Document:

Exhibit 10.1

 

REGISTRATION
RIGHTS AGREEMENT 

 

This
Registration Rights Agreement (this "Agreement") is made and entered into as of
March 29, 2005, by and between HOUSE OF BRUSSELS CHOCOLATES INC., a Nevada
corporation (the "Company"), and Laurus Master Fund, Ltd. (the
"Purchaser").

 

This
Agreement is made pursuant to (i) the Securities Purchase Agreement, dated as of
the date hereof, by and between the Purchaser and the Company (as amended,
modified or supplemented from time to time, the "Securities Purchase
Agreement"), and pursuant to the Note and the Warrants referred to therein and
(ii) the Security Agreement, dated as of the date hereof, by and between the
Purchaser, the Company and certain Subsidiaries of the Company (as amended,
modified or supplemented from time to time, the “Security Agreement”), and
pursuant to the Notes and the Warrants referred to therein.

 

The
Company and the Purchaser hereby agree as follows: 

 

1.     Definitions.
Capitalized terms used and not otherwise defined herein that are defined in the
Securities Purchase Agreement or the Security Agreement, as applicable, shall
have the meanings given such terms in the Securities Purchase Agreement or the
Security Agreement, as applicable. As used in this Agreement, the following
terms shall have the following meanings:

 

"Commission" means
the Securities and Exchange Commission.

 

"Common
Stock" means
shares of the Company's common stock, par value $0.01 per share.

 

"Effectiveness
Date" means
(i) with respect to the initial Registration Statement required to be filed
hereunder, a date no later than one hundred thirty (130) days following the date
hereof and (ii) with respect to each additional Registration Statement required
to be filed hereunder, a date no later than thirty (30) days following the
applicable Filing Date.

 

"Effectiveness
Period" shall
have the meaning set forth in Section 2(a).

 

"Exchange
Act" means
the Securities Exchange Act of 1934, as amended, and any successor
statute.

 

 

"Filing
Date" means,
(i) with respect to the initial Registration Statement required to be filed
hereunder, a date no later than thirty (30) days following the date hereof, (ii)
with respect to each $500,000 tranche of Loans evidenced by a Minimum Borrowing
Note funded after the date hereof, the date which is thirty (30) days after such
funding of such additional $500,000 of Loans evidenced by a Minimum Borrowing
Note, (iii) with respect to shares of Common Stock issuable to the Holder as a
result of adjustments to the Fixed Conversion Price or Exercise Price made
pursuant to the Note or Section 4, the Warrant or otherwise, thirty (30) days
after the occurrence of such event or the date of the adjustment of the Fixed
Conversion Price or Exercise Price and (iv) with respect to any Warrant issued
after the date hereof, if any, the date which is thirty (30) days after the
issuance of such Warrant.

 

"Holder" or
"Holders" means
the Purchaser or any of its affiliates or transferees to the extent any of them
hold Registrable Securities.

 

"Indemnified
Party" shall
have the meaning set forth in Section 5(c).

 

"Indemnifying
Party" shall
have the meaning set forth in Section 5(c).

 

"Proceeding" means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened. 

 

"Prospectus" means
the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement, and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus. 

 

"Registrable
Securities" means
the shares of Common Stock issued upon the conversion of any Note (as defined in
each of the Securities Purchase Agreement and the Security Agreement) and
issuable upon exercise of the Warrants. 

 

"Registration
Statement" means
each registration statement required to be filed hereunder, including the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.

 

"Rule
144" means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule. 

 

"Rule
415" means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule. 

 

"Rule
424" means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule. 

 

 

"Securities
Act" means
the Securities Act of 1933, as amended, and any successor statute.

 

"Securities
Purchase Agreement" shall
have the meaning provided above.

 

"Security
Agreement" shall
have the meaning provided above.

 

"Trading
Market" means
any of the NASD OTCBB, NASDAQ SmallCap Market, the Nasdaq National Market, the
American Stock Exchange or the New York Stock Exchange. 

 

"Warrants" means,
collectively, the Common Stock purchase warrants issued pursuant to the
Securities Purchase Agreement and the Security Agreement. 

 

2.     Registration.

 

(a)    On or
prior to the applicable Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form SB-2 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form SB-2, in which case such
registration shall be on another appropriate form in accordance herewith). The
Company shall use its reasonable commercial efforts to cause the Registration
Statement to become effective and remain effective as provided herein. The
Company shall use its reasonable commercial efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event no later than the
Effectiveness Date. The Company shall use its reasonable commercial efforts to
keep the Registration Statement continuously effective under the Securities Act
until the date which is the earlier date of when (i) all Registrable Securities
have been sold or (ii) all Registrable Securities may be sold immediately
without registration under the Securities Act and without volume restrictions
pursuant to Rule 144(k), as determined by the counsel to the Company pursuant to
a written opinion letter to such effect, addressed and acceptable to the
Company's transfer agent and the affected Holders (the "Effectiveness
Period").

