EXHIBIT 10.1
PRODUCT LICENSING AND LOAN AGREEMENT
This PRODUCT LICENSING AND LOAN AGREEMENT(this "AGREEMENT") is made as
of May 1, 2002 by and between Avanti Optics Corporation a Delaware corporation
("Avanti") and CyberOptics Corporation ("CyberOptics").
WHEREAS, Avanti is engaged in the development of, and is the owner of,
technology to facilitate the assembly of components for photonic communications
systems, and intends to apply such technology to manufacture and sell photonics
modules;
WHEREAS, CyberOptics is engaged in the business of designing,
manufacturing and marketing optical sensors and systems that enable increased
quality and production in the electronics and semiconductor markets and has
developed and owns intellectual property associated with such business;
WHEREAS, Avanti was formed in part with technology and equipment
initially under development and owned by CyberOptics and CyberOptics acquired a
19% equity interest in Avanti in consideration of the license of that technology
and contribution of such equipment and other assets and agreements;
WHEREAS, Avanti is in need of additional funding to continue its
operations and development and CyberOptics is willing to provide that funding on
the terms set forth in this Agreement and provided that CyberOptics has access
to the manufacture and marketing of photonics manufacturing cells under
development by Avanti; and
WHEREAS, Avanti and CyberOptics each further desire to obligate
themselves as set forth in this Agreement and to make the representations and
warranties set forth in below, respectively, in connection with the transactions
contemplated hereby.
Accordingly, in consideration of the premises and the mutual promises
herein set forth, and in consideration of the representations and warranties
herein contained, the parties agree as follows.
ARTICLE I.
DEFINITIONS
Capitalized terms used in this Agreement shall have the
meanings set forth in this Article I:
Section 1.01 "Agreement" means this Product Licensing and Loan
Agreement.
Section 1.02 "Alpha Prototype and Production Specification" means a
complete, functioning bench version of the Photonics Assembly Station suitable
for production of Photonic Devices or portions of Photonic Devices, together
with the specifications for design and
manufacture of an enhanced and finished version of such Photonics Assembly
Station that is suitable for commercial production.
Section 1.03 "Avanti" means Avanti Optics Corporation, a Delaware
corporation having its principal offices at 00000 Xxxxx Xxxxxx Xxxxx,
Xxxxxxxxxxx, XX 00000, facsimile 763-398-2021.
Section 1.04 "Avanti Optical Module" means an assembly (typically
treated as a subassembly in later steps) consisting of an Optical Component
(typically held by an optical component mount) mounted with a defined alignment
to a relative reference in such a fashion that key positional characteristics of
the Optical Component are located with great precision relative to registration
features (preferentially kinematic mounting features) on the relative reference
and that is designed to mate with compatible registration features on
substrates, optical circuit boards or other mounting media without the need for
active alignment.
Section 1.05 "Avanti Surface Mount Optics" means the methods developed
by Avanti for alignment of Optical Components resulting in Optical Modules that
have a defined optical characteristic relative to a fixed reference.
Section 1.06 "Avanti Surface Mount Intellectual Property" means all
those inventions and trade secrets developed by Avanti, or that may hereafter be
developed or acquired by Avanti, relating to, or necessary or useful in, the
Avanti Surface Mount Optics
Section 1.07 "Automated Photonics Assembly System" means any Photonics
Device assembly station or tool that produces all, or a defined part, of such
Photonics Device without human intervention and that incorporates robotic
capture, transport and placement of components with throughput at least
equivalent to the throughput of pick and place machines used as of the date of
this Agreement for the placement of surface mount electronic components.
Section 1.08 "Closing" shall have the meaning assigned to it in Section
2.02.
Section 1.09 "Cost of Goods Sold" means the fully-burdened cost of
manufacture, production, shipment and installation of products giving rise to
revenue, including, without limitation, direct and indirect labor costs
(including benefits), cost of material (including cost of procurement, warehouse
and recordation of new materials and finished goods) manufacturing overhead and
packaging and incoming freight costs, all in accordance with generally accepted
accounting principles. Cost of Goods sold pre-production will be based on
engineering estimates of recurring costs to be provided by CyberOptics to
Avanti.
Section 1.10 "CyberOptics" means CyberOptics Corporation, a Minnesota
corporation having its principal office at 0000 Xxxxxx Xxxxx Xxxxx, Xxxxxx
Xxxxxx, XX 00000, facsimile (000) 000-0000.
Section 1.11 "CyberOptics Module and Device Intellectual Property"
means any and all of (a) the patents, patent applications, reissues, divisions,
continuations, continuations-in-part, re-examinations, invention certificates
and patents of addition, U.S. or otherwise, (b) the works of expression
protectable under 17 U.S.C. ss.401 et seq., (c) CyberOptics proprietary
procedures and information that derive their value by not being generally known,
including any proprietary
know-how necessary to implement any of the foregoing, and any other intellectual
property for which CyberOptics claims protection, in each case that are owned,
controlled or otherwise licensable on an exclusive basis by CyberOptics, or that
are hereafter designed, created or acquired by or on behalf of CyberOptics, and
that are used or useful in the design, development, manufacturing, marketing or
sale of Avanti Optical Modules or in the attachment, active alignment, or
securing of Avanti Optical Modules into Photonics Devices (including without
limitation matters relating to the design of Avanti Optical Modules and
Photonics Devices and the attachment, active alignment, or securing of Optical
Components into Avanti Optical Modules).
