AGREEMENT
Exhibit
10.1
AGREEMENT
THIS
AGREEMENT
(“Agreement”)
is
made as of this the 30th
day of
March, 2007 by and between BIOMETRICS
INVESTORS, L.L.C.,
a
Delaware limited liability company (“Lender”),
and
SEQUIAM
CORPORATION,
a
California corporation (“Borrower”).
W
I T
N E S S E T H
WHEREAS,
Lender is the holder of the Prior Note (as defined below), which was made by
Borrower and which has an outstanding balance as of the date of this Agreement,
including principal and accrued interest, of $3,965,119.00. Subject to the
terms
and conditions of this Agreement, Lender has agreed to extend a Term Loan (as
defined below) to Borrower in the total aggregate amount of $2,500,000 which
Term Loan would be consolidated with the indebtedness evidenced by the Prior
Note and evidenced by a new Term Note in the face amount of $6,500,000. Subject
to the terms and conditions of this Agreement, Lender has agreed to extend
a
separate Term Loan to Borrower in the amount of $5,000,000. In connection with
extending credits to Borrower, Borrower shall also issue Warrants to Lender
which, if both Term Loans are funded, would allow Lender to purchase up to
40%
of Borrower’s Fully Diluted Common Shares, subject to adjustments as set forth
in the Warrants.
NOW,
THEREFORE, in consideration of the Warrants and any Loans made for the account
of Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Borrower, the parties agree
as
follows:
| 1. |
DEFINITIONS.
|
“Account”
shall
have meaning assigned to such term in the UCC.
“Account
Debtor”
shall
have the meaning assigned to such term in the UCC.
“Additional
Warrants”
means
the Common Share purchase warrants, in the form of Exhibit A delivered to
Lender in accordance with Paragraph 4(c)(iv) hereof, which Warrants shall be
exercisable immediately for 39,431,424 Common Shares at an exercise price of
$0.01 per share and have a term of exercise equal to 5 years.
“Advance
Conditions”
shall
have the meaning specified in Paragraph 4 hereof.
“Affiliate”
shall
mean any Person directly or indirectly controlling, controlled by or under
common control with another Person.
“Agreement”
shall
mean this Agreement, any exhibits or schedules hereto, any concurrent or
subsequent rider hereto and any extensions, supplements, amendments or
modifications hereto.
“Base
Rate”
shall
have the meaning specified in Paragraph 3(a) hereof.
“Borrowing
Base Certificate”
shall
have the meaning specified in Paragraph 4(a)(i) hereof.
“Chattel
Paper”
shall
have the meaning assigned to such term in the UCC.
“Collateral”
shall
mean all of the property of Borrower described in paragraph 5 hereof, together
with all other real or personal property of Borrower now or hereafter pledged
to
Lender to secure repayment of any of the Liabilities.
“Commercial
Tort Claims”
shall
have the meaning assigned to such term in the UCC.
“Common
Shares”
means
the common shares of Borrower, par value $.001 per share, and any other class
of
securities into which such securities may hereafter be reclassified or changed
into.
“Common
Shares Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Shares, including, without limitation,
any
debt, preferred shares, rights, options, warrants or other instrument that
is at
any time convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Shares.
“Cost
of Goods Sold”
shall
have the meaning assigned to that term in GAAP.
“Default
Rate”
shall
have the meaning specified in Paragraph 3(a) hereof.
“Deposit
Accounts”
shall
have the meaning assigned to such term in the UCC.
“Disclosure
Schedule”
shall
have the meaning specified in Paragraph 11.
“Documents”
shall
have the meaning assigned to such term in the UCC.
“EBITDA”
shall
mean, with respect to any period, Borrower’s and its Subsidiaries’ Net Income
After Taxes for such period, plus
interest
expense, income tax expense, depreciation and amortization for such period,
plus
or
minus
any
other non-cash charges or gains which have been subtracted or added in
calculating Net Income After Taxes for such period, all on a consolidated basis.
As used herein, the term "Net Income After Taxes" for any period shall mean
Borrower’s and its Subsidiaries net income after taxes for that period, subject
to the following requirements: (i) any net operating loss carryforwards which
would otherwise be available as deductions against Borrower’s gross income shall
be disregarded for purposes of this calculation; (ii) any after-tax gains or
losses on the sale of assets, other than the sale of Inventory in the ordinary
course of business, shall be disregarded for purposes of this calculation;
and
(iii) any other after-tax extraordinary gains or losses shall be disregarded
for
purposes of this calculation.
“EBITDA
Projections”
shall
have the meaning specified in Paragraph 12(b) hereof.
“EBITDA
Shortfall”
shall
have the meaning specified in Paragraph 8(a) hereof.
“Electronic
Chattel Paper”
shall
have the meaning assigned to such term in the UCC.
“Eligible
Accounts”
shall
mean those Accounts of Borrower which are unpaid no more than ninety (90) days
from invoice date, and which Lender, in its sole discretion, determines to
be
eligible. Without limiting Lender’s discretion, unless otherwise agreed by
Lender, the following Accounts of Borrower are not Eligible Accounts:
(i) all
Accounts owing by a single Account Debtor, if ten percent (10%) or more of
the
balance owing by such Account Debtor to Borrower is unpaid more than ninety
(90)
days after the invoice date;
(ii) Accounts
with respect to which the Account Debtor is an officer, director, employee,
Subsidiary or Affiliate of Borrower;
(iii) Accounts
with respect to which the Account Debtor is the United States of America or
any
department, agency or instrumentality thereof, unless Borrower assigns its
right
to payment of such Accounts to Lender pursuant to, and in full compliance with,
the Assignment of Claims Act of 1940, as amended;
(iv) Accounts
with respect to which the Account Debtor is not a resident of the continental
United States, although Accounts with respect to which the Account Debtor is
Fujitsu Microelectronics of America will not be disqualified as “Eligible
Accounts” under this clause;
(v) Accounts
in dispute or with respect to which the Account Debtor has asserted or may
assert a counterclaim or has asserted or may assert a right of setoff;
(vi) Accounts
with respect to which the prospect of payment or performance by the Account
Debtor is or will be impaired, as determined by Lender in the exercise of its
sole discretion;
(vii) Accounts
with respect to which Lender does not have a first and valid fully perfected
security interest;
(viii) Accounts
with respect to which the Account Debtor is the subject of bankruptcy or a
similar insolvency proceeding or has made an assignment for the benefit of
creditors or whose assets have been conveyed to a receiver or trustee;
(ix) Accounts
with respect to which the Account Debtor’s obligation to pay the Account is
conditional upon the Account Debtor’s approval or is otherwise subject to any
repurchase obligation or return right, as with sales made on a xxxx-and-hold,
guaranteed sale, sale-and-return, sale on approval or consignment basis;
(x) Accounts
to the extent that the Account Debtor’s indebtedness to Borrower exceeds a
credit limit determined by Lender in Lender’s sole discretion;
(xi) Accounts
with respect to which the Account Debtor is located in a state which requires
Borrower, as a precondition to commencing or maintaining an action in the courts
of that state, either to (a) receive a certificate of authority to do business
and be in good standing in such state, or (b) file a notice of business
activities report with such state’s taxing authority for the then current year
unless Borrower has taken one of the actions described in clauses (a) or (b)
or
Borrower has proven to Lender’s satisfaction that it is exempt from such
requirement;
(xii) Accounts
which arise out of sales (a) not made in the ordinary course of Borrower’s
business, (b) which are not valid or legally enforceable, (c) which do not
meet
the Account Debtor’s specifications (if any) or (d) which have not been shipped;
(xiii) Accounts
with respect to which the Account Debtor has refused to accept or returned
to
Borrower any portion of the Inventory the sale of which gave rise to such
Accounts; and
(xiv) Accounts
with respect to which any document or agreement executed or delivered in
connection therewith, or any procedure used in connection with any such document
or agreement, fails in any material respect to comply with the requirements
of
applicable law.
"Eligible
Inventory" shall
mean Inventory of Borrower consisting of raw materials and finished goods which
Lender, in its sole discretion, determines to be eligible. Without limiting
Lender’s discretion, unless otherwise agreed by Lender, the following Inventory
of Borrower is not Eligible Inventory:
(i)
Inventory which is in transit;
(ii)
Inventory which is not in good condition, or not currently usable or currently
saleable in the ordinary course of Borrower’s business;
(iii)
Inventory which is obsolete;
(iv)
Inventory which Lender determines, in the exercise of its sole discretion,
to be
unacceptable due to age, type, category and/or quantity;
(v)
Inventory with respect to which Lender does not have a first and valid fully
perfected security interest;
(vi)
Inventory consisting of work-in-progress, packaging materials or supplies;
or
(vii)
Inventory which is stored with or located on the premises of a bailee,
consignee, warehouseman, processor or other third party.
“Eligible
Orders”
shall
mean those Orders of Borrower which Lender, in its sole discretion, determines
to be eligible. Without limiting Lender’s discretion, unless otherwise agreed by
Lender, the following Orders of Borrower are not Eligible Orders:
(i) Any
Order
from a single Customer which is received at a time at which the amount of the
outstanding Orders and Accounts from that Customer exceeds One Million Dollars
($1,000,000);
(ii) Orders
with respect to which the Customer is an officer, director, employee, Subsidiary
or Affiliate of Borrower;
(iii) Orders
with respect to which the Customer is the United States of America or any
department, agency or instrumentality thereof, unless Borrower assigns its
right
to payment for the Accounts arising from such Orders to Lender pursuant to,
and
in full compliance with, the Assignment of Claims Act of 1940, as amended;
(iv) Orders
where the Customer is in dispute regarding Accounts in excess of Fifty Thousand
Dollars ($50,000) or more, or where the Customer has asserted or may assert
a
counterclaim or has asserted or may assert a right of setoff with regard to
Accounts in excess of Fifty Thousand Dollars ($50,000) or more;
(v) Orders
with respect to which the prospect of payment or performance by the Customer
is
or will be impaired, as determined by Lender in the exercise of its sole
discretion;
(vi) Orders
having a Gross Profit Margin that does not satisfy the gross profit requirements
set forth in Exhibit B;
(vii) Orders
with respect to which the Customer is the subject of bankruptcy or a similar
insolvency proceeding or has made an assignment for the benefit of creditors
or
whose assets have been conveyed to a receiver or trustee;
(viii) Orders
with respect to which the Customer’s obligation to pay the Account for the Order
is conditional upon the Customer’s approval or is otherwise subject to any
repurchase obligation or return right, as with sales made on a xxxx-and-hold,
guaranteed sale, sale-and-return, sale on approval or consignment basis;
(ix) Orders
with respect to which the Customer is located in a state which requires
Borrower, as a precondition to commencing or maintaining an action in the courts
of that state, either to (a) receive a certificate of authority to do business
and be in good standing in such state, or (b) file a notice of business
activities report with such state’s taxing authority for the then current year
unless Borrower has taken one of the actions described in clauses (a) or (b)
or
Borrower has proven to Lender’s satisfaction that it is exempt from such
requirement;
(x) Orders
which arise out of sales (a) not made in the ordinary course of Borrower’s
business, or (b) which are not valid or legally enforceable; and
(xi) Orders
with respect to which any document or agreement executed or delivered in
connection therewith, or any procedure used in connection with any such document
or agreement, fails in any material respect to comply with the requirements
of
applicable law.
“Equipment”
shall
have the meaning assigned to such term in the UCC.
“ERISA”
shall
mean the Employee Retirement Income Security Act of 1974, as
amended.
“Event
of Default”
shall
have the meaning specified in Paragraph 13 hereof.
“Finished
Goods”
shall
mean equipment fabricated by or on behalf of Borrower which conforms to the
purchase requirements of an identified customer of Borrower.
“Fixtures”
shall
have the meaning assigned to such term in the UCC.
“Fully
Diluted”
shall
mean the amount of Common Shares that would be outstanding if all options,
warrants and other rights exercisable for the issuance of Common Shares and
all
conversion rights convertible for Common Shares were exercised, including the
exercise of the Warrants herein.
“GAAP”
shall
mean generally accepted United States accounting principles, consistently
applied.
“General
Advance Conditions”
shall
have the meaning specified in Paragraph 4(a) hereof.
“General
Intangibles”
shall
have the meaning assigned to such term in the UCC.
“Governmental
Authority”
means:
(a) the
government of:
(i) the
United States of America or any State or other political subdivision thereof,
or
(ii) any
jurisdiction in which the Borrower or any Subsidiary conducts all or any part
of
its business, or which asserts jurisdiction over any properties of the Borrower
or any Subsidiary; or
(b) any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government.
“Gross
Profit Margin”
shall
mean, with respect to any Order, the result obtained by dividing (a) the result
of subtracting the Cost of Goods Sold for the Inventory which is the subject
of
the Order from the gross sales price for that Inventory by (b) the gross sales
price for that Inventory.
“Indemnified
Party”
shall
have the meaning specified in Paragraph 15 hereof.
“Information”
shall
have the meaning specified in Paragraph 16 hereof.
“Initial
Warrants”
means
the Common Share purchase warrants, in the form of Exhibit C delivered to
Lender in accordance with Paragraph 4(b)(ii) hereof, which Warrants shall be
exercisable immediately for 65,719,041 Common Shares at an exercise price of
$0.01 per share and have a term of exercise equal to 5 years.
“Instruments”
shall
have the meaning assigned to such term in the UCC.
“Intellectual
Property”
shall
mean collectively, all worldwide:
(i) inventions,
designs, algorithms and other industrial property, and all enhancements and
improvements thereto, whether patentable or unpatentable and whether or not
reduced to practice, and all patent rights in connection therewith (including
all U.S. and foreign patents, patent applications, patent disclosures, mask
works, and all divisions, continuations, continuations-in-part, reissues,
re-examinations and extensions thereof), whether or not any of the foregoing
are
registered;
(ii) trademarks,
trade names and service marks, trade dress, logos, Internet domain names, and
other commercial product or service designations, together with all
translations, adaptations, derivations and combinations thereof, and all
goodwill and similar value associated with any of the foregoing, and all
applications, registrations, and renewals in connection therewith;
(iii) copyrights
(whether or not registered), moral rights, and all registrations and
applications for registration thereof, as well as rights to renew
copyrights;
(iv) trade
secrets (as such are determined under applicable law), know-how and other
confidential business information, including technical
information, marketing plans, research, designs, plans, methods, techniques,
and
processes, any
and
all technology, supplier lists, computer software programs or applications,
in
both source and object code form, technical documentation of such software
programs, statistical models, supplier lists, e-mail lists, inventions, sui
generis database rights, databases, and data, whether
in tangible or intangible form and whether or not stored, compiled or
memorialized physically, electronically, graphically, photographically or in
writing;
(v) any
and
all other rights to existing and future registrations and applications for
any
of the foregoing and all other proprietary rights in, or relating to, any of
the
foregoing, including remedies against and rights to xxx for past infringements,
and rights to damages and profits due or accrued in or relating to any of the
foregoing; and
(vi) any
and
all other tangible or intangible proprietary property, information and materials
that are or have been used (including in the development of) the Borrower’s
business and/or in any product, technology or process (a) currently being or
formerly manufactured, published, marketed or used by Seller, or (b) previously
or currently under development for possible future manufacturing, publication,
marketing or other use by Seller.