 

 

(b)    If: (i)
the Registration Statement is not filed on or prior to the Filing Date; (ii) the
Registration Statement is not declared effective by the Commission by the
Effectiveness Date; (iii) after the Registration Statement is filed with and
declared effective by the Commission, the Registration Statement ceases to be
effective (by suspension or otherwise) as to all Registrable Securities to which
it is required to relate at any time prior to the expiration of the
Effectiveness Period (without being succeeded immediately by an additional
registration statement filed and declared effective) for a period of time which
shall exceed 30 days in the aggregate per year or more than 20 consecutive
calendar days (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective); or (iv) the Common Stock is not
listed or quoted, or is suspended from trading on any Trading Market for a
period of three (3) consecutive Trading Days (provided the Company shall not
have been able to cure such trading suspension within 30 days of the notice
thereof or list the Common Stock on another Trading Market); (any such failure
or breach being referred to as an "Event," and for purposes of clause (i) or
(ii) the date on which such Event occurs, or for purposes of clause (iii) the
date which such 30 day or 20 consecutive day period (as the case may be) is
exceeded, or for purposes of clause (iv) the date on which such three (3)
Trading Day period is exceeded, being referred to as "Event Date"), then until
the applicable Event is cured, the Company shall pay, for each day that an Event
has occurred and is continuing, to each Holder an amount in cash, as liquidated
damages and not as a penalty, equal to one-thirtieth (1/30th) of the
product of: (A) the sum of (I) the original principal amount of the Note (as
defined in the Securities Purchase Agreement) plus (y) the
original principal amount of each applicable Minimum Borrowing Note (as defined
in the Security Agreement) multiplied by (B) 0.015. While such Event continues,
such liquidated damages shall be paid not less often than each thirty (30) days.
Any unpaid liquidated damages as of the date when an Event has been cured by the
Company shall be paid within three (3) days following the date on which such
Event has been cured by the Company.

 

(c)    Within
three business days of the Effectiveness Date, the Company shall cause its
counsel to issue a blanket opinion in the form attached hereto as Exhibit A, to
the transfer agent stating that the shares are subject to an effective
registration statement and can be reissued free of restrictive legend upon
notice of a sale by the Purchaser and confirmation by the Purchaser that it has
complied with the prospectus delivery requirements, provided that the Company
has not advised the transfer agent orally or in writing that the opinion has
been withdrawn. Copies of the blanket opinion required by this Section 2(c)
shall be delivered to Laurus within the time frame set forth above.

 

3.     Registration
Procedures. If and
whenever the Company is required by the provisions hereof to effect the
registration of any Registrable Securities under the Securities Act, the Company
will, as expeditiously as possible: 

 

(a)    prepare
and file with the Commission the Registration Statement with respect to such
Registrable Securities, respond as promptly as possible to any comments received
from the Commission, and use its best efforts to cause the Registration
Statement to become and remain effective for the Effectiveness Period with
respect thereto, and promptly provide to the Purchaser copies of all filings and
Commission letters of comment relating thereto;

 

(b)    prepare
and file with the Commission such amendments and supplements to the Registration
Statement and the Prospectus used in connection therewith as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by the Registration Statement and to keep
such Registration Statement effective until the expiration of the Effectiveness
Period;

 

 

(c)    furnish
to the Purchaser such number of copies of the Registration Statement and the
Prospectus included therein (including each preliminary Prospectus) as the
Purchaser reasonably may request to facilitate the public sale or disposition of
the Registrable Securities covered by the Registration Statement;

 

(d)    use its
commercially reasonable efforts to register or qualify the Purchaser's
Registrable Securities covered by the Registration Statement under the
securities or "blue sky" laws of such jurisdictions within the United States as
the Purchaser may reasonably request, provided, however, that the Company shall
not for any such purpose be required to qualify generally to transact business
as a foreign corporation or subject itself to taxation in any jurisdiction where
it is not so qualified or subject or to consent to general service of process in
any such jurisdiction;

 

(e)    list the
Registrable Securities covered by the Registration Statement with any securities
exchange on which the Common Stock of the Company is then listed; 

 

(f)    promptly
notify the Purchaser at any time when a Prospectus relating thereto is required
to be delivered under the Securities Act, of the happening of any event of which
the Company has knowledge as a result of which the Prospectus contained in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing; and

 

(g)    make
available for inspection by the Purchaser and any attorney, accountant or other
agent retained by the Purchaser, all publicly available, non-confidential
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to supply all
publicly available, non-confidential information reasonably requested by the
attorney, accountant or agent of the Purchaser.

 

4.     Registration
Expenses. All
expenses relating to the Company's compliance with Sections 2 and 3 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including reasonable counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the NASD, transfer taxes, fees of transfer agents and registrars, fees of, and
disbursements incurred by, one counsel for the Holders (to the extent such
counsel is required due to Company's failure to meet any of its obligations
hereunder), are called "Registration Expenses". All selling commissions
applicable to the sale of Registrable Securities, including any fees and
disbursements of any special counsel to the Holders beyond those included in
Registration Expenses, are called "Selling Expenses." The Company shall only be
responsible for all Registration Expenses.

 

 

5.     Indemnification.

 

(a)    In the
event of a registration of any Registrable Securities under the Securities Act
pursuant to this Agreement, the Company will indemnify and hold harmless the
Purchaser, and its officers, directors and each other person, if any, who
controls the Purchaser within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which the
Purchaser, or such persons may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Securities were registered under the Securities Act
pursuant to this Agreement, any preliminary Prospectus or final Prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Purchaser, and each such person for any
reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case if and
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by or on
behalf of the Purchaser or any such person in writing specifically for use in
any such document.

 

(b)    In the
event of a registration of the Registrable Securities under the Securities Act
pursuant to this Agreement, the Purchaser will indemnify and hold harmless the
Company, and its officers, directors and each other person, if any, who controls
the Company within the meaning of the Securities Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact which was furnished in writing by the Purchaser to the
Company expressly for use in (and such information is contained in) the
Registration Statement under which such Registrable Securities were registered
under the Securities Act pursuant to this Agreement, any preliminary Prospectus
or final Prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
person for any reasonable legal or other expenses incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that the Purchaser will be liable in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission so made in conformity with information furnished in writing
to the Company by or on behalf of the Purchaser specifically for use in any such
document. Notwithstanding the provisions of this paragraph, the Purchaser shall
not be required to indemnify any person or entity in excess of the amount of the
aggregate net proceeds received by the Purchaser in respect of Registrable
Securities in connection with any such registration under the Securities
Act.

