TERM LOAN AND SECURITY AGREEMENT dated as of December 29, 2006 by and between IRVINE SENSORS CORPORATION and LONGVIEW FUND, L.P. et al.
Exhibit 10.2
TERM LOAN AND SECURITY AGREEMENT
dated as of December 29, 2006
by and between
IRVINE SENSORS CORPORATION
and
LONGVIEW FUND, L.P.
et al.
LONGVIEW FUND, L.P.
TERM LOAN AND SECURITY AGREEMENT
This Term Loan and Security Agreement (the “Agreement”) dated as of December 29, 2006 is entered into by and between Longview Fund, L.P. and Alpha Capital Anstalt (collectively, “Lender”) and Irvine Sensors Corporation, a Delaware corporation (“Borrower”).
WHEREAS, Borrower wishes to borrow funds from Lender; and
WHEREAS, Lender desires to extend credit to Borrower; and
1.1. Certain Definitions. As used herein the following terms have the meanings set forth below:
“Accounts” means all of Borrower’s accounts, accounts receivable, contract rights, and all other debts, obligations and liabilities in whatever form owing to Borrower from any Person for goods sold by Borrower or for services rendered by Borrower, or however otherwise established or created; all guaranties and security therefor, all right, title and interest of Borrower in the goods or services which gave rise thereto, including rights to reclamation and stoppage in transit and all rights of an unpaid seller of goods or services; whether any of the foregoing be now existing or hereafter arising, now or hereafter received by or owing or belonging to Borrower.
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“Acquisition” means the acquisition by Borrower of one hundred percent (100%) of the issued and outstanding capital stock of Optex, pursuant to the Acquisition Documents.
“Acquisition Documents” means the Stock Purchase Agreement dated as of December 30, 2005, by and between Borrower, Optex and Seller, and the schedules and exhibits thereto, and any and all agreement and instruments executed in connection therewith; each as amended from time in form and substance reasonably satisfactory to Lender.
“Affiliate” shall mean any Person which directly or indirectly is in control of, is controlled by, or is under common control with Borrower.
“Assignee” has the meaning set forth in Section 15.3 hereof.
“Borrower” has the meaning given such term in the Preamble hereto.
“Borrowing Date” as to any Loan shall mean the Business Day on which such Loan is made.
“Business Day” has the meaning given such term in Section 2.9 hereof.
“Capital Expenditures” shall mean, for any period, amounts included or required to be included in the fixed assets account on a balance sheet of a Borrower in accordance with GAAP and shall include, in the case of a purchase, the entire purchase price and, in the case of a Capital Lease (but not an operating lease), the entire rental for the term.
“Capital Leases” means capital leases, conditional sales contracts and other title retention documents relating to the acquisition of capital assets (as classified in accordance with GAAP).
“Change in Control” shall mean (i) the Company no longer having a class of shares publicly traded or listed on a Principal Market, (ii) the Company becoming a Subsidiary of another entity (other than a corporation formed by the Company for purposes of reincorporation in another U.S. jurisdiction), (iii) a majority of the board of directors of the Company as of the Closing Date no longer serving as directors of the Company except due to natural causes, (iv) the sale, lease or transfer of substantially all the assets of the Company or Subsidiaries, or (v) the Company’s directors, executive officers and Cash or Deferred & Stock Bonus Plan (the “Principal Stockholders”) cease to own directly or indirectly in the aggregate more than 40% of the shares beneficially owned by such Principal Stockholders as a group as of the Closing Date, other than any transfer (a) by will or intestacy or for estate planning purposes, (b) by a Principal Stockholder to such Principal Stockholder’s ancestors, descendants, siblings, adopted children or spouse or to trusts for the direct or indirect benefit of such persons, or (c) as a distribution by the Cash or Deferred & Stock Bonus Plan.
“Closing Date” means the date that the Term Loan is made pursuant to Section 2 of this Agreement.
“Code” means the New York Uniform Commercial Code as amended or supplemented from time to time.
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“Collateral” has the meaning given such term in Section 3 hereof.
“Collateral States” means the state or states where the Collateral is located, which are California and Texas.
“Commitment Period” means the period from and including the Closing Date to but not including the Termination Date.
“Commonly Controlled Entities” shall mean entities sharing “common control” under ERISA.
“Contingent Liability” means any obligation of a Person guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations of any other Person in any manner, whether directly or indirectly or any obligation otherwise to assure or hold harmless any other Person against any loss or cost in respect of services rendered or products furnished and any other contingent liability or obligation as determined in accordance with GAAP; provided, however, that the term Contingent Liability shall not include endorsements of negotiable instruments in the ordinary course of business.
“Copyrights” means any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held.
“Default” means any event or occurrence which, with notice or lapse of time or both, might become an Event of Default.
“Default Rate” shall have the meaning set forth in Section 2.6.
“Distributions” means, for the applicable period, the aggregate of all amounts paid or payable (without duplication) as dividends, distributions or owner withdrawals and includes any purchase, redemption or other retirement of any of any Borrower’s equity interests, directly or indirectly through a subsidiary of any Borrower or otherwise and includes return of capital by any Borrower to its equity holders; provided, however, that the following shall not be deemed to be Distributions hereunder: (a) salary and other compensation paid to equity holders in their capacities as employees and officers of any Borrower (b) expense reimbursement payable to officers of any Borrower; (c) the repurchase the stock of former employees pursuant to stock repurchase agreements as long as an Event of Default does not exist prior to such repurchase or would not exist after giving effect to such repurchase; and (d) the repurchase the stock of former employees pursuant to stock repurchase agreements by the cancellation of indebtedness owed by such former employees to Borrower regardless of whether an Event of Default exists.
“Earnings” means, for any applicable period, income (loss) from continuing operations and before all extraordinary and nonrecurring items, determined in accordance with GAAP.
“Earnings Before Interest, Taxes, Depreciation and Amortization” (“EBITDA”) means, for the applicable period, consolidated net income (exclusive of any extraordinary or non-recurring gains and extraordinary or non-recurring non-cash losses and other income which is not from the
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continuing operations of the Borrower) of the Borrower and its subsidiaries plus, to the extent deducted from such consolidated net income, net interest expenses, income taxes and depreciation/amortization expense, all determined in accordance with GAAP.
“Equipment” means all Borrower’s now or hereafter acquired equipment, machinery, plant, furnishings, fixtures, and other fixed assets now owned or hereafter acquired by any Borrower, including (without limitation) all items of machinery and equipment of any kind, nature and description, as well as trucks and vehicles of every description, trailers, handling and delivery equipment and office furniture, and all additions to, substitutions for, replacements of or accessions to any of the foregoing items and all attachments, components, parts (including spare parts) and accessories, whether installed thereon or affixed thereto, and all fuel for any thereof.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.
“Event of Default” means any event specified in Section 11.
“GAAP” means generally accepted accounting principles in the United States of America, consistently applied.