“Inventory”
shall
have the meaning assigned to such term in the UCC.
“Investment
Property”
shall
have the meaning assigned to such term in the UCC.
“IP
Diligence Issue” shall
have the meaning specified in Paragraph 4(b)(i).
“Knowledge”
shall
mean the actual knowledge, after reasonable investigation, of Xxxx Xxxxxxxxxxx,
Xxxxxxxx Xxxxxxxxxxxx, Xxxx XxXxxx, Xxxxx Xxxxxxxxx, or Xxxx Xxxxx.
“Lender's
IP Due Diligence”
shall
have the meaning specified in Paragraph 4(b)(i).
“Letter-of-Credit
Right”
shall
have the meaning assigned to such term in the UCC.
“Liabilities”
shall
mean any and all obligations, liabilities and indebtedness of Borrower to Lender
or to any Affiliate of Lender of any and every kind and nature, howsoever
created, arising or evidenced and howsoever owned, held or acquired, whether
now
or hereafter existing, whether now due or to become due, whether primary,
secondary, direct, indirect, absolute, contingent or otherwise (including
without limitation obligations of performance), whether several, joint or joint
and several, and whether arising or existing under written or oral agreement
or
by operation of law, including without limitation all obligations, liabilities
and indebtedness of Borrower under this Agreement.
“Loan”
or
“Loans”
shall
mean Term Loan A and Term Loan B made by Lender to Borrower pursuant to
Paragraph 2 hereof.
“Lock
Box,” “Lock
Box Account”
and
“Lock
Box Event”
shall
have the meanings specified in Paragraph 8(a) hereof.
“Material
Adverse Effect”
shall
have the meaning specified in Paragraph 11(b) hereof.
“Maturity
Date”
shall
mean April 15, 2009.
“Obligor”
shall
mean Borrower and each Person who is or shall become primarily or secondarily
liable for any of the Liabilities.
“Order”
shall
mean a written purchase order from a third party for one or more items of
Inventory sold or offered for sale by the Borrower in the ordinary course of
business.
“Other
Agreements”
shall
mean all agreements, instruments and documents, including without limitation
the
Registration Rights Agreement, the Warrants, the Shareholders Agreement,
guaranties, mortgages, trust deeds, pledges, powers of attorney, consents,
assignments, security agreements, intercreditor agreements, financing statements
and all other writings heretofore, now or from time to time hereafter executed
by or on behalf of Borrower or any other Person and delivered to Lender or
to
any Affiliate of Lender in connection with the Liabilities or the transactions
contemplated hereby, including the Pledge Agreements, the Subsidiary Guarantees
and the Subordination Agreements.
“Permitted
Liens”
shall
mean (i) statutory liens of landlords, carriers, warehousemen, mechanics,
materialmen or suppliers incurred in the ordinary course of business and
securing amounts not yet due, (ii) liens or security interests in favor of
Lender, (iii) zoning restrictions and easements, licenses, covenants and other
restrictions affecting the use of real property that do not individually or
in
the aggregate have a material adverse effect on Borrower’s ability to use such
real property for its intended purpose in connection with Borrower’s business,
and (iv) the liens set forth on Exhibit D.
“Person”
shall
mean any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, institution, entity,
party or foreign or United States government (whether federal, state, county,
city, municipal or otherwise), including without limitation any instrumentality,
division, agency, body or department thereof.
“Plan”
shall
mean any employee benefit plan defined in Section 3(3) of ERISA, including
any
multiemployer plan or any employee welfare benefit plan which is maintained
or
has been maintained pursuant to a collective bargaining agreement to which
two
or more unrelated employers contribute and in respect of which Borrower is
an
“employer” as defined in Section 3(5) of ERISA.
“Pledge
Agreements”
shall
have the meaning specified in Paragraph 5(a) hereof.
“Prior
Indebtedness”
shall
mean the indebtedness from Borrower to the holder of the Prior Note which is
evidenced by the Prior Note.
“Prior
Note”
shall
mean that Second Amended, Restated and Consolidated Senior Secured Term Note
dated November 1, 2005 made by Borrower to Xxx Xxxxxxxx Xxxxxx, Attorney In
Fact
for the Trust under the Will of Xxxx Xxxxxxxxxxx.
“Proceeds”
shall
have the meaning assigned to such term in the UCC.
“Related
Parties”
means,
with respect to any specified Person, such Person’s Affiliates and the
respective directors, officers, employees, agents and advisors of such Person
and such Person’s Affiliates.
“Registration
Rights Agreement”
means
the
Registration Rights Agreement, dated the date hereof, between Borrower and
Lender, in the form of Exhibit E delivered to Lender in accordance with
Paragraph 4(b)(iii) hereof.
“Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale of the Underlying Shares by Lender
as
provided for in the Registration Rights Agreement.
“Securities”
means
the Warrants and the Underlying Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended from time to time.
“Securities
Exchange Act”
means
the Securities Exchange Act of 1934, as amended.
“Shareholders
Agreement”
shall
have the meaning specified in Paragraph 4(b)(v).
“Subsidiary”
shall
mean any corporation of which more than fifty percent (50%) of the outstanding
capital stock having ordinary voting power to elect a majority of the board
of
directors of such corporation (irrespective of whether at the time shares of
any
other class of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned by Borrower or by any partnership or joint venture of which more than
fifty percent (50%) of the outstanding equity interests are at the time,
directly or indirectly, owned by Borrower.
“Subsidiary
Guarantees”
shall
have the meaning specified in Paragraph 5(b) hereof.
“Subordination
Agreements”
shall
have the meaning specified in Paragraph 5(c) hereof.
“Tangible
Chattel Paper”
shall
have the meaning assigned to such term in the UCC.
“Term
Loan A”
shall
have the meaning specified in Paragraph 2(a) hereof.
“Term
Loan B”
shall
have the meaning specified in Paragraph 2(c) hereof.
“Term
Loan B Cash Flow Advances”
shall
have the meaning specified in Paragraph 2(d) hereof.
“Term Note
A”
shall
mean the Term Note in the principal amount of $6,500,000 executed by Borrower
in
favor of Lender pursuant to Paragraph 2(a) hereof, and any extensions,
supplements, amendments or modifications thereto.
“Term
Note B”
shall
mean the Term Note in the principal amount of $5,000,000 executed by Borrower
in
favor of Lender pursuant to Paragraph 2(c) hereof, and any extensions,
supplements, amendments or modifications thereto.
“Termination
Date”
shall
mean the earliest to occur of the following: (i) the Maturity Date; and (ii)
the
date the Liabilities are accelerated pursuant to Paragraph 14
hereof.
“UCC”
shall
mean the Uniform Commercial Code as in effect form time to time in the state
of
Illinois.
“Underlying
Shares”
means
the Common Shares issued and issuable upon exercise of the Warrants in
accordance with the terms of the Warrants.
“Warrants”
means
collectively the Initial Warrants and the Additional Warrants.
2. LOANS.
(a) Subject
to the terms and conditions of this Agreement and the Other Agreements, Lender
agrees to make a term loan to Borrower in the principal amount of Two Million
Five Hundred Thousand Dollars ($2,500,000) (“Term
Loan A”).
Term
Loan A shall be further evidenced by and payable in accordance with Term Note
A,
which is a consolidation, amendment and restatement of the Prior Note, and
which
has a face amount of Six Million Five Hundred Thousand Dollars ($6,500,000),
reflecting the sum of the amounts previously advanced under the Prior Note
(the
“Prior
Indebtedness”),
plus
the amount of Term Loan A. Borrower agrees that Term Loan A includes the Prior
Indebtedness, and that repayment in full of Term Loan A shall include repayment
in full not only of the $2,500,000 which may be advanced by Lender under this
Agreement, but also repayment in full of the Prior Indebtedness. Payments of
principal of Term Loan A may not be reborrowed. Principal of and all accrued
and
unpaid interest on Term Loan A shall be payable in full on the Termination
Date.
(b) Term
Loan
A shall be disbursed by Lender to Borrower in a series of 10 disbursements,
each
in the amount of Two Hundred Fifty Thousand Dollars ($250,000), each payable
every other week, which shall be disbursed based on the Borrower’s satisfaction
of the Advance Conditions stated in Paragraphs 4(a) and (b) of this Agreement,
including the issuance by Borrower to Lender of the Initial Warrants for twenty
five percent (25%) of Borrower’s Fully Diluted Common Shares. Lender, in its
sole discretion, may elect to advance Term Loan A in greater amounts or on
an
accelerated funding schedule.
(c) Subject
to the terms and conditions of this Agreement and the Other Agreements, Lender
agrees to make a term loan to Borrower in the principal amount of Five Million
Dollars ($5,000,000) (“Term
Loan B”).
Term
Loan B shall be evidenced by and payable in accordance with Term Note B, which
has a face amount of Five Million Dollars ($5,000,000). Payments of principal
of
Term Loan B may not be reborrowed. Principal of and all accrued and unpaid
interest on Term Loan B shall be payable in full on the Termination
Date.
(d) Term
Loan
B shall consist of a series of advances not to exceed, in the aggregate, Five
Million Dollars ($5,000,000) (“Term
Loan B Cash Flow Advances”),
which
shall be disbursed to Borrower based on Borrower’s satisfaction of the Advance
Conditions stated in Paragraphs 4(a) and (c) of this Agreement, including the
issuance by Borrower to Lender of the Additional Warrants for fifteen percent
(15%) of Borrower’s Fully Diluted Common Shares..
3. INTEREST,
FEES AND CHARGES.
Borrower shall pay to Lender the following:
(a) Borrower
shall pay to Lender interest on the outstanding principal balance of the Loans
monthly in arrears on the first day of each month beginning on May 1, 2007
at
the per annum rate of twelve percent (12%) (the “Base
Rate”).
Following the occurrence of an Event of Default, Borrower shall pay to Lender
interest on the outstanding principal balance of the Loans at the per annum
rate
of four percent (4%) plus the Base Rate (the “Default
Rate”).
Interest shall be computed on the basis of a year of three hundred sixty (360)
days for the actual number of days elapsed.
(b) It
is the
intent of the parties that the rate of interest and the other fees and charges
to Borrower under this Agreement shall be lawful; therefore, if for any reason
the interest or other fees and charges payable under this Agreement are found
by
a court of competent jurisdiction, in a final determination, to exceed the
limit
which Lender may lawfully charge Borrower, then the obligation to pay interest
and other charges shall automatically be reduced to such limit and, if any
amount in excess of such limit shall have been paid, then such amount shall
be
refunded to Borrower.
4. CONDITIONS
OF ADVANCES.
Without
limiting Lender’s discretion to make advances hereunder, the making of any
advance provided for in this Agreement shall be conditioned upon the following
conditions (“Advance
Conditions”):
(a) The
following conditions (the “General
Advance Conditions”)
must
be satisfied for any advance of the Loan:
(i) Lender
shall have received, by at least twelve o’clock noon (12:00 noon)
Chicago
time on the day on which an advance is requested to be made hereunder, a
telephonic request from an officer of Borrower (or any Person authorized by
Borrower pursuant to a written list provided to Lender), for an advance in
a
specific amount. In addition, Lender shall also have received all of the
schedules, reports, and the Borrowing Base Certificate, in the form of Exhibit
F, required to have been delivered by Borrower pursuant to Paragraph 9 hereof
(the “Borrowing
Base Certificate”);
(ii) No
Event
of Default shall have occurred and be continuing or be caused by the making
of
such advance;
(iii) All
of
the representations and warranties contained in this Agreement and the Other
Agreements, including the representations and warranties regarding Borrower’s
Intellectual Property, shall be true and correct in all material respects as
if
made on the date the request for an advance is made;
(iv) Borrower’s
employment agreements with Xxxxxxxx X. XxxxxxXxxxxx and Xxxx X. Xxxxxxxxxx
provide for termination payments to Xxxxxxxx X. XxxxxxXxxxxx and Xxxx X.
Xxxxxxxxxx in the event a change of control (as defined therein) occurs without
the approval of the Borrower’s Board of Directors; it shall be a General Advance
Condition Lender shall have received waivers of the application of those
provisions of the employment agreements to the issuance of the Warrants, the
issuance of shares to Lender pursuant to the Warrants and the exercise of
Lender’s rights as a shareholder of Borrower, and those waivers must be in full
force and effect at any time that an advance of the Loans is
requested;
(v) Lender
shall have received, in form and substance satisfactory to Lender, the Pledge
Agreements, the Subsidiary Guarantees and the Subordination Agreements, and
those agreements must be in full force and effect at any time that an advance
of
the Loans is requested;
(vi) Lender
shall have received a Waiver and Consent in a form satisfactory to Lender from
each of the Series A Preferred Shareholders and Series B Preferred Shareholders
identified on Exhibit S; and
(vii) Lender
shall have received, in form and substance satisfactory to Lender, all
certificates, orders, authorities, consents, affidavits, schedules, instruments,
security agreements, financing statements, mortgages and other documents which
are provided for hereunder, or which Lender may at any time request in a
commercially reasonable manner.
(b) The
following conditions must be satisfied before Lender will make any advance
from
the Term Loan A:
(i) Following
the execution of this Agreement, Lender shall conduct due diligence with respect
to Borrower’s Intellectual Property and Borrower’s rights to use Borrower’s
Intellectual Property to commercialize technology (“Lender's
IP Due Diligence”).
On
or
before that date which will occur forty five (45) days after the date of this
Agreement, Lender shall advise Borrower in writing as to whether Lender's IP
Due
Diligence has disclosed a condition or facts which Lender, in its sole
discretion, regards as having the potential to result in a material adverse
effect on the financial condition of Borrower (an "IP
Diligence Issue").
Lender's notice to Borrower of the existence of an IP Diligence Issue shall
constitute evidence that a condition precedent to the funding of Term Loan
A
related to IP Due Diligence has not been satisfied and no further advance of
either Term Loan A or Term Loan B shall be made unless and until the IP
Diligence Issue is resolved to Lender's satisfaction. In the event that Lender
determines, in Lender's sole discretion, that Lender and Borrower have not
reached a satisfactory resolution of the IP Diligence Issue or in the event
that
Lender and Borrower have not agreed upon a plan for the protection of Borrower's
IP within a period of thirty (30) days following the date of Lender's notice
to
Borrower regarding the IP Diligence Issue, then Lender may declare an Event
of
Default under this Agreement.
(ii) Lender
shall have received the Initial Warrants registered in the name of
Lender;
(iii) Lender
shall have received the
Registration Rights Agreement duly executed by Borrower;
(iv) Lender
shall have received evidence of an amendment to the Borrower’s Articles of
Incorporation to increase the amount of Borrower’s authorized Common Shares to
cover all Fully Diluted Common Shares, including those exercisable under the
Warrants;
(v) Lender
shall have received a shareholders agreement providing for the election of
2
additional directors to Borrower’s Board of Directors designated by Lender, in
the form attached hereto as Exhibit G (the “Shareholders
Agreement”),
executed by the holders of a sufficient number of Fully Diluted Common Shares;
and
(vi) The
General Advance Conditions must be satisfied as of the time of the proposed
advance.