 

 

(c)    Promptly
after receipt by a party entitled to claim indemnification hereunder (an
"Indemnified Party") of notice of the commencement of any action, such
Indemnified Party shall, if a claim for indemnification in respect thereof is to
be made against a party hereto obligated to indemnify such Indemnified Party (an
"Indemnifying Party"), notify the Indemnifying Party in writing thereof, but the
omission so to notify the Indemnifying Party shall not relieve it from any
liability which it may have to such Indemnified Party other than under this
Section 5(c) and shall only relieve it from any liability which it may have to
such Indemnified Party under this Section 5(c) if and to the extent the
Indemnifying Party is prejudiced by such omission. In case any such action shall
be brought against any Indemnified Party and it shall notify the Indemnifying
Party of the commencement thereof, the Indemnifying Party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel reasonably satisfactory to such Indemnified Party,
and, after notice from the Indemnifying Party to such Indemnified Party of its
election so to assume and undertake the defense thereof, the Indemnifying Party
shall not be liable to such Indemnified Party under this Section 5(c) for any
legal expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof; if the Indemnified Party retains its own counsel, then
the Indemnified Party shall pay all fees, costs and expenses of such counsel,
provided, however, that, if the defendants in any such action include both the
Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded based on the advice of counsel that there may be
reasonable defenses available to it which are different from or additional to
those available to the Indemnifying Party or if the interests of the Indemnified
Party reasonably may be deemed to conflict with the interests of the
Indemnifying Party, the Indemnified Party shall have the right to select one
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the Indemnifying Party as incurred. 

 

 

(d)    In order
to provide for just and equitable contribution in the event of joint liability
under the Securities Act in any case in which either (i) the Purchaser, or any
officer, director or controlling person of the Purchaser, makes a claim for
indemnification pursuant to this Section 5 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 5 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of the
Purchaser or such officer, director or controlling person of the Purchaser in
circumstances for which indemnification is provided under this Section 5; then,
and in each such case, the Company and the Purchaser will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Purchaser is
responsible only for the portion represented by the percentage that the public
offering price of its securities offered by the Registration Statement bears to
the public offering price of all securities offered by such Registration
Statement, provided, however, that, in any such case, (A) the Purchaser will not
be required to contribute any amount in excess of the public offering price of
all such securities offered by it pursuant to such Registration Statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 10(f) of the Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent
misrepresentation.

 

6.     Representations
and Warranties.

 

(a)    The
Common Stock of the Company is registered pursuant to Section 12(b) or 12(g) of
the Exchange Act and, except with respect to certain matters which the Company
has disclosed to the Purchaser on Schedule 4.21 to the Securities Purchase
Agreement, during the preceding three fiscal years of the Company, the Company
has timely filed all proxy statements, reports, schedules, forms, statements and
other documents required to be filed by it under the Exchange Act. The Company
has filed (i) its Annual Report on Form 10-KSB for its fiscal year ended April
30, 2004 and (ii) its Quarterly Report on Form 10-QSB for the fiscal quarters
ended July 31, 2004, October 31, 2004, and January 31, 2005 (collectively, the
"SEC Reports"). Each SEC Report was, at the time of its filing, in substantial
compliance with the requirements of its respective form and none of the SEC
Reports, nor the financial statements (and the notes thereto) included in the
SEC Reports, as of their respective filing dates, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except as disclosed to
the Purchaser on Schedule 4.21 to the Securities Purchase Agreement, the
financial statements of the Company included in the SEC Reports comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed) and fairly present in all material respects the financial
condition, the results of operations and the cash flows of the Company and its
subsidiaries, on a consolidated basis, as of, and for, the periods presented in
each such SEC Report.

 

 

(b)    The
Common Stock is listed for trading on the NASD OTCBB and satisfies all
requirements for the continuation of such listing. The Company has not received
any notice that its Common Stock will be delisted from the NASD OTCBB (except
for prior notices which have been fully remedied) or that the Common Stock does
not meet all requirements for the continuation of such listing.

 

(c)    Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would cause
the offering of the Securities pursuant to the Securities Purchase Agreement and
the Security Agreement to be integrated with prior offerings by the Company for
purposes of the Securities Act which would prevent the Company from selling the
Common Stock pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of
its affiliates or subsidiaries take any action or steps that would cause the
offering of such Securities to be integrated with other offerings.

 

(d)    The
Warrants, the Notes and the shares of Common Stock which the Purchaser may
acquire pursuant to the Warrants and the Notes are all restricted securities
under the Securities Act as of the date of this Agreement. The Company will not
issue any stop transfer order or other order impeding the sale and delivery of
any of the Registrable Securities at such time as such Registrable Securities
are registered for public sale or an exemption from registration is available,
except as required by federal or state securities laws.

 

(e)    The
Company understands the nature of the Registrable Securities issuable upon the
conversion of the Notes and the exercise of the Warrant and recognizes that the
issuance of such Registrable Securities may have a potential dilutive effect.
The Company specifically acknowledges that its obligation to issue the
Registrable Securities is binding upon the Company and enforceable regardless of
the dilution such issuance may have on the ownership interests of other
shareholders of the Company.

 

(f)    Except
for agreements made in the ordinary course of business, there is no agreement
that has not been filed with the Commission as an exhibit to a registration
statement or to a form required to be filed by the Company under the Exchange
Act, the breach of which could reasonably be expected to have a material and
adverse effect on the Company and its subsidiaries, or would prohibit or
otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement in any material
respect.

 

(g)    The
Company will at all times on and after the sixtieth (60) day following the
Closing Date have authorized and reserved a sufficient number of shares of
Common Stock for the full conversion of the Notes and the exercise of the
Warrants.

 

 

7.     Miscellaneous.

 

(a)    Remedies. In the
event of a breach by the Company or by a Holder, of any of their respective
obligations under this Agreement, each Holder or the Company, as the case may
be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. 