“General Intangibles” means all intangible personal property of Borrower not included in Accounts or in Instruments and Documents, and Investment Property, now or hereafter owned or acquired by Borrower, and also means and includes all right, title and interest of Borrower now or hereafter owned or acquired in intellectual property, patents, patent applications, goodwill, trademarks, trademark applications, trade names, trade secrets, service marks, copyrights, permits, licenses, federal, state, or local tax refunds, claims under insurance policies (whether or not Proceeds), other rights (if any) to payment, rights of set off, chooses in action, rights under judgments, computer programs and all to, or of which Borrower is a party or beneficiary, and all leasehold interests of Borrower in real estate to the extent considered law.
“Indebtedness” means (i) Indebtedness for Borrowed Money and (ii) all other liabilities or obligations which would, in accordance with GAAP, be classified as liabilities of such Person.
“Indebtedness for Borrowed Money” means (i) all liabilities for borrowed money, (A) for the deferred purchase price of property or services, and (B) under leases which are or should be, under GAAP, recorded as Capital Leases, in each case in respect of which a Person is directly or indirectly, absolutely or continently liable as obligor, guarantor, endorser or otherwise, or in respect of which such Person otherwise assures a creditor against loss, and (ii) all liabilities of the type described in (i) above which are secured by (or for which the holder has an existing right, contingent or otherwise, to be secured by) any Lien upon property owned by such Person, whether or not such Person has assumed or become liable for the payment thereof.
“Instruments and Documents” means all “instruments,” “documents,” “deposit accounts,” and “chattel paper,” as defined in Article 9 of the UCC, all securities, and includes (without limitation) all warehouse receipts and other documents of title, policies and certificates of insurance, checking, savings, and other Lender accounts, certificates of deposit, checks, notes, drafts, bills, and acceptances, now or hereafter acquired, to the extent not included in Accounts or Investment Property.
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“Intangible Assets” means assets that in accordance with GAAP are properly classified as intangible assets, including, but not limited to, goodwill, franchises, licenses, patents, trademarks, tradenames and copyrights.
“Intellectual Property Collateral” means all of Borrower’s right, title, and interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to xxx for and collect such damages for said use or infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.
“Interest” means, for the applicable period, all interest paid or payable, including, but not limited to, interest paid or payable on Indebtedness for Borrowed Money, determined in accordance with GAAP.
“Inventory” means all inventory of whatever name, nature, kind or description, all goods held for sale or lease or to be furnished under contracts of service, finished goods, work in process, raw materials, materials used or consumed by Borrower, supplies, all wrapping, packaging, advertising, labeling, and shipping materials, rights and documents relating to any of the foregoing, whether any of the foregoing be now existing or hereafter arising, wherever located, now owned or hereafter acquired by Borrower.
“Investment” means any transfer of property to, contribution to capital of, acquisition of stock, other securities or evidences of indebtedness of, acquisition of businesses or acquisition of property of any Person, other than in the ordinary course of business.
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“Investment Property” means all now owned or hereafter acquired securities, financial assets, securities entitlements and investment property of the Borrower, as such terms are defined in Article 9 of the UCC.
“Lender” has the meaning given such term in the Preamble hereto.
“Lien” means any mortgage, pledge, assignment, lien, charge, encumbrance or security interest of any kind whatsoever, or the interest of a vendor or lessor under a conditional sale, title retention or capital lease agreement.
“Loan” or “Loans” (as the context permits) means the Term Loan.
“Loan Documents” means this Agreement, the Note and any and all other agreements, instruments and documents relating to, evidencing or securing the Obligations.
“Material Adverse Effect” shall mean an effect that constitutes a material adverse change in Borrower’s financial condition, operations, business or prospects, taken as a whole.
“Modified Following Business Day Convention” has the meaning given such term in Section 2.9 hereof.
“Non-Financed Capital Expenditures” means Capital Expenditures not financed with additional long-term debt or Capital Leases.
“Note” or “Notes” means (as the context permits) any or all notes evidencing the Loan, including the Term Note.
“Obligations” means all loans, advances, interest, fees, debts, liabilities, obligations (including, without limitation, contingent obligations under indemnities and guaranties with respect thereto), agreements, undertakings, covenants and duties owing or to be performed or observed by Borrower to or in favor of Lender, of every kind and description (whether or not evidenced by any note or other instrument or arising out of this Agreement, Notes, Subordinated Loan Documents, the Subscription Documentation or any other agreement between Lender and any Borrower or any other instrument of any Borrower in favor of Lender), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including, without limitation, all interest, fees, charges, and amounts chargeable to any Borrower under Section 12.1.
“Optex” means Optex Systems, Inc., a Texas corporation
“Participant” has the meaning given such term in Section 14.6 hereof.
“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“PBGC” means the Pension Benefit Guaranty Corporation.
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“Permitted Liens” has the meaning given such term in Section 8.4.
“Person” means any individual, partnership, firm, association, business, enterprise, trust, estate, company, joint venture, governmental authority, corporation or other entity.
“Plan” means any employee plan subject to Title IV of ERISA maintained for employees of any Borrower, any subsidiary of any Borrower or any other trade or business under common control with any Borrower within the meaning of Section 414(c) of the Internal Revenue Code or the regulations thereunder.
“Proceeds” has the meaning given such term under the UCC and, in any event, includes (but is not limited to) (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any Person acting under color of governmental authority), (c) whatever is received upon any collection, exchange, sale, lease or other disposition of any of the Collateral and any property into which any of the Collateral is converted, whether cash or non-cash proceeds, and (d) any and all other products of, or any rents, profits or other amounts from time to time paid or payable under, or in connection with, any of the Collateral.
“Related Collateral” means all Borrower’s goodwill; cash; deposit accounts; claims under insurance policies (whether or not proceeds of other Collateral); rights of set off; rights under judgments; tort claims and chooses in action; computer programs and software; books and records (including without limitation all electronically recorded data); contract rights; and all contracts and agreements to or of which it is a party or beneficiary, whether any of the foregoing be now existing or hereafter arising, now or hereafter received by or belonging to any Borrower.
“Reportable Event” means any reportable event as defined in ERISA.
“Shares” means (subject to Section 4.13 hereof) (i) sixty-six and two-thirds percent (66 2/3%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by Borrower in any Subsidiary of Borrower which is not an entity organized under the laws of the United States or any territory thereof, and (ii) one hundred percent (100%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by Borrower in any Subsidiary of Borrower which is an entity organized under the laws of the United States or any territory thereof.
“Subordination Agreement” means the Intercreditor, Subordination and Standby Agreement of even date among the Lender, Subordinated Lender and Borrower, in form and substance satisfactory to the Lender.
“Subordinated Debt” means Indebtedness of Borrower to Subordinated Lender that is subordinated to the prior payment and enforcement of the Obligations pursuant to the Subordination Agreement.
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“Subordinated Lender” means the Lender (solely with respect to the Subordinated Debt) and Xxxxxxx Xxxxxx.