Section 1.12 "Loan Documents" means the Note, the Security Agreement
and the exhibits to the Note and Security Agreement.
Section 1.13 "Note" means the promissory note from Avanti to
CyberOptics substantially in the form of the attached Exhibit A.
Section 1.14 "Optical Component" means an object configured to interact
with light so as to either modify the light (such as a lens, grating, fiber,
mirror, etc.) or to transduce light into electricity (such as a photodiode) or
electricity into light (such as a laser or LED).
Section 1.15 "Photonics Assembly Station" means any Photonics Device
assembly station or tool, that requires some form of human intervention for the
production of each Photonics Device or portion of a Photonics Device or that,
regardless of such intervention, does not use full, three-axis robotic capture,
transport and placement of components with throughput at least equivalent to the
throughput of pick and place machines used as of the date of this Agreement for
the placement of surface mount electronic components.
Section 1.16 "Photonics Assembly Station Assets" means all assets
relating to the Photonics Assembly Station, including, without limitation, all
bills of materials, drawings, software source code and design documentations,
performance specifications, vendor sourcing, design documentation, architecture
documentation, and other technical information owned or possessed by Avanti,
relating to the manufacture, assembly, quality control and testing of any
Photonics Assembly Station.
Section 1.17 "Photonics Assembly Station Intellectual Property" means
any and all of (a) the patents, patent applications, reissues, divisions,
continuations, continuations-in-part, re-examinations, invention certificates
and patents of addition, U.S. or otherwise, (b) the works of expression
protectable under 17 U.S.C. 401 et seq., and (c) Avanti proprietary procedures
and information which derive their value by not being generally known; including
any proprietary know-how necessary to implement any of the foregoing, or any
other intellectual property for which Avanti claims protection, in each case
which are owned, controlled or otherwise licensable on an exclusive basis by
Avanti, or that are hereafter designed, created or acquired by or on behalf of
Avanti and that provide Avanti any of the rights necessary to take advantage of
or necessary for manufacturing and developing a Photonics Assembly Station, but
specifically not including the Avanti Surface Mount Intellectual Property.
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Section 1.18 "Photonics Assembly Market" means (a) the business of
designing, developing, manufacturing, using or selling equipment that assembles
components and subassemblies for use in the optoelectronic telecommunications
and data communications markets; and (b) the business of designing, developing,
manufacturing, using or selling components and subassemblies for use in the
optoelectronic telecommunications and data communications markets.
Section 1.19 "Photonics Device" means an assembly comprised, at least
partially, of one or more Avanti Optical Modules and a fixed reference (such as
an optical circuit board), but which may include other components, both optical
and electronic, to produce a device capable of performing a function in an
optical communication or transmission system (such as a wave length multiplexor)
..
Section 1.20 Prohibited Transaction means any of the transactions
prohibited by the covenants contained in Section 6.10 to 6.20 of this Agreement.
Section 1.21 "Purchase Price" shall have the meaning assigned to it in
Section 2.01.
Section 1.22 "Right of First Refusal" means the exclusive right of
CyberOptics to contract with Avanti or a customer of Avanti for development of a
commercially marketable form of the Photonics Assembly Station and for the
manufacture and sale of such Photonics Assembly Station to Avanti or the
customer set forth in Section 3.03.
Section 1.23 "Security Agreement" means the security agreement in the
form of the attached Exhibit C.
ARTICLE II.
PURCHASE AND SALE OF THE NOTE AND WARRANT.
Section 2.01 Purchase and Sale. Subject to the terms and conditions of
this Agreement, at the Closing Avanti shall issue and sell the Note and Warrant
to CyberOptics, and CyberOptics shall purchase the Note and Warrant from Avanti,
at a purchase price of $1,500,000 (the "Purchase Price").
Section 2.02 The Closing. The issuance of the Note and the Warrant to
CyberOptics shall take place concurrently with the execution of this Agreement
at the offices of CyberOptics or at such other time and place as Avanti and
CyberOptics shall agree (which time is referred to herein as the "Closing").
Section 2.03 Closing Deliveries. At the Closing,
(a) Avanti shall deliver to CyberOptics the Note, made
payable to CyberOptics in the aggregate principal
amount of $1,500,000;
(b) Avanti shall deliver to CyberOptics the Warrant in
the form set forth in Exhibit B:
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(c) Avanti shall deliver to CyberOptics an executed copy
of the security Agreement in the form set forth in
Exhibit C, together with executed copies of the
assignment of patents and patent rights attached as
exhibits thereto;
(d) CyberOptics shall deliver to Avanti the Purchase
Price of the Note and Warrant.
ARTICLE III.
RIGHT OF FIRST REFUSAL AND LICENSES
Section 3.01 Best Efforts to Develop Alpha Prototype. Avanti agrees to
use its best efforts to complete development of an Alpha Prototype and
Production Specification on or prior to April 30, 2003. Avanti agrees that it
will complete the Alpha Prototype and Production Specification before it devotes
any significant resources to an Automated Photonics Assembly System.
