DEBT CONVERSION AGREEMENT
Exhibit 10.2
DOC-1608
This Debt Conversion Agreement (this “Agreement”) is entered into as of May 12, 2010 (the “Signing
Date”) by and among Picometrix, LLC, a Delaware limited liability company whose
address is 0000 Xxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxx 00000 (the “Company”),
Advanced Photonix, Inc., a Delaware corporation, whose address is 0000 Xxxxxxxxx
Xxxxx, Xxx Xxxxx, Xxxxxxxx 00000 (“API”), the Michigan Economic Development
Corporation, a public body corporate, whose address is 000 Xxxxx Xxxxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (the “MEDC”) and the Michigan Strategic Fund, a
public body corporate and politic within the Department of Treasury of the State
of Michigan, whose address is 000 Xxxxx Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000 (the “MSF”). The Company, API, MEDC and the MSF may be referred to
individually as “Party” or collectively as “Parties.”
Recitals
WHEREAS, pursuant to
that certain Loan Agreement dated as of September 15, 2005 (the “2005 Loan
Agreement”) by and between the Company and the MEDC, the MEDC made available to
the Company a line of credit up to an aggregate principal amount of One Million
Two Hundred Thousand Dollars ($1,200,000) pursuant to a Promissory Note (Line of
Credit) dated as of September 15, 2005 (the “2005 Note”), as amended. The 2005
Loan Agreement and 2005 Note are collectively referred to as “2005 Loan
Documents”;
WHEREAS, the Company
is wholly owned by API, a publicly traded company;
WHEREAS, the MEDC
provides administrative services for the MSF;
WHEREAS, by
Resolution of the MSF Board, dated October 28 2009, the MSF Board approved the
request of the MEDC to assign all of the MEDC’s rights, duties, and obligations
under the 2005 Loan Documents to the MSF;
WHEREAS, any
assignment by the MEDC of the rights, duties, and obligations under the 2005
Loan Documents also require the written consent of the Company;
WHEREAS, the MEDC,
the MSF and the Company, upon the Closing Date (as defined below), desire to
sign and deliver all documents necessary to effectuate the assignment of all of
MEDC’s rights, duties and obligations under the 2005 Loan Documents to the MSF;
WHEREAS, upon the
Closing Date, the MSF and the Company desire to execute and deliver to each
other an Amendment One to the 2005 Loan Documents (“Amendment One”), the Company
desires to execute and deliver to the MSF the Second Amended and Restated
Promissory Note made part of Amendment One (“New Note”), and API desires to
execute and deliver to the MSF an unconditional and irrevocable Guaranty of the
payment and performance obligations of the Company under this Agreement and the
2005 Loan Documents, as amended (“Guaranty Agreement”);
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WHEREAS, in addition
to the execution and delivery of Amendment One by the MSF and the Company, the
execution and delivery of the New Note to the MSF by the Company, and the
execution and delivery of the Guaranty Agreement by API to the MSF, the MSF and
the Company, agree to convert, upon the Closing Date, the accrued and unpaid
interest owing as of October 31, 2009 under the 2005 Note, in the amount of Two
Hundred Thirty Seven Thousand Six Hundred Sixty Seven and 39/100 Dollars
($237,667.39) (the “Interest Indebtedness”), into unregistered shares of Class A
Common Stock of API at the price per share of Fifty Four Cents ($.54) (the
“Conversion”);
WHEREAS, as a result
of the Conversion, the Class A Common Stock of API shall be issued to the MSF,
and the MSF shall have the rights, privileges and preferences of a holder of
Class A Common Stock of API in accordance with the API’s Certificate of
Incorporation, as amended, a copy of which is attached as EXHIBIT A (“API’S Articles”);
WHEREAS, the MSF will
have certain contractual rights and obligations with respect to its Class A
Common Stock identical to those that are applicable to the holders of Class A
Common Stock of API;
WHEREAS, the Class A
Common Stock of API to be issued pursuant to this Agreement will not be
registered under and have not been registered under the Securities Act of 1933,
as amended (the “Securities Act”).
NOW THEREFORE, in
consideration of the foregoing, and of the terms and conditions set forth in
this Agreement, the Parties agree as follows:
1. Execution and
Delivery of Loan Documents. On the Closing Date, the Parties (as applicable) shall cooperate, and sign and deliver (a) an
assignment agreement, substantially in the form attached hereto as Exhibit B
(the “MEDC Assignment”), (b) Amendment One, substantially in the form attached
hereto as Exhibit C, (c) the New Note, substantially in the form attached to
Amendment One, (d) the Guaranty Agreement, substantially in the form attached
hereto as Exhibit D and all other documents reasonably necessary to effectuate
the transactions contemplated therein.
2. Conversion of
Interest Indebtedness. On
the Closing Date, the Company and API shall cause the Interest Indebtedness to
be converted into Four Hundred Forty Thousand One Hundred Twenty Four (440,124)
validly issued, fully paid and non-assessable unregistered Class A Common Stock
of API (“Shares”). The Shares represent the equivalent of the conversion of the
Interest Indebtedness divided by the price per share of Fifty Four Cents ($.54)
of the Class A Common Stock of API, rounded down to the nearest whole share. On
the Closing Date, API shall issue the Shares to the MSF, and upon issuance of
the Shares to the MSF, the Interest Indebtedness shall be deemed cancelled and
extinguished in its entirety.
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3. Closing;
Pre-closing Covenants.
(a) The closing of
the transactions contemplated hereby (the “Closing”) shall occur as soon as
practicable, but no later than ten (10) business days (unless otherwise agreed
to in writing by the Parties or terminated as provided under Section 9), after
the date the MEDC has received from API, written notification, and copies, of
both of the: (a) approval from NYSE Amex of the listing application submitted by
API in connection with the Conversion (the “Approval”) and (b) consent (the
“Bank Consent”) from The PrivateBank and Trust Company (the “Bank”) as required
under that certain Loan Agreement, dated September 25, 2008, between API and the
Bank.