“Subsidiary” means with respect to any Person, any limited liability company corporation, partnership, trust or other organization, whether or not incorporated, the majority of the voting stock or voting rights of which is owned or controlled, directly or indirectly, by such Person.
“Tangible Net Worth” means at any date as of which the amount thereof shall be determined, the sum of the sum of the common stock, preferred stock, additional paid-in capital and retained earnings (deducting treasury stock) of Borrower and its Subsidiaries minus intangible assets, determined in accordance with GAAP.
“Term Loan” means the Term Loan in the principal amount of $8,250,000 to be made by Lender to Borrower on the Closing Date.
“Term Loan Maturity Date” shall mean December 29, 2008.
“Term Note” means the promissory note in the form of Exhibit A hereto.
“Termination Date” means a termination of the Lender’s commitments hereunder pursuant to Section 11.1 or the Term Loan Maturity Date, whichever is earlier.
“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
“UCC” means the Uniform Commercial Code, as adopted and in effect in the State of New York, as amended from time to time.
All terms used herein which are defined in Article 1 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement. All references to the plural herein shall also mean the singular and to the singular shall also mean the plural. All references to the Borrower and Lender pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. Any accounting term used herein unless otherwise defined in this Agreement shall have the meanings customarily given to such term in accordance with GAAP. The words “hereof,” “herein,” “hereunder,” “this Agreement” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
1.2. Accounting Terms. Any accounting term not specifically defined Section 1.1 shall be construed in accordance with GAAP and all calculations shall be made in accordance with GAAP. The term “financial statements” shall include the accompanying notes and schedules.
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2.1. Term Loan.
2.1.1. General. Subject to the terms and conditions set forth in this Agreement, Lender agrees to lend to Borrower on the Closing Date, the Term Loan in an amount equal to $8,250,000.
2.1.2. Term Note. The Term Loan shall be evidenced by the Term Note which shall be payable to the order of Lender in a principal amount equal to the Term Loan, plus interest accrued thereon.
2.1.3. Repayment of Term Loan.
(a) Maturity. Borrower promises to pay on the Term Loan Maturity Date, and there shall become absolutely due and payable on the Term Loan Maturity Date, one hundred and ten percent (110%) of the entire principal of the Term Loan outstanding on such date, together with any and all accrued and unpaid interest and other charges, if any, thereon.
(b) Schedule of Installment Payments of Term Loan. Borrower promises to pay to Lender accrued and unpaid interest on the Term Loan in consecutive quarterly installments of interest, as set forth in the Term Note, such installments to be due and payable in arrears on the first day of each calendar quarter of each calendar year, commencing on January 1, 2007, with a final payment on the Term Loan Maturity Date in an amount equal to the unpaid balance of the Term Loan plus all accrued and unpaid interest, fees and penalties thereon.
(c) Optional Prepayment of Term Loan. Borrower shall have the right at any time to prepay the Term Note on or before the Term Loan Maturity Date, as a whole, or in part, upon not less than fifteen (15) Business Days prior written notice to Lender, without premium or penalty. Any prepayment of the Term Loan shall first be applied against accrued and unpaid interest and then against the then remaining principal balance of the Term Loan. No amount repaid with respect to the Term Loan may be reborrowed.
2.2.1. Interest Rate Pricing Formula for Term Loan. The Term Loan shall bear interest calculated on the basis of a 360-day year and the actual number of days elapsed and payable quarterly in arrears on the unpaid principal amount thereof from time to time outstanding at a rate per annum equal to 11% per annum.
2.2.2. Interest Payable in Cash or Stock. Interest will be payable in cash or if an Event of Default, or an event which with the passage of time or the giving of notice could become an Event of Default has not occurred, at the election of the Borrower and subject to the approval of the Borrower’s shareholders, if such approval is deemed necessary, by the Borrower’s delivery of registered Common Stock (“Interest Shares”) valued at 80% of the
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average of the three lower closing bid prices of the Common Stock as reported by Bloomberg L.P. for the Principal Market for the twenty trading days ending on the trading day preceding the relevant interest payment date. The Borrower must notify the Holder, in writing, not less than fifteen trading days of its intention to pay interest with shares of Common Stock otherwise such payment must be made in cash. The Interest Shares must be delivered not later than two trading days after the date a cash interest payment would otherwise be payable.
2.3. Limitation on Interest. All agreements between Borrower and Lender are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to be paid to Lender for the use or the forbearance of the indebtedness evidenced hereby exceed the maximum permissible under applicable law. As used herein, the term “applicable law” shall mean the law in effect as of the date hereof, provided, however that in the event there is a change in the law which results in a higher permissible rate of interest, then this Agreement shall be governed by such new law as of its effective date. In this regard, it is expressly agreed that it is the intent of Borrower and Lender in the execution, delivery and acceptance of the Notes to contract in strict compliance with the laws of the State of New York and any other applicable state from time to time in effect. If, under or from any circumstances whatsoever, fulfillment of any provision hereof or of any of the Loan Documents at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by applicable law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from circumstances whatsoever Lender should ever receive as interest an amount which would exceed the then highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not to the payment of interest. This provision shall control every other provision of all agreements between Borrower and Lender.
2.4. Fees. Borrower agrees to pay all fees as set forth in the Subscription Agreement.
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2.7. Modified Following Business Day Convention. The term “Modified Following Business Day Convention” means the convention for adjusting any relevant date if it would not otherwise fall on a day that is not a Business Day. All dates specified for payments to be made under this Agreement shall be subject to the Modified Following Business Day Convention. The following terms, when used in conjunction with the term “Modified Following Business Day Convention” and a date shall mean that an adjustment will be made if that date would otherwise fall on a day that is not a Business Day so that the date will be the first following day that is a Business Day. A “Business Day” means, in respect of any date that is specified in this Agreement to be subject to adjustment in accordance with applicable Business Day Convention, a day on which commercial Lenders settle payments in New York City, NY.
3. Grant of Security Interest.
(a) | all Accounts; |
(b) | all Inventory; |
(c) | all Equipment; |
(d) | all General Intangibles; |
(e) | all Investment Property; |
(f) | all Instruments and Documents; |
(g) | all Related Collateral; and |
(h) | all accessions to and additions to, substitutions for, replacements, products; and |
(i) | products and proceeds of any and all of the foregoing. |
The term “Collateral” shall also refer to any other property in which Lender is granted a Lien to secure any of the Obligations pursuant to an agreement supplemental hereto or otherwise (whether or not such agreement makes reference to this Agreement or the Obligations of Borrower hereunder).
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part of the Collateral and any transfer agent to reflect the pledge of the Shares. Upon the occurrence of an Event of Default hereunder, Lender may effect the transfer of any securities included in the Collateral (including but not limited to the Shares) into the name of Lender and cause new certificates representing such securities to be issued in the name of Lender or its transferee. Borrower will execute and deliver such documents, and take or cause to be taken such actions, as Lender may reasonably request to perfect or continue the perfection of Lender’s security interest in the Shares. Unless an Event of Default shall have occurred and be continuing, Borrower shall be entitled to exercise any voting rights with respect to the Shares and to give consents, waivers and ratifications in respect thereof, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent with any of the terms of this Agreement or which would constitute or create any violation of any of such terms. All such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default.