(c) The
following conditions must be satisfied for any Term Loan B Cash Flow
Advance:
(i) Lender
must have received from Borrower and approved Borrower’s annual budget and
EBITDA Projections (as defined below) for the calendar year during which the
advance is requested,
and Borrower’s cumulative EBITDA for the portions of that calendar year
occurring before the month in which the advance is requested must be equal
to or
in excess of Borrower’s projected EBITDA for those months;
(ii) Lender
shall have received the Additional Warrants registered in the name of
Lender;
(iii) The
General Advance
Conditions must be satisfied as of the time of the Term Loan B Working Capital
Advance; and
(iv) at
least
one of the following conditions must be satisfied; either:
(A) Advances
from the Term Loan B Cash Flow Facility may be requested for the purpose of
obtaining Inventory for sale; for such advances, the Borrower must have one
or
more Eligible Orders for that Inventory, and no Order will be an Eligible Order
unless fulfillment of that Order will produce a Gross Profit Margin in
accordance with Exhibit B;
(B) Advances
from the Term Loan B Cash Flow Facility may be requested for the purpose of
obtaining working capital by advancing against royalty payments or other forms
of income; in each such case, Borrower and Lender shall agree upon a formula
to
advance against such royalty payments or other forms of income; or
(C) Lender
has, in its sole discretion, agreed to make an advance from the Term Loan B
Cash
Flow Facility.
5. GRANT
OF SECURITY INTEREST TO LENDER.
As
security for the payment or other satisfaction of all Liabilities, Borrower
hereby assigns to Lender and grants to Lender a continuing security interest
in
the following property of Borrower, whether now or hereafter owned, existing,
acquired or arising and wherever now or hereafter located: (a) all Accounts
and
all Goods whose sale, lease or other disposition by Borrower has given rise
to
Accounts and have been returned to or repossessed or stopped in transit by
Borrower; (b) all Chattel Paper, Instruments, Documents and General Intangibles
(including without limitation all patents, patent applications, trademarks,
trademark applications, tradenames, trade secrets, goodwill, copyrights, rights
in Intellectual Property, registrations, licenses, software, franchises,
customer lists, tax refund claims, claims against carriers and shippers,
guarantee claims, contracts rights, payment intangibles, security interests,
security deposits and any rights to indemnification); (c) all Inventory and
other Goods, including without limitation Equipment, vehicles and Fixtures;
(d)
all Investment Property, including all shares of Borrower’s Subsidiaries; (e)
all Deposit Accounts, bank accounts, deposits and cash; (f) all Letter-of-Credit
Rights; (g) Commercial Tort Claims listed on Exhibit H hereto; (h) any other
property of Borrower now or hereafter in the possession, custody or control
of
Lender or any agent or any Affiliate of Lender or any participant with Lender
in
the Loans for any purpose (whether for safekeeping, deposit, collection,
custody, pledge, transmission or otherwise); and (f) all additions and
accessions to, substitutions for, and replacements, products and proceeds of
the
foregoing property, including without limitation proceeds of all insurance
policies insuring the foregoing property, and all of Borrower’s books and
records relating to any of the foregoing and to Borrower’s business.
(a) To
further evidence the foregoing security interests, as a General Advance
Condition, Borrower shall execute and deliver to Lender in a form satisfactory
to Lender a pledge of Borrower’s shares in the Subsidiaries and a pledge of
Borrower’s Intellectual Property, plus such additional security agreements and
UCC financing statements as Lender may request to evidence and document the
foregoing grant of security interests (collectively, the “Pledge
Agreements”),
which
Pledge Agreements shall include provisions recognizing that the security
agreements and pledges which secured the Prior Note have been assigned to Lender
and confirming that those security agreements and pledges remain in full force
and effect, subject to no defenses of any kind. The Pledge Agreements shall
include an agreement creating a security interest for Lender in the Deposit
Accounts, which agreement shall be in the form of a control
agreement.
(b) As
a
General Advance Condition, Borrower shall also cause the Subsidiaries to enter
into guarantees of the Loans in a form satisfactory to Lender (the “Subsidiary
Guarantees”),
which
Subsidiary Guarantees shall include provisions recognizing that the guarantees
of the Prior Note made by the Subsidiaries have been assigned to Lender and
confirming that those guarantees remain in full force and effect, subject as
of
the date hereof to no defenses of any kind.
(c) As
a
General Advance Condition, Borrower shall cause Xxxxxxxx X. XxxxxxXxxxxx and
Xxxx Xxxxxxxxxx, as existing creditors of Lender, to enter into Subordination
Agreements with Lender in a form satisfactory to Lender (the “Subordination
Agreements”)
which
Subordination Agreements shall include provisions recognizing that the
Subordination Agreements made with respect to the Prior Note have been assigned
to Lender and confirming that those subordination agreements remain in full
force and effect, subject to no defenses of any kind.
(d) Lender
shall have the right now, and at any time in the future in his sole and absolute
discretion, without notice to Borrower, to prepare, file and sign the Borrower’s
name on any financing statement, notice of lien, assignment or satisfaction
of
lien or similar document in connection with the any and all security interests
granted by Borrower to Lender under this Agreement. The Borrower hereby
authorizes Lender to file financing statements containing the collateral
description "All of the Debtor’s assets whether now owned or hereafter
acquired." or such lesser amount of assets as Lender may determine, or Lender
may, at his option, file financing statements containing any collateral
description which reasonably describes the collateral in which a security
interest is granted under this Agreement;
6. PRESERVATION
OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
(a) Borrower
shall, at Lender’s request, at any time and from time to time, authenticate,
execute and deliver to Lender such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same
in
all public offices deemed necessary or desirable by Lender) and do such other
acts and things or cause third parties to do such other acts and things as
Lender may deem necessary or desirable in order to establish and maintain a
valid, attached and perfected security interest in the Collateral in favor
of
Lender (free and clear of all other liens, claims and rights of third parties
whatsoever, whether voluntarily or involuntarily created, except Permitted
Liens) to secure payment of the Liabilities, and in order to facilitate the
collection of the Collateral. Borrower irrevocably hereby makes, constitutes
and
appoints Lender (and all Persons designated by Lender for that purpose) as
Borrower’s true and lawful attorney and agent-in-fact to execute such financing
statements, documents and other agreements and instruments and do such other
acts and things as may be necessary to preserve and perfect Lender’s security
interest in the Collateral.
(b) Immediately
upon Borrower’s receipt of any portion of the Collateral evidenced by an
Agreement, Instrument of Document including, without limitation, any Tangible
Chattel Paper and any Investment Property consisting of certificated securities,
Borrower shall deliver the original thereof to Lender together with an
appropriate endorsement or other specific evidence of assignment thereof to
Lender (in form and substance acceptable to Lender). If any endorsement or
assignment of any such items shall not be made for any reason, Lender is hereby
irrevocably authorized as Borrower’s attorney and agent-in-fact, to endorse or
assign the same on Borrower’s behalf.
(c) To
the
extent Borrower obtains or maintains any Electronic Chattel Paper, Deposit
Accounts or Letter-of-Credit Rights, Borrower shall do such acts and things
or
cause third parties to do such acts and things to establish control in favor
of
Lender as control for such type of Collateral is defined in the
UCC.
7. COVENANTS
REGARDING THE WARRANTS.
Borrower shall maintain a reserve from its duly authorized Common Shares for
issuance pursuant to the Warrants and the Other Agreements in such amount as
may
be required to fulfill its obligations in full under the Warrants and the Other
Agreements.
8. COLLECTIONS.
(a) As
used
herein, the term “EBITDA
Shortfall”
shall
mean that for any month, Borrower’s actual EBITDA is less than the EBITDA shown
in Borrower's EBITDA Projections for that month by a percentage factor of
fifteen percent (15%) or more. Upon occurrence of an EBITDA Shortfall for any
month which continues for a second consecutive month, Lender shall have the
right to declare that a cash management event (a “Lock
Box Event”)
has
occurred, and unless and until a Lock Box Reset Event (as defined below) occurs,
Lender shall have the following rights to collect Borrower's cash
payments.
Following occurrence of a Lock Box Event, Lender shall have the right to direct
Borrower to cause all of its Account Debtors to make all payments on the
Accounts to a post office box (the “Lock
Box”)
designated by, and under the exclusive control of Lender or another financial
institution acceptable to Lender. Upon direction by Lender, Borrower shall
establish an account (the “Lock
Box Account”)
in
Borrower’s name with a financial institution acceptable to Lender, into which
all payments received in the Lock Box shall be deposited, and into which
Borrower will immediately deposit all payments received by Borrower with respect
to Accounts of Borrower and other Collateral in the identical form in which
such
payments were made, whether by cash or check. Following occurrence of a Lock
Box
Event, if Borrower, any Affiliate or Subsidiary of Borrower, or any shareholder,
officer, director, employee or agent of Borrower or any Affiliate or Subsidiary
of Borrower, or any other Person acting for or in concert with Borrower shall
receive any monies, checks, notes, drafts or other payments relating to or
as
Proceeds of Accounts of Borrower or other Collateral, Borrower and each such
Person shall receive all such items in trust for, and as the sole and exclusive
property of, Lender and, immediately upon receipt thereof, shall remit the
same
(or cause the same to be remitted) in kind to the Lock Box Account. The
financial institution with which the Lock Box Account is established shall
acknowledge and agree, in a manner satisfactory to Lender, that the amounts
on
deposit in such Lock Box Account are the sole and exclusive property of Lender,
that such financial institution will follow the instructions of Lender with
respect to disposition of funds in the Lock Box and Lock Box Account without
further consent from Borrower, that such financial institution has no right
to
setoff against the Lock Box Account or against any other account maintained
by
such financial institution into which the contents of the Lock Box Account
are
transferred, and that such financial institution shall wire to Lender, or
otherwise transfer to Lender in immediately available funds in a manner
satisfactory to Lender, funds deposited in the Lock Box Account on a daily
basis
as such funds are collected. For purposes of calculating interest on the
Liabilities, three (3) business days after receipt by Lender of good Funds),
Lender shall apply (conditional upon final collection) the whole or any part
of
such collections or Proceeds against the Liabilities in such order as Lender
shall determine in its sole discretion. Borrower agrees that all payments
deposited to such Lock Box Account or otherwise received by Lender, whether
in
respect of the Accounts of Borrower or as Proceeds of other Collateral or
otherwise, will be applied on account of the Liabilities in accordance with
the
terms of this Agreement. Borrower agrees to pay all fees, costs and expenses
which Lender incurs in connection with opening and maintaining the Lock Box
Account and depositing for collection by Lender any check or other item of
payment received by Lender on account of the Liabilities. All checks, drafts,
instruments and other items of payment or Proceeds of Collateral shall be
endorsed by Borrower to Lender, and, if that endorsement of any such item shall
not be made for any reason, Lender is hereby irrevocably authorized to endorse
the same on Borrower’s behalf. For the purpose of this Paragraph, Borrower
irrevocably hereby makes, constitutes and appoints Lender (and all Persons
designated by Lender for that purpose) as Borrower’s true and lawful attorney
and agent-in-fact (i) to endorse Borrower’s name upon said items of payment
and/or Proceeds of Collateral and upon any Tangible Chattel Paper of Borrower,
document, instrument, invoice or similar document or agreement relating to
any
Account of Borrower or goods pertaining thereto; (ii) to take control in any
manner of any item of payment or proceeds thereof; and (iii) to have access
to
any lock box or postal box into which any of Borrower’s mail is deposited, and
open and process all mail addressed to Borrower and deposited
therein.
(b) As
used
herein, the term "Lock
Box Reset Event"
shall
mean that following the occurrence of a Lock Box Event, Borrower's actual EBITDA
for two consecutive months has equaled or exceeded the amount of EBITDA shown
in
Borrower's EBITDA Projections for those two months.
(c) After
the
occurrence of a Lock Box Event, Lender may, at any time and from time to time,
whether before or after notification to any Account Debtor and whether before
or
after the maturity of any of the Liabilities, (i) enforce collection of any
of
Borrower’s Accounts or contract rights by suit or otherwise; (ii) exercise all
of Borrower’s rights and remedies with respect to proceedings brought to collect
any Accounts of Borrower; (iii) surrender, release or exchange all or any part
of any Accounts of Borrower, or compromise or extend or renew for any period
(whether or not longer than the original period) any indebtedness thereunder;
(iv) sell or assign any Account of Borrower upon such terms, for such amount
and
at such time or times as Lender deems advisable; (v) prepare, file and sign
Borrower’s name on any proof of claim in bankruptcy or other similar document
against any Account Debtor; and (vi) do all other acts and things which are
necessary, in Lender’s sole discretion, to fulfill Borrower’s obligations under
this Agreement and to allow Lender to collect the Accounts of Borrower. In
addition to any other provision hereof, Lender may at any time, whether before
or after the occurrence of an Event of Default, at Borrower’s expense, notify
any parties obligated on any of the Accounts to make payment directly to Lender
of any amounts due or to become due thereunder.
(d) Lender,
in its sole discretion, without waiving or releasing any obligation, liability
or duty of Borrower under this Agreement or the Other Agreements or any Event
of
Default, may at any time or times hereafter, but shall not be obligated to,
pay,
acquire or accept an assignment of any security interest, lien, encumbrance
or
claim asserted by any Person in, upon or against the Collateral. All sums paid
by Lender in respect thereof and all costs, fees and expenses, including without
limitation reasonable attorney fees, all court costs and all other charges
relating thereto incurred by Lender shall constitute a loan, payable by Borrower
to Lender on demand and, until paid, shall bear interest at the rate then
applicable to the Loans.
(e) Immediately
upon Borrower’s receipt of any portion of the Collateral evidenced by an
agreement, Instrument or Document, including without limitation any Chattel
Paper, Borrower shall deliver the original thereof to Lender together with
an
appropriate endorsement or other specific evidence of assignment thereof to
Lender (in form and substance acceptable to Lender). If an endorsement or
assignment of any such items shall not be made for any reason, Lender is hereby
irrevocably authorized, as Borrower’s attorney and agent-in-fact, to endorse or
assign the same on Borrower’s behalf.
9. SCHEDULES
AND REPORTS.
(a) At
the
end of each
month,
upon each request for a Loan hereunder and at such other times as may be
requested by Lender from time to time hereafter, Borrower shall deliver to
Lender (i) a Borrowing Base Certificate certified by an authorized officer
of
Borrower, which certificate includes a schedule identifying each Eligible Order
together with copies of the invoices, if requested by Lender (with evidence
of
shipment attached) pertaining to each such Eligible Order as well as daily
sales, collections, cash receipts, credit and adjustment reports and all
appropriate supporting documentation; and (ii) such additional schedules,
certificates, reports and information with respect to the Collateral as Lender
may from time to time require. Lender, through its officers, employees or
agents, shall have the right, at any time and from time to time in Lender’s
name, in the name of a nominee of Lender or in Borrower’s name, to verify the
validity, amount or any other matter relating to any of Borrower’s Accounts, by
mail, telephone, telegraph or otherwise. Borrower shall reimburse Lender, on
demand, for all costs, fees and expenses incurred by Lender in this regard.
Borrower shall immediately notify Lender of any event causing loss or
depreciation in value of Borrower’s Inventory (other than normal depreciation
occurring in the ordinary course of business). Such monthly reports may be
submitted by telecopy, with originals to follow by U.S. Mail.