(b) The
Company and API shall each within ten (10) business days after the Signing Date
(unless otherwise agreed in writing by the Parties) take or cause to be taken
such actions as may be required to request the Approval and the Bank Consent,
and provide copies of the requests to the MSF and the MEDC as soon as practical
thereafter, but in no event later than five (5) business days thereafter. The
Company and API shall thereafter use commercially reasonable efforts to
cooperate to obtain the Approval and the Bank Consent, and the MSF and MEDC
shall use commercially reasonable efforts to cooperate with the Company and API
to provide additional information reasonably requested by the Company or API in
their pursuit to obtain the Approval and Bank Consent. API shall promptly
deliver to the MEDC copies of the Approval and the Bank Consent upon its receipt
thereof.
(c) Written notifications and copies required to
be delivered by API to the MEDC under this Section 3 may be delivered by
facsimile or by e-mail to the MSF, to the attention of Xxxxxxx Xxxxx, Fund
Manager, fax: (000) 000-0000 or xxxxxx@xxxxxxxx.xxx with a copy to the MEDC,
to the attention of Xxxxx X. Xxxxxxxx, fax: (517) 000- 0000, or xxxxxxxxx@xxxxxxxx.xxx, or to such other
persons, fax numbers or e-mail addresses as may be provided.
4. Grant of Put
Option. In addition to any
other provisions in API’s Articles, API grants and conveys to the MSF the
further right, to the extent permitted by Michigan Law, but not the obligation,
(the “Put Option”) to sell back to API the Shares received by the MSF pursuant
to this Agreement (including without limitation, appropriate adjustment in the
event of any stock dividend, stock split, combination or other similar
recapitalization of such stock) (collectively, the “MSF Equity Interest”) in
accordance with the following:
(a)
Definitions:
(i) “Trigger Event”
means any one or more of the following:
(1) when either the
Company or API, or both, relocate substantially all of their respective current
Michigan employees (exclusive of sales staff) or current Michigan operations
outside of Michigan; or
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(2) with respect to
the Company or API, the occurrence of an event listed in MCL 125.2008c(4) for
which grants or loans shall not be used.
(ii) “Qualified
Appraiser” means an independent appraiser qualified in valuing equity interests
in companies selected by the MSF and reasonably acceptable to API.
(b) Exercise of Option. At any time during the one hundred twenty (120) calendar day period after
notice of a Trigger Event (the “Exercise Period”), the MSF shall have the option
to exercise the Put Option by providing notice of this election to API (the
“Notice of Option Exercise”). The Exercise Period shall not commence until API
has provided written notice in reasonable detail of the facts and circumstances
of the Trigger Event to the MSF. In addition, the Exercise Period shall be
extended indefinitely if API fails to provide information reasonably necessary
for the MSF to exercise its Put Option. The closing date for the sale of the MSF
Equity Interest to API shall be on a date mutually acceptable to the MSF and API
but in no event later than sixty (60) calendar days after API’s receipt of the
Notice of Option Exercise (the “Put Closing Date”). In the event that the Put
Option is not exercised during the Exercise Period, the Put Option shall
immediately terminate and be of no further force and effect.
(c) Purchase Price. The purchase price for the MSF Equity Interest (the “Option Price”) shall
be the Fair Market Value (as defined in this section) of the MSF Equity Interest
on the Put Closing Date. The “Fair Market Value” of the MSF Equity Interest
shall mean: (a) the average of the closing price of API’s Class A Common Stock
traded on the NYSE Amex or any other then applicable public trading exchange
during the seven (7) trading days immediately preceding the date of the Trigger
Event; or (b) if subparagraph (a) does not apply, the Fair Market Value of the
MSF Equity Interest shall be as determined by a written appraisal of API
obtained by API within the twelve (12) month period up to and including the
Trigger Event from a qualified appraiser that the MSF reasonably agrees
qualifies for purposes of such valuation, a copy of which appraisal API provides
to the MSF; (c) if neither of subparagraphs (a) or (b) apply, the value of the
MSF Equity Interest shall be as established in an “arms-length” transaction
between API and any unrelated third party in connection with the most recent
equity investment in API occurring within the six (6) month period up to and
including the Trigger Event; and (d) if none of subparagraphs (a), (b) or (c)
apply, the Fair Market Value of the MSF Equity Interest shall be determined by
appraisal of API by a Qualified Appraiser, taking into account any and all
discounts and premiums appropriate in the judgment of the Qualified Appraiser.
Any fees or expenses incurred in connection with the appraisal under subsection
(d) shall be borne and paid by the MSF.
(d) API’s Deliverables. On the Put Closing Date and upon API’s receipt of the deliverables set
forth in Section 4(e), API shall: (a) deliver the Option Price (either by check
or wire transfer as selected by the MSF); and (b) execute and deliver to the MSF
such other documents and instruments as may be reasonably requested by the MSF
and its legal counsel (“API Deliverables”).
(e) MSF’s Deliverables. On the Put Closing Date, the MSF shall: (a) execute and deliver to API a
document, mutually agreeable to API and the MSF, selling the MSF Equity Interest
to API, free and clear of all liens, claims and encumbrances; (b) deliver to API
all original certificates evidencing the MSF Equity Interest; and (c) execute
and deliver to API such other documents and instruments as may be reasonably
requested by API and its legal counsel.
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(f) Survival. This
Section 4 shall survive the Closing; provided however, that if the MSF Equity
Interest is listed on a national securities exchange and can be sold without
restriction under Rule 144 and any other applicable rule or regulation as
promulgated under the Securities Act, as amended (“Securities Act’) this Section
4 shall have no further effect.