Section 3.02 Commercially Reasonable Efforts to Market. Avanti agrees
to use its commercially reasonable efforts to promote, and to locate a customer
in the Photonics Assembly Markets interested in purchasing, the Photonics
Assembly Station on or prior to April 30, 2003. Avanti shall notify CyberOptics
of any leads for potential customers interested in developing or using a
Photonics Assembly Station and CyberOptics shall cooperate in promoting Avanti's
technology to such potential customer and shall assist Avanti in negotiating a
contract or commitment from a customer interested in acquiring a Photonics
Assembly Station based on the Alpha Prototype and Production Specification ( any
such contract or commitment relative to a specific Alpha Prototype and
Production Specification being hereafter referred to as a "Proposal") .
Section 3.03 Right of First Refusal.
(a) PROHIBITION ON LICENSE. Avanti shall not license the
Photonics Assembly Station Intellectual Property or
the Avanti Surface Mount Intellectual Property to any
other person, entity or organization, or provide
assistance to the same, for the development,
marketing, manufacture or sale of a Photonics
Assembly Station until after expiration of
CyberOptics Right of First Refusal in accordance with
Section 3.03(c). After expiration of the Right of
First Refusal with respect to any individual
Proposal, Avanti may license the Photonics Assembly
Station Intellectual Property and the Avanti Surface
Mount Intellectual Property, and provide assistance,
for the development, manufacture, marketing,
distribution and sale of a commercially marketable
Photonics Assembly Station developed and sold in
accordance with the Proposal. Upon expiration of the
Right of First Refusal with respect to all Proposals,
the limitations of this subsection 3.03(a) shall
expire.
(b) RIGHT OF FIRST REFUSAL. Until expiration of the Right
of First Refusal in accordance with subsection (c),
Avanti shall promptly notify CyberOptics upon
negotiation or receipt by Avanti of any Proposal.
Such notification shall be accompanied by a copy of
the Alpha Prototype and Production Specification and
by immediate access to the Photonics Assembly Station
Intellectual Property and
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Photonics Assembly Station Assets, and such personnel
of Avanti as CyberOptics shall reasonably request, so
that CyberOptics may evaluate the Proposal.
CyberOptics shall have the right of first refusal
(the "Right of First Refusal") to contract with
Avanti or the customer, or both, for the development
of a commercially marketable form of the Photonics
Assembly Station and for the manufacture and sale of
such Photonics Assembly Station to Avanti or the
customer. CyberOptics shall exercise such Right of
First Refusal by notifying Avanti in writing within
45 days of receipt of the Proposal and all supporting
documentation.
(c) EXPIRATION OF RIGHT OF FIRST REFUSAL. The Right Of
First Refusal set forth in this Section 3.03 shall
expire with respect to any individual Proposal (a
"Passed Proposal") in the event that (i) the Proposal
is submitted to CyberOptics in accordance with
subsection (b) and includes pricing to CyberOptics
consistent with Section 3.05 and CyberOptics fails to
exercise its Right of First Refusal within 45 days of
receipt of such Proposal, or (ii) CyberOptics
abandons development of the Photonics Assembly
Station specified in the Proposal after exercising
the Right of First Refusal. After such expiration of
the Right of First Refusal with respect to any
specific Passed Proposal, Avanti shall be free to
pursue development and introduction of a commercially
available Photonics Assembly Station on the basis of
such Passed Proposal or to contract with a third
party for such development and introduction, and the
exclusivity of the license granted to CyberOptics
pursuant to Paragraph 3.04(a) below upon exercise of
the Right of First Refusal with respect to any
subsequent Proposal shall be subject to any rights
exercised or granted by Avanti in connection with
such Passed Proposal. In the event, however, that the
Passed Proposal is materially changed in a manner
advantageous to such third party prior to
commencement of such development (or if such change
was foreseeable at the time of such commencement),
Avanti shall again offer the revised Passed Proposal
to CyberOptics pursuant to the Right of First Refusal
set forth in subsection (b). In the event that the
Right of First Refusal expires with respect an
individual Passed Proposal and Avanti subsequently
develops a Proposal with respect to a Photonics
Assembly Station having materially different
specifications from the Passed Proposal (the "Second
Proposal"), then CyberOptics shall have the Right of
First Refusal pursuant to Paragraph (b) above and
this Paragraph (c) with respect to the Second
Proposal. In the event, however, that development of
a commercial version of a Photonics Assembly Station
is completed by a third party, and Avanti fails to
exercise its Right of First Refusal with respect to
the Second Proposal, the Right of First Refusal set
forth in this Section 3.03 shall in all respects
expire for all subsequent Proposals and CyberOptics'
only right with respect to any subsequent Proposal
shall be to be notified of the same and to be given
the opportunity, to the extent not in conflict with
CyberOptics' contractual obligations with others, to
bid for the development of the first such new
Proposal (but not more than one such new Proposal).
(d) OBLIGATIONS OF CYBEROPTICS. Provided that the Alpha
Prototype and Design Specification has been completed
by Avanti, if CyberOptics exercises its Right of
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First Refusal, CyberOptics shall be obligated to use
its commercially reasonable efforts to develop a beta
prototype and then a commercial version of the
Photonics Assembly Station; provided that nothing
herein shall limit the ability of CyberOptics to
abandon such development project if it determines, in
its sole discretion, that it is not commercially
feasible to complete such development or that such
development would not result in a product with
adequate margins and markets, considering such
development costs, to justify development. Any
intellectual property related to such development by
CyberOptics (the "CyberOptics PAS Intellectual
Property") shall be the property of CyberOptics,
subject to the license set forth in Section 3.04.