 

(b)    No
Piggyback on Registrations. Except
as and to the extent specified in Schedule 7(b) hereto, neither the Company nor
any of its security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in any Registration Statement to
be filed hereunder other than the Registrable Securities, and the Company shall
not after the date hereof enter into any agreement providing any such right for
inclusion of shares in the Registration Statement to any of its security
holders. Except as and to the extent specified in Schedule 7(b) hereto, the
Company has not previously entered into any agreement granting any registration
rights with respect to any of its securities to any Person that have not been
fully satisfied. 

 

(c)    Compliance. Each
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.

 

(d)    Discontinued
Disposition. Each
Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of a Discontinuation
Event (as defined below), such Holder will forthwith discontinue disposition of
such Registrable Securities under the applicable Registration Statement until
such Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. For purposes of this Section 7(d), a
"Discontinuation Event" shall mean (i) when the Commission notifies the Company
whether there will be a "review" of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement (the Company shall
provide true and complete copies thereof and all written responses thereto to
each of the Holders); (ii) any request by the Commission or any other Federal or
state governmental authority for amendments or supplements to such Registration
Statement or Prospectus or for additional information; (iii) the issuance by the
Commission of any stop order suspending the effectiveness of such Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and/or (v) the occurrence of any event or passage of time that makes
the financial statements included in such Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.

 

 

(e)    Piggy-Back
Registrations. If at
any time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
fifteen days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered to the
extent the Company may do so without violating registration rights of others
which exist as of the date of this Agreement, subject to customary underwriter
cutbacks applicable to all holders of registration rights and subject to
obtaining any required consent of any selling stockholder(s) to such inclusion
under such registration statement.

 

(f)    Amendments
and Waivers. The
provisions of this Agreement, including the provisions of this sentence, may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of certain Holders and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.

 

 

(g)    Notices. Any
notice or request hereunder may be given to the Company or the Purchaser at the
respective addresses set forth below or as may hereafter be specified in a
notice designated as a change of address under this Section 7(g). Any notice or
request hereunder shall be given by registered or certified mail, return receipt
requested, hand delivery, overnight mail, Federal Express or other national
overnight next day carrier (collectively, "Courier") or telecopy (confirmed by
mail). Notices and requests shall be, in the case of those by hand delivery,
deemed to have been given when delivered to any party to whom it is addressed,
in the case of those by mail or overnight mail, deemed to have been given three
(3) business days after the date when deposited in the mail or with the
overnight mail carrier, in the case of a Courier, the next business day
following timely delivery of the package with the Courier, and, in the case of a
telecopy, when confirmed. The address for such notices and communications shall
be as follows:

 

	
      If
      to the Company:
	
      House
      of Brussels Chocolates Inc.

      One
      Riverway, Suite 1700

      Houston,
      Texas 77056

       

      Attention: Bob
      Wesolek

      Facsimile: 604-527-8005

	 	 
	
      With
      a copy to:
	
      Robert
      D. Axelrod

      Axelrod,
      Smith & Kirshbaum

      5300
      Memorial Drive, Ste. 700

      Houston,
      Texas 77007

       

      Facsimile:
      713-552-0202

	
       
	 
	
      If
      to a Purchaser:
	
      To
      the address set forth under such Purchaser name on the signature pages
      hereto.

	
       
	 
	
      If
      to any other Person who is then the registered
Holder:
	
       

      To
      the address of such Holder as it appears in the stock transfer books of
      the Company

or such
other address as may be designated in writing hereafter in accordance with this
Section 7(g) by such Person.

 

(h)    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 and shall inure to the benefit of each
Holder. The Company may not assign its rights or obligations hereunder without
the prior written consent of each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the the Securities Purchase Agreement, the Security Agreement and each
Note.

 

 

(i)    Execution
and Counterparts. This
Agreement may be executed in any number of 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. 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 the original thereof.

 

(j)    Governing
Law. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement shall be commenced exclusively in the state and
federal courts sitting in the City of New York, Borough of Manhattan. Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that such
Proceeding is improper. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such Proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Proceeding to
enforce any provisions of this Agreement, the Securities Purchase Agreement, any
Related Agreement, the Security Agreement or any Ancillary Agreement, then the
prevailing party in such Proceeding shall be reimbursed by the other party for
its reasonable attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding. 

 

(k)    Cumulative
Remedies. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.

 

 

(l)    Severability. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.

 

(m)    Headings. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

 

[BALANCE
OF PAGE INTENTIONALLY LEFT BLANK;

 

SIGNATURE
PAGE FOLLOWS]

 

IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as
of the date first written above. 

 

	
      HOUSE
      OF BRUSSELS CHOCOLATE INC.
	 	
      Laurus
      Master Fund, Ltd.

	 	 	 
	 	 	 
	
      By:
	 	 	
      By:
	 
	
      Name:
	 	 	
      Name:
	 
	
      Title:
	 	 	
      Title:
	 
	 	 	 
	 	 	
      Address
      for Notices:

	 	 	 
	 	 	
      825
      Third Avenue − 14th
      Floor

	 	 	
      New
      York, NY 10022

	 	 	
      Attention: David
      Grin

	 	 	
      Facsimile: 212-541-4434

 

EXHIBIT
A

 

[Month
__, 200_]

	
      [____________]

      [Insert
      Address]

      Attn:
      ]
	 

	
      Re:

       
	
      House
      of Brussels Chocolate Inc. Registration Statement on Form SB-2

       

 

Ladies
and Gentlemen:

 

As
counsel to House of Brussels Chocolate Inc., a Nevada corporation (the
“Company”), we have been requested to render our opinion to you in connection
with the resale by the individuals or entitles listed on Schedule A attached
hereto (the “Selling Stockholders”), of an aggregate of [amount]shares (the
“Shares”) of the Company’s Common Stock.