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undertaking to which Borrower or any Subsidiary is a party (other than the Subordinated Debt) or by which any of its properties may be bound, and will not result in the creation or imposition of any Lien on Borrower’s or any Subsidiary’s revenues or properties, except in favor of Lender.
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which may result in a Lien on any Collateral, other than a Permitted Lien, being hereby deemed material); has paid all taxes shown or determined to be due thereon except those being contested in good faith; and has made adequate provision for the payment of all taxes so contested. The federal tax identification number of Borrower is set forth on Schedule 4.15 hereto.
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any order, award or decree of any court, arbitrator or governmental authority binding upon or affecting it or by which any of its property may be bound or affected, and no such order, award or decree has or could reasonably be expected to have a Material Adverse Effect.
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Adverse Effect on Borrower’s financial condition business, prospects or the value of the Collateral. Neither Borrower nor, to the knowledge of Borrower, any other owner of any real property owned or used by or on behalf of Borrower or such other owner, has placed or disposed of, used, generated or transported any hazardous or toxic chemical, material or substance or oil, in violation of any applicable law or regulation, upon or over any of Borrower’s real property and Borrower or such other owner, as the case may be, has no knowledge of such hazardous or toxic chemical, material or substance or oil on such real property.
After giving effect to the Term Loan hereunder, the creation of the interest of Lender and the other transactions contemplated hereunder, (a) Borrower shall be solvent, shall be able to pay its debts as they mature and has (and has reason to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business and all businesses in which it is about to engage(b) the assets and properties of Borrower at a fair valuation and at their present fair salable value as part of a business going concern are, and will be, greater than the Indebtedness of Borrower, and including subordinated and contingent liabilities computed at the amount which, to the best of Borrower’s knowledge, represents an amount which can reasonably be expected to become an actual or matured liability; and (c) Borrower shall not be left with unreasonably small capital.
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4.31. Real Property. Borrower owns no real property.
4.33. Government Contracts which are to be considered as Collateral. Schedule 4.33 sets forth a true and complete list of all non-classified government contracts with a value in excess of $1,000,000 which shall constitute Collateral (“Government Contracts”). All Government Contracts are the legal, valid and binding obligation of both Borrower and, subject to the terms thereof and applicable law, the governmental agency or agencies which constitute the purchasers of goods and services thereunder. The assignment of the Government Contracts as undertaken by Borrower in connection with the Closing complies with the Assignment of Claims Act of 1940 (“Claims Act”) and upon assignment, Lender shall have a valid perfected first priority security interest in Borrower’s right to receive payments under the Government Contracts. Other than Lender, there is no other party to which the Government Contracts have been assigned other than Square 1 Bank, whose assignments shall be terminated in connection with the payoff as of the date hereof of the Borrower’s obligations thereto. Borrower has received no notice nor has any other knowledge that it is in default of its obligations under the Government Contracts.
5. Borrower’s Reports and Notices. Borrower will deliver to Lender:
5.1. Deliveries. Borrower shall deliver to Lender: (i) as soon as available, but in any event within 30 days after the end of each calendar month, a company prepared consolidated and consolidating balance sheet and income statement covering Borrower’s operations during such period, in a form reasonably acceptable to Lender and certified by a Responsible Officer; (ii) as
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soon as available, but in any event not later than the date on which the Borrower is obligated to file its Form 10-K with the Securities and Exchange Commission, audited consolidated and consolidating financial statements of Borrower prepared in accordance with GAAP, consistently applied, together with an opinion which is unqualified or otherwise consented to in writing by Lender on such financial statements of an independent certified public accounting firm reasonably acceptable to Lender; (iii) if applicable, copies of all statements, reports and notices sent or made available generally by Borrower to its security holders or to any holders of Subordinated Debt and all reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (iv) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of $100,000 or more; (v) promptly upon receipt, each management letter prepared by Borrower’s independent certified public accounting firm regarding Borrower’s management control systems; (vi) such budgets, sales projections, operating plans or other financial information generally prepared by Borrower in the ordinary course of business as Lender may reasonably request from time to time; and (vii) within 30 days of the last day of each fiscal quarter in which an application is filed or the status of any outstanding applications or registrations change, a report signed by Borrower, in form reasonably acceptable to Lender, listing any applications or registrations that Borrower has made or filed in respect of any Patents, Copyrights or Trademarks and the status of any outstanding applications or registrations, as well as any material change in Borrower’s Intellectual Property Collateral, including but not limited to any subsequent ownership right of Borrower in or to any Trademark, Patent or Copyright not specified in Exhibits A, B, and C of any Intellectual Property Security Agreement delivered to Lender by Borrower in connection with this Agreement.
(a) Within 30 days after the last day of each month, Borrower shall deliver to Lender with the monthly financial statements a Compliance Certificate certified as of the last day of the applicable month and signed by a Responsible Officer in substantially the form of Exhibit E hereto.
(b) As soon as possible and in any event within 3 Business Days after becoming aware of the occurrence or existence of an Event of Default hereunder, a written statement of a Responsible Officer setting forth details of the Event of Default, and the action which Borrower has taken or proposes to take with respect thereto.
(c) Lender shall have a right from time to time hereafter to audit Borrower’s Accounts and appraise Collateral at Borrower’s expense, provided that such audits will be conducted no more often than every 6 months unless an Event of Default has occurred and is continuing.
Borrower may deliver to Lender on an electronic basis any certificates, reports or information required pursuant to this Section 5.2, and Lender shall be entitled to rely on the information contained in the electronic files, provided that Lender in good faith believes that the files were delivered by a Responsible Officer. If Borrower delivers this information electronically, it shall also deliver to Lender by U.S. Mail, reputable overnight courier service, hand delivery, facsimile or .pdf file within 5 Business Days of submission of the unsigned electronic copy the certification of monthly financial statements, the intellectual property report, the Borrowing Base Certificate and the Compliance Certificate, each bearing the physical signature of the Responsible Officer.
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5.4. Notices. Immediately, notice of:
(a) any Default or Event of Default;
(b) the institution or commencement of any action, suit, proceeding or investigation against or affecting Borrower or any of its assets which, if determined adversely to Borrower, could result in judgment in excess of $100,000;
(c) any judgment, award, decree, order or determination relating thereto in an amount in excess of $100,000;
(d) the imposition or creation of any Lien against any asset of Borrower except in favor of Lender or Permitted Liens;
(e) any capital or operating lease to which Borrower becomes a party, together with a copy of each such lease, in excess of $100,000;
(f) any Reportable Event, together with a statement of the Borrower’s President or Chief Financial Officer as to the details thereof, and a copy of its notice thereof to the PBGC;
(g) any known release or potential release or threat of release of hazardous or toxic chemicals, materials or substances or oil from, on or onto any site owned or used by Borrower or the incurrence of any expense or loss in connection therewith or upon Borrower’s obtaining knowledge of any the incurrence of any expense or loss by any governmental authority in connection with the containment or removal of any hazardous or toxic chemical, material or substance or oil for which expense or loss Borrower may be liable or potentially responsible; and
(h) any loss or destruction of Collateral or other assets, whether or not covered by insurance, if the value of such loss or destruction or of such Collateral affected exceeds $100,000.
