Document:

Unassociated Document

EXHIBIT 10.2

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (hereinafter referred to as the “Agreement”), dated August 17, 2010 by and between Safe Technologies International, Inc, a Delaware Corporation, with its principal office at 1200 North Federal Highway, Boca Raton, FL 33432 (hereinafter referred to as the “Company”),

and

Kodiak Capital Group, LLC, a Delaware Limited Liability Company, with its principal office at One Columbus Place, 25th Floor, New York, NY 10019 (hereinafter referred to as the “Investor”).

WHEREAS, in connection with the Investment Agreement by and between the Company and the Investor of equal date as the Agreement hereto (the “Investment Agreement”), the Company has agreed to issue and sell to the Investor an indeterminate number of shares of the Company’s Common Stock, $.00001 par value per share (the “Common Stock”), to be purchased pursuant to the terms and subject to the conditions set forth in the Investment Agreement, which is hereby incorporated by reference; and

WHEREAS, to induce the Investor to execute and deliver the Investment Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “1933 Act”), and applicable state securities laws, with respect to the shares of Common Stock issuable pursuant to the Investment Agreement.

NOW THEREFORE, in consideration of the foregoing promises and the mutual covenants contained hereinafter and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:

Section 1.  DEFINITIONS.

As used in this Agreement, the following terms shall have the following meanings:

“Execution Date” means the date of this Agreement set forth above.

“Investor” means Kodiak Capital Group, LLC, a Delaware Limited Liability Company.

“Person” means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.

  

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“Potential Material Event” means any of the following: (i) the possession by the Company of material information not ripe for disclosure in the Registration Statement, which shall be evidenced by determinations in good faith by the Board of Directors of the Company that disclosure of such information in the Registration Statement would be detrimental to the business and affairs of the Company, or (ii) any material engagement or activity by the Company which would, in the good faith determination of the Board of Directors of the Company, be adversely affected by disclosure in the Registration Statement at such time, which determination shall be accompanied by a good faith determination by the Board of Directors of the Company that the Registration Statement would be materially misleading absent the inclusion of such information.

“Principal Market” shall mean The American Stock Exchange, National Association of Securities Dealer’s, Inc., Over-the-Counter electronic bulletin board, the Nasdaq National Market or The Nasdaq SmallCap Market whichever is the principal market on which the Common Stock of the Company is listed.

“Register,” “Registered,” and “Registration” refer to the Registration effected by preparing and filing one (1) or more Registration Statements in compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule providing for offering securities on a continuous basis (hereinafter referred to as “Rule 415”), and the declaration or ordering of effectiveness of such Registration Statement(s) by the United States Securities and Exchange Commission (hereinafter referred to as the “SEC”).

“Registrable Securities” means (i) the shares of Common Stock issued or issuable pursuant to the Investment Agreement, and (ii) any shares of capital stock issued or issuable with respect to such shares of Common Stock, if any, as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, which have not been (x) included in the Registration Statement that has been declared effective by the SEC, or (y) sold under circumstances meeting all of the applicable conditions of Rule 144 (or any similar provision then in force) under the 1933 Act.

“Registration Statement” means the registration statement of the Company filed under the 1933 Act covering the Registrable Securities.

All capitalized terms used in this Agreement and not otherwise defined herein shall have the same meaning ascribed to them as in the Investment Agreement.

Section 2.  REGISTRATION.

(a)  The Company shall, within fifteen (15) days of the date of this Agreement, deliver to Investor a draft Registration Statement on Form S-1 (or, if such form is unavailable for such a registration, on such other form as is available for such registration), covering the sale of all of the Registrable Securities, which Registration Statement(s) shall state that, in accordance with Rule 416 promulgated under the 1933 Act, such Registration Statement also covers such indeterminate number of additional shares of Common Stock as may become issuable upon stock splits, stock dividends or similar transactions.  The Company shall initially register for resale Eighty Million (80,000,000) shares of Common Stock which would be issuable on the date preceding the filing of the Registration Statement based on the closing bid price of the Company’s Common Stock on such date except to the extent that the SEC requires the share amount to be reduced as a condition of effectiveness.  Upon approval of the Registration Statement content by Investor, the Company will promptly file the Registration Statement with the SEC.

  

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(b)  The Company shall use all commercially reasonable efforts to have the Registration Statement(s) declared effective by the SEC as soon as practicable.

(c)  The Company agrees not to include any other securities in the Registration Statement covering the Registrable Securities without Investor’s prior written consent which Investor may withhold in its sole discretion. Furthermore, the Company agrees that it will not file any other Registration Statement for other securities, until thirty calendar days after the Registration Statement for the Registrable Securities is declared effective by the SEC.  Notwithstanding the foregoing, the Investor hereby consents to the registration of up to 20,000,000 shares for selling shareholders.

Section 3.  RELATED OBLIGATIONS.

At such time as the Company is obligated to prepare and file the Registration Statement with the SEC pursuant to Section 2(a), the Company will effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, with respect thereto, the Company shall have the following obligations:

(a)  The Company shall use all commercially reasonable efforts to cause such Registration Statement relating to the Registrable Securities to become effective as soon as practicable and shall keep such Registration Statement effective until the earlier to occur of  the date on which (A) the Investor shall have sold all the Registrable Securities; or (B) the Investor has no right to acquire any additional shares of Common Stock under the Investment Agreement (hereinafter referred to as the “Registration Period”).  The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. The Company shall use all commercially reasonable efforts to respond to all SEC comments within seven (7) business days from receipt of such comments by the Company. The Company shall use all commercially reasonable efforts to cause the Registration Statement relating to the Registrable Securities to become effective no later than five (5) business days after notice from the SEC that the Registration Statement may be declared effective.  The Investor agrees to provide all information which it is required by law to provide to the Company, including the intended method of disposition of the Registrable Securities, and the Company’s obligations set forth above shall be conditioned on the receipt of such information.

(b)  The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the Investor thereof as set forth in such Registration Statement.  In the event the number of shares of Common Stock covered by the Registration Statement filed pursuant to this Agreement is at any time insufficient to cover all of the Registrable Securities, the Company shall amend such Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover all of the Registrable Securities, in each case, as soon as practicable, but in any event within thirty (30) calendar days after the necessity therefor arises (based on the then Purchase Price of the Common Stock and other relevant factors on which the Company reasonably elects to rely), assuming the Company has sufficient authorized shares at that time, and if it does not, within thirty (30) calendar days after such shares are authorized.  The Company shall use commercially reasonable efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof.

