AEROSONIC CORPORATION LOAN AGREEMENT
Exhibit
10.1
AEROSONIC
CORPORATION
This Loan
Agreement (this “Agreement”) is executed as of
May 14, 2009 (the “Effective
Date”), by and between Aerosonic Corporation (the
“Company”), a Delaware
corporation and Xxxxx X. Xxxxx (“Xxxxx”), to record the
agreement regarding Stone’s willingness to make a loan (the “Loan”) to the Company on the
terms and conditions set forth in this Agreement:
ARTICLE
1
DEFINITIONS
1.1 Defined Terms.
As used
in this Agreement and the exhibits to this Agreement, the following capitalized
terms have the respective definitions attributed to them:
“Advances”
has the meaning set forth in Section 2.2.
“Advance
Shares” means shares of Common
Stock to be issued to Stone by the Company pursuant to Section 2.1, and includes any
additional Shares issued in respect of those Shares.
“Balance
Sheet” means the consolidated balance sheet of the Company and its
Subsidiaries for the period ended January 31, 2009.
“Balance Sheet
Date” means the period ended January 31, 2009.
“Benefit
Plan” means every previous and current employee benefit, pension,
welfare, or compensation plan, trust, program, practice, agreement, or
arrangement that provides benefits, compensation, or deferred compensation to
any current or former officer, director, or employee of the Company, any
predecessor, or any subsidiary of the Company or any predecessor or his or her
survivors, including any bonus, thrift, pension, savings, incentive, insurance,
retirement, stock bonus, stock option, stock purchase, profit sharing, loan
guarantee, early retirement, deferred compensation, medical reimbursement,
relocation assistance, supplemental retirement, stock appreciation right,
severance or termination compensation, employee loan or credit extension, and
dental, vision, medical, or other health care plan.
“Borrowing” means a borrowing hereunder
consisting of Advances made on the same day by Stone to the
Company.
“Business
Day” means any day that is not a Sunday, Saturday, or holiday observed by
commercial banks in Tampa, Florida.
“Closing”
means the consummation of the Transactions.
“Closing
Date” means
the date which is no later than one Business Day after all the conditions
precedent set forth in Sections
3.4 and 3.5 have
been satisfied or waived by Stone, but in no event later than May 15,
2009.
“Closing
Price” means the volume weighted average sales price of a share of the
Common Stock on the Stock Exchange or other principal national securities
exchange on which the Common Stock is then traded for the 15 trading days
preceding the Closing Date.
“Code”
means the United States Internal Revenue Code of 1986, as amended from time to
time, and any regulations (including Temporary Regulations) under that Code that
are promulgated.
“Common
Stock” means the common stock, par value $.40 per share, of the
Company.
“Company SEC
Documents” means all forms,
notices, reports, schedules, statements, and other documents filed by the
Company with the SEC during the period beginning on February 1, 2007, and ending
on the Effective Date, whether or not constituting a “filed” document, and
includes all proxy statements, registration statements, amendments to
registration statements, periodic reports on Forms 10-K, 10-Q, and 8-K, and
annual and quarterly reports to shareholders.
“Default” has the meaning
indicated in the Note, and the definition of “Default” in the Note is
incorporated by reference into this Agreement.
“Drawdown
Shares” means shares of Common
Stock to be issued to Stone by the Company pursuant to Section 2.1, and includes any
additional Shares issued in respect of those Shares.
“Exchange
Act” means
the United States Securities Exchange Act of 1934, as amended, and includes all
rules and regulations of the SEC promulgated under that act.
“Existing
Lender” means Wachovia Bank, N.A., a national banking association, and
includes its assignees and successors in interest by operation of law or
otherwise.
“Existing
Loans” means the loans made by the Existing Lender to the Company
pursuant to the Existing Loan Documents, as amended and restated through the
Closing Date, including the Renewal and Future Advance Term Loan in the original
principal amount of $3,920,000, the Renewal and Amended Term Loan in the
original principal amount of $2,000,000, and the Revolving Loan in the maximum
principal amount of $2,500,000.
“Existing Loan
Documents” means the Revolving and Term Credit and Security Agreement
dated February 24, 2004, among the Company, the Existing Lender, and Avionics
Specialties, Inc., as amended through the Closing Date, and every document,
mortgage, deed of trust, agreement, and instrument executed pursuant to that
agreement on or before the Closing Date, as renewed, extended, or waived from
time to time on the same terms and conditions that were in effect on the
Effective Date (including any extension or forbearance agreements
executed in connection with those documents).
“Financing
Documents” mean the Note, the Warrants, this Agreement, and every
document, agreement, and instrument executed pursuant to any of the foregoing
documents, and all renewals, extensions, amendments, modifications, and
supplements to any of the foregoing documents.
“Funding
Date” means the date on which a Borrowing occurs.
“GAAP”
means generally accepted accounting principles of the United States, as in
effect from time to time.
“Governmental
Authority” means a government, a central bank, a securities exchange, a
public body or authority, a self-regulatory organization, and any governmental
body, agency, authority, commission, department, or subdivision, whether
domestic or foreign or local, state, regional, or national.
“Governmental
Authorization” means any and every order, right, permit, waiver, consent,
license, variance, approval, exemption, certificate, designation, registration,
and other authorization given, issued, granted, or otherwise made available by
or under the authority of any Governmental Authority pursuant to any law or
order.
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“IRS”
means the United States Internal Revenue Service.
“Lien” means a restriction on
the use or transferability of property and any claim or charge on any interest
in property securing an obligation owed to, or claimed by, a person other than
the owner of the property, whether the claim or charge exists by reason of
statute, contract, or common law, and includes a construction lien, a lien or
security interest arising from a pledge, mortgage, indenture, encumbrance,
hypothecation, trust receipt, deed of trust, conditional sale, security
agreement, or collateral assignment and a lease, bailment, or consignment for
security purposes.
“Loan
Documents” means the Note, this Agreement, and every document, agreement,
and instrument executed pursuant to any of those documents or with respect to
the Liabilities, and all renewals, extensions, amendments, modifications, and
supplements to any of the foregoing documents.
“Material Adverse
Effect” means any material adverse effect upon the validity,
performance or enforceability of any of the Loan Documents or any of the
transactions contemplated hereby or thereby, material adverse effect
upon the properties, business, prospects or condition (financial or otherwise)
of Borrower and its Subsidiaries, taken as a whole, or material
adverse effect upon the ability of Borrower and its Subsidiaries, taken as a
whole, to fulfill any obligation under any of the Loan Documents.
“Maximum
Availability Amount” means $1,000,000.
“Note”
means the 14% Subordinated Note due April 10, 2010, as extended pursuant to the
terms and conditions of the Note, in the aggregate principal amount of
$1,000,000, to be issued to Stone at the Closing by the Company and the
Subsidiaries in the form of Exhibit
1.
“Other
Lenders” mean the Xxxxxxx Family Investments, LLLP and Xxxxxx X.
Xxxxxxxx.