(b) Without
limiting the generality of the foregoing, Borrower shall deliver to Lender,
at
least once a month, not later than the tenth (10th)
day of
each month (or more frequently when requested by Lender), a month-end EBITDA
certificate, certified by an authorized officer of Borrower which reconciles
to
all month-end financial reports and which states the amount of EBITDA for the
prior month.
(c) Without
limiting the generality of the foregoing, Borrower shall deliver to Lender,
at
least once a month, not later than the tenth (10th)
day of
each month (or more frequently when requested by Lender), a month-end Borrowing
Base Certificate, certified by an authorized officer of Borrower which
reconciles to all month-end financial reports, an accounts receivable aging
report (aged by invoice date), an accounts payable aging report (aged by invoice
date) and all appropriate supporting documentation.
(d) All
schedules, certificates, reports, and assignments and other items delivered
by
Borrower to Lender hereunder shall be executed by an authorized representative
of Borrower and shall be in such form and contain such information as Lender
shall specify.
10. TERMINATION.
This
Agreement shall be in effect until the Termination Date. The security interests
and liens created under this Agreement and the Other Agreements shall survive
such termination until the payment of the Liabilities has become indefeasible.
In addition, the
Covenants contained in Xxxxxxxxxx 00(x), (x), (x), (x), (x), (x), (x), (x),
(x),
(x), and (s) shall survive the Termination Date for so long as Lender holds
the
Initial Warrants, the Additional Warrants or the Underlying Shares representing
25% of the Fully Diluted Common Shares. At
such
time as Borrower has repaid all of the Liabilities and this Agreement has
terminated, Borrower shall deliver to Lender a release, in form and substance
satisfactory to Lender, of all obligations and liabilities of Lender and its
officers, directors, employees, agents and Affiliates to Borrower.
11. REPRESENTATIONS,
WARRANTIES AND COVENANTS.
Except
as
set forth in the disclosure schedules provided by the Borrower to the Lender
on
the date hereof, which may be supplemented with Lender’s approval from time to
time after the date hereof should any fact or condition require a change thereto
(the “Disclosure
Schedule”),
Borrower
hereby represents, warrants and covenants that:
(a) all
of
the direct and indirect Subsidiaries of Borrower are set forth on Exhibit I.
Except as set forth on Exhibit G, Borrower owns, directly or indirectly, all
of
the capital stock or other equity interests of each Subsidiary free and clear
of
any Liens, and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities;
(b) Borrower
and each of its Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and
to
carry on its business as currently conducted. Neither Borrower nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of Borrower and its Subsidiaries is duly qualified
to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on
the
legality, validity or enforceability of this Agreement and/or the Other
Agreements, (ii) a material adverse effect on the results of operations, assets,
business, prospects or condition (financial or otherwise) of Borrower and its
Subsidiaries, taken as a whole, or (iii) a material adverse effect on Borrower’s
ability to perform in any material respect on a timely basis its obligations
under this Agreement and/or the Other Agreements (any of (i), (ii) or (iii),
a
“Material
Adverse Effect”)
and no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification;
(c) the
execution, delivery and performance of this Agreement and the Other Agreements
by Borrower and the consummation by Borrower of the transactions contemplated
hereby and thereby do not and will not: (i) conflict with or violate any
provision of Borrower’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse
of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of Borrower or any Subsidiary, or give
to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any material agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt
or
otherwise) or other understanding to which Borrower or any Subsidiary is a
party
or by which any property or asset of Borrower or any Subsidiary is bound or
affected, or (iii) subject to the Required Approvals, conflict with or result
in
a violation of any material law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which
Borrower or a Subsidiary is subject (including federal and state securities
laws
and regulations), or by which any property or asset of Borrower or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii),
such
as could not have or reasonably be expected to result in a Material Adverse
Effect;
(d) the
financial statements delivered or to be delivered by Borrower to Lender at
or
prior to the date of this Agreement and at all times subsequent thereto
fairly
reflect the financial condition of Borrower in accordance with GAAP, and there
has been no adverse change in the financial condition, the operations or any
other status of Borrower since the date of the financial statements delivered
to
Lender most recently prior to the date of this Agreement;
(e) the
office where Borrower keeps its books, records and accounts (or copies thereof)
concerning the Collateral, Borrower’s principal place of business and all of
Borrower’s other places of business, locations of Collateral and post office
boxes are as set forth in Exhibit J; Borrower shall promptly (but in no event
less than ten (10) days prior thereto) advise Lender in writing of the proposed
opening of any new place of business, the closing of any existing place of
business, any change in the location of Borrower’s books, records and accounts
(or copies thereof) or the opening or closing of any post office box of
Borrower;
(f) the
Collateral, including without limitation the Equipment (except any part thereof
which prior to the date of this Agreement Borrower shall have advised Lender
in
writing consists of Collateral normally used in more than one state) is and
shall be kept, or, in the case of vehicles, based, only at the addresses set
forth on the first page of this Agreement or on Exhibit J;
(g) if
any of
the Collateral consists of Goods of a type normally used in more than one state,
whether or not actually so used, Borrower shall immediately give written notice
to Lender of any use of any such Goods in any state other than a state in which
Borrower has previously advised Lender such Goods shall be used, and such Goods
shall not, unless Lender shall otherwise consent in writing, be used outside
of
the continental United States;
(h) Borrower
is and shall at all times be the lawful owner of its property now purportedly
owned or hereafter purportedly acquired by Borrower, free from all liens,
claims, security interests and encumbrances whatsoever, whether voluntarily
or
involuntarily created and whether or not perfected, other than the Permitted
Liens and except for sales of Inventory in the ordinary course of
business;
(i) Borrower
has the right and power and is duly authorized and empowered to enter into,
execute and deliver this Agreement and the Other Agreements and perform its
obligations hereunder and thereunder; Borrower’s execution, delivery and
performance of this Agreement and the Other Agreements does not and shall not
conflict with the provisions of any statute, regulation, ordinance or rule
of
law, or any agreement, contract or other document which may now or hereafter
be
binding on Borrower, and Borrower’s execution, delivery and performance of this
Agreement and the Other Agreements shall not result in the imposition of any
lien or other encumbrance which might result in any Materially Adversely Effect
upon any of Borrower’s property under any existing indenture, mortgage, deed of
trust, loan or credit agreement or other agreement or instrument by which
Borrower or any of its property may be bound or affected;
(j) Borrower
shall, and shall cause each of its Subsidiaries to comply in all material
respects with all applicable laws, rules and regulations of all governmental
authorities, the violation of which would reasonably be expected to have a
Material Adverse Effect upon the financial condition, operating results, assets,
operations or business prospects of Borrower and its Subsidiaries taken as
a
whole, and pay and discharge when payable all taxes, assessments and
governmental charges (except to the extent the same are being contested in
good
faith and adequate reserves therefor have been established);
(k) there
are
no actions or proceedings which are pending or threatened against Borrower
which
might result in any Materially
Adversely Effect with respect to Borrower’s property and Borrower shall,
promptly upon becoming aware of any such pending or threatened action or
proceeding, give written notice thereof to Lender;
(l) Borrower
has obtained all material licenses, authorizations, approvals and permits,
the
lack of which would have a Material Adverse Effect on the operation of its
business, and Borrower is and shall remain in compliance in all material
respects with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, statutes,
orders, regulations, rules, and ordinances relating to taxes, securities,
employee health and safety and environmental matters), the failure to comply
with which would have a Material Adverse Effect on its business, property,
assets, operations or condition, financial or otherwise;
(m) other
than Lender and those entities listed in Exhibit K, no Person has any right
to
cause Borrower to effect the registration under the Securities Act of any
securities of Borrower;
(n) the
Securities are duly authorized and, when issued and paid for in accordance
with
this Agreement and/or the Other Agreements, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by Borrower
other than restrictions on transfer provided for in this Agreement and/or the
Other Agreements. The Underlying Shares, when issued in accordance with the
terms of this Agreement and/or the Other Agreements, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by Borrower.
The Initial Warrants shall be exercisable for 25% of Borrower’s Fully Diluted
Common Shares and the Additional Warrants shall be exercisable for 15% of
Borrower’s Fully Diluted Common Shares, therefore, Borrower has reserved from
its duly authorized capital stock a number of Common Shares for issuance of
the
Underlying Shares at least equal to 40% of the Borrower’s Fully Diluted Common
Shares on the date hereof;
(o) the
capitalization of Borrower is as set forth on Exhibit L. Borrower has not issued
any capital stock since its most recently filed periodic report under the
Securities Exchange Act, except as set forth on Exhibit K, other than pursuant
to the exercise of employee stock options under Borrower’s stock option plans,
the issuance of Common Shares to employees pursuant to Borrower’s employee stock
purchase plan and pursuant to the conversion or exercise of Common Shares
Equivalents outstanding as of the date of the most recently filed periodic
report under the Securities Exchange Act. No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement and/or the Other
Agreements. Except as a result of the purchase and sale of the Securities,
or as
set forth in Schedule 11(o), there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe
for
or acquire, any Common Shares, or contracts, commitments, understandings or
arrangements by which Borrower or any Subsidiary is or may become bound to
issue
additional Common Shares or Common Shares Equivalents. The issuance and sale
of
the Securities will not obligate Borrower to issue Common Shares or other
securities to any Person (other than the Purchasers) and will not result in
a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of Borrower are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation
of
any preemptive rights or similar rights to subscribe for or purchase securities.
No further approval or authorization of any shareholder, the Board of Directors
of Borrower or others is required for the issuance and sale of the Securities.
There are no shareholders agreements, voting agreements or other similar
agreements with respect to Borrower’s capital stock to which Borrower is a party
or, to the Knowledge of Borrower, between or among any of Borrower’s
shareholders;
(p) all
written information now, heretofore or hereafter furnished by Borrower to Lender
is and shall be materially
true and correct as of the date with respect to which such information was
or is
furnished, except to the extent the failure of such information being true
and
correct would not result in a Material Adverse Effect on the
Borrower;
(q) Borrower
is not conducting, permitting or suffering to be conducted, nor shall it
conduct, permit or suffer to be conducted, any activities or transactions with
any Affiliate of Borrower; provided, however, that Borrower may enter into
transactions with Affiliates of Borrower in the ordinary course of business
pursuant to terms that are no less favorable to Borrower than the terms upon
which such transfers or transactions would have been made had they been made
to
or with a Person that is not an Affiliate of Borrower and, in connection
therewith, may transfer cash or property to Affiliates of Borrower for fair
value;
(r) Except
as
set forth on Exhibit M, Borrower’s name has always been as set forth on the
first page of this Agreement and Borrower uses no tradenames or division names
in the operation of its business; Borrower shall notify Lender in writing within
ten (10) days of the change of its name or the use of any tradenames or division
names not previously disclosed to Lender in writing;
(s) with
respect to Borrower’s Equipment: (i) Borrower has good and indefeasible and
merchantable title to and ownership of all Equipment, including without
limitation the Equipment described on Exhibit N; (ii) Borrower shall keep and
maintain the Equipment in good operating condition and repair and shall make
all
necessary replacements thereof and renewals thereto so that the value and
operating efficiency thereof shall at all times be preserved and maintained;
(iii) Borrower shall not permit any such items to become a Fixture to real
estate or an accession to other personal property; and (iv) Borrower,
immediately on demand by Lender, shall deliver to Lender any and all evidence
of
ownership of, including without limitation, if applicable, certificates of
title
and applications of title to, any of the Equipment;
(t) this
Agreement and the Other Agreements to which Borrower is a party are the legal,
valid and binding obligations of Borrower and are enforceable against Borrower
in accordance with their respective terms except as may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors’ rights generally and by general principles of
equity;
(u) Except
as
set forth on Schedule 11(u), Borrower is not now obligated, nor shall it create,
incur, assume or become obligated (directly or indirectly), for any loans or
other indebtedness for borrowed money other than the Loans, except that Borrower
may (i) borrow money from a Person other than Lender on an unsecured and
subordinated basis if a subordination agreement in favor of Lender and in form
and substance satisfactory to Lender is executed and delivered to Lender
relative thereto; (ii) maintain any present indebtedness to any Person which
is
set forth on Exhibit O; and (iii) incur unsecured indebtedness to trade
creditors in the ordinary course of Borrower’s business;
(v) Borrower
does not own any margin securities, and none of the proceeds of the Loans
hereunder shall be used for the purpose of purchasing or carrying any margin
securities or for the purpose of reducing or retiring any indebtedness which
was
originally incurred to purchase any margin securities or for any other purpose
not permitted by Regulation U of the Board of Governors of the Federal Reserve
System as in effect from time to time;
(w) Exhibit
H
sets forth the names of all of the Subsidiaries of Borrower and except as set
forth on Exhibit H, Borrower has no subsidiaries or divisions, nor is Borrower
engaged in any joint venture or partnership with any other Person;
(x) Borrower
has not received written notice that it is in default under any material
contract, lease or commitment to which it is a party or by which it is bound,
nor does Borrower know of any dispute regarding any contract, lease or
commitment which is material to the continued financial success and well-being
of Borrower;
(y) there
are
no controversies pending or to the Borrower’s Knowledge, threatened between
Borrower and any of its employees, other than employee grievances arising in
the
ordinary course of business which would not, in the aggregate, have a Material
Adverse Effect on Borrower, and Borrower is in compliance with all federal
and
state laws respecting employment and employment terms, conditions and practices,
except to the extent the Borrower’s failure to be in compliance with all such
laws would not result in a Material Adverse Effect on Borrower;
(z) Exhibit
P, Schedule 1 contains a true and complete list of the Intellectual Property,
and includes details of all due dates for further filings, maintenance and
other
payments or other actions falling due in respect of the Intellectual Property
within twelve (12) months following the date of this Agreement, and the current
status of the corresponding registrations, filings, applications and
payments;
(aa) Borrower
has not received written notice that it has infringed upon or misappropriated
any Intellectual Property rights of any person in Borrower’s conduct of the
Business. No written notice (i) challenging the validity, effectiveness or
ownership by Borrower of any of the Intellectual Property, or (ii) to the effect
that the use, distribution, licensing, sublicensing, sale or any other exercise
of rights in any product, service, work, technology or process as now used
or
offered or proposed for use, licensing, sublicensing, sale or other manner
of
commercial exploitation by Borrower infringes or will infringe on any
Intellectual Property rights or personal right of any Person have been asserted
or, to Borrower’s Knowledge, are threatened by any Person, nor are there, to
Borrower’s knowledge, any valid grounds for any bona fide claim of any such
kind. To Borrower’s knowledge, there is and has been no unauthorized use,
infringement or misappropriation of any Intellectual Property by any third
party, employee or former employee;
(bb) Except
as
set forth on Exhibit P, Borrower does not owe any royalties or other payments
to
third parties in respect of the Intellectual Property. All royalties or other
payments set forth on Exhibit P, Schedule 2 that have accrued prior to the
date
of this Agreement have been paid; and
(cc) Borrower
represents, warrants and covenants to Lender that all representations and
warranties of Borrower contained in this Agreement (whether appearing in
Paragraph 11 or 12 hereof or elsewhere) shall be true at the time of Borrower’s
execution of this Agreement, shall survive the execution, delivery and
acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, shall be remade by Borrower at the time
each
Loan is made pursuant to this Agreement.