 

A
Registration Statement on Form SB-2 under the Securities Act of 1933, as amended
(the “Act”), with respect to the resale of the Shares was declared effective by
the Securities and Exchange Commission on [date]. Enclosed is the Prospectus
dated [date]. We understand that the Shares are to be offered and sold in the
manner described in the Prospectus.

 

Based
upon the foregoing, upon request by the Selling Stockholders at any time while
the registration statement remains effective, it is our opinion that the Shares
have been registered for resale under the Act and assuming that the Shares have
been fully paid for in accordance with the terms of the Note and the Warrants as
set forth and described in the Prospectus new certificates evidencing the Shares
upon their resale by the Selling Stockholders may be issued without restrictive
legend. We will advise you if the registration statement is not available or
effective at any point in the future.

 

Very
truly yours,

[Company
counsel]EXHIBIT 10.6

                            AGREEMENT BY AND BETWEEN
                        The National Bank of Gainesville
                              Gainesville, Georgia
                                       and
                  The Office of the Comptroller of the Currency

     The National Bank of Gainesville, Gainesville, Georgia (Bank) and the
Comptroller of the Currency of the United States of America (Comptroller) wish
to protect the interests of the depositors, other customers, and shareholders of
the Bank, and, toward that end, wish the Bank to operate safely and soundly and
in accordance with all applicable laws, rules and regulations.

     The Comptroller, through his National Bank Examiner, has examined the Bank,
and his findings are contained in the Report of Examination, dated April 26,
2004 (ROE).

     In consideration of the above premises, it is agreed, between the Bank, by
and through its duly elected and acting Board of Directors (Board), and the
Comptroller, through his authorized representative, that the Bank shall operate
at all times in compliance with the articles of this Agreement.

                                    ARTICLE I

                                  JURISDICTION
                                  ------------

     (1)  This Agreement shall be construed to be a "written agreement entered
into with the agency" within the meaning of 12 U.S.C. Sec. 1818(b)(1).

     (2)  This Agreement shall be construed to be a "written agreement between
such depository institution and such agency" within the meaning of 12 U.S.C.
Sec. 1818(e)(1) and 12 U.S.C. Sec. 1818(i)(2).

     (3)  This Agreement shall be construed to be a "formal written agreement"
within the meaning of 12 C.F.R. Sec. 5.51(c)(6)(ii).  See 12 U.S.C. Sec. 1831i.
                                                      ---

     (4)  This Agreement shall be construed to be a "written agreement" within
the meaning of 12 U.S.C. Sec. 1818(u)(1)(A).

<PAGE>
     (5)  All reports or plans which the Bank or Board has agreed to submit to
the Assistant Deputy Comptroller pursuant to this Agreement shall be forwarded
to the:

     Assistant Deputy Comptroller
     Atlanta Field Office
     1117 Perimeter Center West, Suite 401
     Atlanta, Georgia 30338

                                   ARTICLE II

                              COMPLIANCE COMMITTEE
                              --------------------

     (1)  Within (30) days, the Board shall appoint a Compliance Committee of at
least five (5) directors, of which no more than two (2) shall be employees of
the Bank.  Upon appointment, the names of the members of the Compliance
Committee shall be submitted in writing to the Assistant Deputy Comptroller.
The Compliance Committee shall be responsible for monitoring and coordinating
the Bank's adherence to the provisions of this Formal Agreement.

     (2)  The Compliance Committee shall meet at least monthly.

     (3)  Within thirty (30) days of the appointment of the Committee and
quarterly thereafter, the Compliance Committee shall submit a written progress
report to the Board setting forth in detail:

          (a)  actions taken to comply with each Article of this Formal
     Agreement; and

          (b)  the results of those actions.

     (4)  The Board shall forward a copy of the Compliance Committee's report,
with any additional comments by the Board, to the Assistant Deputy Comptroller.

                                      -2-
<PAGE>
                                   ARTICLE III

                 OBTAIN A PERMANENT PRESIDENT AND SENIOR LENDER
                 ----------------------------------------------

     (1)  Within ninety (90) days, the Board shall appoint both a capable
President and Senior Lender who shall be vested with sufficient executive
authority to fulfill the duties and responsibilities of these positions and
ensure the safe and sound operation of the Bank.

     (2)  Prior to the appointment of any individuals to the President and
Senior Lender positions, the Board shall submit to the Assistant Deputy
Comptroller the following information:

          (a)  the information sought in the "Changes in Directors and Senior
     Executive Officers" booklet of the Comptroller's Corporate Manual, together
     with a legible fingerprint card for the proposed individual;

          (b)  a written statement of the Board's reasons for selecting the
     proposed officer; and

          (c)  a written description of the proposed officer's duties and
     responsibilities.

     (3)  The Assistant Deputy Comptroller shall have the power of veto over the
employment of the proposed officers.  However, the failure to exercise such veto
power shall not constitute an approval or endorsement of the proposed officers.

     (4)  The requirement to submit information and the prior veto provisions of
this Article are based on the authority of 12 U.S.C. Sec. 1818(b) and do not
require the Comptroller to complete his review and act on any such information
or authority within ninety (90) days.

                                   ARTICLE IV

                        CAPITAL PLAN AND HIGHER MINIMUMS
                        --------------------------------

     (1)  The Bank shall immediately achieve and maintain the following capital
levels (defined in 12 C.F.R. Part 3):

                                      -3-
<PAGE>
          (a)  Total capital at least equal to twelve percent (12%) of
     risk-weighted assets; and

          (b)  Tier 1 capital at least equal to eight percent (8%) of adjusted
     total assets.

     (2) The Bank shall achieve by March 31, 2005, and thereafter maintain, the
following capital levels:

          (a)  Total capital at least equal to fourteen percent (14%) of
     risk-weighted assets; and

          (b)  Tier 1 capital at least equal to nine percent (9%) of adjusted
     total assets.