5. COMPLIANCE WITH
THE MICHIGAN
STRATEGIC FUND ACT. For so long
as MSF holds stock of API,
the Company and API shall comply with the requirements set forth in the Michigan
Strategic Fund Act, as amended, (the “Act”) including, without limitation, the annual
reporting requirements set forth in the Act. In connection with the foregoing,
the Company and API shall, on or before September 30 of each calendar year,
cause submission of an annual progress report in the manner set forth in the
2005 Loan Agreement, containing the following information:
(a) The entity that has received funding,
the amount received and the type of funding;
(b) The number of new patents,
copyrights, or trademarks applied for and issued by the Company and
API;
(c) The number of new start-up businesses
created by the Company and API;
(d) The number of new jobs created and
projected new job growth of the Company and API;
(e) Amounts of other funds received or
leveraged so the Portfolio Manager can determine the amount the Company and API
has leveraged from other sources for the project;
(f) Money or other revenues or property
returned by the Company and API to the investment fund;
(g) The total number of new licensing
agreements by institution and the number of new licensing agreements entered
into by the Company and API with Michigan firms; and
(h)
Products commercialized by the Company and API.
6. COMPANY
AND API REPRESENTATIONS
AND WARRANTIES. As of the
Signing Date and the Closing
Date (unless otherwise specified below), the Company and API, jointly and
severally, represent and warrant:
(a) Organization. Each of the Company and API are duly organized, validly existing, and in
good standing under the laws of the State of Delaware, and each are duly
qualified and in good standing under the laws of the State of Michigan. Each has
the organized power and authority to enter into and perform their respective
obligations under this Agreement. The Company and API each have their respective
principal offices and business operations and employees located within the State
of Michigan. The sole member of the Company is API.
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(b) Authority. The
execution, delivery and performance by the Company and API of this Agreement
will not violate any material provision of law or any provision of the Company’s
Certificate of Formation or operating agreement, or of API’s Articles or bylaws,
or result in the breach of or constitute a default or require any consent (other
than the Bank Consent) under, or result in the creation of any lien, charge,
restriction, claim or encumbrance upon, any property or assets of the Company or
API under any indenture or other agreement or instrument to which the Company or
API is a party, or constitute a violation of any law, rule, regulation, order,
judgment, or decree (including any federal and state securities laws and
regulations and the rules and regulations of the NYSE Amex) by which the Company
or API or either of its properties may be bound or affected. This Agreement is
valid, binding, and enforceable in accordance with its terms, except as limited
by applicable bankruptcy, insolvency, moratorium, reorganization or other laws
or affecting the enforcement of creditors’ rights generally or by general
principles of equity. API’s Articles have not been altered or amended, and API
shall not alter or amend API’s Articles without the prior written approval of
the MSF if such alteration or amendment adversely affects MSF in a manner
different than the other holders of API’s Class A Common Stock.
(c) Consents. All
action on the part of the Company and API, their respective officers, directors,
and managers, members, and shareholders necessary for the authorization,
execution, delivery and performance of the Company and API under this Agreement
have been taken by the Company and API, respectively. None of API’s Class A
Common Stock is subject to any preemptive or similar rights held by other
holders of any equity interest in API. Subject to the Approval, API is not in
violation of the listing requirements of the NYSE Amex and has no knowledge of
any facts which would reasonably lead to delisting or suspension of its common
stock in the foreseeable future.
(d) SEC Documents;
Financial Statements. During the two (2) years prior to the
Signing Date, API has filed, and for the period from and after the Signing Date
through the Closing Date, and for so long as the MSF Equity Interest is not free
of restriction from transfer under Rule 144 and any other applicable rule or
regulation as promulgated under the Securities Act, API shall file, all reports,
schedules, forms, statements and other documents (“SEC Documents”) required to
be filed by it with the Securities and Exchange Commission (“SEC”) pursuant to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(“1934 Act”). All SEC Documents filed have complied, and all SEC Documents to be
filed as required hereunder shall comply, in all material respects with the
requirements of the 1934 Act, and the rules and regulations of the SEC.
(e) Full Disclosure. There are no undisclosed facts, which materially adversely affect or, to
the best of the Company’s or API’s knowledge, are likely to materially adversely
affect the properties, business, or condition (financial or otherwise) of the
Company or API or the ability of
the Company or API to perform their respective obligations under this Agreement.
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(f) Litigation or Other Proceedings. To the knowledge of the Company and API,
and their respective officers, directors, and managers, except as otherwise
publicly reported by API to the SEC under the 1934 Act, there are no suits or
proceedings pending or threatened against the Company or API, before any court,
governmental commission, board, bureau, or other administrative agency or
tribunal, which, if resolved against the Company or API, as applicable, would
have a material adverse effect on the financial condition or business of the
Company or API or impair the Company’s or API’s ability to perform their
respective obligations under this Agreement.
(g) Compliance with Laws. To their respective knowledge, neither the Company or API are in
violation of any laws, ordinances, regulations, rules, orders, judgments,
decrees or other requirements imposed by any governmental authority to which
either are subject and neither has failed to obtain any licenses, permits or
other governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective business, profits, properties
or condition (financial or otherwise).
(h) Capitalization; Fully Paid Stock; Taxes. The authorized capital stock of API is
set forth in API’s Articles. The issued and outstanding shares of the stock,
options (including granted and outstanding and remaining reserved options)
warrants, and other convertible securities of API (not including the Shares to
be issued to the MSF under this Agreement) are set forth in API’s latest public
filing required by the SEC to include such information. The securities to be
issued with respect to the Shares and delivered in connection with the
Conversion shall, at the time of such delivery, be validly issued and
outstanding, fully paid and non-assessable, and free of restriction on transfer
other than as provided by Rule 144 of the Securities Act. API will pay, when due
and payable, all federal and state stamp, original issue or similar taxes, if
any, which are payable in respect of the issuance of the Shares or
certificates.
7. LIMITED TRANSFERABILITY. MSF acknowledges that the Shares have not been registered under the
Securities Act and may be transferred only pursuant to an effective registration
under the Securities Act or an exemption from the registration requirements of
the Securities Act, and otherwise in compliance with applicable state securities
laws. The certificate evidencing the Shares shall bear an appropriate legend
with respect to any such restrictions on transfer.
(a) As of the Signing Date and the
Closing Date, the MSF represents and warrants:
(i) Organization.
The MSF is a public body corporate and politic within the Department of Treasury
of the State of Michigan created under the Michigan Strategic Fund Act. The MSF
has the power and authority to enter into and perform its obligations under this
Agreement.