12. ADDITIONAL
COVENANTS OF BORROWER.
Except
as otherwise contemplated in this Agreement or necessary to comply with this
Agreement or the Other Agreements, unless Borrower obtains Lender’s prior
written consent waiving or modifying any of Borrower’s covenants hereunder in
any specific instance, Borrower agrees as follows:
(a) Borrower
shall at all times keep accurate and complete books, records and accounts with
respect to all of Borrower’s
business activities, in accordance with sound accounting practices and generally
accepted accounting principles consistently applied, and shall keep such books,
records and accounts, and any copies thereof, only at the addresses indicated
for such purpose on Exhibit J;
(b) Borrower
agrees to deliver to Lender the following financial information, all of which
shall be prepared in accordance with generally accepted accounting principles
consistently applied: (i) no later than thirty (30) days after each calendar
month, copies of internally prepared financial statements, including without
limitation balance sheets and statements of income, retained earnings and cash
flow of Borrower, with a Compliance Certificate in the form of Exhibit Q hereto,
acknowledged by the Chief Financial Officer of Borrower to be true and correct
and free from material error, as well as detailed accounts payable and accounts
receivable agings; (ii) no later than ninety (90) days after the end of each
of
Borrower’s fiscal years, annual financial statements audited by independent
certified public accountants selected by Borrower and satisfactory to Lender,
which financial statements shall be accompanied by a letter from such
accountants acknowledging that they are aware that Lender is relying upon such
financial statements in connection with the exercise of its rights hereunder
and
a Compliance Certificate acknowledged by the Chief Financial Officer of Borrower
to be true and correct and free from material error; (iii) no later than the
end
of each fiscal year of Borrower, Borrower shall deliver to Lender projected
balance sheets, income statements and projections of EBITDA (“EBITDA
Projections”)
for
the succeeding fiscal year, such projections to be prepared showing monthly
calculations; (iv) within ten (10) days after the filing thereof, copies of
Borrower’s United States corporate income tax returns; and (v) such other
financial information as Lender shall reasonably request;
(c) Borrower
shall promptly advise Lender in writing of any event that has had a Material
Adverse Effect, the occurrence of any Event of Default hereunder or the
occurrence of any event which, if uncured, will become an Event of Default
hereunder after notice or lapse of time (or both), and such written advise
under
this Paragraph 12(c) shall not be deemed to cure or waive and an Event of
Default;
(d) Lender,
or any Persons designated by it, shall have the right, upon providing the
Borrower or its Subsidiaries, as the case may be, with no less than one day
prior written notice, to call at Borrower’s places of business at any reasonable
times, and, without hindrance or delay, to inspect the Collateral and to
inspect, audit, check and make extracts from Borrower’s books, records,
journals, orders, receipts and any correspondence and other data relating to
Borrower’s business, the Collateral or any transactions between the parties
hereto, and shall have the right to make such verification concerning Borrower’s
business as Lender may consider reasonable under the circumstances. Borrower
shall furnish to Lender such information relevant to Lender’s rights under this
Agreement as Lender shall at any time and from time to time request. Borrower
authorizes Lender to discuss the affairs, finances and business of Borrower
with
any officers, employees or directors of Borrower or with any Affiliate or the
officers, employees or directors of any Affiliate, and to discuss the financial
condition of Borrower with Borrower’s independent public
accountants;
(e) Borrower
shall:
(i) keep
the
Collateral properly housed and shall keep the Collateral insured for the full
insurable value thereof against loss or damage by fire, theft, explosion,
sprinklers, collision (in the case of motor vehicles) and such other risks
as
are customarily insured against by Persons engaged in businesses similar to
that
of Borrower with such companies, in such amounts and under policies in such
form
as shall be reasonably satisfactory to Lender. At the request of Lender,
original (or certified) copies of such policies of insurance shall be delivered
to Lender, together with evidence of payment of all premiums therefor, and
shall
contain an endorsement, in form and substance acceptable to Lender, showing
loss
under such insurance policies payable to Lender. Such endorsement, or an
independent instrument furnished to Lender, shall provide that the insurance
company shall give Lender at least thirty (30) days written notice before any
such policy of insurance is altered or cancelled and that no act, whether
willful or negligent, or default of Borrower or any other Person shall affect
the right of Lender to recover under such policy of insurance in case of loss
or
damage. In addition, Borrower shall cause to be executed and delivered to Lender
an assignment of proceeds of its business interruption insurance policies.
Borrower hereby directs all insurers under such policies of insurance to pay
all
proceeds payable thereunder directly to Lender; and
(ii) maintain,
at its expense, such public liability and third party property damage insurance
as is customary for Persons engaged in businesses similar to that of Borrower
with such companies and in such amounts, with such deductibles and under
policies in such form as shall be satisfactory to Lender and, at the request
of
Lender, original (or certified) copies of such policies shall be delivered
to
Lender, together with evidence of payment of all premiums therefor; each such
policy shall contain an endorsement showing Lender as additional insured
thereunder and providing that the insurance company shall give Lender at least
thirty (30) days written notice before any such policy shall be altered or
cancelled.
If
Borrower at any time or times hereafter shall fail to obtain or maintain any
of
the policies of insurance required above or to pay any premium in whole or
in
part relating thereto, then Lender, without waiving or releasing any obligation
or default by Borrower hereunder, may (but shall be under no obligation to)
obtain and maintain such policies of insurance and pay such premiums and take
such other actions with respect thereto as Lender deems advisable. Such
insurance, if obtained by Lender, may, but need not protect Borrower’s
interests or pay any claim made by or against Borrower with respect to the
Collateral. Such insurance may be more expensive than the cost of insurance
Borrower may be able to obtain on its own and may be cancelled only upon
Borrower providing evidence that it has obtained the insurance as required
above. All sums disbursed by Lender in connection with any such actions,
including without limitation court costs, expenses, other charges relating
thereto and reasonable attorneys’ fees, shall be payable on demand by Borrower
to Lender and, until paid, shall bear interest at the highest rate then
applicable to the Term Loans hereunder;
(f) Borrower
shall not use its property, or any part thereof, in any unlawful business or
for
any unlawful purpose or use or maintain any of its property in any manner that
does or could result in material damage to the environment or a violation of
any
applicable environmental laws, rules or regulations; shall keep its property
in
good condition, repair and order; shall permit Lender to examine any of its
property at any time; shall not permit its property, or any part thereof, to
be
levied upon under execution, attachment, distraint or other legal process;
shall
not grant a security interest in or suffer to exist a lien on any of its
property; shall not sell, lease, transfer or otherwise dispose of any of its
property except for the sale of Inventory in the ordinary course of its
business; and shall not secrete or abandon any of its property, or remove or
permit removal of any of its property from any of the locations listed on
Exhibit
J
or in any written notice to Lender pursuant to Paragraph 11(b) hereof, except
for the removal of Inventory sold in the ordinary course of Borrower’s
business;
(g) all
monies and other property obtained by Borrower from Lender pursuant to this
Agreement will be used solely for business purposes of Borrower as set forth
in
its Securities Exchange Act reports;
(h) Borrower
shall, at the request of Lender, indicate on its records concerning the
Collateral a notation, in form satisfactory to Lender, of the security interest
of Lender hereunder, and Borrower shall not maintain duplicates or copies of
such records at any address other than Borrower’s principal place of business
set forth on the first page of this Agreement;
(i) Borrower
shall file all required tax returns and pay all of its taxes when due, including
without limitation taxes imposed by federal, state or municipal agencies, and
shall cause any liens for taxes to be promptly released; provided, that Borrower
shall have the right to contest the payment of such taxes in good faith by
appropriate proceedings so long as (i) the amount so contested is shown on
Borrower’s financial statements, (ii) the contesting of any such payment does
not give rise to a lien for taxes, (iii) Borrower keeps on deposit with Lender
an amount of money which, in the sole judgment of Lender, is sufficient to
pay
such taxes and any interest or penalties that may accrue thereon, and (iv)
if
Borrower fails to prosecute such contest with reasonable diligence, Lender
may
apply the money so deposited in payment of such taxes. If Borrower fails to
pay
any such taxes and in the absence of any such contest by Borrower, Lender may
(but shall be under no obligation to) advance and pay any sums required to
pay
any such taxes and/or to secure the release of any lien therefor, and any sums
so advanced by Lender shall be payable by Borrower to Lender on demand, and,
until paid, shall bear interest at the highest rate then applicable to the
Term
Loans hereunder;
(j) Borrower
shall not assume, guarantee or endorse, or otherwise become liable in connection
with, the obligations of any Person, except by endorsement of instruments for
deposit or collection or similar transactions in the ordinary course of
business;
(k) Except
for the payment of dividends to the holders of the Borrower’s Series A or Series
B Preferred Stock, Borrower shall not, except as expressly contemplated by
this
Agreement, directly or indirectly declare or pay any dividends or make any
distributions upon any of its Common Shares;
(l) Except
in
accordance with the rights and preferences of the Series A and Series B
Preferred Stock, Borrower shall not, directly or indirectly redeem, purchase
or
otherwise acquire, or permit any Subsidiary to redeem, purchase or otherwise
acquire, any of Borrower’s Common Shares (including, without limitation,
warrants, options and other rights to acquire Common Shares);
(m) Borrower
shall not, except as expressly contemplated by this Agreement, authorize, issue,
sell or enter into any agreement providing for the issuance (contingent or
otherwise), or permit any Subsidiary to authorize, issue, sell or enter into
any
agreement providing for the issuance (contingent or otherwise) of, (i) any
notes
or debt securities containing equity features (including, without limitation,
any notes or debt securities convertible into or exchangeable for Common Shares,
issued in connection with the issuance of Common Shares or containing profit
participation features), (ii) any Common Shares (or any securities convertible
into or exchangeable for any Common Shares) or rights to acquire any Common
Shares, except in connection with any existing obligations or issued and
outstanding securities as of the date hereof that may be convertible or
exchangeable into Common Shares of the Borrower, in accordance with their terms,
or (iii) any Preferred Shares or rights to acquire any Preferred
Shares;
(n) Borrower
shall not merge or consolidate with any Person or permit any Subsidiary to
merge
or consolidate with any Person (other than a wholly-owned
Subsidiary);
(o) Borrower
shall not sell, lease or otherwise dispose of, or permit any Subsidiary to
sell,
lease or otherwise dispose of, more than 5% of the consolidated assets of
Borrower and its Subsidiaries (computed on the basis of book value, determined
in accordance with GAAP or fair market value, determined by the Board in its
reasonable good faith judgment) in any transaction or series of related
transactions (other than sales of inventory in the ordinary course of
business);
(p) Borrower
shall not liquidate, dissolve or effect a recapitalization or reorganization
in
any form of transaction (including, without limitation, any reorganization
into
partnership form);
(q) Borrower
shall not enter into, or permit any Subsidiary to enter into, the ownership,
active management or operation of any business other than the business of
Borrower as set forth in its Securities Exchange Act reports;
(r) Borrower
shall not enter into, or permit any Subsidiary to enter into, any transaction
with any of its or any of its Subsidiary’s officers, directors, employees or
Affiliates except in the ordinary course of its business;
(s) Borrower
shall not create, incur, assume or suffer to exist, or permit any Subsidiary
to
create, incur, assume or suffer to exist, indebtedness for borrowed money except
as contemplated in this Agreement;
(t) Borrower
shall (i) keep in full force and effect any and all Plans which may, from time
to time, come into existence under ERISA, unless such Plans can be terminated
without liability to Borrower; (ii) make contributions to all of the Plans
in a
timely manner and in a sufficient amount to comply with the requirements of
ERISA; (iii) comply with all material requirements of ERISA which relate to
Plans (including without limitation the minimum funding standards of Section
302
of ERISA); and (iv) notify Lender immediately upon receipt by Borrower of any
notice of the institution of any proceeding or other action which may result
in
the termination of any Plans;
(u) Borrower
shall reimburse Lender for all costs and expenses, including without limitation
legal expenses and reasonable attorneys’ fees, incurred by Lender in connection
with documentation and consummation of this transaction and any other future
transactions between Borrower and Lender, including without limitation Uniform
Commercial Code and other public record searches, lien filings, Federal Express
or similar express or messenger delivery, appraisal costs, surveys, title
insurance and environmental audit or review costs, and in seeking to administer,
collect, protect or enforce any rights in or to the Collateral or incurred
by
Lender in seeking to collect any Liabilities and to administer and/or enforce
any of Lender’s rights under this Agreement and the Other Agreements. All such
costs, expenses and charges shall be payable by Borrower to Lender on demand,
and, until paid, shall bear interest at the highest rate then applicable to
the
Term Loans hereunder;
(v) Borrower
shall not purchase or otherwise acquire (including without limitation
acquisition by way of capitalized lease), or commit to purchase or otherwise
acquire, any fixed asset, if, after giving affect to such purchase or other
acquisition, the aggregate costs of all fixed assets purchased or otherwise
acquired by Borrower would exceed Two Hundred Fifty Thousand Dollars ($250,000)
during any fiscal year of Borrower;
(w) As
required by federal law and the Lender’s policies and practices, the Lender may
need to obtain, verify and record certain customer identification information
and documentation in connection with opening or maintaining accounts, or
establishing or continuing to provide services and Borrower agrees to provide
such information. In addition, and without limiting the foregoing sentence,
the
Borrower shall (a) ensure,
and cause each Subsidiary to ensure, that no Person who owns a controlling
interest in or otherwise controls the Borrower or any Subsidiary is or shall
be
listed on the Specially Designated Nationals and Blocked Person List
or
other
similar lists maintained
by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury
or
included in any
Executive Orders, (b) not
use or permit the use of the proceeds of the Loans to violate any of the foreign
asset control regulations of OFAC or any enabling statute or Executive Order
relating thereto, and
(c) comply, and cause each Subsidiary to comply, with all applicable Bank
Secrecy Act (“BSA”) laws and regulations, as amended; and
(x) Borrower
will propose to Lender procedures to protect the secrecy, confidentiality,
and
value of all trade secrets and Intellectual Property Rights included in the
Intellectual Property; and, following Lender's reasonable approval of such
procedures, Borrower will implement and adhere to those procedures in a
commercially reasonable manner.
13. INVESTMENT
REPRESENTATIONS OF THE LENDER.