     (3)  The requirement in this Agreement to meet and maintain a specific
capital level means that the Bank may not be deemed to be "well capitalized" for
purposes of 12 U.S.C. Sec. 1831o and 12 C.F.R. Part 6 pursuant to 12 C.F.R. Sec.
6.4(b)(1)(iv).

     (4)  Within sixty (60) days, the Board shall develop, implement, and
thereafter ensure Bank adherence to a three-year capital program.  The program
shall include:

          (a)  specific plans for the maintenance of adequate capital that may
     in no event be less than the requirements of paragraphs (1) and (2);

          (b)  projections for growth and capital requirements based upon a
     detailed analysis of the Bank's assets, liabilities, earnings, fixed
     assets, and off-balance sheet activities;

          (c)  projections of the sources and timing of additional capital to
     meet the Bank's current and future needs;

          (d)  the primary source(s) from which the Bank will strengthen its
     capital structure to meet the Bank's needs;

                                      -4-
<PAGE>
          (e)  contingency plans that identify alternative methods should the
     primary source(s) under (d) above not be available; and

          (f)  a dividend policy that permits the declaration of a dividend
     only:

               (i)    when the Bank is in compliance with its approved capital
          program;

               (ii)   when the Bank is in compliance with 12 U.S.C. Sec.Sec. 56
          and 60; and

               (iii)  with the prior written approval of the Assistant Deputy
          Comptroller.

     (5)  Upon completion, the Bank's capital program shall be submitted to the
Assistant Deputy Comptroller for approval.  Upon approval by the Assistant
Deputy Comptroller, the Bank shall implement and adhere to the capital program.

                                    ARTICLE V

               LENDING/CREDIT ADMINISTRATION POLICY AND PROCEDURES
               ---------------------------------------------------

     (1)  Within (30) days, the Board shall review and revise the Bank's written
loan policy.  In revising this policy, the Board shall refer to the Loan
Portfolio Management booklet, A-LPM, of the Comptroller's Handbook.  This policy
shall incorporate, but not necessarily be limited to, the following:

          (a)  a description of acceptable types of loans;

          (b)  procedures to ensure that extensions of credit are granted, by
     renewal or otherwise, to any borrower only after obtaining and analyzing
     current and satisfactory credit information;

          (c)  maturity scheduling related to the anticipated source of
     repayment, the purpose of the loan, and the useful life of the collateral;

          (d)  maximum ratio of loan value to appraised value or acquisition
     cost;

          (e)  policy requirements for unsecured lending;

                                      -5-
<PAGE>
          (f)  guidelines and limitations on concentrations of credit;

          (g)  a limitation on the type and size of loans that may be made by
     each loan officer without prior approval by the Board or loan committee;

          (h)  measures to correct the deficiencies in the Bank's lending
     procedures noted in any Report of Examination;

          (i)    effective nonaccrual loan procedures;

          (j)  procedures to ensure the timely identification and rating of
     loans and leases based on lending officer submissions;

          (k)  guidelines setting forth the criteria under which renewals of
     extensions of credit may be approved. At a minimum the policy shall:

               (i)    ensure that renewals are not made for the sole purpose of
          reducing the volume of loan delinquencies; and

               (ii)   provide guidelines and limitations on the capitalization
          of interest;

     (2) Upon adoption, the policy shall be implemented, the Board shall
thereafter ensure Bank adherence to the policy, and a copy of the policy shall
be forwarded to the Assistant Deputy Comptroller for review.

                                   ARTICLE VI

                         INDEPENDENT LOAN REVIEW PROGRAM
                         -------------------------------

     (1)  Within thirty (30) days, the Board shall employ a qualified consultant
to perform an ongoing asset quality review of the Bank.  The consultant shall be
utilized until such time as an ongoing internal asset quality review system is
developed by the Board, implemented and demonstrated to be effective.  Before
terminating the consultant's asset quality review services, the Board shall both
certify the effectiveness of the internal asset quality review system, and
receive prior approval from the Assistant Deputy Comptroller.

                                      -6-
<PAGE>
     (2)  Prior to hiring a consultant or entering into any contract with a
consultant, the Bank shall submit the proposed terms of employment and the
qualifications of the consultant to the Assistant Deputy Comptroller who shall
have the power of veto.  However, the failure to exercise such veto power shall
not constitute an approval or endorsement of the proposed consultant.

     (3)  The requirement to submit information and the prior veto provisions of
this Article are based on the authority of 12 U.S.C. Sec. 1818(b) and do not
require the Comptroller to complete his review and act on any such information
or authority within ninety (90) days.

                                   ARTICLE VII

                        CREDIT AND COLLATERAL EXCEPTIONS
                        --------------------------------

     (1)  Within ninety (90) days, the Board shall take action to obtain current
and satisfactory credit information on all loans over twenty-five thousand
dollars ($25,000) lacking such information.

     (2)  Within ninety (90) days, the Board shall take all possible actions to
obtain proper collateral documentation on all loans.

     (3)  Effective immediately, the Bank may grant, extend, renew, alter, or
restructure any loan or other extension of credit only after:

          (a) documenting the specific reason or purpose for the extension of
     credit;

          (b)  identifying the expected source of repayment in writing;

          (c)  structuring the repayment terms to coincide with the expected
     source of repayment;

          (d)  obtaining and analyzing current and satisfactory credit
     information, including cash flow analysis where loans are to be repaid from
     operations;

                                      -7-
<PAGE>
               (i)    Failure to obtain the information in (d) shall require a
          majority of the full Board (or a delegated committee thereof) to
          certify in writing the specific reasons why obtaining and analyzing
          the information in (d) would be detrimental to the best interests of
          the Bank.