“Permitted
Liens” means any of the following: (a) the leasehold interests of lessors
and landlords in any property leased to the Company or any Subsidiary; (b)
statutory vendor, carrier, landlord, mechanic, repairmen, warehousemen, and
similar Liens that arise or are incurred in good faith in the usual and ordinary
course of business for payments that are not delinquent; (c) Liens for Taxes
that either are not yet delinquent or are being contested in good faith by
appropriate proceedings and for which adequate accruals or reserves have been
recorded in the Company’s books of account in accordance with GAAP; (d)
statutory Liens arising or incurred in the ordinary course of business in
connection with workers’ compensation, unemployment insurance, old-age pensions,
and social security benefits for payments that are not delinquent; (e) Liens
arising out of awards or judgments against the Company with respect to which the
Company is proceeding with an appeal or other proceeding for review or time for
appeal has not yet expired; (f) Liens in favor of issuers of surety bonds and
letters of credit issued pursuant to and for the account of the Company in the
ordinary course of business; (g) the Liens in favor of the Existing Lender on
assets of the Company and the Subsidiaries on the Effective Date that are
created under the Existing Loan Documents and secure the Existing Loans; and (h)
Liens in favor of a third party in connection with the purchase of equipment or
machinery used in the operations of the Company and its Subsidiaries and in the
production of products, including equipment used to replace obsolete equipment,
equipment used to test and produce products and to maintain or increase
capacity.
“Proceeding” means an audit, claim, action,
demand, inquiry, lawsuit, proceeding, or investigation by a third party or
Governmental Authority (whether formal or informal, pending, threatened, or
completed, or civil, criminal, or administrative), and includes asserted claims
and assessments and trial, appellate, mediation, arbitration, bankruptcy, and
administrative proceedings of every kind.
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“Restricted
Information” means all information concerning the Company and the
Subsidiaries that is confidential, proprietary, or not readily available to the
general public, however and whenever acquired, whether furnished or made
available in writing, electronic, or any other media format, through inspection
of written or electronic documents, or orally in meetings, presentations, and
conversations, whether or not a trade secret or designated “secret” or
“confidential,” and whether obtained before or after the Effective Date; but
excludes in each case information that is publicly available, or is required to
be disclosed by law, by a court having jurisdiction, or to respond in good faith
to a valid inquiry by a Governmental Authority, or that has been intentionally
disclosed by the Company to the public or to a person who does not have either a
duty to keep the information confidential or a relationship of privity with the
Company as a lender, tenant, partner, employee, customer, professional advisor,
or participant in a joint venture (whatever the form of business
organization).
“SEC”
means the United States Securities and Exchange Commission.
“Securities”
means the Note, the Warrants, and the Drawdown Shares.
“Securities Act”
means the United States Securities Act of 1933, as amended, and includes
all rules and regulations of the SEC promulgated under that Act.
“Shares”
means the Drawdown Shares and the Warrant Shares.
“Stock
Exchange” means the NYSE Amex, the securities exchange on which the
Common Stock is traded on the Effective Date.
“Stock Option
Plan” means the Aerosonic Corporation 2004 Stock Incentive Plan, as
amended and restated on July 26, 2007.
“Subsidiaries”
means OP Technologies, Inc., an Oregon corporation, and Avionics Specialties,
Inc., a Virginia corporation, both of which are wholly owned subsidiaries of the
Company.
“Tax”
means any taxes, assessments, fees, or other charges from time to time or at any
time imposed by any law or by any state, commonwealth, federal, foreign,
territorial, regulatory, or other court or governmental department, commission,
board, bureau, agency or instrumentality.
“Tax
Return” means any form, notice, report, return, schedule, statement or
declaration filed or required to be filed in connection with the reporting,
collection, assessment, or determination of any Tax or the administration of any
law or order relating to any Tax.
“Transactions”
means the acquisition of the Securities pursuant to this Agreement and the other
Financing Documents.
“Warrant
Shares” means the shares of Common Stock issuable on exercise of the
Warrants.
“Warrant”
means a Common Stock Purchase Warrant of the Company to purchase at any time
after the one-year anniversary date of their original issue date until April 10,
2015, one share of the Common Stock for a purchase price of $.64 per share,
subject to anti-dilution protection and adjustment of the warrant price and
number of shares as provided in the Warrant Certificate.
“Warrant
Certificate” means a warrant certificate in the form of Exhibit
2, to be issued
by the Company to Stone pursuant to this Agreement to evidence the number of
Warrants issue to Stone and the terms and conditions of the
Warrants.
1.2 Recurring
Words.
As used throughout this Agreement, (a)
the words “consent”
and “approval”
are synonymous, (b) the word “including”
is always without limitation, (c) neuter words should be construed to include
correlative feminine and masculine words, (d) words in the singular number
include words in the plural number and vice versa, (e) references to “$” are to
dollars of the United States of America, and (f) the following common words and
terms have the meanings attributed to them, unless expressly stated to the
contrary:
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“affiliate”
means, with respect to any specified person, any person directly or
indirectly owning 10% or more of the voting stock or rights of such named person
or of which the named Person owns 10% or more of such voting stock or rights;
any Person controlling, controlled by or under common control with such named
Person; any officer, director or employee of such named Person or any Affiliate
of the named Person; and any family member of the named Person or any Affiliate
of such named Person, including any successor or assign of such
affiliate.
“days”
means calendar days, including Sundays, Saturdays, and holidays.
“knowledge”
when used in reference to the Company, means the current actual awareness of a
particular fact or matter by any executive officer of the Company, after due
inquiry of all the officers of the Company and those employees of the Company
who are reasonably likely to have knowledge of the subject matter as to whether
they are aware of any information that would cause any warranty or
representation by the Company in this Agreement to be inaccurate in any material
respect and includes the content of all correspondence (whether in printed or
electronic form) that has been delivered to any officer or employee of the
Company, but does not otherwise include any imputed or constructive knowledge of
any fact or matter.
“law”
includes a local, state, or national code, rule, treaty, statute, ordinance, or
regulation and the common law arising from final, non-appealable decisions of
Governmental Authorities and state or federal courts in the United States or any
other country.
“liability”
means a liability, indebtedness, accrued expense, or financial obligation of any
kind whatsoever, whether direct or indirect, joint or several, known or unknown,
fixed or contingent, accrued or unaccrued, due or to become due, asserted or
unasserted, matured or unmatured, recorded or unrecorded, or liquidated or
unliquidated.
“order” includes an order,
decree, ruling, judgment, or injunction.
“person”
includes, in addition to a natural person, a group, trust, syndicate,
corporation, cooperative, association, partnership, business trust, joint
venture, limited liability company, unincorporated organization, and
Governmental Authority, as well as a natural person and two or more natural
persons who agree to act in concert for any particular purpose.
1.3 Accounting
Terms.
Accounting terms used, but not defined,
in this Agreement are to be construed and interpreted in accordance with GAAP as
in effect on the Effective Date.
1.4 Exhibits;
Headings; References.
The
headings preceding the articles and sections of this Agreement are solely for
convenient reference and neither constitute a part of this Agreement nor affect
its meaning, interpretation, or effect. All exhibits and schedules
referred to in this Agreement are an integral part of it and are incorporated by
reference in it. Unless otherwise expressly stated, a reference in
this Agreement to an article, section, schedule, or exhibit is to an article,
section, schedule, or exhibit of this Agreement.
1.5 Severability.
Each
provision of this Agreement should be construed and interpreted so it is valid
and enforceable under applicable law. If a provision of this
Agreement (or the application of it) is held by a court to be invalid or
unenforceable under applicable law, that provision will be deemed separable from
the remaining provisions of this Agreement and will not affect the validity or
interpretation of the other provisions of this Agreement or the application of
that provision to a person or circumstance to which it is valid and
enforceable.
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ARTICLE
2
THE
LOAN
2.1 Loan;
Warrants; Drawdown Shares.