In
connection with its acquisition of the Initial Warrants, the Additional Warrants
and the underlying shares of common stock of the Borrower, the Lender hereby
represents and warrants to the Borrower as follows:
(a) The
Lender is aware that the Initial Warrants, the Additional Warrants and the
underlying shares of common stock of the Borrower are being offered and sold
by
means of an exemption under the Securities Act, as well as exemptions under
certain state securities laws for nonpublic offerings, and that they make the
representations, declarations and warranties as contained in this Section 13
with the intent that the same shall be relied upon by the Borrower in
determining the Lender’s suitability as a purchaser of the Initial Warrants, the
Additional Warrants and the underlying shares of common stock of the
Borrower;
(b) The
Lender is, and on each date it exercises either the Initial Warrants or the
Additional Warrants, an “Accredited Investor” as defined in Rule 501 of
Regulation D promulgated under the Securities Act and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Borrower and of making an informed
investment decision;
(c) The
Lender is aware that it cannot sell or otherwise transfer the Initial Warrants,
the Additional Warrants or the underlying shares of common stock of the Borrower
without registration under applicable securities laws or without an exemption
therefrom, and is aware that it will be required to bear the financial risks
of
its purchase for an indefinite period of time because, among other reasons,
the
Initial Warrants, the Additional Warrants and the underlying shares of common
stock of the Borrower have not been registered with any regulatory authority
and, therefore, cannot be transferred or resold unless subsequently registered
under applicable securities laws or an exemption from such registration is
available;
(d) The
Lender recognizes that no agency has recommended or endorsed the purchase of
the
Initial Warrants, the Additional Warrants or the underlying shares of common
stock of the Borrower or passed upon the adequacy or accuracy of the information
set forth herein, and that the Borrower is relying on the truth and accuracy
of
the representations, declarations and warranties made by the Lender as contained
herein in selling the Initial Warrants, the Additional Warrants and the
underlying shares of common stock of the Borrower to the Lender;
(e) The
Lender is not purchasing the Initial Warrants, the Additional Warrants or the
underlying shares of common stock of the Borrower as a result of any
advertisement, article, notice or other communication regarding the Initial
Warrants, the Additional Warrants or the underlying shares of common stock
of
the Borrower published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement; and
(f) The
Lender is purchasing the Initial Warrants, the Additional Warrants and the
underlying shares of common stock of the Borrower for investment for its own
account and not with a view to or for sale in connection with any distribution
of the Initial Warrants, the Additional Warrants or the underlying shares of
common stock of the Borrower to or for the accounts of others. The Lender does
not have any agreement or understanding, directly or indirectly, with any Person
to distribute the Initial Warrants, the Additional Warrants or the underlying
shares of common stock of the Borrower. The Lender agrees that it will not
dispose of the Initial Warrants, the Additional Warrants or the underlying
shares of common stock of the Borrower, or any portion thereof or interest
therein, unless and until counsel for the Borrower shall have determined that
the intended disposition is permissible and does not violate applicable
securities laws.
14. DEFAULT.
The
occurrence of any one or more of the following events shall constitute an
“Event
of Default”
by
Borrower hereunder:
(a) the
failure of any Obligor to pay when due any of the Liabilities,
unless
otherwise cured by Borrower within five (5) days after the receipt of written
notice thereof;
(b) the
failure of any Obligor to perform, keep or observe any of the covenants,
conditions, promises, agreements or obligations of such Obligor under this
Agreement or any of the Other Agreements, unless otherwise cured by Borrower
within thirty (30) days after the receipt of written notice
thereof;
(c) the
making or furnishing by any Obligor to Lender of any representation, warranty,
certificate, schedule, report or other communication within or in connection
with this Agreement or the Other Agreements or in connection with any other
agreement between such Obligor and Lender, which is untrue or misleading in
any
material respect;
(d) the
making or any attempt to make any levy, seizure or attachment of any of
Borrower’s property, unless otherwise cured by Borrower within thirty (30) days
after the receipt of written notice thereof;
(e) the
commencement of any proceedings in bankruptcy by or against any Obligor or
for
the liquidation or reorganization of any Obligor, or alleging that such Obligor
is insolvent or unable to pay its debts as they mature, or for the readjustment
or arrangement of any Obligor’s debts, whether under the United States
Bankruptcy Code or under any other law, whether state or federal, now or
hereafter existing for the relief of debtors, or the commencement of any
analogous statutory or non-statutory proceedings involving any Obligor;
provided, however, that if such commencement of proceedings against such Obligor
is involuntary and such Obligor is contesting such proceedings in good faith,
such action shall not constitute an Event of Default unless such proceedings
are
not dismissed within thirty (30) days after the commencement of such
proceedings;
(f) the
appointment of a receiver or trustee for any Obligor, for any of the Collateral
or for any substantial part of any Obligor’s assets or the institution of any
proceedings for the dissolution, or the full or partial liquidation, of any
Obligor which is a corporation or a partnership; provided, however, that if
such
appointment or commencement of proceedings against such Obligor is involuntary
and such Obligor is contesting such proceedings in good faith, such action
shall
not constitute an Event of Default unless such appointment is not revoked or
such proceedings are not dismissed within thirty (30) days after the
commencement of such proceedings;
(g) the
entry
of any judgment or order against any Obligor which remains unsatisfied or
undischarged and in effect for thirty (30) days after such entry without a
stay
of enforcement or execution;
(h) the
dissolution
of any Obligor which is a partnership or corporation, unless otherwise cured
by
Borrower within thirty (30) days after the receipt of written notice
thereof;
(i) the
occurrence of a change of control of Borrower, except as contemplated in this
Agreement;
(j) unless
otherwise cured by Borrower within thirty (30) days after the receipt of written
notice thereof, the occurrence of an event of default under, or the revocation
or termination of, any agreement, instrument or document executed and delivered
by any Person to Lender pursuant to which such Person has guaranteed to Lender
the payment of all or any of the Liabilities or has granted Lender a security
interest in or lien upon some or all of such Person’s real and/or personal
property to secure the payment of all or any of the Liabilities;
(k) unless
otherwise cured by Borrower within thirty (30) days after the receipt of written
notice thereof, the occurrence of any material adverse change in the financial
condition of Borrower, including a material adverse change regarding Borrower's
Intellectual Property,, as determined by Lender in its sole judgment or the
occurrence of any event which, in Lender’s sole judgment might have a material
adverse effect on the financial condition of Borrower, including a material
adverse change regarding Borrower's Intellectual Property; or
(l) Lender
shall have declared an Event of Default with respect to an IP Diligence Issue
under Section 4(b)(i) of this Agreement.
15. REMEDIES
UPON AN EVENT OF DEFAULT.
(a) Without
limiting Lender’s
right
to demand payment of the Liabilities at any time, upon the occurrence of an
Event of Default, all of Borrower’s Liabilities shall immediately and
automatically become due and payable, without notice of any kind and upon the
occurrence of any other Event of Default, all Liabilities may, at the option
of
Lender, and without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
(b) Upon
the
occurrence of an Event of Default, Lender may exercise from time to time any
rights and remedies available to it under the Uniform Commercial Code and any
other applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any of the Other Agreements and all
of
Lender’s rights and remedies shall be cumulative and non-exclusive to the extent
permitted by law. In particular, but not by way of limitation of the foregoing,
Lender may, without notice, demand or legal process of any kind, take possession
of any or all of the Collateral (in addition to Collateral of which it already
has possession), wherever it may be found, and for that purpose may pursue
the
same wherever it may be found, and may enter into any of Borrower’s premises
where any of the Collateral may be without disturbing the business of the
Borrower in any respect or causing any damage to the real or personal property
of the Borrower, and search for, take possession of, remove, keep and store
any
of the Collateral until the same shall be sold or otherwise disposed of, and
Lender shall have the right to store the same at any of Borrower’s premises
without cost to Lender. At Lender’s request, Borrower shall, at Borrower’s
expense, assemble the Collateral and make it available to Lender at one or
more
places to be designated by Lender and reasonably convenient to Lender and
Borrower. Borrower recognizes that if Borrower fails to perform, observe or
discharge any of its Liabilities under this Agreement or the Other Agreements,
no remedy at law will provide adequate relief to Lender, and agrees that Lender
shall be entitled to temporary and permanent injunctive relief in any such
case
without the necessity of proving actual damages. Any notification of intended
disposition of any of the Collateral required by law will be deemed to be a
reasonable authenticated notification of disposition if given at least ten
(10)
days prior to such disposition and such notice shall (i) describe Lender and
Borrower, (ii) describe the Collateral that is the subject of the intended
disposition, (iii) state the method of the intended disposition, (iv) state
that
Borrower is entitled to an accounting of the Liabilities and state the charge,
if any, for an accounting and (v) state the time and place of any public
disposition or the time after which any private sale is to be made. Lender
may
disclaim any warranties that might arise in connection with the sale, lease
or
other disposition of the Collateral and has no obligation to provide any
warranties at such time. Any proceeds of any disposition by Lender of any of
the
Collateral may be applied by Lender to the payment of expenses in connection
with the Collateral, including without limitation reasonable legal expenses
and
reasonable attorneys’ fees, and any balance of such proceeds may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect.
16. INDEMNIFICATION.
Borrower agrees to defend (with counsel satisfactory to Lender), protect,
indemnify and hold harmless Lender, each Affiliate of Lender, and each of their
respective officers, directors, employees, attorneys and agents (each an
“Indemnified
Party”)
from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any
kind
or nature (including without limitation the disbursements and the reasonable
fees of counsel for each Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether or not the Indemnified Party
shall be designated a party thereto), which may be imposed on, incurred by,
or
asserted against, any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
regulations, including without limitation securities, environmental and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any Other Agreement, or any act, event or transaction related
or
attendant thereto, the making and the management of the Loans; provided,
however, that Borrower shall not have any obligation hereunder to any
Indemnified Party with respect to matters caused by or resulting from the
willful misconduct or gross negligence of such Indemnified Party. To the extent
that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Borrower
shall satisfy such undertaking to the maximum extent permitted by applicable
law. Any liability, obligation, loss, damage, penalty, cost or expense covered
by this indemnity shall be paid to each Indemnified Party within 15 days of
receipt of a written demand from an Indemnified Party, and, failing prompt
payment, shall, together with interest thereon at the highest rate then
applicable to the Loans hereunder from the date incurred by each Indemnified
Party until paid by Borrower, be added to the Liabilities of Borrower and be
secured by the Collateral. The provisions of this Paragraph 15 shall survive
the
satisfaction and payment of the other Liabilities and the termination of this
Agreement.
17. CONFIDENTIALITY.
The
Lender agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its Related
Parties, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed
of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any Governmental
Authority or rating agency, (c) to the extent required by applicable laws
or regulations or by any subpoena or similar legal process, (d) to any
other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Paragraph, to any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations
under this Agreement, (g) to any direct or indirect contractual
counterparty relating to this Agreement or such counterparty's professional
advisor, (h) with the consent of the Borrower, and (i) to the extent
such Information (i) becomes publicly available other than as a result of a
breach of this Paragraph 16 or (ii) becomes available to the Lender on a
nonconfidential basis from a source other than a Borrower. The Lender further
agrees not to buy or sell Common Shares on the basis of Information that is
material and nonpublic at such time. For the purposes of this Paragraph,
“Information”
means
all information received from any Borrower relating to a Borrower or its
business, other than any information that (i) is or becomes publicly known
through no wrongful act of the Lender; (ii) is obtained by the Lender from
a
third party lawfully in possession of such information and having the legal
right to transmit the same, (iii) is already known to the Lender free of any
restrictions at the time it is obtained from the Borrower or (iv) is
independently developed by the Lender without reference to any confidential
information of the Borrower. Any Person required to maintain the confidentiality
of Information as provided in this Paragraph shall be considered to have
complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
18. NOTICE.
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified;
(b)
when sent by confirmed facsimile if sent during normal business hours of the
recipient, if not, then on the next business day; (c) three (3) business days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (d) one (1) day after
deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt.
All
communications shall be sent as follows:
|
If
to Borrower, to:
|
Sequiam
Corporation
000
Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
Attention: Xxxx
X. Xxxxxxxxxxx
Facsimile: 000-000-0000
|
|
with
a copy to:
|
|
|
Xxxxxxxxx
Traurig, P.A.
000
Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxx 00000
|
|
|
Attention: Xxxxxxxx
Xxxxxx, Esq.
Facsimile:
000-000-0000
|
|
|
If
to Lender, to:
|
Biometric
Investors, L.L.C.
0000
Xxxxxxxx Xxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Attention:
Xxxxx Xxxxx
Facsimile:
(000) 000-0000
|
|
with
a copy to:
|
|
|
Xxxxxxx
Xxxxxxxx, Esq.
000
X. Xxxxx Xxxxxx
Xxxxx
000
Xxxxxx,
XX 00000
Facsimile:
(000) 000-0000
with
a copy to:
Xxxxxxx
Xxxxxx, Esq.
Drinker
Xxxxxx Xxxxxxx Xxxxxx
000
X. Xxxxxx Xxxxx
Xxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
|
19. CHOICE
OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.
This
Agreement and the Other Agreements are submitted by Borrower to Lender for
Lender’s acceptance or rejection at Lender’s principal place of business as an
offer by Borrower to borrow monies from Lender now and from time to time
hereafter, and shall not be binding upon Lender or become effective until
accepted by Lender, in writing, at said place of business. If so accepted by
Lender, this Agreement and the Other Agreements shall be deemed to have been
made at said place of business. THIS
AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE
INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT,
VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING WITHOUT
LIMITATION THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING
PERFECTION OF THE SECURITY INTERESTS IN THE COLLATERAL, WHICH SHALL BE GOVERNED
AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION.
If any
provision of this Agreement shall be held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or remaining provisions of this Agreement.
To
induce
Lender to accept this Agreement, Borrower irrevocably agrees that, subject
to
Lender’s
sole
and absolute election, ALL
ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM
OR
RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE
OR
FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST BORROWER BY LENDER IN ACCORDANCE WITH THIS
PARAGRAPH.
20. PARTICIPATION;
ASSIGNMENT.
Lender
shall have the right to assign all or any of its rights under this Agreement
and
the Other Agreements, and/or to offer participation interests therein, to any
Person, without the consent of Borrower. In such event, Borrower shall execute
such agreements, instruments and documents as Lender shall request in connection
therewith, including without limitation agreements, instruments and documents
in
favor of each assignee and participant.
21. MODIFICATION
AND BENEFIT OF AGREEMENT.
This
Agreement and the Other Agreements may not be modified, altered or amended
except by an agreement in writing signed by Borrower and Lender. Borrower may
not sell, assign or transfer this Agreement, or the Other Agreements or any
portion thereof, including without limitation Borrower’s rights, titles,
interest, remedies, powers or duties thereunder.
22. HEADINGS
OF SUBDIVISIONS.
The
headings of subdivisions in this Agreement are for convenience of reference
only, and shall not govern the interpretation of any of the provisions of this
Agreement. As
used
herein, the term “including” and its variations shall be construed to mean
“including without limitation.”
23. POWER
OF ATTORNEY.
Borrower acknowledges and agrees that its appointment of Lender as its attorney
and agent-in-fact for the purposes specified in this Agreement is an appointment
coupled with an interest and shall be irrevocable until all of the Liabilities
are paid in full and this Agreement is terminated.
24. WAIVER
OF JURY TRIAL; OTHER WAIVERS.
(a) BORROWER
HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH
PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS,
THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR
LENDER OR WHICH, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES
TO
THE RELATIONSHIP BETWEEN BORROWER AND LENDER. IN NO EVENT SHALL LENDER BE LIABLE
FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) Except
as
otherwise set forth herein, Borrower
hereby waives demand, presentment, protest and notice of
nonpayment.