               (ii)   A copy of the Board certification shall be maintained in
          the credit file of the affected borrower(s). The certification will be
          reviewed by this Office in subsequent examinations of the Bank; and

          (e)  documenting, with adequate supporting material, the value of
     collateral and properly perfecting the Bank's lien on it where applicable.

                                  ARTICLE VIII

                                CRITICIZED ASSETS
                                -----------------

     (1)  Within thirty (30) days, the Board shall adopt, implement, and
thereafter take all available measures to ensure the Bank adherence to, a
written program designed to eliminate the basis of criticism of assets
criticized in the ROE, in any subsequent Report of Examination, or by any
internal or external loan review, or in any list provided to management by the
National Bank Examiners.  This program shall include, at a minimum:

          (a)  an identification of the expected sources of repayment;

          (b)  the appraised value of supporting collateral and the position of
     the Bank's lien on such collateral where applicable;

          (c)  an analysis of current and satisfactory credit information,
     including cash flow analysis where loans are to be repaid from operations;
     and

          (d)  the proposed action to eliminate the basis of criticism and the
     time frame for its accomplishment.

                                      -8-
<PAGE>
     (2)  The Board, or a designated committee, shall conduct a review, on at
least a quarterly basis, to determine:

          (a)  the status of each criticized asset or criticized portion thereof
     that equals or exceeds fifty thousand dollars ($50,000);

          (b)  management's adherence to the program adopted pursuant to this
     Article;

          (c)  the status and effectiveness of the written program; and

          (d)  the need to revise the program or take alternative action.

     (3)  A copy of each review shall be forwarded to the Assistant Deputy
Comptroller on a quarterly basis in a format similar to Appendix I, attached
hereto.

     (4)  The Bank may extend credit, directly or indirectly, including
renewals, extensions or overdrafts, to a borrower whose loans or other
extensions of credit are criticized only if each of the following conditions is
met:

          (a)  the Board or designated committee finds that the extension of
     additional credit is necessary to promote the best interests of the Bank
     and that prior to renewing, extending, or capitalizing any additional
     credit, a majority of the full Board (or designated committee) approves the
     credit extension and records, in writing, why such extension is necessary
     to promote the best interests of the Bank; and

          (b)  a comparison to the written program adopted pursuant to this
     Article shows that the Board's formal plan to collect or strengthen the
     criticized asset will not be compromised.

     (5)  A copy of the approval of the Board or of the designated committee
shall be maintained in the file of the affected borrower.

                                      -9-
<PAGE>
                                   ARTICLE IX

                       ALLOWANCE FOR LOAN AND LEASE LOSSES

     (1)  The Board shall review the adequacy of the Bank's Allowance for Loan
and Lease Losses (Allowance) and shall establish a program for the maintenance
of an adequate Allowance.  This review and program shall be designed in light of
the comments on maintaining a proper Allowance found in the Allowance for Loan
and Lease Losses booklet, A-ALLL, of the Comptroller's Handbook, and shall focus
particular attention on the following factors:

          (a)  results of the Bank's internal loan review;

          (b)  results of the Bank's external loan review;

          (c)  an estimate of inherent loss exposure on each significant credit;

          (d)  loan loss experience;

          (e)  trends of delinquent and nonaccrual loans;

          (f)  concentrations of credit in the Bank; and,

          (g)  present and prospective economic conditions.

     (2)  The program shall provide for a review of the Allowance by the Board
at least once each calendar quarter.  Any deficiency in the Allowance shall be
remedied in the quarter it is discovered, prior to the filing of the
Consolidated Reports of Condition and Income, by additional provisions from
earnings.  Written documentation shall be maintained indicating the factors
considered and conclusions reached by the Board in determining the adequacy of
the Allowance.

                                    ARTICLE X

                                 STRATEGIC PLAN

     (1)  Within one hundred eighty (180) days, the Board shall adopt,
implement, and thereafter ensure Bank adherence to a written strategic plan for
the Bank covering at least a

                                      -10-
<PAGE>
three-year period.  The strategic plan shall establish objectives for the Bank's
overall risk profile, earnings performance, growth, balance sheet mix,
off-balance sheet activities, liability structure, capital adequacy, reduction
in the volume of nonperforming assets, product line development and market
segments that the Bank intends to promote or develop, together with strategies
to achieve those objectives and, at a minimum, include:

          (a)  a mission statement that forms the framework for the
     establishment of strategic goals and objectives;

          (b)  an assessment of the Bank's present and future operating
     environment;

          (c)  the development of strategic goals and objectives to be
     accomplished over the short and long term;

          (d)  an identification of the Bank's present and future product lines
     (assets and liabilities) that will be utilized to accomplish the strategic
     goals and objectives established in (1)(c) of this Article;

          (e)  an evaluation of the Bank's internal operations, staffing
     requirements, board and management information systems and policies and
     procedures for their adequacy and contribution to the accomplishment of the
     goals and objectives developed under (1)(c) of this Article;

          (f)  a management employment and succession program to promote the
     retention and continuity of capable management;

          (g)  product line development and market segments that the Bank
     intends to promote or develop;

                                      -11-
<PAGE>
          (h)  an action plan to improve bank earnings and accomplish identified
     strategic goals and objectives, including individual responsibilities,
     accountability and specific time frames;

          (i)  a financial forecast to include projections for major balance
     sheet and income statement accounts and desired financial ratios over the
     period covered by the strategic plan;

          (j)  control systems to mitigate risks associated with planned new
     products, growth, or any proposed changes in the Bank's operating
     environment.

     (2)  Upon adoption, a copy of the plan shall be forwarded to the Assistant
Deputy Comptroller for review and approval.

                                   ARTICLE XI

                                     CLOSING

     (1)  Although the Board has agreed to submit certain programs and reports
to the Assistant Deputy Comptroller for review or approval, the Board has the
ultimate responsibility for proper and sound management of the Bank.