Subject
to the terms and conditions of this Agreement: Stone will lend to the
Company and the Company will borrow an aggregate of up to the Maximum
Availability Amount, and the Company shall deliver to Stone, (a) on the Closing
Date, a Note in the principal amount equal to the Maximum Availability Amount,
executed by the Company and each Subsidiary (b) with respect to each
Borrowing, Warrants that are exercisable for the number of Warrant Shares as
described on Schedule
1, and (c) with respect to each Borrowing, the number of Drawdown Shares
as set forth on Schedule
1. The Loan will be senior to all other indebtedness of the
Company or any Subsidiary, other than (i) the Existing Loans, and (ii) the
unsecured loans made by the Other Lenders to the Company and its Subsidiaries,
each of such unsecured loans which shall be pari passu with this
Loan. The Advance Shares shall be listed for trading on the Stock
Exchange upon approval of the Stock Exchange.
2.2 Availability.
(a) Stone
agrees to make Advances to the Company in an amount at any one time outstanding
not to exceed the Maximum Availability Amount. Each Borrowing shall
be made by an irrevocable duly executed Borrowing Notice delivered to Stone
(which notice must be received by Stone no later than 10:00 a.m. (Tampa time) on
the fifth (5th)
Business Day prior to the date that is the requested Funding Date specifying (i)
the amount of such Borrowing, and (ii) the requested Funding Date, which shall
be a Business Day. At Stone’s election, in lieu of delivering the
above-described Borrowing Notice, any Authorized Person may give Stone
telephonic notice of such request by the required time. In such
circumstances, Borrower agrees that any such telephonic notice will be confirmed
with a Borrowing Notice within 24 hours of the giving of such notice and the
failure to provide such Borrowing Notice shall not affect the validity of the
request.
(b) After
receipt of a request for a Borrowing pursuant to Section 2.2(a), Stone shall,
by not later than 3:00 p.m. (Tampa time) on the applicable Funding Date, make
available to Borrower by transferring immediately available funds equal to such
requested Borrowing to the Designated Accounts designated by the Borrower for
such purpose; provided, however, that Stone
shall have no obligation to make any Advance if Stone shall have actual
knowledge that (1) one or more of the applicable conditions precedent set forth
in Section 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing unless such
condition has been waived, or (2) the requested Borrowing would exceed the
Maximum Availability Amount on such Funding Date. If at any time
Stone fails to make available to Borrower on an Applicable Funding Date an
Advance in accordance with the provisions of this Section 2.2(b), the Company
shall be permitted to borrow the amount of the Advance from the Other
Lenders.
2.3 Subordination.
Payment
of the Note will be subordinate to the Existing Loans as set forth in the
Note.
2.4 Use
of Proceeds.
The
Company shall use the proceeds from Loan for working capital.
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ARTICLE
3
CLOSING
OF TRANSACTIONS
3.1 Closing
Time and Place.
The
parties shall close the Transactions at 10:00 a.m., Tampa, Florida time, on the
Closing Date at the offices of the Company, or at any other time and place
mutually acceptable to the Company and Stone.
3.2 Obligations
of the Company.
At the
Closing, the Company shall deliver to Stone:
(a) a
Note in the form of Exhibit
1 that is payable to Stone in the principal amount of $1,000,000 and duly
executed by the Company and the Subsidiaries in favor of Stone;
(b) a
stock certificate of the Company for Stone that is issued in the name of Stone,
duly executed by the Company, and represents the number of Drawdown Shares
specified for Stone on Schedule
1, and in
accordance with the terms set forth in Schedule
1;
(c) a
Warrant Certificate for Stone in the form of Exhibit
2 that is issued in the name of Stone, duly executed by the Company, and
exercisable for the number of Warrant Shares specified for Stone on Schedule
1, and in
accordance with the terms set forth in
Schedule1;
(d) a
Closing Certificate in the form of Exhibit
3 that is signed by the Company’s President and Chief Executive
Officer;
(e) an
Officer’s Certificate in the form of Exhibit
4 that is signed by the Company’s acting Chief Financial
Officer;
(f) a
certified copy of the resolutions adopted by the Company’s Board of Directors
authorizing and approving (i) the execution, delivery, and performance by the
Company of the Note, the Warrants, and this Agreement, (ii) the issuance of the
Securities and the Warrant Shares, and (iii) the other transactions contemplated
by this Agreement and the other Financing Documents; and
(g) payment
to Stone of costs and expenses incurred by Stone to negotiate, document, and
close the Transactions in accordance with Section 7.7, up to a maximum
of $5,000.00, based upon documented expenses.
3.3 Obligations
of Stone.
At the
Closing, Stone shall deliver to the Company:
(a) the
first Advance to the Company; and
(b) a
counterpart of a Warrant Certificate in the form of Exhibit
2 that is issued in the name of Stone, duly executed by Stone, and
exercisable for the number of Warrant Shares specified for Stone on Schedule 1, and in accordance with the
terms set forth in Schedule
1.
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3.4 Conditions
Precedent of the Company.
The
closing obligations of the Company under this Agreement are subject to the
following conditions precedent, each of which must be satisfied on or before the
Closing Date, unless waived in writing by the Company:
(a) Representations and
Warranties. Each representation and warranty of Stone in this
Agreement must be accurate in all material respects as of the Effective Date and
as of the Closing Date;
(b) Performance of
Agreement. Stone must have performed in all material respects
every obligation required by this Agreement to be performed or satisfied by it
at or before the Closing;
(c) Consents and
Approvals. The Company must have received all consents and
approvals that are necessary to close the Transactions, including approval of
the Transactions by the Board of Directors of the Company and the Subsidiaries;
and
(d) Adverse
Proceeding. A Proceeding must not be pending or threatened
before, and a law or order must not have been issued, adopted, enacted, entered,
enforced, or held applicable to the Transactions by, any Governmental Authority
or any state or federal court in the United States of America or other
government that directly or indirectly does or seeks to do any of the following:
(i) declare the offer or sale of the Note, the Warrants, or the Drawdown Shares
to be illegal; or (ii) permanently enjoin, restrain, or otherwise prohibit the
sale of the Note, the Warrants, or the Drawdown Shares pursuant to this
Agreement.
A waiver
of any condition precedent to the closing obligations of the Company will be
valid and effective if approved in writing by the President and Chief Executive
Officer of the Company, and any unsatisfied condition precedent will be deemed
waived (without further action) by the closing of the
Transactions. The President and Chief Executive Officer of the
Company may waive any condition precedent to the Company’s closing obligations
without any notice to, or further approval of, the Company’s stockholders or
board of directors.
3.5 Conditions
Precedent of Stone.
The
obligations of Stone to make any Advance under this Agreement are subject to the
following conditions precedent, each of which must be satisfied on the Closing
Date and as of the date of each Advance, unless waived in writing by
Stone:
(a) Compliance with
Agreement. The Company must have performed in all material
respects every obligation required by this Agreement to be performed by it on or
before the Closing Date and as of the date of each Advance;
(b) Representations and
Warranties. Each representation and warranty of the Company
contained in this Agreement must be accurate in all material respects as of the
as of the Closing Date and as of the date of each Advance, except to the extent
the representation or warranty expressly addresses an earlier date, in which
case the representation and warranty must be true and accurate as of that
earlier date;
(c) Good Standing
Certificates. Stone must have received a good standing
certificate for the Company and each Subsidiary from the appropriate
Governmental Authority, dated as of a recent date, and certifying that each of
those corporations is an active corporation incorporated under the laws of its
jurisdiction and has filed all annual reports and paid all annual report fees
that are due through the date of the certificate;
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(d) Adverse
Proceeding. A Proceeding must not be pending or threatened
before, and a law or order must not have been issued,
adopted, enacted, entered, enforced, or held applicable to the
Transactions by, any Governmental Authority or any state or federal court in the
United States or other government that directly or indirectly does or seeks to
do any of the following: (i) declare the offer or sale of the Note, the
Warrants, or the Drawdown Shares to be illegal; or (ii) permanently enjoin,
restrain, or otherwise prohibit the sale of the Note, the Warrants, or the
Drawdown Shares pursuant to this Agreement;
(e) Existing
Loans. Stone must have received written evidence satisfactory
to him that confirms the following: (i) the Existing Lender has
consented to the Transactions; (ii) the Existing Lender has entered into the
extension agreement provided to Stone on the date hereof with respect to the
Existing Loans; (iii) the Existing Lender has agreed that any future insurance
proceeds received by the Company in connection with the August 2008 fire at its
Clearwater, Florida, facilities will be paid to and become an asset of the
Company without any restrictions imposed by the Existing Lender on the use of
those funds; and (iv) the Existing Lender has agreed that any proceeds received
by the Company from the sale of its Earlysville, Virginia, real property that
are in excess of the mortgage balance will become an asset of the Company
without restrictions by the Existing Lender on the use of those
funds.