(c) Lender’s
failure, at any time or times hereafter, to require strict performance by
Borrower of any provision of this Agreement or any of the Other Agreements
shall
not waive, affect or diminish any right of Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver by Lender of
an
Event of Default under this Agreement or any default under any of the Other
Agreements shall not suspend, waive or affect any other Event of Default under
this Agreement or any other default under any of the Other Agreements, whether
the same is prior or subsequent thereto and whether of the same or of a
different kind or character. No delay on the part of Lender in the exercise
of
any right or remedy under this Agreement or any Other Agreement shall preclude
other or further exercise thereof or the exercise of any right or remedy. None
of the undertakings, agreements, warranties, covenants and representations
of
Borrower contained in this Agreement or any of the Other Agreements and no
Event
of Default under this Agreement or default under any of the Other Agreements
shall be deemed to have been suspended or waived by Lender unless such
suspension or waiver is in writing, signed by a duly authorized officer of
Lender and directed to Borrower specifying such suspension or
waiver.
(Signatures
continue on attached page)
--
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the
day and year first above written.
SEQUIAM
CORPORATION,
a
California corporation
By:
Name:
Title:
LENDER:
BIOMETRICS
INVESTORS, L.L.C.,
a
Delaware limited liability company
By:
Name:
Xxxxx Xxxxx
Title:
Manager
LIST
OF EXHIBITS
A - Additional
Warrants
B - Gross
Profit Margin Requirements
C - Initial
Warrants
D - Permitted
Liens
E - Registration
Rights Agreement
F - Form
of
Borrower’s Base certificate
G
- Form
of
Shareholders Agreement
H
- Commercial
Tort Claims
I - Subsidiaries
J - Business
and Collateral Locations
|
K
|
-
|
Entities
Authorized to Cause Borrower to Effect a Registration Under the
Securitieis Exchange Act of any Securities of
Borrower
|
L - Borrower’s
Capitalization
M - Additional
Names
N - Equipment
List
O - Indebtedness
P - Intellectual
Property
Q - Certificate
of Compliance
R - Forms
of
Notes
S - Series
A
and Series B preferred Shareholders
EXHIBIT
A
Additional
Warrants
EXHIBIT
B
Gross
Profit Margin Requirements
For
any
customer (unless otherwise specified below), the Gross Profit Margin for items
of Inventory sold pursuant to any particular Order shall be greater or equal
to
the gross profit margins set forth in the table below, in order to be
considered, in Lender’s sole discretion (unless otherwise agreed by Lender), an
Eligible Order.
|
Customer
|
Item
of Inventory
|
Gross
Profit Margin
|
|
All
Customers of Borrower
|
Any
Item of Inventory
|
[25%]
|
EXHIBIT
C
Initial
Warrants
EXHIBIT
D
Permitted
Liens
The
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property owned by them that is material to the business of the Company
and
the Subsidiaries and good and marketable title in all personal property owned
by
them that is material to the business of the Company and the Subsidiaries,
in
each case free and clear of all Liens, except that all Leasehold improvements
are collaterized by the landlord (East Group Properties, LP) and Biometrics
Investors, L.L.C. has a security interest in all assets of the Company.
All
the
assets of Biometric Security (PTY) LTD are secured as collateral for a purchase
money note payable to AreGee
Investments No. 105 (PTY)
LTD. The unpaid balance of that note is $37,500 and 178,000 Sequiam Corporation
restricted common shares. The shares of Sequiam East, Inc. serve as collateral
for a purchase money note of $150,000.
EXHIBIT
E
Registration
Rights Agreement
EXHIBIT
F
Form
of
Borrower’s Base certificate
EXHIBIT
G
Form
of
Shareholders Agreement
EXHIBIT
H
Commercial
Tort Claims
None
EXHIBIT
I
Subsidiaries
Each
direct and indirect Subsidiary of the Company, the direct owner of such
Subsidiary and its percentage ownership thereof, is set forth
below:
|
Subsidiary
|
Owner
|
Employer
Identification #
|
Place
of Incorporation
|
Percentage
Ownership
|
||
|
Sequiam
Software, Inc.
|
Sequiam
Corporation
|
00-0000000
|
CA
|
100.00%
|
||
|
Sequiam
Biometrics, Inc.
|
Sequiam
Corporation
|
00-0000000
|
FL
|
100.00%
|
||
|
Sequiam
Education, Inc.
|
Sequiam
Corporation
|
00-0000000
|
FL
|
100.00%
|
||
|
Sequiam
Sports, Inc.
|
Sequiam
Corporation
|
00-0000000
|
DE
|
99.38%
|
||
|
Fingerprint
Detection Technologies, Inc.
|
Sequiam
Corporation
|
00-0000000
|
FL
|
100.00%
|
||
|
Constellation
Biometrics
Corporation
|
Sequiam
Corporation
|
00-0000000
|
FL
|
100.00%
|
||
|
Biometric
Security (Pty) Ltd.
|
Constellation
Biometrics
Corporation
|
2005/005066/07
|
South
Africa
|
100.00%
|
||
|
Sequiam
East, Inc. (f/k/a Magstone Innovation, Inc.)
|
Sequiam
Corporation
|
1164611
|
China
|
80.00%
|
||
Biometrics
Investors, L.L.C. holds the stock of all of the subsidiary companies shown
above
as collateral for their loan except for Sequiam East, Inc. whose ownership
documentation is still in process with the Chinese government
EXHIBIT
J
Business
and Collateral Locations
Corporate
Headquarters
Sequiam
Corporation
000
Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
Africa
Office
Biometric
Security (Pty) Ltd.
Xxxxxx
Xxxx 000
Xx.
0,
Xxxxxx Xxxxx
Xxxxxx
xxx Xxxxxx Avenue
Bellville,
South Africa
7535
Asia
Office
Sequiam
East, Inc.
Room
508,
Venture Center
Tianan
Hi-Tech Park, No. 730
Yingbin
Road
Shiqiao
Town
Panyu
District
Guangzhou,
China 511400
EXHIBIT
K
Entities
Authorized to Cause Borrower to Effect a Registration Under the Exchange Act
of
Any
Securities of Borrower
Biometrics
Investors, L.L.C.
EXHIBIT
L
Borrower’s
Capitalization
|
Shares
outstanding at December 31., 2006
|
82,281,212
|
||||||||||||||
|
Shares
issued - Litghtmaker LLC (3/7/07)
|
684,000
|
shares
issued pursuant to pre-existing agreements
|
|||||||||||||
|
Shares
issued - Xxx Xxxxx (3/14/07)
|
322,581
|
shares
issued pursuant to pre-existing agreements
|
|||||||||||||
|
Shares
outstanding at March 27, 2007
|
83,287,793
|
||||||||||||||
|
Warrants
|
|||||||||||||||
|
Warrant
Holder
|
Shares
|
Price
|
Amount
Due on Exercise
|
Issue
Date
|
Expiration
Date
|
||||||||||
|
Xxxxxx
X. Xxxxxxxx, III
|
-
|
1.00
|
-
|
2/6/2003
|
2/6/2007
|
||||||||||
|
Xxxxxx
X. Xxxxxxxx, III
|
1,000,000
|
0.75
|
750,000
|
4/22/2003
|
4/22/2007
|
||||||||||
|
Xxxxxx
X. Xxxxxxxx, III
|
20,000
|
1.25
|
25,000
|
6/1/2003
|
6/1/2007
|
||||||||||
|
Xxxxxx
X. Xxxxxxxx, III
|
1,000,000
|
0.75
|
750,000
|
6/19/2003
|
6/19/2007
|
||||||||||
|
Xxxxxx
X. Xxxxxxxx, III
|
2,000,000
|
0.75
|
1,500,000
|
9/15/2003
|
9/15/2007
|
||||||||||
|
Xxxxxx
X. Xxxxxxxx, III
|
1,000,000
|
0.50
|
500,000
|
10/15/2003
|
10/15/2007
|
||||||||||
|
Xxxxxx
X. Xxxxxxxx, III
|
2,647,059
|
0.17
|
450,000
|
12/17/2003
|
12/17/2007
|
||||||||||
|
Xxxxxx
X. Xxxxxxxx, III
|
260,000
|
0.66
|
171,600
|
11/19/2004
|
11/19/2009
|
||||||||||
|
Xxx
Xxxxxxxx Xxxxxx, Attorney-in-Fact for the Trust Under the Will of
Xxxx
Xxxxxxxxxxx
|
350,000
|
1.00
|
350,000
|
5/13/2003
|
5/12/2008
|
||||||||||
|
Xxx
Xxxxxxxx Xxxxxx
|
100,000
|
0.25
|
25,000
|
12/18/2003
|
12/18/2008
|
||||||||||
|
Xxx
Xxxxxxxx Xxxxxx
|
220,000
|
0.75
|
165,000
|
7/24/2003
|
7/24/2008
|
||||||||||
|
Xxx
Xxxxxxxx Xxxxxx, Attorney-in-Fact for the Trust Under the Will of
Xxxx
Xxxxxxxxxxx
|
200,000
|
0.25
|
50,000
|
12/18/2003
|
12/18/2008
|
||||||||||
|
Xxx
Xxxxxxxx Xxxxxx, Attorney-in-Fact for the Trust Under the Will of
Xxxx
Xxxxxxxxxxx
|
1,300,000
|
0.66
|
858,000
|
9/30/2004
|
9/30/2009
|
||||||||||
|
Xxx
Xxxxxxxx Xxxxxx, Attorney-in-Fact for the Trust Under the Will of
Xxxx
Xxxxxxxxxxx
|
150,000
|
0.33
|
49,500
|
12/16/2004
|
12/16/2009
|
||||||||||
|
Xxx
Xxxxxxxx Xxxxxx, Attorney-in-Fact for the Trust Under the Will of
Xxxx
Xxxxxxxxxxx
|
600,000
|
0.33
|
198,000
|
3/23/2005
|
3/23/2010
|
||||||||||
|
Xxx
Xxxxxxxx Xxxxxx
|
195,000
|
0.66
|
128,700
|
9/30/2004
|
9/30/2009
|
||||||||||
|
Eagle
Funding, LLC
|
400,000
|
0.66
|
264,000
|
9/7/2004
|
9/7/2009
|
||||||||||
|
Xxxx
X. Xxxxxxx
|
280,000
|
0.75
|
210,000
|
7/24/2003
|
7/24/2008
|
||||||||||
|
Broad
Street Ventures
|
350,000
|
0.35
|
-
|
11/25/2003
|
11/25/2008
|
||||||||||
|
Broad
Street Ventures
|
350,000
|
0.35
|
-
|
11/25/2003
|
11/25/2008
|
||||||||||
|
Xxx
Xxxxxxxx Xxxxxx
|
525,000
|
0.32
|
168,000
|
1/5/2006
|
1/5/2011
|
||||||||||
|
Series
A Pfd Stock Placement Agent Warrants
|
|||||||||||||||
|
Xxxxx
Xxxxxxxxx
|
25,190
|
0.21
|
5,290
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Xxxxx
Xxxxxxxxx
|
16,031
|
0.21
|
3,367
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Xxxxxxx
Xxxxxxxx
|
58,929
|
0.21
|
12,375
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Xxxxxxx
Xxxxxxxx
|
37,501
|
0.21
|
7,875
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Harborview
Capital Management LLC
|
344,500
|
0.21
|
72,345
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Harborview
Capital Management LLC
|
-
|
0.21
|
-
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Xxxxxxxx
Xxxx
|
7,990
|
0.21
|
1,678
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Xxxxxxxx
Xxxx
|
5,086
|
0.21
|
1,068
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Xxxx
Xxxxxxx
|
11,786
|
0.21
|
2,475
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Xxxx
Xxxxxxx
|
7,500
|
0.21
|
1,575
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Xxxx
Xxxxxxx
|
11,786
|
0.21
|
2,475
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Xxxx
Xxxxxxx
|
7,500
|
0.21
|
1,575
|
11/30/2005
|
11/30/2010
|
||||||||||
|
vFinance
Investments, Inc.
|
518,386
|
0.21
|
108,861
|
11/30/2005
|
11/30/2010
|
||||||||||
|
vFinance
Investments, Inc.
|
-
|
0.21
|
-
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Xxxx
Xxxxx
|
589,286
|
0.21
|
123,750
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Xxxx
Xxxxx
|
375,000
|
0.21
|
78,750
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Series
A Pfd Stockholders Warrants
|
|||||||||||||||
|
Harborview
Master Fund LP
|
823,129
|
0.21
|
172,857
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Monarch
Capital Fund Ltd.
|
600,000
|
0.21
|
126,000
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Nite
Capital LP
|
935,376
|
0.21
|
196,429
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Double
U Master Fund LP
|
399,997
|
0.21
|
83,999
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Alpha
Capital
|
3,741,495
|
0.21
|
785,714
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Whalehaven
Capital Fund Ltd.
|
2,164,895
|
0.21
|
454,628
|
11/30/2005
|
11/30/2010
|
||||||||||
|
DKR
Soundshire Oasis Holding Fund Ltd.
|
2,619,048
|
0.21
|
550,000
|
11/30/2005
|
11/30/2010
|
||||||||||
|
Series
B Pfd Stock (1st Issuance) Placement Agent
Warrants
|
|||||||||||||||
|
Xxxxxxx
Xxxxxxxx
|
299,732
|
0.30
|
89,920
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Harborview
Capital Management LLC
|
420,000
|
0.30
|
126,000
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxxxxxx
Xxxx
|
107,904
|
0.30
|
32,371
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxx
Xxxxxxx
|
16,071
|
0.30
|
4,821
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxx
Xxxxxxx
|
16,071
|
0.30
|
4,821
|
5/17/2006
|
5/17/2011
|
||||||||||
|
vFinance
Investments, Inc.
|
1,155,954
|
0.30
|
346,786
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxx
Xxxxx
|
128,571
|
0.30
|
38,571
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxx
Xxxxxx
|
84,268
|
0.30
|
25,280
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxx
Xxxx
|
42,857
|
0.30
|
12,857
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxxxx
Xxxxxxx
|
64,286
|
0.30
|
19,286
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Series
B Pfd Stockholders (1st Issuance) Warrants
|
|||||||||||||||
|
Xxxxx
International
|
476,190
|
0.30
|
142,857
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Brio
Capital LP
|
476,190
|
0.30
|
142,857
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Double
U Master Fund LP
|
952,381
|
0.30
|
285,714
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxx
Xxxxxxxx Xxxxxx
|
714,286
|
0.30
|
214,286
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Nite
Capital LP
|
714,286
|
0.30
|
214,286
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Sibex
Capital Fund Inc.
|
1,428,571
|
0.30
|
428,571
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Harborview
Master Fund LP
|
714,286
|
0.30
|
214,286
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Monarch
Capital Fund Ltd.