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7.4. Business. Continue to engage in its business as now conducted in all material respects, and maintain and preserve all of its properties reasonably necessary for the conduct thereof in good working order and condition, ordinary wear and tear excepted.
(a) Notify Lender immediately of: (i) any material delay in Borrower’s performance of any of its obligations to any account debtor or the assertion of any material claims, offsets, defenses or counterclaims by any account debtor, or any material disputes with account debtors, or any settlement adjustment or compromise thereof, and (ii) all material adverse information known to Borrower relating to the financial condition of any account debtor. No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor without Lender’s consent, except in the ordinary course of Borrower’s business in accordance with practices and policies previously disclosed in writing to Lender. So long as no Event of Default exists or has occurred and is continuing, Borrower shall settle, adjust or compromise any claim, offset, counterclaim or dispute with any account debtor. At any time that an Event of Default exists or has occurred and is continuing, Lender shall, at its option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors or grant any credits, discounts or allowances.
(b) Promptly report to Lender any return of Inventory by an account debtor having a sales price in excess of $100,000. In the event any account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, Borrower shall, upon Lender’s request, (i) hold the returned Inventory in trust for Lender, (ii) segregate all returned Inventory from all of its other property, (iii) dispose of the returned Inventory solely according to Lender’s instructions, and (iv) not issue any credits, discounts or allowances with respect thereto without Lender’s prior written consent.
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inventory shall supply Lender with a report in the form and with such specificity as may be reasonably satisfactory to Lender concerning such physical count; (c) Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Lender, except for sales of Inventory in the ordinary course of Borrower’s business and except to move Inventory directly from one location set forth or permitted herein to another such location; (d) upon Lender’s request upon the occurrence and during the continuance of an Event of Default, Borrower shall, at its expense, deliver or cause to be delivered to Lender written reports or appraisals as to the Inventory in form, scope and methodology acceptable to Lender and by an appraiser acceptable to Lender, addressed to Lender or upon which Lender is expressly permitted to rely; (e) Borrower shall produce, use, store and maintain the Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws (including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) Borrower assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory; (g) other than in the ordinary course of business as disclosed to Lender by Borrower from time to time, Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate Borrower to repurchase such Inventory; (h) Borrower shall keep the Inventory in good and marketable condition; and (i) Borrower shall not, without prior written notice to Lender, acquire or accept any Inventory on consignment or approval. Returns and allowances, if any, as between Borrower and its account debtors shall be on the same basis and in accordance with the usual customary practices of Borrower, as they exist on the Closing Date. Borrower shall promptly notify Lender of all returns, recoveries, disputes or claims involving more than $100,000.
7.9. Registration of Intellectual Property Rights.
(a) Borrower shall register or cause to be registered on an expedited basis (to the extent not already registered) with the United States Patent and Trademark Office or the United
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States Copyright Office, as the case may be, those registrable intellectual property rights now owned or hereafter developed or acquired by Borrower, to the extent that Borrower, in its reasonable business judgment, deems it appropriate to so protect such intellectual property rights.
(b) Borrower shall promptly give Lender written notice of any applications or registrations of intellectual property rights filed with the United States Patent and Trademark Office, including the date of such filing and the registration or application numbers, if any.
(c) Borrower shall (i) give Lender not less than 30 days prior written notice of the filing of any applications or registrations with the United States Copyright Office, including the title of such intellectual property rights to be registered, as such title will appear on such applications or registrations, and the date such applications or registrations will be filed; (ii) prior to the filing of any such applications or registrations, execute such documents as Lender may reasonably request for Lender to maintain its perfection in such intellectual property rights to be registered by Borrower; (iii) upon the request of Lender, either deliver to Lender or file such documents simultaneously with the filing of any such applications or registrations; (iv) upon filing any such applications or registrations, promptly provide Lender with a copy of such applications or registrations together with any exhibits, evidence of the filing of any documents requested by Lender to be filed for Lender to maintain the perfection and priority of its security interest in such intellectual property rights, and the date of such filing.
(d) Borrower shall execute and deliver such additional instruments and documents from time to time as Lender shall reasonably request to perfect and maintain the perfection and priority of Lender’s security interest in the Intellectual Property Collateral.
(e) Borrower shall (i) protect, defend and maintain the validity and enforceability of the trade secrets, Trademarks, Patents and Copyrights, (ii) use commercially reasonable efforts to detect infringements of the Trademarks, Patents and Copyrights and promptly advise Lender in writing of material infringements detected and (iii) not allow any material Trademarks, Patents or Copyrights to be abandoned, forfeited or dedicated to the public without the written consent of Lender, which shall not be unreasonably withheld.
(f) Lender may audit Borrower’s Intellectual Property Collateral to confirm compliance with this Section 6.8, provided such audit may not occur more often than twice per year, unless an Event of Default has occurred and is continuing. Lender shall have the right, but not the obligation, to take, at Borrower’s sole expense, any actions that Borrower is required under this Section 6.8 to take but which Borrower fails to take, after 15 days’ notice to Borrower. Borrower shall reimburse and indemnify Lender for all reasonable costs and reasonable expenses incurred in the reasonable exercise of its rights under this Section 7.9.
7.10. Consent of Inbound Licensors. Prior to entering into or becoming bound by any material license or agreement, Borrower shall: (i) provide written notice to Lender of the material terms of such license or agreement with a description of its likely impact on Borrower’s business or financial condition; and (ii) in good faith use commercially reasonable efforts to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for Borrower’s interest in such licenses or contract rights to be deemed Collateral and for Lender to have a security interest in it that might otherwise be restricted by the terms of the applicable
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license or agreement, whether now existing or entered into in the future, provided, however, that the failure to obtain any such consent or waiver shall not constitute a default under this Agreement.
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8.3. Change in Name, Location, Executive Office, or Executive Management; Change in Business; Change in Fiscal Year; Change in Control. Change its name or the Borrower State or relocate its chief executive office without 30 days prior written notification to Lender; replace its chief executive officer or chief financial officer without prompt written notification to Lender; engage in any business, or permit any of its Subsidiaries to engage in any business, other than or reasonably related or incidental to the businesses currently engaged in by Borrower; change its fiscal year end; have a Change in Control.
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8.9. Subsidiaries. Form or acquire any Subsidiary.