A waiver
of any condition precedent to the closing obligations of Stone will be valid and
effective, if approved in writing by Stone, and any unsatisfied condition
precedent will be deemed waived (without further action) by the closing of the
Transactions.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Stone the accuracy of the following
statements as of the Effective Date and as of the Closing Date:
4.1 Organization
and Authority.
(a) The
Company is a corporation that is duly incorporated and validly existing in good
standing under the laws of the State of Delaware. The Company is
qualified or registered to do business as a foreign corporation and is in good
standing in each jurisdiction in which the failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.
(b) Avionics
Specialties, Inc. is a corporation that is duly incorporated and validly
existing in good standing under the laws of the State of
Virginia. Avionics Specialties, Inc. is in good standing in each
jurisdiction in which the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect.
(c) OP
Technologies, Inc. is a corporation that is duly incorporated and validly
existing in good standing under the laws of the State of Oregon. OP
Technologies, Inc. is in good standing in each jurisdiction in which the failure
to be so qualified could reasonably be expected to have a Material Adverse
Effect.
(d) The
Company has all requisite corporate power and authority and the full legal right
to own, lease, and operate its properties, to issue the Note, the Shares, and
the Warrants, to conduct its business as presently conducted, and to execute,
deliver, and perform this Agreement and the other Financing
Documents. Each of the Subsidiaries has all requisite corporate power
and authority and the full legal right to own, lease, and operate its
properties, to conduct its business as presently conducted, and to execute,
deliver, and perform the Financing Documents to which it is a
party.
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(e) The
Company does not own any capital stock, membership interest, partnership
interest, or other ownership interest in any person, except for the
Subsidiaries.
(f) None
of the Company or the Subsidiaries is a “foreign person” within the meaning of
Section 1445 of the Code.
4.2 Authorization
and Validity.
(a) This
Agreement has been duly and validly executed and delivered on behalf of the
Company, and each of the other Financing Documents to which the Company is a
party will be duly and validly executed by the Company when it is delivered to
Stone at the Closing.
(b) This
Agreement is, and (when executed and delivered to Stone at the Closing) each
other Financing Document to which the Company is a party will be, a valid and
binding obligation of the Company that is enforceable by Stone against the
Company in accordance with their respective terms, except in each case to the
extent limited by application of general principles of equity and by bankruptcy,
insolvency, debtor relief, and similar laws of general application affecting the
enforcement of creditors’ rights and debtors’ obligations.
(c) The
Advance Shares are duly authorized for issuance and, when issued to Stone, will
be validly issued, fully paid, and non-assessable, free and clean of any Liens,
preemptive rights, or restriction on transfer, except for transfer restrictions
imposed by state and federal securities laws.
(d) The
Warrants have been duly authorized and, when issued to Stone, will be validly
issued, free and clean of any Liens, preemptive rights, or restriction on
transfer, except for any transfer restrictions imposed by state and federal
securities laws.
(e) The
Warrant Shares have been duly authorized for issuance, reserved for issuance on
exercise of the Warrants, and, when issued in exchange for payment of the
warrant exercise price, will be validly issued, free and clean of any Liens,
preemptive rights, or restriction on transfer, except for any transfer
restrictions imposed by state and federal securities laws.
(f) The
issuance, execution, delivery, and performance of the Note by the Subsidiaries
have been duly authorized by all requisite corporate action of the Subsidiaries,
and no other action on the part of the Subsidiaries or their respective
directors, affiliates, or shareholders is necessary for either of the
Subsidiaries to issue the Note.
(g) The
Note will be duly and validly executed by the Company and the Subsidiaries when
it is delivered to Stone at the Closing.
(h) When
executed and delivered by the Company and the Subsidiaries to Stone at the
Closing, the Note will be valid and binding obligations of the Company and the
Subsidiaries that are enforceable by Stone against the Company and the
Subsidiaries in accordance with its terms, except to the extent limited by
application of general principles of equity and by bankruptcy, insolvency,
debtor relief, and similar laws of general application affecting the enforcement
of creditors’ rights and debtors’ obligations.
4.3 Noncontravention.
The
execution, delivery, and performance by the Company of this Agreement and the
other Financing Documents to which it is a party, the issuance, execution,
delivery, and performance of the Note by the Company and the Subsidiaries, and
the Closing of the Transactions will not:
-10-
(a) contravene
any law or order;
(b) conflict
with any provision of the Bylaws or Articles or Certificate of Incorporation of
the Company or any Subsidiary;
(c) violate
or result in the suspension, revocation, termination, or cancellation of any
Governmental Authorization that is necessary for the operation of the business
of the Company or any Subsidiary;
(d) result
in the vesting, creation, or exercise of any option to purchase, right of first
offer or refusal, or other right to purchase any common stock of the Company or
any Subsidiary;
(e) require
any filing, notice, report, application, registration, or other submission of
any kind to be made by the Company or any Subsidiary with any Governmental
Authority or other person (other than the SEC and the Stock
Exchange);
(f) require
any Governmental Authorization to be obtained by the Company or any Subsidiary
from any Governmental Authority or any consent, approval, or authorization to be
obtained by the Company or any Subsidiary from any other person; or
(g) conflict
with or result in a breach or default, the imposition of a penalty, the creation
or attachment of a Lien on any of the Company’s or any Subsidiary’s assets, a
suspension, cancellation, or termination (or the creation of any right of
suspension, cancellation, or termination), or the acceleration of the maturity
of any liability, obligation, or indebtedness of the Company or any Subsidiary,
under or pursuant to any order or contract.
4.4 Capitalization.
(a) The
authorized capital stock of the Company consists of 8,000,000 shares of common
stock, par value $.40 per share, of which 4,051,110 shares are issued and
3,620,343 shares are outstanding, all of which are fully paid and
nonassessable. All the issued and outstanding shares of Common Stock
have been duly authorized and validly issued and were not issued in
contravention of any preemptive rights. The Company does not have
authorized or outstanding any other class of debt or equity securities, any
right, option, warrant, agreement, commitment, or subscription of any kind
obligating it to sell, issue, redeem, transfer, repurchase, or otherwise acquire
any shares of its capital stock, or any securities convertible into or
exchangeable for shares of its capital stock or any right, option, warrant, or
subscription to acquire any of its capital stock, other than options issued or
to be issued under the Stock Option Plan. To the Company’s knowledge,
no proxy, voting trust, voting agreement, shareholder agreement, or other
agreement, arrangement, or understanding of any kind exists that entitles any
person other than the record owner of any shares of capital stock of the Company
to vote those shares or to exercise any right or power (including a right of
consent or approval) in respect of those shares.