Section 3.04 LICENSE RIGHTS UPON EXERCISE.
(a) GRANT OF LICENSE. In the event that CyberOptics
exercises the Right of First Refusal, and from and
after such exercise Avanti shall grant, and effective
upon such exercise hereby does grant, to CyberOptics:
(i) a worldwide, perpetual, non-transferable,
fully paid-up license under the Photonics
Assembly Station Intellectual Property to
make, have made, use, offer for sale, sell
and otherwise deal in all Photonics Assembly
Stations which license shall be exclusive
for five years after the date of exercise of
the Right of First Refusal (except as
otherwise provided in Paragraph 3.03(c)
above) and nonexclusive thereafter; and
(ii) to the extent necessary to develop,
manufacture, market and sell, and allow its
customers to use, the Photonics Assembly
Station (but specifically not for the
development, manufacture, marketing or sale
of Avanti Optical Modules) a nonexclusive,
worldwide, perpetual, nontransferable, fully
paid-up license under the Avanti Surface
Mount Intellectual Property;
provided, however, that both such licenses
shall terminate in the event that
CyberOptics abandons development of the
Photonics Assembly Station.
(b) NO WARRANTY. CyberOptics agrees that the licenses by
Avanti to CyberOptics pursuant to Subsection 3.04(a)
are "AS IS" and that, THERE ARE NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, AS TO
MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE,
NON-INFRINGEMENT OR ANY OTHER MATTER WITH RESPECT TO
ANY INTELLECTUAL PROPERTY LICENSED HEREIN OR ANY
OTHER GOODS OR SERVICES
Section 3.05 License and Sale to Avanti.
(a) CyberOptics shall make available to Avanti, on
commercially reasonable terms (which shall not
include penalties for failure in CyberOptics'
production), the right to purchase, market and sell
any of the Photonics Assembly Stations that it
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has developed or as to which it has otherwise
acquired rights pursuant to Section 3.03. Avanti
shall be entitled to purchase such Photonics Assembly
Stations at a price of not more than 182% of
CyberOptics' Cost of Goods Sold for such Photonics
Assembly Station.
(b) CyberOptics hereby grants to Avanti a non-exclusive,
worldwide, perpetual, transferable, fully paid-up
license under the CyberOptics Module and Device
Intellectual Property for purposes of designing,
developing, manufacturing, assembling, marketing and
selling Avanti Optical Modules, Photonic Devices, and
Automated Photonics Assembly Systems. Upon request by
Avanti, CyberOptics shall provide to Avanti
reasonable access to the CyberOptics Module and
Device Intellectual Property and related information.
(c) NO WARRANTY. Avanti agrees that the licenses by
CyberOptics to Avanti pursuant to Subsection 3.05(b)
are "AS IS" and that, THERE ARE NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, AS TO
MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE,
NON-INFRINGEMENT OR ANY OTHER MATTER WITH RESPECT TO
ANY INTELLECTUAL PROPERTY LICENSED HEREIN OR ANY
OTHER GOODS OR SERVICES.
Section 3.06 License to Avanti Customers. In the event requested by
Avanti, CyberOptics agrees to negotiate and license to such of Avanti's
customers as desire to develop photonics assembly stations for their own
internal use, the Photonics Assembly Station Intellectual Property and the
CyberOptics PAS Intellectual Property on commercially reasonable terms (but AS
IS and without any warranties, express or implied, with respect to the same),
subject to a royalty payable to CyberOptics of not less than to 5% of the list
price for a CyberOptics Photonics Assembly Station.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF AVANTI
Avanti represents and warrants to CyberOptics that except as set forth
in the Schedules to this Agreement:
Section 4.01 Organization, Standing, Etc. Avanti is a corporation duly
incorporated and validly existing and in good standing under the laws of
Delaware and has all requisite power and authority to carry on its business as
now conducted, to enter into this Agreement and to issue the Note and to perform
its obligations under the Loan Documents. Avanti has no subsidiaries. Avanti (a)
holds all certificates of authority, licenses and permits necessary to carry on
its business as presently conducted in each jurisdiction in which it is carrying
on such business, except where the failure to hold such certificates, licenses
or permits would not have a material adverse effect on the business, operations,
property, assets or condition, financial or otherwise, of Avanti, and (b) is
duly qualified and in good standing as a foreign corporation (or other
organization) in each jurisdiction in which the character of the properties
owned, leased or operated by it or the business conducted by it makes such
qualification necessary and the failure so to qualify would permanently preclude
Avanti from enforcing its rights with respect to any
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assets or expose Avanti to any liability, which in either case would be material
to Avanti taken as a whole.
Section 4.02 Authorization and Validity. The execution, delivery and
performance by Avanti of this Agreement, the Warrant and the Loan Documents have
been duly authorized by all necessary corporate action by Avanti, and this
Agreement constitutes, and the Note and the Warrant and other Loan Documents
when executed will constitute, the legal, valid and binding obligations of
Avanti, enforceable against Avanti in accordance with their respective terms,
subject to limitations as to enforceability which might result from bankruptcy,
insolvency, moratorium and other similar laws affecting creditors' rights
generally and subject to limitations on the availability of equitable remedies.