  

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(c)  The Company shall make available to the Investor whose Registrable Securities are included in any Registration Statement and its legal counsel without charge:

	
  

	
(i)

	
promptly after the same is prepared and filed with the SEC at least one (1) copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, the prospectus included in such Registration Statement (including each preliminary prospectus) and, with regards to such Registration Statement(s), any correspondence by or on behalf of the Company to the SEC or the staff of the SEC and any correspondence from the SEC or the staff of the SEC to the Company or its representatives;

	
  

	
(ii)

	
upon the effectiveness of any Registration Statement, the Company shall make available copies of the prospectus, via EDGAR, included in such Registration Statement and all amendments and supplements thereto; and

	
  

	
(iii)

	
such other documents, including copies of any preliminary or final prospectus, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities.

(d)  The Company shall use commercially reasonable efforts to:

	
  

	
(i)

	
register and qualify the Registrable Securities covered by the Registration Statement under such other securities or “blue sky” laws of such states in the United States as the Investor reasonably requests;

 

 

	
  

	
(ii)

	
prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period;

	
  

	
(iii)

	
take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and

	
  

	
(iv)

	
take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to:

	
  

	
a.

	
qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), or

	
  

	
b.

	
subject itself to general taxation in any such jurisdiction.  

  

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The Company shall promptly notify the Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

(e)  As promptly as practicable after becoming aware of such event, the Company shall notify Investor in writing of the happening of any event as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omission 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 (hereinafter referred to as “Registration Default”) and use all diligent efforts to promptly prepare a supplement or amendment to such Registration Statement and take any other necessary steps to cure the Registration Default (which, if such Registration Statement is on Form S-3, may consist of a document to be filed by the Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to be incorporated by reference in the prospectus) to correct such untrue statement or omission, and make available copies of such supplement or amendment to the Investor. The Company shall also promptly notify the Investor:

	
  

	
(i)

	
When a prospectus or any prospectus supplement or post-effective amendment has been filed, and when the Registration Statement or any post-effective amendment has become effective (the Company will prepare notification of such effectiveness which shall be delivered to the Investor on the same day of such effectiveness and by overnight mail), additionally, the Company will promptly provide to the Investor, a copy of the effectiveness order prepared by the SEC once it is received by the Company;

	
  

	
(ii)

	
Of any request by the SEC for amendments or supplements to the Registration Statement or related prospectus or related information;

	
  

	
(iii)

	
Of the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate;

	
  

	
(iv)

	
In the event the Registration Statement is no longer effective; and / or

	
  

	
(v)

	
If the Registration Statement is stale as a result of the Company’s failure to timely file its financials or otherwise.

The Company acknowledges that its failure to cure the Registration Default within ten (10) business days will cause the Investor to suffer damages in an amount that will be difficult to ascertain.  Accordingly, the parties agree that it is appropriate to include a provision for liquidated damages.  The parties acknowledge and agree that the liquidated damages provision set forth in this section represents the parties’ good faith effort to quantify such damages and, as such, agree that the form and amount of such liquidated damages are reasonable and will not constitute a penalty.  It is the intention of the parties that interest payable under any of the terms of this Agreement shall not exceed the maximum amount permitted under any applicable law. If a law, which applies to this Agreement, which sets the maximum interest amount, is finally interpreted so that the interest in connection with this Agreement exceeds the permitted limits, then: (1) any such interest shall be reduced by the amount necessary to reduce the interest to the permitted limit; and (2) any sums already collected (if any) from the Company which exceed the permitted limits will be refunded to the Company.  The Investor may choose to make this refund by reducing the amount that the Company owes under this Agreement or by making a direct payment to the Company.  If a refund reduces the amount that the Company owes the Investor, the reduction will be treated as a partial payment.  

  

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(f)  The Company shall use all commercially reasonable efforts to prevent the issuance of any stop order or other  suspension of effectiveness of the Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued,  to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor holding Registrable Securities being sold of the issuance of such order and the  resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding concerning the effectiveness of the registration statement.

(g)  The Company shall permit the Investor and one (1) legal counsel, designated by the Investor, to review and comment upon the Registration Statement and all amendments and supplements thereto at least one (1) calendar day prior to their filing with the SEC.  However, any postponement of a filing of a Registration Statement or any postponement of a request for acceleration or any postponement of the effective date or effectiveness of a Registration Statement by written request of the Investor (collectively, the "Investor's Delay") shall not act to trigger any penalty of any kind, or any cash amount due or any in-kind amount due the Investor from the Company under any and all agreements of any nature or kind between the Company and the Investor.  The event(s) of an Investor's Delay shall act to suspend all obligations of any kind or nature of the Company under any and all agreements of any nature or kind between the Company and the Investor.   

(h)  At the request of the Investor, the Company's counsel shall furnish to the Investor an opinion letter confirming the effectiveness of the registration statement.  Such opinion letter shall be issued as of the date of the effectiveness of the registration statement and be in a form suitable to the Investor. 

(i)  The Company shall hold in confidence and not make any disclosure of information concerning the Investor unless:

	
  

	
(i)

	
Disclosure of such information is necessary to comply with federal or state securities laws;

	
  

	
(ii)

	
The disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement;

	
  

	
(iii)

	
The release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction; or

	
  

	
(iv)

	
Such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement.

  

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The Company agrees that it shall, upon learning that disclosure of such information concerning the Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Investor and allow the Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order covering such information.

(j)  The Company shall use all commercially reasonable efforts to maintain designation and quotation of all the Registrable Securities covered by any Registration Statement on the Principal Market.  If, despite the Company’s commercially reasonable efforts, the Company is unsuccessful in satisfying the preceding sentence, it shall use commercially reasonable efforts to cause all the Registrable Securities covered by any Registration Statement to be listed on each other national securities exchange and automated quotation system, if any, on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or system.  The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(j).