(b) All
the issued and outstanding capital stock of the Subsidiaries has been duly
authorized and validly issued and is fully paid, nonassessable, and owned of
record and beneficially by the Company, free and clean of any Lien (other than
Liens in favor of the Existing Lender), assessment, adverse claim, preemptive
right, contract for sale, option to purchase, right of first refusal, or
restriction on transfer, except for transfer restrictions imposed by state and
federal securities laws, and are not subject to any proxy, voting trust,
shareholder agreement, or other agreement with respect to the voting or transfer
of any of the stock. Except for the class of capital stock owned by
the Company, neither of the Subsidiaries has authorized or outstanding any other
class of debt or equity securities, any right, option, warrant, agreement,
commitment, or subscription of any kind obligating it to sell, issue, redeem,
transfer, repurchase, or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable or exchangeable for shares of its
capital stock or any right, option, warrant, or subscription to acquire any of
its capital stock.
-11-
4.5 SEC
Filings.
The Company shall deliver to Stone as
soon as they become available accurate and complete copies of any report or
statement that it mails to its stockholders generally or files with the SEC
during the period after the Effective Date and before the Closing
Date. As of their respective dates, these reports and statements will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated in them or necessary to make the statements in them
not misleading, in light of the circumstances under which they are made, and
these reports and statements will comply in all material respects with all
applicable requirements of the Exchange Act and the Securities Act.
4.6 Financial
Statements.
(a) The
audited consolidated financial statements and unaudited consolidated interim
financial statements of the Company and its Subsidiaries that are included or
incorporated in the Company SEC Documents were prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as otherwise
indicated in the notes to them) and fairly present the consolidated financial
position, results of operations, and cash flows from operating, investing, and
financing activities of the Company and its Subsidiaries as of the dates and for
the periods indicated, except that the unaudited consolidated interim financial
statements in the Company SEC Documents are subject to normal year-end
adjustments and were prepared in accordance with the instructions to SEC Form
10-Q and, accordingly, omit or condense certain footnotes and other information
normally included in financial statements prepared in accordance with generally
accepted accounting principles. The consolidated financial statements
of the Company and its Subsidiaries that are included or incorporated in any
subsequent report or statement that the Company mails to its shareholders
generally or files with the SEC during the period after the Effective Date and
before the Closing Date will be prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as otherwise indicated in
them, the notes to them, or any related report of the Company’s independent
accountants) and will fairly present the financial information that they purport
to present, except that the unaudited, consolidated interim financial statements
will be subject to normal year-end adjustments and will omit or condense certain
footnotes and other information normally included in financial statements
prepared in accordance with GAAP.
(b) All
the books of account and financial records of the Company and the Subsidiaries
are in the possession of the Company and located at its principal business
office, are accurate and complete in all material respects, and have been
maintained in accordance with good business practices, and every material
transaction affecting the Company’s or a Subsidiary’s business has been recorded
in them.
(c) Any
financial projections of the Company or any Subsidiary that have been provided
to Stone are reasonable, are based on reasonable assumptions and historical
results, can be supported by the Company’s or the Subsidiary’s existing customer
contracts and business arrangements, and describe in reasonable detail all
material assumptions on which they are based.
(d) Except
to the extent of the stated amount of the allowance for doubtful accounts, all
the accounts receivable and notes receivable reflected in the most recent
balance sheet included in the Company SEC Documents, and all accounts receivable
that have arisen since January 31, 2009, constitute valid and bona fide rights
to collect payments from the sale of goods and services in the ordinary course
of the business of the Company or a Subsidiary or other valid claims for which
all requisite performance has been rendered by the Company or a Subsidiary, will
be collectible by the Company or the Subsidiary in the usual and ordinary course
of business, and are not subject to any setoff, defense, or
counterclaim. The allowance for doubtful accounts reflected on the
most recent balance sheet included in the Company SEC Documents was determined
by the Company in a manner consistent with past practices.
-12-
(e) Except
for any liabilities that are accrued, reflected, reserved, or disclosed in the
Balance Sheet, that have been incurred in immaterial amounts in the usual and
ordinary course of business since the Balance Sheet Date, or that do not exceed
$300,000 in the aggregate, the Company and the Subsidiaries do not have any
liabilities. The Company has provided to Stone all detail and
information relating to any material liability that is accrued, reflected,
reserved, or disclosed in the Balance Sheet. The Company is not in
violation of, or default under, any contract that could give rise to any
material liability that is not accrued, reflected, or reserved, and clearly
disclosed on the Balance Sheet.
4.7 Brokerage.
Neither the Company nor any Subsidiary
has incurred any liability to a broker, finder, investment banker, or other
intermediary who is entitled to be paid a fee, commission, or other remuneration
in connection with this Agreement or the Transactions.
4.8 Status
of Note.
The indebtedness evidenced by the Note,
when issued, will not be subordinate to any other liability, obligation, or
indebtedness of the Company or any Subsidiary other than the Existing Loans to
the extent and only to the extent expressly provided in the Note.
4.9 Affiliate
Transactions.
Except as
described in the Company SEC Documents, no director, employee, shareholder, or
other affiliate of the Company is a party to any agreement, contract,
commitment, or transaction with the Company, or has any interest in any property
(whether real, personal, or mixed, or tangible or intangible) used in or
necessary to the Company’s or any Subsidiary’s business.
4.10 Claims
and Litigation.
No
Proceeding affecting the Company, a Subsidiary, or the assets or business of the
Company or a Subsidiary is pending before any court, mediator, arbitrator, or
Governmental Authority or, to the knowledge of the Company, threatened by any
person, or otherwise reasonably foreseeable, except as disclosed in the Company
SEC Documents and except for any Proceeding pending or threatened that has been
fully disclosed to Stone and that would not have a Material Adverse Effect, and
the Company is not in default with respect to any order of any court or
Governmental Authority.
4.11 Absence
of Undisclosed Liabilities.
Except
for liabilities, obligations, and Financial Contingencies disclosed in the
Company SEC Documents, incurred in immaterial amounts in the usual and ordinary
course of business since the Balance Sheet Date, and any others that in the
aggregate do not exceed $300,000, neither the Company nor any Subsidiary has any
liabilities, obligations, or indebtedness of any nature whatsoever (whether
absolute, accrued, direct, indirect, perfected, inchoate, unliquidated, or
otherwise, and whether due or to become due).
4.13 Title
to Assets; Liens.
The
Company and each Subsidiary has good, valid, and marketable record and equitable
title to all its assets, free and clear of any Lien (other than Permitted
Liens), assessment, adverse claim, preemptive right, contract for sale, option
to purchase, or right of first offer or refusal, or any other transfer
restriction of any kind whatsoever. All of the assets of the Company
and each Subsidiary are located in the States of Florida, Oregon, or
Virginia.
-13-
4.14 Governmental
Authorizations.
The Company and the Subsidiaries
possess all Governmental Authorizations that are legally required for the
operation of their respective businesses and their use and ownership of their
respective assets. The Company has furnished to Stone accurate and
complete copies of all the Governmental Authorizations, and each of those
Governmental Authorizations is in full force and effect, has been duly and
validly issued, is not subject to any conditions that are not stated in the
authorization, has not been amended, annulled, or revoked in any respect, and
will not be cancelled, impaired, or adversely affected in any way by the
execution of this Agreement or the Closing of the Transactions.