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(ii)
Consent. All consents and approvals necessary
from any governmental authority as a condition to the execution and delivery of
this Agreement by the MSF or the performance of any of its obligations under
this Agreement have been obtained by the MSF.
(b) As of the Signing Date and the
Closing Date, the MEDC represents and warrants:
(i) Organization.
The MEDC is a public body corporate formed under an Interlocal agreement
pursuant to the Urban Cooperation Act of 1967, as amended, primarily to promote
economic development in the State of Michigan. The MEDC has the power and
authority to enter into and perform its obligations under this
Agreement.
(ii) Consent. All
consents and approvals necessary from any governmental authority as a condition
to the execution and delivery of this Agreement by the MEDC or the performance
of any of its obligations under this Agreement have been obtained by the
MEDC.
8. INVESTMENT REPRESENTATIONS OF MSF. As of the
Signing Date and the Closing
Date (unless otherwise specified below), MSF represents and warrants to the
Company that:
(a) the Shares to be acquired by MSF will
be acquired for investment for MSF’s own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that MSF
has no present intention of selling, granting any participation in, or otherwise
distributing the same;
(b) MSF does not presently have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares acquired under this Agreement;
(c) MSF has not been formed for the
specific purpose of acquiring the shares to be transferred pursuant to this
Agreement;
(d) MSF is an “accredited investor”, as
that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act; and
(e) MSF, as of the Closing Date, is the
sole owner of the indebtedness represented by the 2005 Note and that the 2005
Note is not subject to any lien, pledge or encumbrance of any kind.
9. TERMINATION. This Agreement may be terminated at any time prior to the Closing:
(a) by
mutual written consent of the Parties;
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(b) by any or all of the Parties if the
Approval is not received from NYSE Amex and a copy thereof delivered to the MEDC
by the date which is ninety (90) calendar days after the Signing
Date;
(c) by any or all of the Parties if the
Bank Consent is not executed by the Bank and a copy thereof delivered to the
MEDC by the date which is ninety (90) calendar days after the Signing
Date;
(d) by API or the Company if there is a
material inaccuracy in any of the representations or warranties of the MEDC or
the MSF under Sections 7 or 8 as of the Closing Date such that such
representation or warranty would not be accurate in all respects as of the
Closing Date, MSF or API shall have delivered a written notice of such
inaccuracy and at least ten (10) business days shall have elapsed since the
delivery of such notice without such inaccuracy having been cured;
(e) by the MEDC or the MSF for any one or
more of the following: (i) if there is a material inaccuracy in any of the
representations or warranties of API or the Company under Section 6 as of the
Closing Date such that such representation or warranty would not be accurate in
all respects as of the Closing Date, API or the Company (as applicable), or the
MEDC or MSF (as applicable) shall have delivered a written notice of such
inaccuracy and at least ten (10) business days shall have elapsed since the
delivery of such notice without such inaccuracy having been cured, (ii) the
requirements set forth in the first sentence of Section 3(b) have not been met;
(iii) if under the 2005 Loan Documents there is an Event of Default (as defined
in the 2005 Loan Document), provided however, for purposes of this Section 9(e)
only, Event of Default shall not include the failure by the Company to pay an
installment of principal or interest under the 2005 Note prior to effectuation
of the transactions contemplated by this Agreement.
10. INDEMNIFICATION AND HOLD HARMLESS. Except for the obligations, representations and warranties of the MSF
and the MEDC contained in this Agreement, the MSF, the MEDC, the MEDC’s
executive committee, or any of their respective directors, participants,
officers, agents and employees (collectively, the “Indemnified Person(s)”) shall
not be liable to the Company or API for any reason.
The Company and API, jointly and severally, shall indemnify and hold the
Indemnified Persons harmless against any and all claims asserted by or on behalf
of any individual person, firm or entity, (other than an Indemnified Person),
arising or resulting from, or in any way connected with this Agreement, the 2005
Loan Documents, and any and all related documents executed and delivered in
connection therewith, or any act or failure to act by the Company or API under
this Agreement or the 2005 Loan Documents, including all liabilities, costs and
expenses, including reasonable counsel fees, incurred in any action or
proceeding brought by reason of any such claim. In the event that any action or
proceeding is brought against any Indemnified Person by reason of any such
claim, such action or proceeding shall be defended by MSF counsel, or by counsel
chosen by the Company or API, as the MSF shall determine and indicate by notice
to the Company within fifteen (15) days of the MSF’s receipt of notice of the
filing of any such claim. In the event such defense is by MSF counsel, the
Company and API, jointly and severally, shall indemnify the MSF for reasonable
costs of its counsel allocated to such defense and charged to the MSF. The
Company and API, jointly and severally, shall also indemnify the Indemnified
Persons from and against all costs and expenses, including reasonable counsel
fees, lawfully incurred in enforcing any obligation of the Company or API under
this Agreement and the 2005 Loan Documents.
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Neither the Company nor API shall have any obligation to indemnify an
Indemnified Person if a court with competent jurisdiction finds that the
liability in question was caused by the willful misconduct or gross negligence
of the Indemnified Person, unless the court finds that despite the adjudication
or liability, the Indemnified Person is fairly and reasonably entitled to
indemnity for the expenses the court considers proper. The Parties agree to act
cooperatively in the defense of any action brought against any Indemnified
Person, the Company or API, to the greatest extent possible.
Any Indemnified Person making a claim under this Section 10 shall give
the Company and API notice thereof within fifteen (15) days following the
Indemnified Person’s receipt of the complaint or other pleading giving rise to
such claim, which notice shall specify the nature, scope and amount of any such
claim and be accompanied by such complaint or other pleading giving rise to such
claim. The failure of such Indemnified Person to deliver such notice within such
fifteen (15) day period shall, if materially prejudicial to the Company’s and
API’s ability to defend such action, relieve the Company and API of its
obligation of indemnity hereunder as to such claim. In the event that the MSF
shall use its own counsel to defend against any claim giving rise to the
Company’s and API’s obligation of indemnity under this Section 10, the Company
and API, jointly and severally, shall nonetheless, at their sole cost and
expense, have the right to participate in such defense to the extent practical.