(k)  The Company shall cooperate with the Investor to facilitate the prompt preparation and delivery of certificates representing the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investor may reasonably request (and after any sales of such Registrable Securities by the Investor, such certificates not bearing any restrictive legend).

(l)  The Company shall provide a transfer agent for all the Registrable Securities not later than the effective date of the first Registration Statement filed pursuant hereto.

(m)  If requested by the Investor, the Company shall:

	
  

	
(i)

	
As soon as reasonably practical incorporate in a prospectus supplement or post-effective amendment such information as the Investor reasonably determines should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the offering of the Registrable Securities to be sold in such offering;

	
  

	
(ii)

	
Make all required filings of such prospectus supplement or post-effective amendment as soon as reasonably possible after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and

	
  

	
(iii)

	
Supplement or make amendments to any Registration Statement if reasonably requested by the Investor.

  

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(n)  The Company shall use all commercially reasonable efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to facilitate the disposition of such Registrable Securities.

(o)  The Company shall otherwise use all commercially reasonable efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

(p)  Within one (1) business day after the Registration Statement which includes Registrable Securities is declared effective by the SEC, the Company shall deliver to the transfer agent for such Registrable Securities, with copies to the Investor, confirmation that such Registration Statement has been declared effective by the SEC.

(q)  The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable Securities pursuant to the Registration Statement.

Section 4.  OBLIGATIONS OF THE INVESTOR.

(a)  At least five (5) calendar days prior to the first anticipated filing date of the Registration Statement  the Company shall notify the Investor in writing of the information the Company requires from the Investor for the Registration Statement.  It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities and the Investor agrees to furnish to the Company that information regarding itself, the Registrable Securities and the intended method of disposition of the Registrable Securities as shall reasonably be required to effect the registration of such Registrable Securities and the Investor shall execute such documents in connection with such registration as the Company may reasonably request.  The Investor covenants and agrees that, in connection with any sale of Registrable Securities by it pursuant to the Registration Statement, it shall comply with the “Plan of Distribution” section of the then current prospectus relating to such Registration Statement.

(b)  The Investor, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless the Investor has notified the Company in writing of an election to exclude all of the Investor’s Registrable Securities from such Registration Statement.

(c)  The Investor agrees that, upon receipt of written notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of 3(e).

  

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Section 5.  EXPENSES OF REGISTRATION.

All expenses, other than underwriting discounts and commissions and other than as set forth in the Investment Agreement, incurred in connection with or in any way related to registrations including comments, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printing and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company.  Any attorneys’ accountants’ or other advisors’ fees incurred by Investor shall be paid by Investor.  The Company warrants and represents that it has paid the Preparation Fee as defined in the Term Sheet executed on July 7, 2010 and which is hereby incorporated by reference.

Section 6.  INDEMNIFICATION.

In the event any Registrable Securities are included in the Registration Statement under this Agreement:

(a)  To the fullest extent permitted by law, the Company, under this Agreement, will, and hereby does, indemnify, hold harmless and defend the Investor who holds Registrable Securities, the directors, officers, partners, employees, counsel, agents, representatives of, and each Person, if any, who controls, any Investor within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (hereinafter referred to as the “1934 Act”) (each, hereinafter referred to as an “Indemnified Person”), against any and all losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, hereinafter referred to as “Claims”), incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (hereinafter referred to as “Indemnification Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon:

	
  

	
(i)

	
Any untrue statement or alleged untrue statement of a material fact in the Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which the Investor has requested in writing that the Company register or qualify the Shares (hereinafter referred to as “Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which the statements therein were made, not misleading;

  

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(ii)

	
Any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, or

	
  

	
(iii)

	
Any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, hereinafter referred to as “Violations”).  

Subject to the restrictions set forth in Section 6(c) the Company shall reimburse the Investor and each such controlling person, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a):

	
  

	
1)

	
Shall not apply to a Claim arising out of or based upon a Violation which is due to the inclusion in the Registration Statement of the information furnished to the Company by any Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto;

	
  

	
2)

	
Shall not be available to the extent such Claim is based on:

	
  

	
a.

	
A failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company; or

	
  

	
b.

	
The Indemnified Person’s use of an incorrect prospectus despite being promptly advised in advance by the Company in writing not to use such incorrect prospectus; or 

	
  

	
c.

	
Any claims based on the manner of sale of the Registrable Securities by the Investor or of the Investor’s failure to register as a dealer under applicable securities laws; or

	
  

	
d.

	
Any omission of the Investor to notify the Company of any material fact that should be stated in the Registration Statement or prospectus relating to the Investor or the manner of sale; or

	
  

	
e.

	
Any amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the resale of the Registrable Securities by the Investor pursuant to the Registration Statement. 

  

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(b)  In connection with any Registration Statement in which Investor is participating, the Investor agrees to severally and jointly indemnify, hold harmless and defend, to the  same extent and in the same manner as is set forth in Section 6(a), the Company, each of its  directors, each of its officers who signs the Registration Statement, each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act and the Company’s agents (collectively and together with an Indemnified Person, hereinafter referred to as an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation is due to the inclusion in the Registration Statement of the written information furnished to the Company by the Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(c), the Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall only be liable under this Section 6(b) for  that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the resale of the Registrable Securities by the Investor pursuant to the Registration Statement. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any preliminary prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus were corrected on a timely basis in the prospectus, as then amended or supplemented.  This indemnification provision shall apply separately to each Investor and liability hereunder shall not be joint and several. 

(c)  Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, the representation by counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding.  The indemnifying party shall pay for only one (1) separate legal counsel for the Indemnified Persons or the Indemnified Parties, as applicable, and such counsel shall be selected by the Investor, if the Investor is entitled to indemnification hereunder, or the Company, if the Company is entitled to indemnification hereunder, as applicable.  The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or Claim.  The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  No indemnifying party shall be liable for any settlement of any action, claim or proceeding affected without its written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Claim.  Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

  

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(d)  The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

Section 7.  CONTRIBUTION.

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6; (ii) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.

Section 8.  REPORTS UNDER THE 1934 ACT.