4.15 Tax Matters.
The Company and each Subsidiary have
filed (or will file) with the proper governmental authorities all Tax Returns
required by law, except with respect to tax periods for which the applicable
statute of limitations (including any waiver or extensions) has expired
and: (a) all the Tax Returns have been prepared in material
compliance with all applicable laws and are true and accurate in all material
respects; (b) all Taxes reported on those Tax Returns have been fully paid; (c)
no unpaid Tax deficiency has been assessed or to the knowledge of the Company is
proposed against the Company or any Subsidiary by any taxing authority; and (d)
to the knowledge of the Company, no basis exists for any taxing authority to
claim or assess any additional Taxes against the Company or any Subsidiary for
any period.
4.16 Accuracy
of Representations.
None of the information contained in
the representations and warranties made by the Company in this Agreement
(including any exhibit incorporated by reference into this Agreement) or in any
certificate delivered or to be delivered to Stone by the Company pursuant to
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact that is necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading.
ARTICLE
5
REPRESENTATIONS
AND WARRANTIES OF STONE
Stone
represents and warrants to the Company the accuracy of the following statements
as of the Effective Date and as of the Closing Date:
5.1 Authority.
Stone has full legal capacity to
execute, deliver, and perform this Agreement and every other Financing Document
to which he is a party. The execution, delivery, and performance by
Stone of this Agreement and every other Financing Document to which he is a
party will not:
(a) violate
any law or order of any court or Governmental Authority;
(b) require
any notice to, filing or registration with, or consent, license, approval, or
authorization of, any Governmental Authority or other person; or
(c) result
in a breach or default, the imposition of a penalty, the creation or attachment
of a Lien on any of Stone’s assets, a suspension, cancellation, or termination
(or create any right of suspension, cancellation, or termination), or the
acceleration of the maturity of any liability, obligation, or indebtedness of
Stone, under or pursuant to any order or contract to which Stone is a
party.
This
Agreement has been duly and validly executed and delivered to the Company by
Stone, and Stone will have duly and validly executed each of the other Financing
Documents to which he is a party before that Financing Document is delivered to
the Company at the Closing. This Agreement is, and (when executed and
delivered to the Company at the Closing) each other Financing Document to which
Stone is a party will be, valid, effective, and enforceable by the Company
against Stone in accordance with its terms, except in each case to the extent
limited by application of general principles of equity and by bankruptcy,
insolvency, debtor relief, and similar laws of general application affecting the
enforcement of creditors’ rights and debtors’ obligations.
-14-
5.2 Litigation.
No Proceeding is pending before any
court, mediator, arbitrator, or Governmental Authority or (to the knowledge of
Stone) asserted or threatened by any person that could adversely affect in any
way Stone’s right to purchase and own the Note, the Warrants, and the Advance
Shares.
5.3 Brokerage.
Stone has not incurred any liability to
a broker, finder, investment banker, or other intermediary who is entitled to be
paid by a fee, commission, or other remuneration in connection with this
Agreement or the Transactions.
5.4 Communication by
Stone.
Stone has
had a reasonable opportunity to ask questions of and receive answers from the
Company concerning the Transactions, and all such questions have been answered
to the full satisfaction of Stone. Furthermore, Stone represents that
in connection with its review of this Agreement and the transactions
contemplated hereby, he either: (i) has not been represented by counsel and
assumes all risks thereto, or (ii) has been represented by counsel other than
counsel for the Company.
ARTICLE
6
COVENANTS
OF THE COMPANY
6.1 Affirmative
Covenants.
From the
date of this Agreement and for as long as any of the Liabilities remain unpaid,
the Company shall, and shall cause each of the Subsidiaries to:
(a) unless
otherwise waived by the Existing Lender, comply with all of the affirmative
covenants set forth in Section 5 of the Existing Loan Documents;
and
(b) provide
Stone with copies of all information required to be provided to the Existing
Lender under the Existing Loan Documents.
6.2 Negative
Covenants.
From the
date of this Agreement and for as long as any of the Liabilities remain unpaid,
the Company and its Subsidiaries shall:
(a) unless
otherwise waived by the Existing Lender, comply with each negative covenant set
forth in Section 6 of the Existing Loan Documents; or
(b) not
incur, create, assume, or permit to exist a commitment to make a payment under a
lease or any other arrangement for the use of property of another person if,
immediately thereafter, the aggregate of all such payments to be made during any
consecutive 12-month period would exceed $100,000, or enter into any transaction
in which it sells, leases, transfers, or exchanges any of its property to a
third party and then leases back the same or similar property except for (i)
current capital and operating leases existing as of the Closing Date or (ii) any
lease or other arrangement entered into with third parties in connection with
the use of property of another person for equipment or machinery used in the
operations of the Company and its Subsidiaries and in the production of
products, including equipment used to replace obsolete equipment, equipment used
to test and produce products and to maintain or increase capacity;
or
-15-
(c) not,
unless approved by Stone, issue (i) any shares of any class of stock , (ii) any
other equity securities, or (iii) any debt or equity securities convertible
into, or exchangeable for, equity securities (including warrants and stock
options), other than the Warrants, the Advance Shares, and awards issued under
the Stock Option Plan or to be issued under the Stock Option Plan or to be
issued under an amendment to the Stock Option Plan as approved by the
stockholders of the Company; or
(d) not
incur, issue, create, assume, or permit to exist any indebtedness for money
borrowed from anyone other than Stone, except: (i) the Liabilities; (ii) the
Existing Loans; (iii) the purchase of equipment or machinery used in the
operations of the Company and its Subsidiaries and in the production of
products, including equipment used to replace obsolete equipment, equipment used
to test and produce products and to maintain or increase capacity; (iv) accounts
payable to trade creditors and current operating expenses that are not aged more
than 120 days from billing date or more than 30 days from the due date, in each
case incurred in the ordinary course of business and paid within that time
period; (v) obligations to pay rent in connection with its business operations;
(vi) contingent liabilities arising out of endorsements of checks and other
negotiable instruments for deposit or collection in the ordinary course of
business; and (vii) the indebtedness to the Other Lenders in an aggregate amount
equal to $1,000,000; or
(e) not
refinance the outstanding loans with the Senior Lender unless the refinancing is
on more favorable terms to the Company and its Subsidiaries.
ARTICLE
7
FURTHER
AGREEMENTS
7.1 Transfer
Agent.
The
Company will serve as the initial transfer agent for the Note and the
Warrants. The Company may, in its sole discretion, appoint at any
time a commercial transfer agent for the Note and Warrants.
7.2 Brokerage
Fees.
The Company and the Subsidiaries shall
not pay any fee, commission, or other remuneration to any broker, finder,
investment banker, or other intermediary in connection with this Agreement or
the Transactions.
7.3 Survival
of Provisions.
The respective warranties, obligations,
and representations of the parties under this Agreement will survive the Closing
and the consummation of the Transactions. All the obligations of a
party under this Agreement will expire when fully paid, performed, or
discharged.
7.4 Further
Assurances.
At any time and from time to time after
the Closing Date, each party to this Agreement shall furnish to any other party
to this Agreement any reasonable further assurance of the Transactions that the
other party requests, if the requested assurance does not enlarge or extend any
existing liability or obligation of the party or impose on the party any new or
additional liability or obligation.
-16-
7.5 Listing and Reservation of
Shares.
The Company shall list the Advance
Shares for trading on the Stock Exchange on or before they are issued to
Stone. In addition, the Company shall reserve the Warrant Shares for
listing on the Stock Exchange upon official notice of issuance. Also,
the Company shall reserve from its authorized but unissued Common Stock and keep
available for issuance until all the Warrants expire or are exercised that
number of shares of the Common Stock that will be issuable on exercise of the
Warrants.