Section 4.03 No Conflict; No Default. The execution, delivery and
performance by Avanti of this Agreement and the Warrant and the Loan Documents
will not (a) violate any provision of any law, statute, rule or regulation or
any order, writ, judgment, injunction, decree, determination or award of any
court, governmental agency or arbitrator presently in effect having
applicability to Avanti, (b) violate or contravene any provision of the
Certificate of Incorporation or bylaws of Avanti, or (c) result in a breach of
or constitute a default under any indenture, loan or credit agreement or any
other agreement, lease or instrument to which Avanti is a party or by which it
or any of its properties may be bound or result in the creation of any lien
thereunder. Avanti is not in default under or in violation of any such law,
statute, rule or regulation, order, writ, judgment, injunction, decree,
determination or award or any such indenture, loan or credit agreement or other
agreement, lease or instrument in any case in which the consequences of such
default or violation could have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise) of Avanti.
Section 4.04 Government Consent. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of Avanti to authorize, or is required in connection with the execution,
delivery and performance of, or the legality, validity, binding effect or
enforceability of, Loan Documents, except for any necessary filing or
recordation of or with respect to any of the Security Agreement.
Section 4.05 Financial Statements and Condition. Avanti's financial
statements at and for the year ended December 31, 2001 and at and for the three
months ended March 31, 2002, as heretofore furnished to CyberOptics, have been
prepared in accordance with GAAP on a consistent basis (except for the absence
of footnotes and subject to year-end audit adjustments as to the interim
statements) and fairly present the financial condition of Avanti as at such
dates and the results of their operations and changes in financial position for
the respective periods then ended. As of the dates of such financial statements,
Avanti had no material obligation, contingent liability, liability for taxes or
long-term lease obligation which is not reflected in such financial statements
or in the notes thereto. Since March 31, 2002, there has been no material
adverse change in the business, operations, property, assets or condition,
financial or otherwise, of Avanti.
Section 4.06 Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of Avanti, threatened against or affecting Avanti
or any of its properties before any
9
court or arbitrator, or any governmental department, board, agency or other
instrumentality which, if determined adversely to Avanti, would have a material
adverse effect on the business, operations, property or condition (financial or
otherwise) of Avanti taken as a whole or on the ability of Avanti to perform its
obligations under the Loan Documents.
Section 4.07 Environmental, Health and Safety Laws. There does not
exist any violation by Avanti of any applicable federal, state or local law,
rule or regulation or order of any government, governmental department, board,
agency or other instrumentality relating to environmental, pollution, health or
safety matters which will or threatens to impose a material liability on Avanti
or which would require a material expenditure by Avanti to cure. Avanti has not
received any notice to the effect that any part of its operations or properties
is not in material compliance with any such law, rule, regulation or order or
notice that it or its property is the subject of any governmental investigation
evaluating whether any remedial action is needed to respond to any release of
any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could reasonably be expected to have a
material adverse effect on the business, operations, properties, assets or
condition (financial or otherwise) of Avanti. Avanti does not have knowledge
that it or its property will become subject to environmental laws or regulations
during the term of this Agreement, compliance with which would have a material
adverse effect on the business, operations, properties, assets or condition
(financial or otherwise) of Avanti .
Section 4.08 ERISA. Avanti has caused its 401K plan and trust to be
administered, managed and controlled in all respects in compliance with the
Employee Retirement Income Security Act of 1974("ERISA") and the regulations
adopted by the Department of Labor and the Internal Revenue Service pursuant
thereto. Avanti has no other plan, policy or agreement governed by ERISA.
Section 4.09 Title to Property; Leases; Liens; Subordination. Avanti
has (a) good and marketable title to its real properties and (b) good and
sufficient title to, or valid, subsisting and enforceable leasehold interest in,
its other material properties, including all real properties, other properties
and assets, referred to as owned by Avanti in the most recent financial
statement referred to in Section 4.5 (other than property disposed of since the
date of such financial statements in the ordinary course of business). None of
such properties is subject to a lien, claim or encumbrance, except as set forth
in Schedule 4.09. Avanti has not subordinated any of its rights under any
obligation owing to it to the rights of any other person.
Section 4.10 Taxes. Avanti has filed all federal, state and local tax
returns required to be filed and has paid or made provision for the payment of
all taxes due and payable pursuant to such returns and pursuant to any
assessments made against it or any of its property and all other taxes, fees and
other charges imposed on it or any of its property by any governmental authority
(other than taxes, fees or charges the amount or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in accordance with GAAP have been provided on the books of
Avanti). No tax liens have been filed and no material claims are being asserted
with respect to any such taxes, fees or charges. The charges, accruals and
reserves on the books of Avanti in respect of taxes and other governmental
charges are adequate and Avanti knows of no proposed material tax assessment
against it or any basis therefor.
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Section 4.11 Trademarks, Patents. Avanti possesses or has the right to
use all of the Avanti Surface Mount Optics Intellectual Property, all of the
Photonics Assembly Station Intellectual Property and all of the other patents,
trademarks, trade names, service marks and copyrights, and applications
therefore, and all technology, know-how, processes, methods and designs used in
or necessary for the conduct of its business, without known conflict with the
rights of others.