Neither the Company nor API shall have the right or authority to settle any
claim against the any Indemnified Person without the prior written consent of
the MSF and any other applicable Indemnified Person. The MEDC, MSF or other
applicable Indemnified Person shall not be liable for the settlement of any
proceeding made without their respective prior written consent.
Performance of the activities contemplated under this Agreement is within
the sole control of the Company, API and their respective directors, officers,
employees, agents and contractors, and an Indemnified Person shall have no
liability in tort or otherwise for any loss or damage caused by or related to
the actions, products and processes of the Company or API, or their respective
directors, officers, employees, agents or contractors.
This Section 10 shall survive the termination of this Agreement and the
2005 Loan Documents.
11. NOTICES.
Unless otherwise specified in this Agreement, all notices and other
communications required pursuant to this Agreement shall be deemed given if in
writing and personally delivered on the third succeeding business day after
being mailed by registered or certified mail, return receipt requested,
addressed to the address for each party set forth in the introductory paragraph
of this Agreement, or to such other address as such party shall request pursuant
to a written notice given in accordance with the terms of this
Section.
12. ASSIGNMENT. The MSF may assign its rights under this Agreement at any time. Neither
API nor the Company may assign this Agreement without the prior written consent
of the MSF. This Agreement shall bind the permitted successors and assigns of
the Parties.
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13. SEVERABILITY. All of the
clauses of this Agreement are distinct and severable and, if any clause shall be
deemed illegal, void or unenforceable, it shall not affect the validity,
legality or enforceability of any other clause or provision of this
Agreement.
14. GOVERNING LAW.
Michigan law shall govern the construction and enforceability of this
Agreement.
15. JURISDICTION. In
connection with any dispute between the Parties under this Agreement, the
Parties hereby irrevocably submit to jurisdiction and venue of the Michigan
Court of Claims for claims brought against MSF and to the circuit courts of the
State of Michigan located in Xxxxxx County for claims brought by the MSF against
the Company or API. Each Party hereby waives and agrees not to assert, by way of
motion as a defense or otherwise in any such action any claim (a) that it is not
subject to the jurisdiction of such court, (b) that the action is brought in an
inconvenient forum, (c) that the venue of the suit, action or other proceeding
is improper or (d) that this Agreement or the subject matter of this Agreement
may not be enforced in or by such court.
16. COUNTERPARTS; FACSIMILE/.PDF SIGNATURES. This
Agreement may be executed in
counterparts and delivered by facsimile or by .pdf, and in such circumstances,
shall be considered one document and an original for all purposes.
(THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
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The Parties have
caused this Agreement to be executed as of the date first written
above.
| COMPANY ACCEPTANCE: | ||
| Dated: | May 19, 2010 | |
| API ACCEPTANCE: | ||
| Dated: | May 19, 2010 | |
| MSF ACCEPTANCE: | ||
| Dated: | May 18, 2010 | |
| MEDC ACCEPTANCE: | ||
| Dated: | May 18, 2010 | |
| Picometrix, LLC | |
| By: Xxxxx X. Xxxxxx | |
| Its: CFO | |
| Advanced Photonix, Inc. | |
| By: Xxxxx X. Xxxxxx | |
| Its: CFO | |
| Michigan Strategic Fund | |
| Xxxxxxx Xxxxx | |
| Fund Manager | |
| Michigan Economic Development | |
| Corporation | |
| X. Xxxxxxx Main | |
| Its President and Chief Executive Officer | |
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EXHIBIT A
CERTIFICATE OF INCORPORATION OF
API
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EXHIBIT B
FORM OF MEDC
ASSIGNMENT
ASSIGNMENT
Effective
_______________, 2010 (“Effective Date”), the MICHIGAN ECONOMIC DEVELOPMENT CORPORATION, a Michigan public body corporate (the “Assignor”), for good and
valuable consideration, does hereby assign and convey to the MICHIGAN STRATEGIC FUND, a
public body corporate and politic within the Department of Treasury of the State
of Michigan (the “Assignee”):
The rights, duties and obligations of
Assignor under the Loan Agreement and Promissory Note, each dated September 15,
2005, as amended, between the Assignor and Picometrix, LLC, a Delaware limited
liability company (together, the “Agreement”), including, but not limited to,
the right to receive repayment of principal and interest under the
Agreement.
The Assignor
represents and warrants that, subject to the written consent of Picometrix, LLC
to assign the Agreement, it has the authority to assign the Agreement to
Assignee.
Assignee accepts
the assignment and assumption of continuing rights, duties, obligations and the
terms and conditions of the Agreement, and agrees to timely perform and be bound
by the Agreement from and after the date of this Assignment. Notwithstanding the
foregoing, Assignee assumes no liability for breach or negligence with respect
to any of such obligations prior to the Effective Date of this
Assignment.
This instrument
may be executed in one or more counterparts and by facsimile signature, each of
which shall constitute an original.
Assignor and
Assignee have caused their duly authorized representatives to execute this
instrument.
(signatures appear on the following
page)
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MICHIGAN ECONOMIC DEVELOPMENT CORPORATION
| X. Xxxxxxx Main | |
| President and Chief Executive Officer | |
| Dated: | |
| MICHIGAN STRATEGIC FUND | |
| Xxxxxxx Xxxxx | |
| Fund Manager | |
| Dated: | |
| CONSENTED BY: | |
| PICOMETRIX, LLC | |
| By: | |
| Its: | |
| Dated: | |
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EXHIBIT C
FORM OF AMENDMENT ONE
DOC-XXXX
Amend 1
Amend 1
Amendment
One
between the
Michigan Strategic Fund
and
Picometrix, LLC
between the
Michigan Strategic Fund
and
Picometrix, LLC
This
Amendment One (the “Amendment”), dated effective MONTH
XX, 2010 (“Effective Date”), is between the Michigan Strategic Fund whose
address is 000 Xxxxx Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (the “MSF”) and
Picometrix, LLC whose address is 0000 Xxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxx 00000
(the “Company”). The MSF and the Company may be referred to individually as
“Party” or collectively as “Parties.”