With a view to making available to the Investor the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without registration (“Rule 144”), provided that the Investor holds any Registrable Securities are eligible for resale under Rule 144 (k), the Company agrees to:

	
  

	
(a)

	
Make and keep public information available, as those terms are understood and defined in Rule 144; and

	
  

	
(b)

	
File with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company’s obligations under Section 5(c) of the Investment Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

	
  

	
(c)

	
Furnish to the Investor, promptly upon request:

	
  

	
a.

	
A written statement by the Company that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act,

	
  

	
b.

	
A copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration.

  

12

  

Section 9.  NO ASSIGNMENT OF REGISTRATION RIGHTS.

The rights and obligations under this Agreement shall not be assignable.

 

Section 10.  AMENDMENT OF REGISTRATION RIGHTS.

The provisions of this Agreement may be amended only with the written consent of the Company and Investor.  

Section 11.  MISCELLANEOUS.

(a)  Any notices or other communications required or permitted to be given under the terms of this Agreement that must be in writing will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided a confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be:

If to the Company:         

Safe Technologies International, Inc.

1200 N Federal Highway, Suite 200

Boca Raton, FL 33432

866.297.5070 Phone

866.603.0111 Facsimile

If to the Investor:

Kodiak Capital Group, LLC

One Columbus Place

25th Floor

New York, NY 10019

212.262.2600 Telephone:

212.262.2601 Facsimile

Each party shall provide five (5) business days prior notice to the other party of any change in address, phone number or facsimile number.

(b)  Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

  

13

  

(c)   This Agreement and the Transaction Documents constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein.

(d)  This Agreement and the Transaction Documents supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.

(e)  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.  Whenever required by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine.  This Agreement shall not be construed as if it had been prepared by one of the parties, but rather as if all the parties had prepared the same.

(f)  This Agreement may be executed in two or more identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.  This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

(g)  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

(h) In case any provision of this Agreement is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby. The normal rule of construction and contractual interpretation that ambiguities should be held against the drafting party is not operative under this agreement.

  

14

  

Section 12.  DISPUTES SUBJECT TO ARBITRATION; GOVERNED BY NEW YORK LAW

 

Arbitration Clause.  All disputes arising under this agreement shall be governed by and interpreted in accordance with the laws of New York, without regard to principles of conflict of laws.  The parties to this agreement will submit all disputes arising under this agreement to arbitration in City of New York, State of New York before a single arbitrator of the American Arbitration Association ("AAA").  The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law New York.  No party to this agreement will challenge the jurisdiction or venue provisions as provided in this Section.  Nothing contained herein shall prevent a party from obtaining an injunction.  A party shall be able to take a decision or award on Review for an alleged defect in the arbitration proceedings within six weeks of the date of the award being served on the party.  If the alleged defect involves corruption, the application must be made within six weeks of the date that the party discovers the corruption.  The individual who shall conduct the Review shall be selected by application of the rules of the AAA for selection of an impartial arbitrator, or by mutual agreement of the parties, except that such Review shall be conducted by an attorney admitted to practice law New York.  A decision of Review must be justifiable based on a defect in the arbitration proceedings.  For the purposes of this Article 12, a defect means: (1) That the arbitrator committed misconduct in relation to his/her duties as an arbitrator, or (2) That he/she committed a gross irregularity in conducting the proceedings; or (3) That the arbitrators exceeded his/her powers as an arbitrator; or (4) That the award was the result of a mistake of law; or (5) that the award was improperly obtained.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

  

15

  

SIGNATURE PAGE OF REGISTRATION RIGHTS AGREEMENT

 

Your signature on this Signature Page evidences your agreement to be bound by the terms and conditions of the Investment Agreement and the Registration Rights Agreement as of the date first written above.  The undersigned signatory hereby certifies that he has read and understands the Registration Rights Agreement, and the representations made by the undersigned in this Registration Rights Agreement are true and accurate, and agrees to be bound by its terms.

 

KODIAK CAPITAL GROUP, LLC

By:           /s/ Ryan C. Hodson                  

Ryan C. Hodson – Managing Director

SAFE TECHNOLOGIES INTERNATIONAL, INC.

By:           /s/ Christopher Kolb                  

Christopher Kolb, President

16ex101.htm

LICENSE AGREEMENT

THIS AGREEMENT is dated for reference the 16h day of November, 2009 (the “Agreement”).

BETWEEN:

Vosco Vortex Technologies Ltd, a company incorporated under the laws of Hong Kong, having its registered office at 1301 Bank of America Tower, Suite 1038, 12 Harcourt Road, Central, Hong Kong

(the “Licensor”)

AND:

Vosco Technologies Ltd., a company incorporated under the laws of Alberta, having an office at 1530 – 9th Avenue SE, Calgary, AB T2G 0T7, Canada.

(the “Licensee”)

RECITALS:

A. The Licensor has the sole and exclusive ownership rights, including without limitation all patent and trademark rights as applicable to the Licensed Products (as hereinafter defined).

B. The Licensor also has developed Marketing Information (as hereinafter defined) and Technology (as hereinafter defined) which may be utilized in connection with the marketing, sale, distribution and manufacture of the Licensed Products.

C. The Licensor has the right to grant the Licensee an exclusive license to develop, market, sell, and distribute in the Licensed Territory (as hereinafter defined) the Licensed Products (as hereinafter defined) and an exclusive license to manufacture the Licensed Products in the Manufacturing Licensed Territory (as hereinafter defined) using the Licensed Patents (as hereinafter defined), the Technology and the Marketing Information.

D. The Licensee desires to obtain an exclusive license to develop, market, sell, distribute and manufacture the Licensed Products in the Licensed Territory and Manufacturing Licensed Territory, and utilize the Licensed Patents, the Technology and the Marketing Information in connection therewith, and the Licensee desires to obtain the right to grant sub-licenses to others to develop, market, sell, distribute and manufacture the Licensed Products.