Section 4.12 Burdensome Restrictions. Avanti is not a party to or
otherwise bound by any indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any charter, corporate or partnership
restriction which would foreseeably have a material adverse effect on the
business, properties, assets, operations or condition (financial or otherwise)
of Avanti or on the ability of Avanti to carry out its obligations under any
Loan Documents.
Section 4.13 Full Disclosure. Subject to the following sentence,
neither the financial statements referred to in Section 4.05 nor any other
certificate, written statement, exhibit or report furnished by or on behalf of
Avanti in connection with or pursuant to this Agreement contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements contained therein not misleading. Certificates or
statements furnished by or on behalf of Avanti to CyberOptics consisting of
projections or forecasts of future results or events have been prepared in good
faith and based on good faith estimates and assumptions of the management of
Avanti, and Avanti has no reason to believe that such projections or forecasts
are not reasonable.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF CYBEROPTICS
CyberOptics hereby represents and warrants to Avanti that:
Section 5.01 Organization and Standing. CyberOptics is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Minnesota.
Section 5.02 Authority. CyberOptics has corporate power and authority
to enter into this Agreement, and this Agreement, when executed and delivered,
will constitute a valid and legally binding obligation of such CyberOptics,
enforceable against CyberOptics in accordance with its terms subject to
limitations as to enforceability which might result from bankruptcy, insolvency,
moratorium and other similar laws affecting creditors' rights generally and
subject to limitations on the availability of equitable remedies.
Section 5.03 Investment Intent. CyberOptics is acquiring and will hold
the Note and Warrant and any shares of equity securities issued upon conversion
of the Note or upon exercise of such Warrant (the "UNDERLYING SECURITIES") for
investment for its account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act of 1933, as amended (the "SECURITIES ACT").
ARTICLE VI.
COVENANTS OF AVANTI
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Until the Note has been paid in full, unless CyberOptics shall
otherwise consent in writing:
Section 6.01 Patents and Other Intangible Rights. Avanti will apply
for, or use commercially reasonable efforts to obtain assignments of or licenses
to use, all patents, trademarks, trade names and copyrights which in the opinion
of a prudent and experienced businessman operating in the industry in which
Avanti is operating are desirable or necessary for the conduct and protection of
the development, manufacture, marketing and sale of the Photonics Assembly
Station. Without limiting the generality of the foregoing, Avanti shall use its
commercially reasonable efforts to prepare, file and cause to be issued, patents
covering the claims described in the attached Exhibit D and to prepare and file
applications in such foreign jurisdictions as are reasonably necessary, in the
opinion of CyberOptics, to protect the intellectual property in the principal
markets in which the Photonics Assembly Stations will be sold. In the event that
Avanti chooses not to file patents in a foreign jurisdiction that in the opinion
of CyberOptics are necessary to protect the intellectual property in the
principal markets in which the Photonics Assembly Stations will be sold, Avanti
agrees that it will assign to CyberOptics the right to file such patents in
CyberOptics' name.
Section 6.02 Financial Statements and Reports. Avanti will furnish to
CyberOptics:
(i) As soon as available and in any event within 60 days after the
end of each fiscal year of Avanti, the financial statements of
Avanti consisting of at least statements of income, cash flow
and changes in stockholders' equity, and a balance sheet as at
the end of such year, setting forth in each case in
comparative form corresponding figures from the previous
annual financial statements, and in the event audited a copy
of the report of the certified public accountants that
rendered the audit report.
(ii) As soon as available and in any event within 20 days after the
end of each month, unaudited statements of income, for Avanti
for such month and for the period from the beginning of such
fiscal year to the end of such month, and a balance sheet of
Avanti as at the end of such month, setting forth in
comparative form figures for the corresponding period for the
preceding fiscal year.
(iii) As soon as practicable and in any event within 45 days after
the beginning of each fiscal year of Avanti, statements of
forecasted income for Avanti for each fiscal month in such
fiscal year and a forecasted consolidated balance sheet of
Avanti, together with supporting assumptions, as at the end of
each fiscal month, all in reasonable detail and reasonably
satisfactory in scope to CyberOptics.
(iv) Immediately upon any officer of Avanti becoming aware of any
Default or Event of Default, a notice describing the nature
thereof and what action Avanti proposes to take with respect
thereto.
(v) Immediately upon any officer of Avanti becoming aware of the
occurrence of any Prohibited Transaction, a notice specifying
the nature thereof and what action Avanti proposes to take
with respect thereto.
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Section 6.03 Corporate Existence. Avanti will maintain its corporate
existence in good standing under the laws of Delaware and its qualification to
transact business in each jurisdiction where failure so to qualify would
permanently preclude Avanti from enforcing its rights with respect to any
material asset or would expose Avanti to any material liability.
Section 6.04 Payment of Taxes and Claims. Avanti shall file all tax
returns and reports which are required by law to be filed by it and will pay
before they become delinquent all taxes, assessments and governmental charges
and levies imposed upon it or its property and all claims or demands of any kind
(including but not limited to those of suppliers, mechanics, carriers,
warehouses, landlords and other like persons) which, if unpaid, might result in
the creation of a lien upon its property; provided that the foregoing items need
not be paid if they are being contested in good faith by appropriate
proceedings, and as long as Avanti's title to its property is not materially
adversely affected, its use of such property in the ordinary course of its
business is not materially interfered with and adequate reserves with respect
thereto have been set aside on Avanti's books in accordance with GAAP.