RECITALS
WHEREAS, pursuant to that certain Loan
Agreement dated as of September 15, 2005 (the “2005 Loan Agreement”) by and
between the Company and the Michigan Economic Development Corporation, a public
body corporate (the “MEDC”), the MEDC made available to the Company a line of
credit up to an aggregate principal amount of One Million Two Hundred Thousand
Dollars ($1,200,000) pursuant to a Promissory Note (Line of Credit) dated as of
September 15, 2005, as amended, (“2005 Note”). The 2005 Loan Agreement and the
2005 Note are collectively referred to as the “2005 Loan
Documents”;
WHEREAS, the Company is wholly owned by
Advanced Photonix, Inc. (“API”), a publicly traded company;
WHEREAS, by Resolution of the MSF Board,
dated October 28 2009, the MSF Board approved the request of the Company and the
MEDC to assign all of the MEDC’s rights, duties, and obligations under the 2005
Loan Documents to the MSF;
WHEREAS, the Company, API, the MEDC and
the MSF have executed and delivered to one another a Debt Conversion Agreement
dated ________________, 2010 (“Debt Conversion Agreement”) to, among other
things, memorialize the assignment of all of MEDC’s rights, duties and
obligations under the 2005 Loan Documents to the MSF (“Assignment”) and convert
certain accrued and unpaid interest owing under the 2005 Note into Class A
Common Stock of Guarantor subject to the terms and conditions set forth
therein;
WHEREAS, the MEDC provides
administrative services for the MSF;
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WHEREAS, coincident with execution of
this Agreement, API is executing and delivering to the MSF an unconditional and
irrevocable Guaranty of the payment and performance obligations of the Company
under this Agreement, the Debt Conversion Agreement and the 2005 Loan Documents,
as amended (“Guaranty Agreement”);
NOW THEREFORE, in consideration of the
forgoing, the terms and conditions set forth in this Amendment and pursuant to
Section 9.11 of the 2005 Loan Agreement, the Parties agree to hereby amend the
2005 Loan Agreement as follows:
1. Exhibit D is
deleted in its entirety and replaced with the attached Revised Exhibit
D.
The following document is incorporated by
reference as binding obligations, terms and conditions of the 2005 Loan
Agreement.
Revised Exhibit
D: Second Amended and Restated Promissory Note
Except as
specifically provided above, the Parties agree that all terms and conditions of
the 2005 Loan Documents shall remain unchanged and in effect.
(THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
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The signatories
below warrant that they are empowered to enter into this
Amendment.
| COMPANY ACCEPTANCE: | ||
| Dated: | ||
| MSF ACCEPTANCE: | ||
| Dated: | ||
| Picometrix, LLC | |
| By: | |
| Its: | |
| Michigan Strategic Fund | |
| Xxxxxxx Xxxxx | |
| Fund Manager | |
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REVISED EXHIBIT
D
SECOND AMENDED AND RESTATED PROMISSORY
NOTE
(Line of Credit)
(Line of Credit)
| Up to $1,200,000 | Dated: MONTH XX, 2010 |
THIS SECOND AMENDED AND RESTATED
PROMISSORY NOTE REPLACES AND AMENDS AND RESTATES IN ITS ENTIRETY THAT CERTAIN
PROMISSORY NOTE (LINE OF CREDIT) EXECUTED BY BORROWER AND DELIVERED TO LENDER IN
THE ORIGINAL PRINCIPAL AMOUNT OF UP TO ONE MILLION TWO HUNDRED THOUSAND DOLLARS
($1,200,000) DATED SEPTEMBER 15, 2005, AS AMENDED AND RESTATED ON JANUARY 26,
2009 (THE “PRIOR NOTES”). BY ACCEPTANCE OF THIS SECOND AMENDED AND RESTATED
PROMISSORY NOTE, LENDER ACKNOWLEDGES AND AGREES THAT THE PRIOR NOTES SHALL CEASE
TO EVIDENCE ANY OBLIGATIONS OF BORROWER TO LENDER.
FOR VALUE RECEIVED, Picometrix, LLC, a
Delaware limited liability company (“Borrower”), promises to pay to the order of
the Michigan Strategic Fund, a public body corporate and politic within the
Department of Treasury of the State of Michigan (the “Lender” or “MSF”), at 000
Xxxxx Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx or at such other place as Lender may
designate in writing, the principal sum of One Million Two Hundred Thousand
Dollars ($1,200,000) or such lesser sum as shall have been advanced by Lender to
Borrower under this Note (“Indebtedness”) and as contemplated by that certain
Loan Agreement between Borrower and Lender, dated September 15, 2005 (the
“Agreement Date”) as amended as of the date hereof (the “Loan Agreement”), plus
interest as hereinafter provided, all in lawful money of the United States of
America, in accordance with the terms hereof. Capitalized terms used herein and
not otherwise defined shall have the meanings assigned to them in the Loan
Agreement.
All disbursements made under this second
amended and restated promissory note (the “Note”) shall be charged to a loan
account in Borrower’s name on Lender’s books, and Lender shall debit to such
account the amount of each advance made to, and credit to such account the
amount of each repayment made by Borrower. From time to time and upon Borrower's
request, Lender shall furnish Borrower a statement of Borrower’s loan account,
which statement shall be deemed to be correct, accepted by, and binding upon
Borrower, unless Lender receives a written statement of exceptions from Borrower
within ten calendar days after such statement has been furnished.
The unpaid principal balance of this Note
in the amount of One Million two Hundred Thousand Dollars ($1,200,000)
(“Principal”) shall bear interest at a per annum rate of four percent (4.0%)
beginning November 1, 2009. Interest shall be computed on the basis of the
actual number of days elapsed.