7.6 Indemnity.
The
Company shall indemnify Stone against any and all costs, claims, losses,
damages, expenses, and liabilities incurred by Stone and arising out of, in
connection with, or as a result of any breach or inaccuracy of any covenant,
warranty, or representation of the Company in this Agreement or any other
Financing Document. Stone shall indemnify the Company against any and
all costs, claims, losses, damages, expenses, and liabilities incurred by the
Company and arising out of, in connection with, or as a result of any breach or
inaccuracy of any covenant, warranty, or representation of Stone in this
Agreement or any other Financing Document.
7.7 Transaction
Expenses.
Whether
or not the Transactions are consummated, the Company and the Subsidiaries
jointly and severally shall pay all the fees, costs, taxes, charges, and
expenses (including attorneys’ fees) incurred by them in connection with the
preparation, negotiation, and consummation of the Financing Documents and the
Transactions. Additionally, whether or not the Transactions are
consummated, the Company and the Subsidiaries jointly and severally shall pay,
on demand, all fees (including reasonable attorneys’ fees), costs, taxes,
charges, and expenses incurred by Stone in connection with the preparation,
negotiation, and consummation of the Financing Documents and the Transactions,
subject to a maximum aggregate amount of $5,000.00.
7.8 Confidentiality.
Stone acknowledges that he has been or
will be given access to Restricted Information in its capacity as the owner of a
Note, Shares, and Warrant and that it is essential to the successful conduct of
the Company’s business that all Restricted Information remain protected and
strictly confidential. Accordingly, Stone shall treat all Restricted
Information as strictly confidential and use it only in connection with its
evaluation of the Company’s business and exercising his rights under the
Financing Documents. Stone shall not at any time, reveal, discuss,
divulge, disclose, or duplicate any Restricted Information in any way, at any
time, for any reason, or to any person who is not an officer, director, or
professional advisor of the Company who is authorized by the Company to have
access to the information and needs to know the information for the purposes of
performing its, her, or his responsibilities on behalf of the Company, except to
the extent expressly authorized in writing by the Company, and except for any
disclosure that is required by law, by a court of competent jurisdiction, or to
respond in good faith to a valid inquiry by a Governmental
Authority. Stone shall not use and shall not permit any of his
affiliates to use any Restricted Information for any other purpose whatsoever,
including the use of any Restricted Information in any way to compete unfairly
or improperly with the Company or to purchase or sell any securities of the
Company in violation of any applicable law. The provisions of this
Section 7.8 shall
survive the payment in full of the obligations under the Loan.
-17-
7.9 Registration
Rights.
If there
is a change in control of the Company, or if the Company files for bankruptcy,
the Company will immediately register, on behalf of Stone, the sale of the
shares of Common Stock issued upon exercise of the Warrants and the shares of
Common Stock issued pursuant to this Agreement (together, the “Stone
Shares”). Further, in the event the Company does not pay the
interest on the Subordinated Note in full when due on the first day of each
month, as required by the Subordinated Note, or if the Subordinated Note is not
paid in full when due, whether at the Maturity Date or upon acceleration of the
Maturity Date as a result of a Default by the Company, as required by the
Subordinated Note, the Company will immediately register, on behalf of Stone,
the sale of the Stone Shares. The Company’s obligations pursuant to
this Section 7.9
relating to the registration of the sale of the Stone Shares are as
follows:
The
Company shall use commercially reasonable efforts to (a) prepare and file with
the U.S. Securities and Exchange Commission (the “SEC”) a Registration Statement
(the “Registration
Statement”) in accordance with the Securities Act as soon as practicable
after it is obligated to pursuant to one of the events described above in this
Section 7.9 (“Registration Event”), (b) have
the Registration Statement declared effective by SEC under the Securities Act as
promptly as practicable, and in any event within 90 days after the Registration
Event, (c) to respond to comments of the SEC (if any) in connection with that
filing, and (d) take all action necessary or appropriate to obtain all permits,
approvals, and registrations under applicable state securities or “Blue Sky”
laws to ensure that Stone’s sale of the Stone Shares complies with those
laws. The Company shall promptly notify Stone, after it receives the
information, of the time when the Registration Statement becomes effective or
any supplement or amendment to it is filed with the SEC, the issuance of any
stop order, the suspension of the qualification of the shares of Common Stock
for offering or sale in any jurisdiction, any request by the SEC for amendment
of the Registration Statement, or any comments by the SEC on the Registration
Statement, requests by the SEC for additional information, and all responses to
SEC comments or requests for additional information.
7.10 Anti-Dilution
Protection for Advance Shares.
If the
Company does any of the following dilutive acts (a “Share Adjustment Event”) at
any time during the period after the Closing Date and before the date when all
the Liabilities have been paid in full:
|
|
(a)
|
issues
to anyone shares of its Common Stock without consideration or for a
purchase price lower than the Closing
Price;
|
|
|
(b)
|
issues
to anyone any securities that are convertible into, or exchangeable for,
shares of its Common Stock (“Convertible
Securities”) without consideration or at an exchange or conversion
price lower than the Closing Price;
or
|
|
|
(c)
|
grants
or issues to anyone any right, option, warrant, or other agreement to
purchase, subscribe for, or otherwise acquire any shares of its Common
Stock (“Derivative
Securities”) without consideration or at an exercise price lower
than the Closing Price;
|
then, in
each case, the Company shall issue to each holder of Advance Shares within ten
days after the occurrence of the Share Adjustment Event additional shares of the
Common Stock determined by the following formula:
|
NCS
|
=
|
[(CSO
+ CSP) ÷ (CSO + CSAP)] x CS - CS
|
|
Where:
|
||
|
NCS
|
=
|
The
aggregate number of additional shares of Common Stock issuable to a holder
of Advance Shares as a result of the Share Adjustment
Event.
|
|
CS
|
=
|
The
number of Advance Shares owned by the shareholder on the date of the Share
Adjustment Event, taking into account all previous Share Adjustment
Events.
|
-18-
|
CP
|
=
|
The
Closing Price.
|
|
CSO
|
=
|
The
number of shares of Common Stock outstanding, excluding (a) the Advance
Shares, (b) unissued Warrant Shares, (c) the shares of Common Stock issued
pursuant to the Share Adjustment Event, and (d) any other shares of Common
Stock issuable on the exercise of any other rights, options, or warrant or
on the exchange or conversion of any other securities of the
Company.
|
|
CSP
|
=
|
The
number of shares of Common Stock that the purchaser or purchasers of the
Convertible Securities, Derivative Securities, or shares of Common Stock
pursuant to the Share Adjustment Event would have received for their
aggregate investment, if the exercise, purchase, exchange, or conversion
price per share for the shares of Common Stock issued or issuable pursuant
to the Share Adjustment Event were the Closing Price, instead of the lower
exercise, purchase, exchange, or conversion price per share actually paid
or to be paid. If the shares of Common Stock are issued without
consideration, the CSP will be zero.
|
|
CSAP
|
=
|
Number
of shares of Common Stock actually issuable on exercise of the new
securities
|
All share
adjustment calculations under this Section are to be rounded up
to the nearest one hundredth of a share.