Section 6.05 Inspection. Avanti shall permit any person designated by
CyberOptics to visit and inspect at reasonable times during normal business
hours, and upon reasonable notice, any of the properties, corporate books and
financial records of Avanti, to examine and to make copies of the books of
accounts and other financial records of Avanti, and to discuss the affairs,
finances and accounts of Avanti with, and to be advised as to the same by, its
officers at such reasonable times and intervals as CyberOptics may designate.
Section 6.06 Maintenance of Properties. Avanti will maintain its
properties used or useful in the conduct of its business in good condition,
repair and working order, and supplied with all necessary equipment, and make
all necessary repairs, renewals, replacements, betterments and improvements
thereto, all as may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
Section 6.07 Books and Records. Avanti will keep adequate and proper
records and books of account in which full and correct entries will be made of
its dealings, business and affairs.
Section 6.08 Compliance. Avanti will comply in all material respects
with all laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject; provided, however, that failure so
to comply shall not be a breach of this covenant if such failure does not have,
or is not reasonably expected to have, a materially adverse effect on the
properties, business, prospects or condition (financial or otherwise) of Avanti
and Avanti is acting in good faith and with reasonable dispatch to cure such
noncompliance.
Section 6.09 Notice of Litigation. Avanti will give prompt written
notice to CyberOptics of the commencement of any action, suit or proceeding
before any court or arbitrator or any governmental department, board, agency or
other instrumentality affecting Avanti or any property of Avanti or to which
Avanti is a party in which an adverse determination or result could have a
material adverse effect on the business, operations, property or condition
(financial or otherwise) of Avanti taken as a whole or on the ability of Avanti
to perform its
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obligations under this Agreement and the other Loan Documents, stating the
nature and status of such action, suit or proceeding.
Section 6.10 Further Assurances. Avanti shall promptly correct any
defect or error that may be discovered in any Loan Document or in the execution,
acknowledgment or recordation thereof. Promptly upon request by CyberOptics.
Avanti also shall do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register, any and all deeds, conveyances, mortgages,
deeds of trust, trust deeds, assignments, estoppel certificates, financing
statements and continuations thereof, notices of assignment, transfers,
certificates, assurances and other instruments as CyberOptics may reasonable
require from time to time in order: (a) to carry out more effectively the
purposes of the Loan Documents; (b) to perfect and maintain the validity,
effectiveness and priority of any security interests intended to be created by
the Loan Documents; and (c) to better assure, convey, grant, assign, transfer,
preserve, protect and confirm unto CyberOptics the rights granted now or
hereafter intended to be granted to CyberOptics under any Loan Document or under
any other instrument executed in connection with any Loan Document or that
Avanti may be or become bound to convey, mortgage or assign to CyberOptics in
order to carry out the intention or facilitate the performance of the provisions
of any Loan Document. Avanti shall furnish to CyberOptics evidence satisfactory
to CyberOptics of every such recording, filing or registration.
Section 6.11 Merger. Unless it provides CyberOptics at least 15 days
written notice and makes provision for payment as required by Section 3 of the
Note, Avanti will not merge, consolidate or enter into any analogous
reorganization or transaction with any person, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution).
Section 6.12 Disposition of Assets. Unless it provides CyberOptics at
least 15 days written notice and makes provision for payment as required by
Section 3 of the Note, Avanti will not directly or indirectly, sell, license,
assign, lease, convey, transfer or otherwise dispose of (whether in one
transaction or a series of transactions) any property or enter into any
agreement to do any of the foregoing, except:
(a) sale of finished goods inventory in the normal course of
business;
(b) dispositions of used, worn-out or surplus equipment, all in
the ordinary course of business;
(c) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are
applied with reasonable promptness to the purchase price of
such replacement equipment; or
(d) the license of the Avanti Surface Mount Intellectual Property
or Photonics Assembly Station Intellectual Property in
accordance with the terms of this Agreement, and in any event
not substantially in their entirety.
Section 6.13 Change in Nature of Business. Avanti will not make any
material change in the nature of the business of Avanti, as carried on at the
date hereof.
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Section 6.14 Subsidiaries. After the date of this Agreement, Avanti
will not form or acquire any corporation which would thereby become a
subsidiary.
Section 6.15 Negative Pledges. Avanti will not enter into any
agreement, bond, note or other instrument with or for the benefit of any person
other than CyberOptics that would prohibit Avanti from granting, or otherwise
limit the ability of Avanti to grant, to CyberOptics any lien on any assets or
properties of Avanti.
Section 6.16 Dividends or Distributions. Avanti will not pay any
dividends, redeem, repurchase or make any other distribution with respect to any
of its equity securities.
Section 6.17 Capital Expenditures. Avanti will not make capital
expenditures in an amount exceeding $10,000 in any fiscal year.
Section 6.18 Investments. Avanti will not acquire for value, make, have
or hold any stock or other security, any loan, advance, contribution to capital,
extension of credit (except for trade and customer accounts receivable for
inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms), any acquisitions of real or
personal property (other than real and personal property acquired in the
ordinary course of business) and any purchase or commitment or option to
purchase stock or other debt or equity securities of or any interest in another
person or any integral part of any business or the assets comprising such
business or part thereto, except:
(i) Investments existing on the date of this Agreement.