Commencing on July 1, 2010, and
continuing on the first business day of each calendar month thereafter for the
following Fifty-One (51) calendar months, Borrower shall pay Lender the Principal and accrued interest
on any unpaid portion thereof in equal installments until paid in
full.
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In the event that any payment under this
Note is not received by Lender within ten days of the date when due, a late
charge of five (5%) percent of the amount of such shall be due and payable.
Borrower agrees that the late charge is a reasonable estimate of the
administrative costs which Lender will incur in processing the delinquency.
Lender’s acceptance of a late payment and/or of the late payment charge will not
waive any default under this Note.
The Borrower shall have the right to
prepay accrued interest and principal in whole or in part at any time without
payment of any prepayment fee or penalty. Prepayments are to be applied first to
accrued interest and then to principal.
Upon the occurrence of a Trigger Event
(as defined in the Debt Conversion Agreement) or an Event of Default (as defined
in the Loan Agreement), the entire Indebtedness, shall become immediately due
and payable at the election of Lender without notice, demand or presentment. All
costs and expenses of collection, including, without limitation, reasonable
attorneys fees and expenses, shall be added to and become part of the total
Indebtedness evidenced by this Note.
Upon the occurrence of a Trigger Event
(as defined in the Debt Conversion Agreement), Lender may at its sole option and
discretion declare the entire Indebtedness, plus a premium equal to seven
percent (7%) of the then-outstanding principal balance of this Note, immediately
due and payable. Lender shall give Borrower written notice of this declaration
of acceleration by sending a statement to Borrower stating the declaration and
setting out the amount owed as of the date of the notice. Interest shall
continue to accrue at the rate set out herein until Borrower pays the
Indebtedness and such premium, in full.
Acceptance by Lender of any payment in an
amount less than the amount then due shall be deemed an acceptance on account
only, and Borrower’s failure to pay the entire amount then due shall be and
continue to be a default. Upon the occurrence of any Event of Default under the
Loan Agreement, neither the failure of Lender promptly to exercise its right to
declare the outstanding principal and accrued unpaid interest and any applicable
premium hereunder to be immediately due and payable, nor the failure of Lender
to demand strict performance of any other obligation of Borrower, shall
constitute a waiver of any such rights, nor a waiver of such rights in
connection with any future default on the part of Borrower or any other person
who may be liable hereunder.
Notwithstanding anything herein to the
contrary, in no event shall Borrower be required to pay a rate of interest in
excess of the Maximum Rate. The term “Maximum Rate” shall mean the maximum
non-usurious rate of interest that Lender is allowed to contract for, charge,
take, reserve or receive under the applicable laws of any applicable state or of
the United States of America (whichever from time to time permits the highest
rate for the use, forbearance or detention of money) after taking into account,
to the extent required by applicable law, any and all relevant payments or
charges hereunder, or under any other document or instrument executed and
delivered in connection therewith and the Indebtedness.
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In the event Lender ever receives, as
interest, any amount in excess of the Maximum Rate, such amount as would be
excessive interest shall be deemed a partial prepayment of principal, and, if
the principal hereof is paid in full, any remaining excess shall be returned to
Borrower. In determining whether or not the interest paid or payable, under any
specified contingency, exceeds the Maximum Rate, Borrower and Lender shall, to
the maximum extent permitted by law, (a) characterize any non-principal payment
as an expense, fee, or premium rather than as interest; (b) exclude voluntary
prepayments and the effects thereof; and (c) amortize, prorate, allocate and
spread the total amount of interest through the entire contemplated term of such
indebtedness until payment is made in full of the principal (including the
period of any extension or renewal thereof) so that the interest on account of
such indebtedness shall not exceed the Maximum Rate.
This Note shall be binding upon Borrower
and its permitted successors and assigns, and the benefits hereof shall inure to
Lender and its successors and assigns. This Note has been executed in the State
of Michigan, and all rights and obligations hereunder shall be governed by the
laws of the State of Michigan.
| BORROWER: PICOMETRIX, LLC | |
| By: | |
| Its: | |
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EXHIBIT D
FORM OF GUARANTY
AGREEMENT
GUARANTY
This
GUARANTY AGREEMENT (the “Guaranty Agreement”), dated as of MONTH XX, 20XX (the “Effective
Date”), is made by Advanced Photonix, Inc., a Delaware corporation, whose
address is 0000 Xxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxx 00000 (the “Guarantor”) in
favor of the Michigan Strategic Fund, a public body corporate and politic within
the Department of Treasury of the State of Michigan, whose address is 000 Xxxxx
Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (the “MSF”). Guarantor and the MSF
may be referred to individually as “Party” or collectively as
“Parties.”
RECITALS
WHEREAS, pursuant to that certain Loan
Agreement dated as of September 15, 2005 (the “2005 Loan Agreement”) by and
between Picometrix, LLC, a Michigan limited liability company (the “Debtor”) and
the Michigan Economic Development Corporation, a Michigan public body corporate
(the “MEDC”), the MEDC made available to the Debtor a line of credit up to an
aggregate principal amount of One Million Two Hundred Thousand Dollars
($1,200,000) pursuant to a Promissory Note (Line of Credit) dated as of
September 15, 2005 (the “2005 Note”), as amended. The 2005 Loan Agreement and
2005 Note, including the Amendment (defined below), and Debt Conversion
Agreement (defined below), and as each may be further amended from time to time,
are collectively referred to as “2005 Loan Documents”;
WHEREAS, the Debtor is wholly owned by Guarantor, a publicly traded
company;
WHEREAS, the Debtor, Guarantor, the MEDC and the MSF have executed and
delivered to one another a Debt Conversion Agreement dated MONTH XX, 20XX (the
“Debt Conversion Agreement”) to, among other things, memorialize the assignment
of all of MEDC’s rights, duties and obligations under the 2005 Loan Documents to
the MSF (the “Assignment”); and convert certain accrued and unpaid interest
owing under the 2005 Note into Class A Common Stock of Guarantor subject to the
terms and conditions set forth therein;
WHEREAS, the MEDC provides administrative services for the
MSF;
WHEREAS, coincident with the execution of this Guaranty Agreement, the
MSF and Debtor are executing and delivering to each other an Amendment One to
the 2005 Loan Documents to among other things, restate the 2005 Note (the
“Amendment”);
WHEREAS, in connection with the Debt Conversion Agreement, Assignment,
Conversion and Amendment, the MSF has required, and the Guarantor has agreed to
enter into and deliver to the MSF,
this Guaranty Agreement with respect to the 2005 Loan Documents.