An
issuance of Convertible Securities that are convertible into, or exchangeable
for, shares of Common Stock without consideration will constitute for purposes
of this Section an
issuance of the maximum number of shares of Common Stock that are issuable on
the exchange or conversion of the Convertible Securities, effective as of the
date when the Convertible Securities are sold or issued. Similarly, a
grant or issuance of Derivative Securities to purchase, subscribe for, or
otherwise acquire shares of Common Stock without consideration will constitute
for purposes of this Section an issuance of the
maximum number of shares of Common Stock issuable pursuant to the exercise of
the Derivative Securities, effective as of the date when the Derivative
Securities were granted or issued. No further adjustment will be
required on the subsequent actual issuance of shares of Common Stock pursuant to
the exercise of the Derivative Securities or the exchange or conversion of the
Convertible Securities.
ARTICLE
8
GENERAL
PROVISIONS
8.1 Counterparts.
The
parties to this Agreement may execute this Agreement in counterparts by manual
or facsimile signature. Each executed counterpart of this Agreement
will constitute an original document, and all executed counterparts,
collectively, will constitute the same agreement.
8.2 Governing
Law
The validity, construction,
enforcement, and interpretation of this Agreement are governed by the laws of
the State of Florida and the federal laws of the United States of America,
excluding the laws of those jurisdictions pertaining to the resolution of
conflicts with laws of other jurisdictions.
8.3 Complete
Agreement.
This Agreement records the entire
understanding among the parties regarding the Transactions and supersedes any
previous or contemporaneous agreement, understanding, or representation, oral or
written, by any of them. The terms of the other Financing Documents
are an integral part of this Agreement and are incorporated by reference into
this Agreement.
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8.4 Rights
of Third Parties.
Nothing in this Agreement, whether
express or implied, is intended or should be construed to confer or grant to any
person, except the parties to this Agreement and their respective assignees and
successors in interest (by operation of law or otherwise), any claim, right,
remedy, or privilege under, or because of, this Agreement or any provision of
it.
8.5 Venue
and Jurisdiction.
The parties (a) consent to the personal
jurisdiction of the state and federal courts having jurisdiction over Pinellas
County, Florida, (b) stipulate that the proper, exclusive, and convenient venues
for all legal proceedings arising out of this Agreement are the Circuit Court
for Pinellas County, Florida, for state court proceedings, and the United States
District Court for the Middle District of Florida - Tampa Division, for federal
court proceedings, and (c) waive any defense, whether asserted by motion or
pleading, that those venues are improper or inconvenient. In any
lawsuit arising out of this Agreement, the losing party shall reimburse the
prevailing party, on demand, for all costs incurred by the prevailing party in
enforcing, defending, or prosecuting the lawsuit.
8.6 Assignment;
Binding Effect.
This
Agreement is not assignable (by operation of law or otherwise) by any party
without the advance written approval of all other parties to this
Agreement. This Agreement shall be binding on each party’s assignees
and successors in interest (by operation of law or otherwise) and inure to the
benefit of each party’s authorized assignees and successors in
interest.
8.7 Waivers,
Amendments, and Extensions.
An
amendment, extension, or modification of this Agreement or any provision of it
will be valid and effective only if it is signed by all the parties to this
Agreement. A waiver of any provision of this Agreement will be valid
and effective only if it is evidenced by a writing signed by or on behalf of the
party against whom the waiver is sought to be enforced. At any time
on or before the Closing Date, and regardless of whether this Agreement has been
approved by any third party or by the members, managers, partners, trustees,
shareholders, or board of directors of a party to this Agreement, the parties to
this Agreement may in writing: (a) extend the time for performance of any of the
obligations or other actions of the other parties; (b) waive any inaccuracies of
the representations or warranties of the other parties contained in this
Agreement; (c) waive compliance with any of the covenants of the other parties
contained in this Agreement; (d) waive performance of any of the obligations of
the other parties created under this Agreement; or (e) waive any of the
conditions precedent to its own obligations under this Agreement. No
delay or course of dealing by a party to this Agreement in exercising a power,
right, or remedy under this Agreement will operate as a waiver of any power,
right, or remedy of that party, except to the extent expressly manifested in a
writing signed by or on behalf of that party. In addition, the
written waiver by a party of a power, right, or remedy under any provision of
this Agreement will not constitute a waiver of any succeeding exercise of the
power, right, or remedy or a waiver of the provision itself.
8.8 Notices.
Any
notice, demand, waiver, consent, approval, or other communication that is
required or permitted to be given to any party under this Agreement will be
validly given and delivered only if it is in writing (whether or not this
Agreement expressly provides for it to be in writing), delivered personally or
sent by fax, email, commercial courier, or first-class, postage prepaid, United
States mail (whether or not certified or registered, and whether or not a return
receipt is requested or received by the sender) to the appropriate
party at its fax number, email address, or street address that is
listed below or that is designated by the party after Closing by a notice to all
the other parties to this Agreement that is validly given in accordance with the
provisions of this Section:
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(a) If to the
Company:
Aerosonic Corporation
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Fax No.: (000) 000-0000
Email: xxxxxxxx@xxxxxxxxx.xxx
Attention: Xxxxxxx
X. Xxxxxxx, Chief Executive Officer
with a copy
to:
Arent Fox
LLP
0000
Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx,
XX 00000-0000
Fax:
(000) 000-0000
Email: xxxxxxx.xxxxxxx@xxxxxxxx.xxx
Attention: Xxxxxxx
X. Xxxxxxx
(b) If
to Stone:
c/o
Xxxxxxx X. Xxxx
Xxxxxxx,
Xxxxxx & co.
000 X.X.
Xxxxxx Xxxx., Xxxxx 000
Xxxx
Xxxxx, XX 00000
Fax: (000)
000-0000
A validly given and delivered notice,
request, demand, waiver, consent, approval, or other communication under this
Agreement will be effective and “received” for purposes of this Agreement on the
earlier of (i) the day when it is actually received, if it is delivered
personally or by commercial courier, (ii) the second day after it is sent, if it
is delivered by fax, email, or other means of electronic communication and a
copy is also delivered by U.S. mail, or (iii) the fifth day after it is
postmarked by the United States Postal Service, if it is delivered by first
class, postage prepaid, United States mail. Each party promptly shall
notify the other parties of any change in its fax number, email address, or
mailing address for notices. The delivery to a party’s legal counsel
of a copy of a notice, request, demand, waiver, consent, approval, or other
communication will not constitute delivery of the notice, request, demand,
waiver, consent, approval, or other communication to the party, unless so
confirmed in writing by the party’s counsel.
Exhibits:
Exhibit 1
– Form of 14% Subordinated Note
Exhibit 2
– Form of Warrant Certificate
Exhibit 3
– Company Closing Certificate
Exhibit 4
– Officer’s Certificate
[Signature
pages follow]
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|
AEROSONIC
CORPORATION
|
||||
| WITNESSES: |
By:
|
/s/
Xxxxxxx X. Xxxxxxx
|
||
|
Xxxxxxx
X. Xxxxxxx
|
||||
|
President
and Chief Executive Officer
|
||||
| Name: |
|
|||
| Name: |
|
|||
|
By:
|
/s/
Xxxxx X. Xxxxx
|
|||
|
XXXXX
X. XXXXX
|
||||
| WITNESSES: | ||||
| Name: |
|
|||
| Name: |
|
|||
SCHEDULE
1
|
Maximum Availability
|
Advance Shares
|
Warrants
|
||
|
$1,000,000.00
$750,000.00
to be made available to the Company on the Closing Date
|
(1/10th)
of one (1) share of
Common
Stock for each
$1.00
in principal amount of each Borrowing.
|
to
purchase 0.25 shares of Common Stock for each $1.00 of principal amount of
each Borrowing.
|
||
|
$250,000.00
to be made available to the Company no later than July 5,
2009
|