     (2)  It is expressly and clearly understood that if, at any time, the
Comptroller deems it appropriate in fulfilling the responsibilities placed upon
him by the several laws of the United States of America to undertake any action
affecting the Bank, nothing in this Agreement shall in any way inhibit, estop,
bar, or otherwise prevent the Comptroller from so doing.

     (3)  Any time limitations imposed by this Agreement shall begin to run from
the effective date of this Agreement.  Such time requirements may be extended in
writing by the Assistant Deputy Comptroller for good cause upon written
application by the Board.

     (4)  The provisions of this Agreement shall be effective upon execution by
the parties hereto and its provisions shall continue in full force and effect
unless or until such provisions are

                                      -12-
<PAGE>
amended in writing by mutual consent of the parties to the Agreement or
excepted, waived, or terminated in writing by the Comptroller.

     (5)  This Agreement is intended to be, and shall be construed to be, a
supervisory "written agreement entered into with the agency" as contemplated by
12 U.S.C. Sec. 1818(b)(1), and expressly does not form, and may not be construed
to form, a contract binding on the OCC or the United States.  Notwithstanding
the absence of mutuality of obligation, or of consideration, or of a contract,
the OCC may enforce any of the commitments or obligations herein undertaken by
the Bank under its supervisory powers, including 12 U.S.C. Sec. 1818(b)(1), and
not as a matter of contract law.  The Bank expressly acknowledges that neither
the Bank nor the OCC has any intention to enter into a contract.  The Bank also
expressly acknowledges that no OCC officer or employee has statutory or other
authority to bind the United States, the U.S. Treasury Department, the OCC, or
any other federal bank regulatory agency or entity, or any officer or employee
of any of those entities to a contract affecting the OCC's exercise of its
supervisory responsibilities.  The terms of this Agreement, including this
paragraph, are not subject to amendment or modification by any extraneous
expression, prior agreements or arrangements, or negotiations between the
parties, whether oral or written.

     IN TESTIMONY WHEREOF, the undersigned, authorized by the Comptroller, has
hereunto set his hand on behalf of the Comptroller.

/s/ Ben E. Noelke                                   8/18/04
-----------------------------------                 ---------------------------
Ben E. Noelke                                       Date
Acting Assistant Deputy Comptroller
Atlanta Field Office

                                      -13-
<PAGE>
     IN TESTIMONY WHEREOF, the undersigned, as the duly elected and acting Board
of Directors of the Bank, have hereunto set their hands on behalf of the Bank.

/s/ Paula M. Allen                                   8/18/04
--------------------------                           --------------------------
Paula M. Allen                                       Date

/s/ J. Darwin Allison, Jr.                           8/18/04
--------------------------                           --------------------------
J. Darwin Allison, Jr.                               Date

/s/ Shelley P. Anderson                              8/18/04
--------------------------                           --------------------------
Shelley P. Anderson                                  Date

/s/ Kathy L. Cooper                                  8/18/04
--------------------------                           --------------------------
Kathy L. Cooper                                      Date

/s/ Anne L. Davenport                                8/18/04
--------------------------                           --------------------------
Anne L. Davenport                                    Date

/s/ Lanny W. Dunagan                                 8/18/04
--------------------------                           --------------------------
Lanny W. Dunagan                                     Date

/s/ Gilbert T. Jones Sr.                             8/18/04
--------------------------                           --------------------------
Gilbert T. Jones Sr.                                 Date

/s/ Roger P. Martin                                  8/18/04
--------------------------                           --------------------------
Roger P. Martin                                      Date

/s/ John W. McHugh                                   8/18/04
--------------------------                           --------------------------
John W. McHugh                                       Date

/s/ Ann M. Palmour                                   8/18/04
--------------------------                           --------------------------
Ann M. Palmour                                       Date

/s/ Wendall A. Turner                                8/18/04
--------------------------                           --------------------------
Wendall A. Turner                                    Date

                                      -14-
<PAGE>
                                   APPENDIX A
                         THE NATIONAL BANK OF GAINSVILLE

CRITICIZED ASSET REPORT AS OF:
                                ------------------------------------

BORROWER(S):

--------------------------------------------------------------------

ASSET BALANCE(S) AND OCC RATING CRITICISM (OAEM, SUBSTANDARD, DOUBTFUL, OR
LOSS):

               ASSET BALANCE:  $
                                 -----------------------------------------------

               CRITICISM:
                           -----------------------------------------------------

               AMOUNT CHARGED OFF TO DATE:
                                             -----------------------------------

               FUTURE POTENTIAL CHARGE-OFF:
                                             -----------------------------------

PRESENT STATUS* (include past due status, nonperforming, significant progress of
deterioration, etc.):

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

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FINANCIAL AND/OR COLLATERAL SUPPORT (include brief summary of most current
financial information, appraised value of collateral and/or estimated value and
date thereof, bank's lien position and amount of available equity, if any,
guarantor(s) info, etc.):
                           -----------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

PROPOSED PLAN OF ACTION TO ELIMINATE ASSET CRITICISM(S) AND TIME FRAME FOR ITS
ACCOMPLISHMENT:

--------------------------------------------------------------------------------

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IDENTIFIED SOURCE OF REPAYMENT AND DEFINED REPAYMENT PROGRAM (repayment program
should coincide with source of repayment):

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

USE THIS FORM for reporting each criticized asset which exceeds fifty thousand
dollars ($50,000) and retain the original in the credit file for review by the
examiners.  Submit your reports quarterly until notified otherwise, in writing,
to the Assistant Deputy Comptroller, Northeast Texas Field Office.

*Any increase in the asset(s) should be fully explained in the PRESENT STATUS
section.

<PAGE>

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