In consideration of the mutual promises, covenants and conditions contained in this Agreement, the parties hereto agree as follows:

	
1.0  

	
INTERPRETATION

  

1

  

1.1 Definitions

For the purpose of this Agreement the following words, whenever used in this Agreement unless there is something in the subject or context inconsistent therewith, shall have the following meanings:

	
(a)  

	
“Affiliate” of a specified person shall mean a person who, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified person.  For this purpose, “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise;

	
(b)  

	
“Agreement” means this agreement, including all recitals and schedules hereto;

	
(c)  

	
“Confidential Information” shall have the meaning described in Section 4;

	
(d)  

	
“Effective Date” shall mean November 1, 2009;

	
(e)  

	
“Licensed Patents” shall mean all patents described in Schedule “A” to this Agreement, as updated from time to time in accordance with the terms of this Agreement, including without limitation method patents, utility models and industrial designs, issued prior to the Effective Date or to be issued during the term of this Agreement in the Licensed Territory, all continuations, continuations-in-part, derivatives, substitutions, divisions, extensions, reissues, reexaminations or renewals of such patents, filed prior to the Effective Date or to be filed during the term of this Agreement in the Licensed Territory, owned, controlled or licensable without  payment of consideration by the Licensee or an Affiliate, now or at any time during the term of this Agreement, which patents and patent applications relate to the Licensed Products, the equipment necessary for the development, manufacture, assembly, installation, maintenance, packaging and/or labelling, marketing, sale or distribution of the Licensed Products, the utilization of such equipment, and software and computer systems relating to the development, marketing, sale, distribution and manufacture of the Licensed Products or for inventory control; but shall not include any such patents after the expiration thereof;

	
(f)  

	
“Licensed Products” shall mean the Vosco Vortex Air Dryer and any modifications, enhancements, alterations, improvements or changes thereto along with any other product developed or owned by the Licensor or an Affiliate in any way dealing with or able to be characterized as a product which enhances the compressed air drying process and includes all complementary products such as control systems, related piping and mechanical systems, and associated accessories / replacement parts;

	
(g)  

	
“Licensed Territory”, as of the Effective Date, shall mean Canada, its provinces and territories, and any jurisdictions which are successors thereto;

	
(h)  

	
“Manufacturing Licensed Territory”, as of the Effective Date, shall mean Canada, its provinces and territories, and any jurisdictions which are successors thereto;

	
(i)  

	
“Marketing Information” shall mean the advertising and other marketing aids or materials within the knowledge, possession or control of the Licensor or an Affiliate thereof, and all advertising and other marketing aids or materials thereafter developed or acquired by the Licensor or an Affiliate thereof or which comes within the knowledge, possession or control of the Licensor or an Affiliate thereof, in connection with the development, marketing, sale, distribution and manufacture of the Licensed Products;

  

2

  

	
(j)  

	
“Net Sales Price” means, for the purposes of calculating the royalties on the Licensed Products, Licensee’s invoiced selling price of the Licensed Products to its customers, excluding applicable retail sales and used consumption taxes, normal sale discounts, sales credits and sales allowances arising in the ordinary course of Licensee’s business, restocking costs, and transportation costs (where the Licensee customer does not pay for such costs);

	
(k)  

	
“Patent License” shall have the meaning described in clause 2.2;

	
(l)  

	
“Royalty Fee” has the meaning set out in clause 6.2;

	
(m)  

	
“Technology” shall mean all proprietary technology and know-how, whether patentable or unpatentable or whether the subject of one or more patents or patent applications in the Licensed Territory, which has been developed or acquired (which the Licensor is free to disclose to third parties without breaching any obligation to any third party owner of such acquired proprietary technology or know-how) by the Licensor or an Affiliate thereof, and all proprietary technology and know-how thereafter developed or acquired by the Licensor or an Affiliate thereof, relating to the Licensed Products, the equipment necessary for the development, manufacture, assembly, installation, maintenance, packaging and/or labelling, marketing, sale or distribution of the Licensed products, the utilization of such equipment, plant layouts, product specifications and software and computer systems relating to the development, marketing, sale, distribution and manufacture of the Licensed Products or for inventory control, and any other materials or information connected with or ancillary to the air dryer business, within the knowledge, possession or control of the Licensor, or Affiliates, as of the Effective Date and thereafter;

	
(n)  

	
“Technology License” shall have the meaning described in clause 2.1; and

	
(o)  

	
“Term” shall have the meaning described in clause 13.1.

1.2 Divisions, Heading and Index

The division of this Agreement into sections, paragraphs and schedules and the insertion of headings and any index are provided for convenience of reference only and shall not affect materially the construction or interpretation of this Agreement.  All references in this Agreement to a designated article, section, paragraph, subdivision, schedule or the like, is to the designated article, section, paragraph, subdivision or the like of, or schedule to, this Agreement.

1.3 Gender and Number

Unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders.

1.4 Proper Law of Agreement

This Agreement shall be governed by and construed in accordance with the laws of Hong Kong.

  

3

  

1.5 Invalidity

The parties agree that (i) the provisions of this Agreement shall be severable in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (ii) such invalid, void or otherwise unenforceable provisions shall be replaced as soon as reasonably possible upon the agreement of the parties with such other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but which are valid and enforceable, and (iii) the remaining provisions shall remain enforceable to the fullest extent permitted by law.

1.6 Currency

All dollar amounts stated herein are in United States currency.

1.7 Accounting Technology

All accounting terms not expressly defined in this Agreement shall have the meanings usually ascribed to them in accordance with generally accepted accounting principles in Hong Kong, applied consistently.

1.8 Inclusive Language

The word “including”, when followed by any general statement, term or matter, is not to be construed to limit such general statement, term or matter to specific items or matters set forth immediately following such word or similar items or matters, whether or not non-limiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather to be construed to refer to all other items or matters that could fall reasonably within the broadest of such general statement, term or matter.

1.9 Force Majeure

If the performance of this Agreement or of any obligation under this Agreement is prevented, restricted or interfered with by reason of fire, or other casualty or accident, strikes or labour disputes, inability to procure raw materials, delays in transportation, war or other violence, any law, order, proclamation, regulation, ordinance, demand or requirement of any government agency (including but not limited to the foreign exchange controls of any country or territory in the Licensed Territory or Manufacturing Licensed Territory applicable to the Licensee), or any other act or condition whatsoever beyond the reasonable control of the parties (excluding the economic conditions of a party), the party so affected, upon giving prompt notice to the other party, shall be excused from such performance to the extent of such prevention, restriction or interference, provided that the party so affected shall use its best efforts to avoid or remove such causes of non performance and shall continue performance of this agreement or of any obligation under this Agreement with the utmost dispatch as soon as such causes have been removed and shall provide faithfully substitute performance as the parties reasonably may agree.