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NOW THEREFORE, in consideration of
the foregoing, the Guarantor hereby agrees with and for the benefit of MSF as
follows:
1. PROMISE TO PAY AND PERFORM. The
Guarantor hereby irrevocably and unconditionally guarantees timely payment and
performance of all of the obligation of Debtor under the 2005 Loan Documents,
now existing or later arising, including without limitation, payment of all
costs, expenses, fees, interest and other amounts due under the 2005 Loan
Documents.
2. NATURE OF GUARANTY. This
Guaranty is a guaranty of payment and performance, and not of collection. The
MSF may insist the Guarantor pay and perform immediately and the MSF is not
required to first or ever attempt to collect or require performance from Debtor.
The obligations of the Guarantor are unconditional and absolute, regardless of
the unenforceability of any provisions of this Guaranty Agreement, or the
existence of any defense, setoff or counterclaim which the Debtor may assert.
Any payment is due on demand.
3. RIGHTS OF SUBROGATION. The
Guarantor shall not enforce any rights of subrogation, contribution or
indemnification that it has or may have against the Debtor until all obligations
of the Debtor under the 2005 Loan Documents are irrevocably paid and performed
in full. Guarantor further agrees that if any payments to the MSF under the 2005
Loan Documents are invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, receiver or any other party under
any bankruptcy act or code, state, federal or local law, common law or equitable
doctrine, this Guaranty Agreement and the MSF’s interests in any of the 2005
Loan Documents remain in full force and effect (or are reinstated as the case
may be) until payment in full of those amounts, which are due on
demand.
4. REPRESENTATIONS OF GUARANTOR. As of the
Effective Date, the Guarantor represents and warrants:
a) Organization. Guarantor is duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, is duly qualified and in good standing
under the laws of the State of Michigan, and has the organized power and
authority to enter into this Guaranty Agreement.
b) Corporate Authority. The execution, delivery and performance
of by the Guarantor of this Guaranty Agreement will not: (i) violate any
provision of law or any provision of the Guarantor’s Certificate of
Incorporation; (ii) violate any material provision of the Guarantor’s bylaws; or
(iii) result in the breach of or constitute a default, or require any consent
other than the consent of the PrivateBank and Trust Company (a copy of which
consent has been provided to the MSF) or result in the creation of any lien,
charge, restriction, claim or encumbrance upon any property or assets of the
Guarantor, under any indenture or other agreement or instrument to which the
Guarantor is a party or by which the Guarantor or its property may be bound or affected, and this Guaranty
Agreement is valid, binding, and enforceable in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, moratorium,
reorganization or other laws or principals of equity affecting the enforcement
of creditors’ rights generally or by general principals of equity.
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c) Consents. All corporate action on the part of the Guarantor, its officers,
directors and shareholders necessary for the authorization, execution, delivery
and performance of the Guarantor under this Guaranty Agreement has been obtained
by the Guarantor.
5. NOTICES. All notices and other communications
required pursuant to this Guaranty Agreement shall be deemed given if in writing and personally
delivered on the third succeeding business day after being mailed by registered
or certified mail, return receipt requested, addressed to the address for each
Party set forth in the introductory paragraph of this Guaranty Agreement, or to
such other address as such Party shall request pursuant to a written notice
given in accordance with the terms of this Section.
6. ASSIGNMENT. The MSF may assign its rights under this
Guaranty Agreement at any time. This Guaranty Agreement may not be assigned by
Guarantor without the prior written consent of the MSF. This Guaranty Agreement
shall bind the permitted successors and assigns of the Parties.
7. SEVERABILITY. All of the clauses of this Guaranty
Agreement are distinct and severable and, if any clause shall be deemed illegal,
void or unenforceable, it shall not affect the validity, legality or
enforceability of any other clause or provision of this Guaranty
Agreement.
8. GOVERNING LAW. Michigan law
shall govern the construction and enforceability of this Guaranty
Agreement.
9. JURISDICTION. In connection with any dispute between
the Parties under this Guaranty Agreement, the Guarantor hereby irrevocably submits to
jurisdiction and venue of the Michigan Court of Claims for claims brought
against MSF and to the circuit courts of the State of Michigan located in Xxxxxx
County for claims brought against the Guarantor. Guarantor hereby waives and
agrees not to assert, by way of motion as a defense or otherwise in any such
action any claim (a) that is not subject to the jurisdiction of such court, (b)
that the action is brought in an inconvenient forum, (c) that the venue of the
suit, action or other proceeding is improper or (d) that this Guaranty Agreement
or the subject matter of this Guaranty Agreement may not be enforced in or by
such court.
10. COUNTERPARTS; FACSIMILE/.PDF SIGNATURES. This
Guaranty Agreement may be
executed and delivered by facsimile or by .pdf, and in such circumstances, shall
be considered one document and an original for all purposes.
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11. MISCELLANEOUS. Nothing in this Guaranty Agreement shall
waive or restrict any right of MSF granted in any other document or by law. No
delay on the part of MSF in the exercise of any right or remedy shall operate as
a waiver under this Guaranty Agreement. No single or partial release by MSF or any right or remedy
shall preclude any other future exercise of that right or remedy or the exercise
of any other right or remedy under this Guaranty Agreement. No waiver or
indulgence by MSF of any default shall be effective unless in writing and signed
by the MSF, nor shall a waiver on one occasion be construed as a bar to or
waiver of that right on any future occasion.
(THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
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Guarantor has
caused this Guaranty Agreement to be executed effective as of the Effective
Date.
| GUARANTOR: |
| Advanced Photonix, Inc. |
| By: |
| Name: |
| Title: |
| Dated: |
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