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8.11. Affiliates. Directly or indirectly, transfer, sell, lease, assign or otherwise dispose of any material assets to an Affiliate; purchase or acquire any assets from an Affiliate; enter into any management agreement, service or consulting agreement with an Affiliate or make any payment thereon; or enter into any other transaction directly or indirectly with or for the benefit of an Affiliate (including, without limitation, guaranties or assumptions of obligations of an Affiliate); except, in each case, in the ordinary course of Borrower’s business and pursuant to the reasonable requirements of the respective Borrower’s business and upon fair and reasonable terms no less favorable to the Borrower as would be obtained by Borrower in a comparable arm’s length commercial transaction with an independent non-Affiliated Person.
(b) Tangible Net Worth Plus Subordinated Debt. A Tangible Net Worth plus Subordinated Debt at all times of not less than $6,000,000, increasing quarterly by 50% of net profit (but not decreasing for losses).
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9. Additional Covenants and Assurances.
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debtors, assignments, verifications and notices in connection with Accounts, and any instruments or documents relating thereto or to Borrower’s rights therein; (c) to give written notice to such offices and officials of the United States Postal Service to effect such change or changes of address so that all mail addressed to Borrower may be delivered directly to Lender; (d) to take any and all other actions necessary or appropriate to collect, compromise, settle, sell or otherwise deal with any or all of the Collateral or proceeds thereof, and (e) to obtain, adjust, settle and cancel any insurance referred to in Section 7.2; hereby granting to each said substitute full power to do any and all things necessary or appropriate to be done in and about the premises as fully and effectively as Borrower might or could do, and hereby ratifying all that any said attorney-in-fact or his substitute shall lawfully do or cause to be done by virtue hereof.
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journals, orders, receipts and correspondence relating to Collateral, account debtors, transactions unrelated to collateral and Borrower’s general financial condition, business and affairs); to remove any of such books and records temporarily for the purpose of having copies made; and to discuss with any of Borrower’s appropriate members, directors, officers, accountants and other agents or representatives the Collateral and Borrower’s general financial condition, business and affairs. Where such examinations are at the Borrower’s expense, Borrower shall pay Lender’s examination fees plus such costs and expenses as may be reasonably incurred by Lender in connection therewith.
9.13. Transfer of Investment Property to Lender’s Name. Lender may transfer Investment Property of the Borrower into its name or that of its nominee, whether or not a Default or an Event of Default has occurred, and, after the occurrence and during the continuance of an Event of Default, may receive the income and any distributions’ thereon and hold the same as Collateral for the Obligations, or apply the same to any defaulted Obligation.
10. Events of Default. The occurrence of any of the following shall constitute an Event of Default:
(a) failure by Borrower to pay any principal, interest or other amount due on account of the Term Loan or any other Obligation on the date due;
(b) failure by Borrower to perform or comply with the covenants set forth in Sections 7, 8 or 9 hereof or any other material covenant in any of the Subscription Documentation within the time periods set forth for performance and compliance with respect to such covenant.
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(c) failure by Borrower to perform or discharge, observe or comply with any of its other covenants or agreements set forth herein or in the Subscription Documentation, or any other Obligation, within ten (10) days of the date Borrower became aware of such failure or receives notice thereof from the Lender;
(d) any representation, warranty or statement of Borrower to Lender in connection with any Obligation (including, without limitation, any made in any document provided by Borrower hereunder or under any Subscription Documentation) is found to have been false or misleading in any material respect as of the time when made; provided, however, that if the default cannot by its nature be cured within the 10 day period or cannot after diligent attempts by Borrower be cured within such 10 day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable period (which shall not in any case exceed 30 days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default;
(e) occurrence of any event of default (subject to any applicable grace period) as defined in any other instrument evidencing or governing Indebtedness for Borrowed Money in excess of, in the aggregate, $100,000, of Borrower (other than Obligations) now or hereafter outstanding; or any event or condition which gives any holder or trustee of such Indebtedness for Borrowed Money the right to accelerate its maturity; or any event of default under any Subscription Documentation;
(f) Borrower’s or any guarantor’s or endorser’s liquidation, termination, dissolution or ceasing to carry on actively any substantial part of its current business or the death of any guarantor or endorser;
(g) commencement by Borrower or any guarantor or endorser of a voluntary proceeding seeking relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law, or seeking appointment of a trustee, receiver, liquidator or other similar official for it or any substantial part of its assets; or its consent to any of the foregoing in an involuntary proceeding against it; or Borrower or any guarantor or endorser shall generally not be paying its debts as they become due or admit in writing its inability to do so; or an assignment for the benefit of, or the offering to or entering into by, Borrower or any guarantor or endorser of any composition, extension, reorganization or other agreement or arrangement with, its creditors; or if Borrower becomes insolvent;
(h) commencement of an involuntary proceeding against Borrower or any guarantor or endorser seeking relief with respect to it or its debts under any bankruptcy, insolvency or other similar law, or seeking appointment of a trustee, receiver, liquidator or other similar official for it or any substantial part of its assets, which proceeding is not dismissed or stayed within sixty (60) days,
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(i) service upon Lender of a writ of levy or attachment, or naming Lender as trustee for Borrower, or of any other similar process of attachment which is not dismissed within ten (10) days;
(j) entry of any judgment(s) against Borrower in an aggregate amount greater than $100,000 which are not covered by insurance (and for this purpose a judgment shall be deemed “covered by insurance” only if the insurance company has formally advised Borrower in writing that the judgment in its entirety is covered by insurance and no action is being taken to execute such judgment against any of Borrower’s assets) and shall remain undischarged or unvacated for a period in excess of sixty (60) days or execution shall at any time not be effectively stayed;
(k) If Borrower makes any payment on account of Subordinated Debt, except to the extent the payment is allowed under any subordination agreement entered into with Lender;
(l) If any guaranty of all or a portion of the Obligations (a “Guaranty”) ceases for any reason to be in full force and effect, or any guarantor fails to perform any obligation under any Guaranty or a security agreement securing any Guaranty (collectively, the “Guaranty Documents”), or any event of default occurs under any Guaranty Document or any guarantor revokes or purports to revoke a Guaranty, or any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth in any Guaranty Document or in any certificate delivered to Lender in connection with any Guaranty Document, or if any of the circumstances described in (g) or (h), above, occur with respect to any guarantor.
(m) If any material portion of Borrower’s assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within 30 days, or if Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any material portion of Borrower’s assets, or if a notice of lien, levy, or assessment is filed of record with respect to any of Borrower’s assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, and the same is not paid within thirty days after Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by Borrower;
(n) entry of any court order which enjoins, restrains, or in any way prevents Borrower from conducting all or any substantial part of Borrower’s business;
(o) any material reclamation, repossession, loss, theft, damage or destruction to or of any asset(s) of Borrower not covered by insurance in excess of $100,000;
(p) the occurrence of any event having a Material Adverse Effect on Borrower;
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(q) there shall occur and be continuing any Reportable Event which constitutes grounds for termination of or for appointment by a United States District Court of a trustee to administer any Plan; the PBGC shall institute proceedings to terminate or to appoint a trustee to administer any Plan; a United States District Court shall appoint a trustee to administer any Plan; or any Plan shall be terminated in circumstances giving rise to liabilities having a Material Adverse Effect on Borrower’s financial condition;
(r) termination of, failure to make any payment required under or any other default under any guaranty of, or other instrument or agreement securing any of, the Obligations;
(s) If a Change in Control occurs;
(t) The Borrower’s common stock shall be delisted from NASDAQ Capital Market or shall be suspended from trading on NASDAQ Capital Market or Borrower receives notice of action or potential action by the NASDAQ Capital Market which could result in delisting of Borrower from the NASDAQ Capital Market or suspension from trading therefrom or any failure by Borrower to comply with any NASDAQ Capital Market Rules and/or any other laws or regulations, the violation of which may result in delisting or suspension from trading (other than a notice from NASDAQ that Borrower has failed to comply with Nasdaq Capital Market financial requirements set forth in Nasdaq Rules 4310 and 4320 (or any similar successor rules of NCM or any successor exchange), in which case, it shall be an Event of Default only if Borrower fails to cure or successfully appeal such notice prior to being delisted).
Borrower acknowledges and agrees that each and every Event of Default described above shall be of equal weight and significance, and equally and fully shall allow Lender to exercise its rights and remedies hereunder. Borrower acknowledges and agrees that each such Event of Default has been a material inducement for Lender to enter into this Agreement and that Lender would be irreparably harmed if Lender, in any way, were unable to exercise its rights and remedies on the basis that certain Events of Default (for example, Events of Default not relating to payment) were of less weight or significance than certain other Events of Default (for example, Events of Default relating to payment).
11.1. Upon the occurrence and during the continuance of an Event of Default, Lender may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable (provided that upon the occurrence of an Event of Default described in Xxxxxxx 00 (x), (x), (x), (x), (x), (x) or (t), all Obligations shall become immediately due and payable without any action by Lender);
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(b) Cease advancing money or extending credit to or for the benefit of Borrower under this Agreement or under any other agreement between Borrower and Lender;
(c) Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Lender reasonably considers advisable;
(d) Make such payments and do such acts as Lender considers necessary or reasonable to protect its security interest in the Collateral. Borrower agrees to assemble the Collateral if Lender so requires, and to make the Collateral available to Lender as Lender may designate. Borrower authorizes Lender to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Lender’s determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of Borrower’s owned premises, Borrower hereby grants Lender a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of Lender’s rights or remedies provided herein, at law, in equity, or otherwise;
(e) Set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Lender, and (ii) indebtedness at any time owing to or for the credit or the account of Borrower held by Lender;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Lender is hereby granted a license or other right, solely pursuant to the provisions of this Section, to use, without charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Lender’s exercise of its rights under this Section, Borrower’s rights under all licenses and all franchise agreements shall inure to Lender’s benefit;
(g) Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrower’s premises) as Lender determines is commercially reasonable, and apply any proceeds to the Obligations in whatever manner or order Lender deems appropriate. Lender may sell the Collateral without giving any warranties as to the Collateral. Lender may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If Lender sells any of the Collateral upon credit, Borrower will be credited only with payments actually made by the purchaser, received by Lender, and applied to the indebtedness of the purchaser. If the purchaser fails to pay for the Collateral, Lender may resell the Collateral and Borrower shall be credited with the proceeds of the sale;
(h) Lender may credit bid and purchase at any public sale;
(i) Apply for the appointment of a receiver, trustee, liquidator or conservator of the Collateral, without notice and without regard to the adequacy of the security for the Obligations and without regard to the solvency of Borrower, any guarantor or any other Person liable for any of the Obligations;
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(j) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower; and
(k) In the event that at any time Notes and Warrants are outstanding, (i) the Company is prohibited from issuing Warrant Shares, (ii) the Company fails to timely deliver Warrant Shares within five Business Days after a Delivery Date if required to deliver such Warrant Shares pursuant to Section 1.7 or 1.8 of the Warrants, (iii) upon the occurrence of any other Event of Default (as defined in the Loan Documents), any of the foregoing that continues for more than twenty (20) Business Days, (iv) a Change in Control, or (v) of the liquidation, dissolution or winding up of the Company, then at each Lender’s election and in lieu of the payment required pursuant to Section 2.1.3(a), the Company must pay to the Lender fifteen (15) Business Days after request by the Lender (“Calculation Period”), a sum of money determined by multiplying up to the outstanding principal amount of the Lender’s pro rata portion of the Obligations multiplied by 115%, together with accrued but unpaid interest thereon (“Mandatory Redemption Payment”). The Mandatory Redemption Payment must be received by the Lender within fifteen (15) Business Days after request (“Mandatory Redemption Payment Date”). Upon receipt of the Mandatory Redemption Payment, all Obligations with respect to principal and interest for the Term Loan will be deemed paid and no longer outstanding. Liquidated damages calculated pursuant to the Warrants, the Subscription Agreement and the Registration Rights Agreement, that have been paid or accrued for the ten day period prior to the actual receipt of the Mandatory Redemption Payment by the Lender shall be credited against the Mandatory Redemption Payment.
Lender may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.
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right, title or interest in any Copyrights, Patents or Trademarks in which Borrower no longer has or claims to have any right, title or interest; and (h) file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of Borrower where permitted by law; provided Lender may exercise such power of attorney to sign the name of Borrower on any of the documents described in clauses (g) and (h) above, regardless of whether an Event of Default has occurred. The appointment of Lender as Borrower’s attorney in fact, and each and every one of Lender’s rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully repaid and performed and Lender’s obligation to provide advances hereunder is terminated.
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shall be effective unless made in a written document signed on behalf of Lender and then shall be effective only in the specific instance and for the specific purpose for which it was given. Borrower expressly agrees that this Section 9.7 may not be waived or modified by Lender by course of performance, conduct, estoppel or otherwise.
12. Expenses; Indemnification, Etc.
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(i) this Agreement, together with all Schedules and Exhibits hereto;
(ii) the Term Note and other agreements to be executed and delivered in connection herewith;
(iii) the UCC financing statements of Borrower;
(iv) the Subordination Agreement among Lender and Borrower;
(v) the opinion letter of counsel to Borrower with respect to the Purchase Agreements, the Loan Documents and security interest and liens of Lender with respect to the Collateral and such other matters as Lender may reasonably request;
(vi) Incumbency Certificate of Borrower, with authorizing resolutions, and certified copies of the Certificates of Incorporation, By-Laws, certificates of legal existence and good standing, and certificates of foreign good standing and qualification of Borrower;
(vii) UCC and tax lien searches satisfactory to the Lender;
(viii) Commercial Property and Casualty (All-Risk) and Commercial General Liability Certificates naming Lender as additional insured and loss payee and containing non-cancellation provision without ten (10) days notice to Lender;
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(ix) a Officer’s Certificate for Borrower in the form reasonably acceptable to Lender containing customary and usual matters supplied in a commercial loan closing;
(x) compliance certificate for Borrower, as of the date of execution, in the form of Exhibit B hereto; and
(xi) all such other documents and instruments as may be required by the Lender in its reasonable discretion.
(d) No Material Adverse Change. There shall not have occurred any material adverse change in Borrower’s business, assets, operations, prospects and financial condition, taken as a whole, or in the value of the Collateral, since the date of the last financial statements provided to Lender and Lender shall have received certificates signed by Borrower to such effect;
If to Lender: To the address set forth opposite each name on the signature page to the Subscription Agreement.
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With a copy to Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, telecopier number: (000) 000-0000
If to Borrower: IRVINE SENSORS CORPORATION, 0000 Xxx Xxxx Xxx., Xxxx. 0-000, Xxxxx Xxxx, XX 00000, Attn: Chief Financial Officer, FAX: (000) 000-0000
With a copy to: Xxxxxx & Xxxxxxx,
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15. Governing Law, Jurisdiction.
15.1. Governing Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the civil or state courts of New York or in the federal
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courts located in New York County. The parties and the individuals executing this Agreement and other agreements referred to herein or delivered in connection herewith on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
To the extent permitted by law, Borrower, Lender and Lenders acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to one or more preliminary and final injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. Each of the Borrower, Lender and Lenders and any signator hereto in his personal capacity hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction in New York of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.
Caution: Read Before Signing. Great effort has been spent to make sure that this Agreement fully and accurately documents the understanding between the parties. If you believe that you have an implicit or oral understanding or agreement not fully and accurately set forth in this Agreement, DO NOT SIGN IT.
You should also understand that no officer or employee of the Lender has any authority to modify, alter or amend this Agreement orally. Rather, any and all changes would have to be put in writing and approved by appropriate officials at the Lender. If at some future date you believe that this Agreement needs to be changed in any respect, insist that the change be in writing and signed by an appropriate officer of the Lender; otherwise, misunderstandings might occur.
Finally, all signatories to this Agreement are urged to have their own legal counsel review it on their behalf.
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Executed as an instrument under seal on the date set forth above.
WITNESS: | ||||||
IRVINE SENSORS CORPORATION | ||||||
/s/ XXXXX XXXX |
By: | /s/ XXXX X. XXXXXX | ||||
Name: | Xxxx X. Xxxxxx | |||||
Title: | President & CEO | |||||
LONGVIEW FUND, LP | ||||||
/s/ XXX XXXXXXXXX |
By: | /s/ S. XXXXXXX XXXXXXX | ||||
Name: | S. Xxxxxxx Xxxxxxx | |||||
Title: | CFO – Investment Adviser | |||||
ALPHA CAPITAL ANSTALT | ||||||
|
By: | /s/ XXXXXX XXXXXXXX | ||||
Name: | Xxxxxx Xxxxxxxx | |||||
Title: | Director |
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EXHIBIT A
Term Note
December 29, 2006 | ||
$ | New York, NY |
The undersigned (collectively, the “Borrower”), for value received, hereby promise to pay to (the “Lender”), or order, on or before December 29, 2008, the principal amount of ($ ), or such lesser amount as may, at the maturity hereof, whether by declaration, acceleration or otherwise, be the aggregate unpaid principal amount of the Term Loan made by the Lender to the Borrower pursuant to the Loan Agreement referred to below.
This Note shall bear interest (computed on the basis of the actual number of days elapsed over a 360 -day year) on the unpaid principal amount hereof at the rate or rates per annum specified in the Loan Agreement referred to below. Commencing January 1, 2007, and on the 1st Business Day of each calendar quarter thereafter, Borrower agrees to pay to Lender accrued interest, until and including the maturity (whether by declaration, acceleration or otherwise). During the continuance of any Event of Default, at the election of the Lender, the Borrower shall pay the holder of this Note on demand by such holder, interest on the unpaid and overdue principal of and (to the extent permitted by law) on the unpaid interest on this Note at a rate per annum equal to the Default Rate; and provide further that in no event shall the amount contract for and agreed to be paid by the Borrower as interest on this Note exceed the highest lawful rate permissible under any law applicable hereto.
This Note evidences a loan or loans under, and is expressly subject to the provisions of, a certain Term Loan and Security Agreement dated as of December 29, 2006 (as amended from time to time, the “Loan Agreement”) by and between the Borrower and the Lender. The holder of this Note is entitled to the benefits of the Loan Agreement, and to the benefits of the other Loan Documents referred to therein. Neither this reference or such Loan Agreement nor any provision thereof shall affect or impair the absolute and unconditional obligation of the Borrower to pay the principal of and interest on this Note as otherwise provided herein. All payments of principal of and interest on this Note shall be payable in immediately available funds at the address of the Lender set forth in the Loan Agreement without deduction, setoff or counterclaim. Capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Loan Agreement.
This Note is subject to prepayment in whole or in part and to acceleration on default at times and in the manner specified in the Loan Agreement. The maker and all endorsers of this Note hereby waive presentment, demand, notice, protest, notice of intent to accelerate, notice to accelerate, and all other demands and notices in connection with the delivery, acceptance, performance or enforcement of this Note. In case of an Event of Default including, without limitation, a default in the payment of any principal of or interest on this Note, the Borrower will pay to the Lender such further amount as shall be sufficient to cover the cost and expense of collection including, without limitation, reasonable attorneys’ fees, expenses and disbursements.
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The Borrower hereby grants to Lender, a lien, security interest and right of set off as security for all liabilities and obligations to Lender, whether now existing or hereafter arising, upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Lender, or in transit to any of them. At any time that an Event of Default exists, without demand or notice, Lender may set off the same or any part thereof and apply the same to any liability or obligation of the Borrower and any guarantor even though unmatured and regardless of the adequacy of any other collateral securing the Loan. ANY AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SET OFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
This Note shall be construed in accordance with and governed by the internal laws of the State of New York (without giving effect to conflicts of laws principles) and is executed as a sealed instrument as of the date first above written.
WITNESS: | ||||||
IRVINE SENSORS CORPORATION | ||||||
|
By: |
| ||||
Name: | ||||||
Title: |
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EXHIBIT B
IRVINE SENSORS CORPORATION
Compliance Certificate
The undersigned, Xxxx Xxxxxx, Treasurer and Chief Financial Officer of Irvine Sensors Corporation (the “Borrower”), hereby certifies on behalf of the Borrower as of the date hereof the following:
1. | No Defaults. I have read a copy of the Term Loan and Security Agreement dated December 29, 2006 (the “Loan Agreement”) between the Borrower and Longview Fund, L.P. and Alpha Capital Anstalt (collectively, “Lender”). Terms used herein and not otherwise defined herein shall have the meanings set forth in Section I of the Loan Agreement. The Borrower is not in default in the performance or observance of any of the covenants, terms or provisions of the Loan Agreement or any of the other Loan Documents. |
Date: | IRVINE SENSORS CORPORATION | |||
By: |
| |||
Name: | Xxxx Xxxxxx | |||
Title: | CFO |
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