

	  	  
	  	  	  
	  	  	  
	  	  	  
	
(Signature)

	  	  
	  	  	  
	  	  	  
	  	  	  
	
(Date)

	  	  

2

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