	
2.0  

	
GRANT OF LICENSES

2.1 Grant of Technology License

	
(a)  

	
The Licensor grants to the Licensee, and the Licensee accepts from the Licensor, for the Term of this Agreement, the exclusive right, license and privilege to use the Technology in connection with the development, marketing, sale, and distribution of the Licensed Products within the Licensed Territory for use only in the Licensed Territory such license permitted hereunder being subject to the conditions contained in this Agreement (the “Technology License”).

  

4

  

	
(b)  

	
The Licensor grants to the Licensee, and the Licensee accepts from the Licensor, for the Term of this Agreement, the exclusive right, license and privilege to use the Technology in connection with the manufacture of the Licensed Products within the Manufacturing Licensed Territory such license permitted hereunder being subject to the conditions contained in this Agreement (the “Manufacturing Technology License”).

	
(c)  

	
Upon the request of the Licensor, the Licensee shall disclose and deliver promptly to the Licensor at the Licensor’s expense, subject to paragraph 6.4, any technology or know-how, including any inventions, which have been developed or acquired by the Licensee in connection with the development, marketing, sale, distribution and manufacture of the Licensed Products pursuant to the Licenses granted hereunder.  The Licensee covenants and agrees that all rights in and to such technology and know-how shall be proprietary to the Licensor and shall be part of the Technology.

	
(d)  

	
Without limiting the generality of Section 2.1(a) or 2.1(b) above, upon the request of the Licensor, the Licensee shall cooperate fully to assist the Licensor to obtain any patents in Licensed Territory or Manufacturing Licensed Territory with the appropriate registry on inventions relating to Technology.

2.2 Grant of Patent License

	
(a)  

	
The Licensor grants to the Licensee, and the Licensee accepts from the Licensor, for the Term of this Agreement, the exclusive right, license and privilege to use the Licensed Patents for the life of each of the Licensed Patents, in connection with the development, marketing, sale, distribution and manufacture of the Licensed Products within the Licensed Territory and Manufacturing Licensed Territory for use only in the Licensed Territory, such license and any sublicense permitted hereunder being subject to the conditions contained in this Agreement (the “Patent License”).  For greater certainty the Licensee acknowledges that it has no rights to the Licensed Patents outside of the Licensed Territory and further acknowledges that the Licensor is the owner of the Licensed Patents.

	
(b)  

	
Schedule “A” to this Agreement may be amended, with the mutual agreement of the Licensor and the Licensee which agreement shall not be withheld unreasonably by the Licensor, to include additional patents relating to the Licensed Products, or such other patents as may be agreed upon by the Licensor and the Licensee, and the terms and conditions of this Agreement shall apply fully as though such additional patents had been identified in Schedule “A” as of the Effective Date of this Agreement.

	
(c)  

	
Without limiting the generality of Section 2.1(a), 2.1(b) and 2.2(a) above, the Licensee shall cooperate fully to assist the Licensor to obtain applicable patents in Licensed Territory or Manufacturing Licensed Territory with the appropriate registry pertaining to the Licensed Products and Technology.

2.3 Corporate Name and Trade-Marks

The Licensee is permitted to utilize the name VOSCO AIR DRYER along with any other trade-name, trademark or logo used in connection with the Licensed Products as part of its corporate name and as part of any business name or trade-name or in the marketing, sale or distribution of the Licensed Products and to advertise the Licensed Products and engage in such promotion as it considers reasonably necessary in furtherance of this Agreement.

  

5

  

2.4 Right to Grant Sublicenses

Licensee will have the right to appoint distributors, dealers and sub-licensees, which appointments shall be made subject to the terms and conditions of this Agreement.

2.5 Duty of Performance

Licensee agrees that it will conduct the manufacturing, assembly, marketing and sale of the Licensed Products in a sound and proper businesslike manner.

2.6 Right of First Refusal for the Rights to the USA Market

During the term of the Agreement, and subject to this Agreement being in good standing and all of the terms of this Agreement having been met, should the Licensor receive an offer for a third party acquisition of the rights to the USA market, Licensor shall offer the Rights to Licensee on the same terms, for which the Licensee shall have 30 days to accept the terms and fulfill any requirements under the terms.  If Licensee does not enter into an agreement with Licensor during the 30 day period, Licensor may enter into a license agreement on terms no less favorable than those presented to Licensee.

	
3.0  

	
TECHNICAL ASSISTANCE

3.1 Disclosure and Delivery of Licensed Patents and Technology

To assist the Licensee with the production of the Licensed Products, the Licensor, or its Affiliates, shall disclose and deliver to the Licensee, (i) on the Effective Date, the Technology presently within the knowledge, possession or control of the Licensor or its Affiliates and the Licensed Patents, and (ii) thereafter, the Technology and/or Licensed Patents developed or acquired by the Licensor or an Affiliate of the Licensor; provided, however, that the obligation on the Licensor to disclose and deliver the Technology and the Licensed Patents as described in this clause (ii) shall continue and be in effect only so long as the Licensee continues to make the payments described below in article 6.0.

3.2 Disclosure and Delivery of Marketing Information

To assist the Licensee with the marketing, sale, distribution, advertisement and promotion of the Licensed Products, the Licensor, or its Affiliates (i) shall disclose and deliver to the Licensee as soon as possible after the Effective Date the Marketing Information presently within the knowledge, possession or control of the Licensor or its Affiliates, and (ii) thereafter, for so long as this Agreement is in force, shall inform the Licensee of the Marketing Information developed or acquired by the Licensor or its Affiliates from time to time.

	
4.0  

	
CONFIDENTIALITY AND PROPRIETARY RIGHTS

4.1 Acknowledgement of Confidentiality

The Licensor and the Licensee acknowledge that the Technology, the Licensed Patents and any technical or accounting data, or business information of any party, including but not limited to, correspondence and private technical discussions and related memoranda, may embody valuable confidential information which is not known generally to the public and which is proprietary to the Licensor or the Licensee, as the case may be.  The parties further acknowledge that any such information is considered properly to be trade secret, and may consist of devices, processes and compilations of technical information which are secret, confidential and not known generally to the public and which were the product of the expenditure of time, effort, money and/or creative skills. 

