AMENDMENT

 

This AMENDMENT (this “Amendment”), dated effective as of June 22, 2006, is entered into by and between GVI SECURITY SOLUTIONS, INC., a Delaware corporation (the “Company”), and LAURUS MASTER FUND, LTD., a Cayman Islands company (“Laurus”), for the purpose of amending the terms of that certain Term Note, dated as of May 27, 2004 in the original principal amount of $5,000,000 issued by the Company to Laurus (as amended, modified and/or supplemented from time to time, the “Term Note”). The Note, the Securities Purchase Agreement together with the Related Agreements (as defined in the Securities Purchase Agreement) are referred to herein as the “Loan Documents”. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Securities Purchase Agreement.

 

WHEREAS, the Company and Laurus have agreed to make certain changes to the Loan Documents as set forth herein; and

 

NOW, THEREFORE, in consideration of the above, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.  Amendment to Secured Convertible Term Note. (a) Section 2.1(a) of the Note is hereby amended by deleting the last sentence appearing therein in its entirety and inserting the following new sentence in lieu thereof:

“For purposes hereof, the initial “Fixed Conversion Price” means $1.91; provided, however, that in respect of the first Three Hundred Thousand Dollars ($300,000) of aggregate principal amount (the “Post-June 2006 Converted Amount”) of the Note converted into shares of Common Stock on and after June 22, 2006, the Fixed Conversion Price in respect of such Post-June 2006 Converted Amount (and the interest and fees associated therewith to the extent converted) shall be equal to $0.15.”

(b) The following new Section 5.10 is hereby inserted into the Note immediately following existing Section 5.09 of the Note:

“Section 5.10 Registered Obligation. This Note is intended to be a registered obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and the Note shall be registered as to both principal and any stated interest with the Borrower. Notwithstanding any document, instrument or agreement relating to this Note to the contrary, transfer of this Note (or the right to any payments of principal or stated interest thereunder) may only be effected by (i) surrender of this Note and either the reissuance by the Borrower of this Note to the new holder or the issuance by the Borrower of a new instrument to the new holder, or (ii) transfer through a book entry system maintained by the Borrower (or its agent), within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).”

2.  Laurus hereby agrees with the Company that it shall convert into shares of Common Stock as soon as practicable after the Amendment Effective Date (but in no event later than June 30, 2006), Three Hundred Thousand Dollars ($300,000) of aggregate principal amount of the Note. The principal so converted shall be applied to the next payments of principal otherwise due under the Term Note.

 

3.  The Company understands that it has an affirmative obligation to make prompt public disclosure of material agreements and material amendments to such agreements. It is the Company’s determination that this Amendment is material. The Company agrees to file an 8-K within 2 days of the date hereof and in the form otherwise prescribed by the SEC.

4.  The amendment set forth herein shall be effective as of the date first above written (the “Amendment Effective Date”) on the date when each of the Company and Laurus shall have executed and the Company shall have delivered to Laurus its respective counterpart to this Amendment.

5.  Except as specifically set forth in this Amendment, there are no other amendments, modifications or waivers to the Loan Documents, and all of the other forms, terms and provisions of the Loan Documents remain in full force and effect.

6.   The Company hereby represents and warrants to Laurus that (i) no Event of Default exists on the date hereof, after giving effect to this Amendment, (ii) on the date hereof all representations, warranties and covenants made by the Company in connection with the Loan Documents are true, correct and complete and (iii) on the date hereof all of the Company’s and its Subsidiaries’ covenant requirements have been met.

7.  From and after the Amendment Effective Date, all references in the Loan Documents to the Securities Purchase Agreement shall be deemed to be references to the Securities Purchase Agreement as modified hereby.

8.  This Amendment shall be binding upon the parties hereto and their respective successors and permitted assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and their respective successors and permitted assigns. THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument.

 

 

IN WITNESS WHEREOF, each of the Company and Laurus has caused this Amendment to the Loan Documents to be signed in its name effective as of this 22nd day of June 2006.

 

		GVI SECURITY SOLUTIONS, INC.
		By:____________________________
		Name:
		Title:
		LAURUS MASTER FUND, LTD.
		By:___________________________
		Name:
		Title: