EXHIBIT 99.1
SERIES D PREFERRED STOCK RESTRICTION AGREEMENT
THIS SERIES D PREFERRED STOCK RESTRICTION AGREEMENT (this "AGREEMENT"),
dated as January 5th, 2005, by and between James LLC (the "SERIES D HOLDER") and
Markland Technologies, Inc., a Florida corporation (the "COMPANY"),
WITNESSETH THAT:
WHEREAS, the Company desires to limit sales of its common stock, $.0001
par value per share ("COMMON STOCK"), issued upon conversion of (the "CONVERSION
SHARES") the Series D Cumulative Convertible Preferred Stock, $.0001 par value
per share (the "SERIES D PREFERRED STOCK" and collectively with the Conversion
Shares, the "SUBJECT SECURITIES"); and
WHEREAS, the Series D Holder desires to provide for the eventual sale
of the Conversion Shares or the Series D Preferred Stock; and
WHEREAS, both the Company and the Series D Holder agree that it is in
each of their best interest to provide for an orderly disposition of the Series
D Preferred Stock:
N0W, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Series D Holder and
the Company, intending to be legally bound by this Agreement, agree as follows:
1. RESTRICTION ON SALES OF SUBJECT SECURITIES. Except as expressly
provided in this Agreement or with the prior written consent of the Company, the
Series D Holder will not, directly or indirectly, sell, assign, convey,
mortgage, pledge, encumber, exchange, hypothecate, transfer, or otherwise
dispose of ("TRANSFER") any of the Subject Securities which may now or hereafter
be owned, directly or indirectly, by the Series D Holder.
2. PERMITTED SALES. Anything in SECTION 1 to the contrary
notwithstanding, commencing on March 15, 2005 the Series D Holder may sell any
portion of the Conversion Shares, subject to any applicable limitations of Rule
144, in Brokers Transactions (as such term is defined in Rule 144 promulgated
under the Securities Act of 1933, as amended (the "SECURITIES ACT")), and shall
be limited to the quantities during the periods set forth in the table below:
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Time Period Dollar Amount of Sales
- --------------------------------------- --------------------------------------
June 15, 2005 to September 13, 2005 $600,000 per calendar month
(pro rated for any partial month)
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After September 13, 2005 $750.000 per calendar month
(pro rated for any partial month
- --------------------------------------- --------------------------------------
3. EQUITY LINE REGISTRATION. The Company shall use its best efforts to
register an equity line (the "EQUITY LINE") on the following terms and
conditions:
(a) The Company shall comply with the requirements set forth in Section
4.8 of that certain Purchase Agreement, dated September 21, 2004, between the
Company and the Investors named therein, including the limitations on the use of
proceeds from an equity line.
(b) Concurrently with the execution of this Agreement, the Company
shall obtain consents in accordance with SECTION 3(a) above, and shall enter
into a Private Equity Credit Agreement with Brittany Capital Management Ltd.
(the "INVESTOR") on usual and customary terms providing for a $10,000,000 equity
line (the "EQUITY LINE AGREEMENT").
(c) Promptly upon the execution of the Equity Line Agreement but in any
event within 21 days thereafter, the Company shall file a registration statement
providing for the resale by the Investor of Common Stock sold to the Investor
under the Equity Line Agreement (the "REGISTRATION STATEMENT").
(d) The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing of the Registration Statement, but no later than June
15, 2005 ("REQUIRED EFFECTIVENESS DATE"). Failure to have the Registration
Statement declared effective by the Required Effectiveness Date shall cause a
cash penalty of $50,000 per month to be paid out to Brittany Capital Management.
4. WARRANTS. Concurrently with the execution of this Agreement, the
Company shall issue to the Series D Holder the Payment Warrants set forth in
that Lock-Up Agreement dated September 13, 2004, with an amended exercise price
equal to $0.60 per share of Common Stock. The Payment Warrants shall have piggy
back registration rights in the Company's subsequent registration statement
(other than the registration statement associated with the Equity Line in
Section 3(c) above).
4. TERMINATION. This Agreement and the obligations of the parties under
it will terminate on such date as the Series D Holder no longer holds any
shares of Series D Preferred Stock.
5. AMENDMENT. This Agreement may not he amended, waived, restated,
modified or assigned in any manner except by a written agreement executed by
each of the parties hereto.
6. COUNTERPARTS. This Agreement may be executed in facsimile and in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which shall together constitute one and the same
agreement.
7. ENFORCEABILITY. If any provision of this Agreement is held to be
invalid or unenforceable for any reason, such provision will be conformed to
prevailing law rather than voided, if possible, in order to achieve the intent
of the parties and, in any event, the remaining.
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provisions of this Agreement shall remain in full force and effect and shall be
binding upon the parties hereto.
8. GOVERNING LAW. The terms and provisions of this Agreement shall be
construed in accordance with the laws of the State of New York, without regards
to principles of conflicts of law, and the federal laws of the United States of
America applicable therein.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement as of the day and year first above written.
JAMES LLC
BY:
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Name:
Title:
MARKLAND TECHNOLOGIES, INC.
BY: /S/ R. TARINI
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Name: R. Tarini
Title: CEO
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