  

6

  

 The Licensor and the Licensee each may disclose to the other confidential or proprietary technical, accounting or general business data, and each may disclose any such data to its Affiliates, and the Licensee may disclose any such data to its sublicensees permitted hereunder, all of which data shall be maintained as confidential in accordance with the provisions of this article 4 by the party or person to whom it is disclosed as hereby permitted.

Designation

Any information exchanged pursuant to this Agreement which is to be maintained confidential (hereinafter “Confidential Information”) shall be (i) if delivered in writing, designated with the legend “Confidential” (or comparable legend) and (ii) if disclosed orally, indicated “Confidential” at the time of such disclosure and followed within thirty (30) days with written notice specifying the confidentiality.  In addition, Confidential Information shall include any other information exchanged pursuant to this Agreement which the party to whom it was disclosed had reason to believe it was confidential.

4.2 Obligation Not to Disclose

The Licensor and the Licensee mutually agree to maintain each other’s Confidential Information in confidence, and, except as permitted by this Agreement, not to disclose such Confidential Information to any third party without the prior written consent of the transmitting party, during the term of this Agreement and for ten (10) years thereafter.  Such Confidential Information may be used by the receiving party within its place of business and disclosed to its Affiliates and their respective employees and agents, and in the case of the Licensee to its sublicensees, to whom disclosure reasonably is necessary.

4.3 Disclosure to Affiliates and Sublicensees

The Licensor and the Licensee mutually agree that any Confidential Information received pursuant to this Agreement and disclosed to their respective Affiliates, and in the case of the Licensee its sublicensees, shall be held confidential by such Affiliates and sublicensees in the same manner that the Licensor and the Licensee are obligated under the terms of this clause 4.

4.4 Copies

Each party may make copies of materials designated “Confidential” which are delivered to another party as permitted by this Agreement.  All such copies shall at all times be subject to the terms and conditions of this Agreement and shall remain the property of the transmitting party.

4.5 Exclusions

The provisions of this article 4 shall not apply to any information designated “Confidential” which:

	
(i)  

	
at any time after the Effective Date and prior to the time of disclosure becomes known to the receiving party, as evidenced by its written records; or

	
(ii)  

	
is or becomes known or available publicly through no breach of this Agreement; or

	
(iii)  

	
is developed independently by the receiving party as evidenced by its written records; or

  

7

  

	
(iv)  

	
is disclosed pursuant to the requirement of a governmental agency or by operation of law.

The foregoing exclusions shall not apply to information disclosed in confidence to directors, officers, employees or agents of the Licensee while such individuals were directors, officers, employees or agents of the Licensor or an Affiliate of the Licensor.

	
5.0  

	
LICENSED PRODUCTS

5.1 Prohibition

The Licensor or its Affiliates (other than the Licensee or its sublicensees), directly or indirectly, shall not (and shall not permit any third party to whom either has granted or may grant a license to develop, market, sell, distribute and manufacture the Licensed Products or any products covered in whole or in part by the Technology or the Licensed Patents to) develop, market, sell, distribute and manufacture the Licensed Products or any products covered in whole or in part by the Technology or the Licensed Patents inside the Licensed Territory or any other products bearing trade-marks identical or confusingly similar to any of the Licensed Trade-marks, or otherwise identified as a Vosco product of the Licensor or sell or distribute any such products or any other products bearing trade-marks identical or confusingly similar to any person which intends, to the best of the knowledge of the Licensor or any Affiliate, to sell or distribute same inside the Licensed Territory, without the prior written consent of the Licensee.

	
5.2  

	
Alteration

Licensee shall be permitted to manufacture and assemble the Licensed Products according to specifications provided by Licensor and, subject to a required provision of written notice to Licensor, shall be permitted to make such product alterations and components substitutions or modifications as are reasonably necessary to enable Licensee to meet competitive threats, to reconfigure and adapt the Licensed Products to meet the specific requirements of various customers and to more effectively carry out its commitments under the license.

	
6.0  

	
PAYMENTS

6.1 License & Other Fees

	
a)  

	
Licensee shall pay to Licensor for the License the sum of $100,000 (the “License Fee”), on or before December 31, 2010.

	
b)  

	
Licensee shall pay to Licensor up to the amount of $10,000 towards the costs of patent fees associated with the Licensed Products in the Licensed Territory.  Any amounts in excess of $10,000 are to be borne by the Licensor.

	
6.2  

	
Royalty Fee

The Licensee shall pay to the Licensor a royalty (the “Royalty Fee”) calculated as a percentage of the Net Sales Price on each of the Licensed Products sold by Licensee or its distributors, dealers and sub-licensees during each calendar quarter after the date hereof, payable in arrears within 30 days at the end of each calendar quarter, as follows:

4% of the Net Sales Price until such time as the total Net Sales exceed $500,000 and then 6% of the Net Sales Price thereafter.

  

8

  

	
6.3  

	
Fee Verification

Licensee shall:

	
(a)  

	
provide written quarterly reports to Licensor within 60 days of the end of each quarter in which sales of Licensed Products have been made by Licensee, setting out the Royalty Fee payable under this agreement for such calendar quarter, and shall include therewith a written summary of all sales of Licensed Products;

	
(b)  

	
keep full and accurate records containing all data as is reasonably required for the computation and verification of Net Sales Price and the Royalty Fee payable hereunder; upon reasonable notice from Licensor, Licensee shall allow Licensor and its auditors access at reasonable times to the records of Licensee relating to the sale of Licensed Products, including sales under sub-licensing agreements for the purpose of auditing and verifying the amount of Royalty Fee payable pursuant to this agreement; and

	
(c)  

	
upon reasonable notice from Licensor, allow Licensor at reasonable times to inspect Licensee’s stock of Licensed Products to ensure that the Licensed Products are being manufactured with respect to design, quality and performance in accordance with the terms and conditions of this agreement.