|
952,381
|
0.30
|
285,714
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Alpha
Capital AG
|
2,380,952
|
0.30
|
714,286
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Whalehaven
Capital Fund
|
1,666,667
|
0.30
|
500,000
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxxxx
Xxxxxxx
|
714,286
|
0.30
|
214,286
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxxxx
X. Xxxxxx
|
166,667
|
0.30
|
50,000
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxxx
Xxxx
|
119,048
|
0.30
|
35,714
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxxxx
Xxxx
|
190,476
|
0.30
|
57,143
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Noble
Special Situations Fund LP
|
357,143
|
0.30
|
107,143
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Xxxx
Xxxxxx
|
476,190
|
0.30
|
142,857
|
5/17/2006
|
5/17/2011
|
||||||||||
|
CMS
Capital
|
476,190
|
0.30
|
142,857
|
5/17/2006
|
5/17/2011
|
||||||||||
|
Series
B Pfd Stock (2nd Issuance) Placement Agent
Warrants
|
|||||||||||||||
|
Xxxx
Xxxxx
|
203,571
|
0.30
|
61,071
|
6/21/2006
|
6/21/2011
|
||||||||||
|
Series
B Pfd Stockholders (2nd Issuance) Warrants
|
|||||||||||||||
|
RFJM
Partners LLC
|
476,190
|
0.30
|
142,857
|
6/21/2006
|
6/21/2011
|
||||||||||
|
Xxxx
Xxxxx
|
297,619
|
0.30
|
89,286
|
6/21/2006
|
6/21/2011
|
||||||||||
|
Noble
Special Situations Fund LP
|
357,143
|
0.30
|
107,143
|
6/21/2006
|
6/21/2011
|
||||||||||
|
42,893,897
|
0.34
|
14,399,814
|
|||||||||||||
|
Xxxxxxxxxxx
Trust refinance of Laurus Funds
|
|||||||||||||||
|
Warrants
|
2,000,000
|
0.20
|
400,000
|
05/18/2005
|
05/18/2011
|
||||||||||
|
Warrants
|
2,000,000
|
0.25
|
500,000
|
05/18/2005
|
05/18/2011
|
||||||||||
|
Warrants
|
2,000,000
|
0.30
|
600,000
|
05/18/2005
|
05/18/2011
|
||||||||||
|
6,000,000
|
0.25
|
1,500,000
|
|||||||||||||
|
Laurus
Debt Financing
|
|||||||||||||||
|
Warrants
- Original No. 1
|
-
|
0.41
|
-
|
04/27/2004
|
04/27/2010
|
||||||||||
|
Warrants
- Original No. 2
|
-
|
0.50
|
-
|
04/27/2004
|
04/27/2010
|
||||||||||
|
Warrants
- Original No. 3
|
222,222
|
0.58
|
128,889
|
04/27/2004
|
04/27/2010
|
||||||||||
|
Warrant
issued on restructure No. 2
|
-
|
0.33
|
-
|
10/27/2004
|
10/27/2010
|
||||||||||
|
Warrant
issued on payoff No. 3
|
1,500,000
|
0.23
|
345,000
|
05/18/2005
|
05/18/2011
|
||||||||||
|
1,722,222
|
0.28
|
473,889
|
|||||||||||||
|
Convertible
Preferred Stock
|
|||||||||||||||
|
Series
A Preferred Stock
|
|||||||||||||||
|
Harborview
Master Fund LP
|
-
|
0.21
|
-
|
11/30/2005
|
11/30/2008
|
||||||||||
|
Monarch
Capital Fund Ltd.
|
-
|
0.21
|
-
|
11/30/2005
|
11/30/2008
|
||||||||||
|
Nite
Capital LP
|
-
|
0.21
|
-
|
11/30/2005
|
11/30/2008
|
||||||||||
|
Double
U Master Fund LP
|
-
|
0.21
|
-
|
11/30/2005
|
11/30/2008
|
||||||||||
|
Alpha
Capital
|
-
|
0.21
|
-
|
11/30/2005
|
11/30/2008
|
||||||||||
|
Whalehaven
Capital Fund Ltd.
|
-
|
0.21
|
-
|
11/30/2005
|
11/30/2008
|
||||||||||
|
DKR
Soundshire Oasis Holding Fund Ltd.
|
-
|
0.21
|
-
|
11/30/2005
|
11/30/2008
|
||||||||||
|
Series
B Preferred Stock - 1st Issuance
|
|||||||||||||||
|
Xxxxx
International
|
476,190
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Brio
Capital LP
|
476,190
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Double
U Master Fund LP
|
952,381
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Xxx
Xxxxxxxx Xxxxxx
|
714,286
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Nite
Capital LP
|
714,286
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Sibex
Capital Fund Inc.
|
952,381
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Harborview
Master Fund LP
|
714,286
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Monarch
Capital Fund Ltd.
|
952,381
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Alpha
Capital AG
|
2,380,952
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Whalehaven
Capital Fund
|
1,666,667
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Xxxxxx
Xxxxxxx
|
714,286
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Xxxxxx
X. Xxxxxx
|
166,667
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Xxxxx
Xxxx
|
119,048
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Xxxxxx
Xxxx
|
190,476
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Noble
Special Situations Fund LP
|
357,143
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Xxxx
Xxxxxx
|
476,190
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
CMS
Capital
|
476,190
|
0.21
|
-
|
5/17/2006
|
none
|
||||||||||
|
Series
B Preferred Stock - 2nd Issuance
|
|||||||||||||||
|
RFJM
Partners LLC
|
476,190
|
0.21
|
-
|
6/21/2006
|
none
|
||||||||||
|
Xxxx
Xxxxx
|
297,619
|
0.21
|
-
|
6/21/2006
|
none
|
||||||||||
|
Noble
Special Situations Fund LP
|
357,143
|
0.21
|
-
|
6/21/2006
|
none
|
||||||||||
|
13,630,952
|
0.21
|
||||||||||||||
|
Employee
Stock Options
|
|||||||||||||||
|
Option
Holder
|
|||||||||||||||
|
Xxxxx
Xxxxxx
|
22,500
|
0.17
|
3,825
|
11/28/2003
|
11/28/2013
|
||||||||||
|
L.
Xxxx XxXxxx
|
225,000
|
0.17
|
38,250
|
11/28/2003
|
11/28/2013
|
||||||||||
|
L.
Xxxx XxXxxx
|
500,000
|
1.17
|
585,000
|
12/1/2002
|
9/23/2008
|
||||||||||
|
Xxxxxx
Xxxxxxxx
|
22,500
|
0.17
|
3,825
|
11/28/2003
|
11/28/2013
|
||||||||||
|
Xxx
Xxxxx
|
22,500
|
0.17
|
3,825
|
11/28/2003
|
11/28/2013
|
||||||||||
|
Xxxx
Xxxxx
|
15,000
|
0.17
|
2,550
|
11/28/2003
|
11/28/2013
|
||||||||||
|
Xxxxxxxx
XxxxxxXxxxxx
|
5,000,000
|
0.187
|
935,000
|
11/28/2003
|
11/28/2013
|
||||||||||
|
Xxxx
Xxxxxxxxxxx
|
4,000,000
|
0.187
|
748,000
|
11/28/2003
|
11/28/2013
|
||||||||||
|
Xxxxx
Xxxxxxx
|
50,000
|
0.18
|
9,000
|
3/1/2006
|
3/1/2016
|
||||||||||
|
Xxxxx
Xxxxxxxxx
|
333,334
|
0.18
|
60,000
|
3/1/2006
|
3/1/2016
|
||||||||||
|
10,190,834
|
0.23
|
2,389,275
|
|||||||||||||
|
Total
options, warrants and convertible pfd stock
|
74,437,905
|
0.25
|
18,762,978
|
||||||||||||
|
Fully
Diluted
|
157,725,698
|
||||||||||||||
|
Total
number of fully diluted shares - subsequent to Biometrics Investors
LLC
receiving warrants for an amount of common shares that would represent
40%
of the number of shares of common stock that the Company would have
if all
warrants and conversion rights were exercised
|
262,876,163
|
||||||||||||||
|
Warrants
issued with the First Additional Advance (25%)
|
65,719,041
|
||||||||||||||
|
Warrants
issued with the Additional Advance (15%)
|
39,431,424
|
||||||||||||||
|
Total
- 40%
|
105,150,465
|
||||||||||||||
|
In
addition to the foregoing the Company will be obligated to issue
stock
options for an additional 166,666 and 1,500,000 shares to Xxxxx Xxxxxxxxx
and Xxxxxx Xxxx, respectively, when those options vest in accordance
with
the terms of their employment agreements all of which are publicly
disclosed in SEC filings.
|
|||||||||||||||
|
The
Company has an obligation to issue 178,000 shares to Aregee Investments
No. 105 (Pty) Ltd. in accordance with the Amended Promissory Note
entered
into on December 1, 2006.
|
|||||||||||||||
EXHIBIT
M
Additional
Names
Wedge
Net
Experts, Inc.
EXHIBIT
N
Equipment
List
|
Equipment
consists of the following at December 31, 2006:
|
|
|
Leasehold
improvements
|
$1,465,270
|
|
Office
furniture and fixtures
|
567,220
|
|
Computer
equipment
|
226,526
|
|
Purchased
software
|
151,701
|
|
2,410,717
|
|
|
Less
accumulated depreciation
|
1,490,808
|
|
$919,909
|
EXHIBIT
O
Indebtedness
Unrelated
Parties
Biometrics
Investors, L.L.C. $3,965,119
EastGroup
Properties, LP $1,429,978
Aregee
Investments No. 105
$165,000
($37,500 cash + 178,000 shares of restricted common stock)
E-Team
International Limited
$184,675
Xxxxxxx
Xxxxxxxxxxx
$50,000
Related
Parties
Xxxxxxxx
XxxxxxXxxxxx
$361,000
Xxxx
Xxxxxxxxxxx
$50,000
Xxxx
XxXxxx
$12,000
Xxxxxx
Xxxx
$150,000
EXHIBIT
P
Intellectual
Property
Schedule
1
(a) Sequiam
Biometrics, Inc. is a party to that certain Co-operative Development and Supply
Agreement with Kwikset Corporation relating to the Smart Scan
technology.
(b)
List
of all Intellectual Property owned in whole or in part.
Proprietary
Biometric Technologies
Software
| 1. |
BioTime
4.0. Biometric Time and Attendance
Software
|
| 2. |
BioPay.
Payroll system for use with BioTime.
(New)
|
| 3. |
BioTools
4.0. Development Tools for creation of stand alone biometric applications.
|
| 4. |
BioTools
4.0 Professional. Advanced development tools for creation of biometric
client server applications.
|
| 5. |
BioWeb.
2.0 Development tools for creation of biometrically authenticated
web
sites.
|
| 6. |
BioDoor.
Stand alone access control software.
|
| 7. |
BioAccess.
(now part of BioTools)
|
| 8. |
BioRegister.
Software for club/group membership
tracking.
|
| 9. |
BioMail.
Biometric enabling plug-in for Microsoft Outlook.
|
| 10. |
CanSecU
4.0. Biometric software suite that is bundled with OEM and ODM USB
fingerprint pods. Includes features like Windows login, biometric
screensaver, biometric file encryption, one-touch biometric web site
login, biometric encrypted hard disk partitions
etc..
|
| 11. |
CanSecU
925. Client/Server time and attendance software.
|
| 12. |
Shanghai
Police Project. Client/Server biometric matching software for the
Shanghai
police department.
|
| 13. |
Universal
Biometric Interface (UBI) software development kit. Allows OEM customers
to modify the functionality of the UBI in real time.
|
| 14. |
HCB
Development Tools. Software tools for testing and development of
software
for the HCB product.
|
| 15. |
ScanQ
Software Suite. A suite of software similar to CanSecU 4 that is
to be
bundled with Authentec, Fujitsu and other sensors.
|
Hardware
| 1. |
Biovault
2.0. Full features biometric vault.
|
| 2. |
BioBox.
Smaller version of the Biovault 2.0
|
| 3. |
Bank
Box. Box designed to hold money for Banks in the Chinese market.
|
| 4. |
ScanQ.
Fujitsu and CMOS II based PC based biometric pod.
|
| 5. |
BioPod.
A match-on-device pod for real time authentication. Contains an ISO
7816
smart card reader and an Authentec sensor. We store the fingerprint
on a
smart card and the device compares the fingerprints taken from the
device
to the one on the card.
|
| 6. |
Biolock.
Low cost biometric door lock.
|
| 7. |
HCB.
Client/server time and attendance box that communicates billing data
in
real time to Sequiam’s network operations center. The billing data is then
made accessible to clients.
|
| 8. |
HDT.
Biometric/RFID PDA. This is a wireless Windows CE 5.0 PDA with a
removable
RFID/Biometric module. When the device scans a user using its RFID
chip
the fingerprint sensor authenticates that user, then the device wirelessly
pulls that users records from the server and displays it on the screen.
Can be used for venue control, ticketing and other portable projects
(similar to devices used by rental car attendants).
|
| 9. |
HCT.
This device is under development for the US Border Patrol and the
US Army.
It records a voice entry and attaches it to a fingerprint record.
|
| 10. |
OEM
Mini. Inexpensive stripped down version of the UBI. This is used
in very
low cost devices such as small safes and inexpensive
products.
|
| 11. |
OEM
2. Full featured ‘wall-hang’ box used for access control and time and
attendance. Features include wireless access, Power over Ethernet,
Data
over Ethernet, Camera, Anti-pass-thru mechanism, smart card interface,
match fingerprints on board and via server.
|
| 12. |
UBI.
Mid to low range device for allowing manufacturers of products to
enable
biometrics. This device can be added to safes, medicine cabinets
etc. Can
be used with any product that uses an electric locking mechanism.
|
| 13. |
CMOS
II. Low cost flat form factor optical biometric sensor. 500 dpi biometric
sensor for use in notebook computers, PDA’s, portable devices
etc..
|
| 14. |
Fujitsu
BioPod. Enclosure and mechanical design for the Fujitsu OEM/ODM sensor.
|
Test
Hardware
| 1. |
We
have various test equipment we have developed for testing BioVaults,
BioLocks and other products during the manufacturing process. Both
hardware and software.
|
| 2. |
Some
of the software includes software used to serialize the BioVault
etc..
|
| 3. |
Sequiam
also owns the injection molding tools for most of the products.
|
Trademarks
| 1. |
Sequiam
BioLock - pending
|
| 2. |
Biometrics
is the Key - pending
|
| 3. |
Consumer
Lifestyle Biometrics - pending
|
| 4. |
Universal
Biometrics Interface - pending
|
| 5. |
BioVault
- Registration No. 3,182,790
|
| 6. |
IRP
Internet Remote Print - Registration No.
3,105,889
|
| 7. |
QuestPrint
- Registration No. 2,620,977
|
| 8. |
Sequiam
- Registration No. 2,930,720
|
Patents
| 1. |
BioVault
Patent Pending No. 60/302,154
|
| 2. |
BioVault
locking Mechanism Patent Pending No.
10/358,013
|
| 3. |
Briteprint
Patent No. 6,865,285 B1
|
Although
the Company and the Subsidiaries have, or have rights to use, all patents,
patent applications, trademarks, trademark applications, service marks, trade
names, trade secrets, inventions, copyrights, licenses and other similar
intellectual property rights necessary or material for use in connection with
their respective businesses as described in the SEC Reports, the Company granted
a security interest in all of its patents and trademarks to Biometrics
Investors, L.L.C..
EXHIBIT
P
Intellectual
Property
Schedule
2
Tacoma
Technology, Inc. (“Tacoma”) shall receive a royalty on Tacoma products sold by
the Company on a per unit basis equal to the sum of 7% of monies received.
This
payment shall be calculated and paid by wire transfer to Tacoma every 30
days.
EXHIBIT
Q
Certificate
of Compliance
EXHIBIT
R
Forms
of
Notes
Term
Note
A
EXHIBIT
R
Forms
of
Notes
Term
Note
B
EXHIBIT
S
Series
A
Preferred Shareholders
EXHIBIT
S
Series
B
Preferred Shareholders