(ii) Travel advances to management personnel and employees in the
ordinary course of business.
(iii) Investments in readily marketable direct obligations issued or
guaranteed by the United States or any agency thereof and
supported by the full faith and credit of the United States.
(iv) Certificates of deposit or bankers' acceptances issued by any
commercial bank organized under the laws of the United States
or any State thereof which has (i) combined capital and
surplus of at least $100,000,000, and (ii) a credit rating
with respect to its unsecured indebtedness from a nationally
recognized rating service that is satisfactory to the Bank.
Any Investments under clauses (3), (4), (5) or (6) above must mature within one
year of the acquisition thereof by Avanti.
Section 6.19 Indebtedness. Avanti will not, incur, create, issue,
assume or suffer to exist any indebtedness, except:
(a) the obligations under the Note.
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(b) current liabilities, other than for borrowed money, incurred
in the ordinary course of business.
Section 6.20 Liens. Avanti will not create, incur, assume or suffer to
exist any lien, claim or encumbrance, or enter into, or make any commitment to
enter into, any arrangement for the acquisition of any property through
conditional sale, lease-purchase or other title retention agreements, with
respect to any property now owned or hereafter acquired by Avanti, except:
(a) Liens granted to CyberOptics under the Loan Documents.
(b) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or
other social security obligations, in the ordinary course of
business of Avanti.
(c) Liens for taxes, fees, assessments and governmental charges
not delinquent or to the extent that payment therefor shall
not at the time be required to be made in accordance with the
provisions of Section 6.04.
(d) Liens of carriers, warehousemen, mechanics and materialmen,
and other like Liens arising in the ordinary course of
business, for sums not due or to the extent that payment
therefor shall not at the time be required to be made in
accordance with the provisions of Section 6.04.
(e) Liens incurred or deposits or pledges made or given in
connection with, or to secure payment of, indemnity,
performance or other similar bonds.
(f) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or
similar rights and remedies as to deposit accounts or other
funds maintained with a creditor depository institution;
provided that (i) such deposit account is not a dedicated cash
collateral account and is not subject to restriction against
access by Avanti in excess of those set forth by regulations
promulgated by the Board, and (ii) such deposit account is not
intended by Avanti to provide collateral to the depository
institution.
(g) Encumbrances in the nature of zoning restrictions, easements
and rights or restrictions of record on the use of real
property and landlord's liens under leases on the premises
rented, which do not materially detract from the value of such
property or impair the use thereof in the business of Avanti.
(h) The interest of any lessor under any capitalized lease entered
into after the closing date or purchase money Liens on
property acquired after the closing date; provided, that, (i)
the indebtedness secured thereby is otherwise permitted by
this Agreement and (ii) such liens are limited to the property
acquired and do not secure Indebtedness other than the related
capitalized lease obligations or the purchase price of such
property.
Section 6.21 Contingent Liabilities. Avanti will not be guarantee,
endorse or otherwise be or become contingently liable in connection with the
obligations, securities or dividends of
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any person, firm, association or corporation other than Avanti, except that
Avanti may endorse negotiable instruments for collection in the ordinary course
of business;.
ARTICLE VII.
COVENANT OF CYBEROPTICS
CyberOptics agrees that upon the completion of the Next Equity
Financing (as such term is defined in the Note) and the automatic conversion of
the Note (in accordance with the provisions of the Note), CyberOptics shall
execute all agreements generally required to be executed by other investors in
the Next Equity Financing.
ARTICLE VIII.
MISCELLANEOUS
Section 8.01 Entire Agreement. This Agreement and the other documents
required to be delivered pursuant hereto, if any, constitute the entire
understanding and agreement between the parties with regard to the specific
subject matter hereof.
Section 8.02 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties.
Section 8.03 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Minnesota as applied to agreements
among Minnesota residents entered into and to be performed entirely within the
State of Minnesota.
Section 8.04 Counterparts. This Agreement may be executed by facsimile
and in two or more counterparts, each of which shall be deemed an original, but
all of which, when taken together, shall constitute one and the same instrument.
Section 8.05 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given (i) upon
transmission by facsimile during regular business hours (provided sender's
confirmation of receipt is available), (ii) on the next business day if sent by
overnight courier (provided sender's confirmation of receipt is available),
(iii) two business days after it is sent by registered or certified mail, return
receipt requested, postage prepaid, in each case addressed to the intended
recipient, at the address specified for such recipient in Article I hereof.
Any party may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, facsimile, ordinary mail, or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient or
receipt is confirmed electronically or by return mail. Any party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in any manner
herein set forth.
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Section 8.06 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or any document or
instrument contemplated hereby or referred to herein, the prevailing party or
parties, as the case may be, shall be entitled to reasonable attorneys' fees,
costs and disbursements in addition to any other relief to which such party or
parties may otherwise be entitled.
Section 8.07 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of both Parties.
Section 8.08 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision or provisions
shall be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision or provisions were so excluded and shall be
enforceable in accordance with its terms.
Section 8.09 Incorporation of Recitals and Exhibits. The above Recitals
and all Exhibits identified in or attached to this Agreement are deemed to be
incorporated herein by reference and made a part hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
AVANTI OPTICS CORPORATION
By:______________________
Name:____________________
Title:___________________
CYBEROPTICS CORPORATION
By:______________________
Name:____________________
Title:___________________
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