	
7.0  

	
WARRANTY

Licensor hereby represents, warrants and covenants as follows, which representations, warranties and covenants will continue in full force and effect during the Term hereof:

	
(a)  

	
it has the sole ownership of and holds the exclusive right, title and interest to the Technology, the Technology License and the Patent License and it has the authority to grant the rights and licenses set out in this Agreement;

	
(b)  

	
the Licensed Products, the Patent License and the Technology License do not and will not infringe on any Patents or any other intellectual property rights of any other persons;

	
(c)  

	
the Licensed Products are proprietary products developed by Licensor and are protect to the extent provided through patents listed in Schedule A;

	
(d)  

	
it is duly authorized to deliver and enter into this Agreement and transactions contemplated hereby and neither the execution or delivery of this Agreement, nor the consummation of the transactions contemplated hereby nor will the observance or the performance by Licensor of its obligations contained herein conflict with or result in a breach of or result in default under any agreement, contract or commitment to which Licensor is a party or by which Licensor is bound or subject and no other permits, consents, authorizations or approvals of any applicable government or regulatory body will be required which will not have been obtained on or before closing.

8.0 PROPRIETARY RIGHTS

8.1                      The intellectual property rights comprising the Licensed Products and the patents are and shall remain the property of Licensor.

  

9

  

8.2                      Licensee shall notify Licensor immediately if Licensee becomes aware of any possible unauthorized use of the whole or any part of the Licensed Products or infringement of any patents covered by this Agreement by any person.

8.3                      Licensor shall notify Licensee immediately if Licensor becomes aware of any possible unauthorized use of the whole or any part of the Licensed Products or infringements of any patents covered by this Agreement by any person.

8.4                      Licensor and Licensee agree to execute such confidential information and non-disclosure agreements as may reasonably required by the Licensor or Licensee as the case may be in relation to this Agreement and agree to inform their respective employees and affiliates that confidential information and non-disclosure agreements have been entered into between the parties hereto, and to otherwise protect Licensor and Licensee respective interests in the Licensed Products and the patents.

9.0 INDEMNITY

Licensor shall indemnify and hold Licensee harmless from and against any and all damages, costs and expenses arising out of any and all claims, suits, demands or actions based on actual or alleged infringement of any Patent or other intellectual property rights claimed by any other persons resulting from Licensee’s manufacture, assembly, marketing, sale, possession or use of Licensed Products.  Licensor’s indemnification obligation shall not apply to the following:

	
(a)  

	
claims in relation to modification, enhancements or alterations to Licensed Products as are performed by the Licensee;

	
(b)  

	
claims with respect to “off the shelf” components supplied by other persons and not designed by Licensor but which are incorporated into the Licensed Products; and

	
(c)  

	
claims which arise as a result of Licensee’s use of Licensed Products in a manner which is not authorized.

10.0 GOVERNMENT REGISTRATIONS

10.1  Registration of Licenses

To the extent required or permitted by law, the Licensor and the Licensee shall cooperate, after the Effective Date from time to time as appropriate, in the filing for the registration or the recordal of any Patent specific to the Licensed Territory or Manufacturing Licensed Territory.

10.2 Subsequent Registration and Maintenance of Patents

The Licensee will be responsible for all costs, expenses and fees relating to or arising from the maintenance of the Licensed Patents (including the prosecution and defence of patent applications and other proceedings) and from any subsequent registration of the Licensed Patents, but only to the extent such maintenance or registration relates to the Licensed Territory.

11.0 NOTICES

  

10

  

11.1 Written Notice

Every notice provided for in this Agreement shall be given in writing and shall be directed to the party to whom it is delivered or set at the following address:

	
(i)  

	
in the case of the Licensor:

1301 Bank of America Tower, Suite 1038

12 Harcourt Road, Central

Hong Kong

	
(ii)  

	
in the case of the Licensee:

1530 – 9th Avenue SE

Calgary, Alberta  T2G 0T7

Canada

11.2 Manner of Giving Notice

Each such notice shall be:

	
(i)  

	
delivered personally; or

	
  

	
(ii)

	
sent by registered or certified mail, postage prepaid; or

	
  

	
(iii)

	
sent facsimile or other direct written electronic means.

Any notice delivered by way of the means described in paragraph (i) in this clause 11.2 shall be deemed to have been given or delivered validly and effectively on the date at the location of the receiving party when it was delivered.  Any notice sent by way of the means described in paragraph (ii) in this clause 11.2 shall be deemed to have been given or delivered validly and effectively on the fifth (5th) business day following the date at the location of the transmitting party when it was sent.  Any notice sent by way of the means described in paragraph (iii) in this clause 11.2 shall be deemed to have been given or delivered validly and effectively on the date at the location of the transmitting party when it was sent and confirmed as received.

12.0 AMENDMENT AND MODIFICATION

This Agreement may be amended, modified or supplemented only by written agreement of the parties.

13.0 TERM AND TERMINATION

13.1  Term

To the extent rights and obligations under this Agreement continue beyond the Effective Date, this Agreement shall continue in force and effect until expiry of the last patent related to the Technology (the “Term”).

  

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13.2  Termination

This Agreement shall terminate upon the occurrence of any of the following:

	
(a)  

	
agreement of the parties to terminate;

	
(b)  

	
breach of any of the provisions hereof by either party which breach has not been remedied for a period of 90 days; or

	
(c)  

	
the bankruptcy, insolvency or dissolution of the Licensee.

14.0  GENERAL

14.1  Execution in Counterparts

This Agreement may be executed in counterparts, both of which together shall constitute one and the same Agreement.

14.2  Assignment

This Assignment shall be not be assigned by either party without the prior written consent of the other party.

14.3  Further Assurances

The parties shall execute such other documents and give such further assurances as are necessary to give effect to the terms of this Agreement.

  

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IN WITNESS WHEREOF the parties hereto have executed this Agreement on the day and year first above written.

Vosco Vortex Technologies Ltd.

 

Per:         /s/ Don Nicholson                                                                   

Authorized Signatory

Vosco Technologies Ltd.

Per:          /s/ Walter Romanchuk                                                                   

Authorized Signatory

  

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SCHEDULE “A”

Patents

Including, but not limited, to:

Korea

	
Title/Invention

	
Application No. & Filing Date

	
Patent No. & Date

	
THE PNEUMATIC DRIER USING THE VORTEX TUBE.

	
2008-0104873

	
10-0901741

	
2008/10/24

	
2009/06/02

  

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