Exhibit 10.1
SECURITY AGREEMENT
This Security Agreement is made as of June 3, 2003 by and between LAURUS
MASTER FUND, LTD., a Cayman Islands corporation ("Laurus") and SpaceDev, Inc. a
Colorado corporation (the "Company").
BACKGROUND
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The Company has requested that Laurus make advances available to the
Company; and
Laurus has agreed to make such advances to the Company on the terms and
conditions set forth in this Agreement.
AGREEMENT
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NOW, THEREFORE, in consideration of the mutual covenants and undertakings
and the terms and conditions contained herein, the parties hereto agree as
follows:
1. (a) General Definitions. Capitalized terms used in this
Agreement shall have the meanings assigned to them in Annex A.
Accounting Terms. Any accounting terms used in this
Agreement which are not specifically defined shall have the meanings customarily
Given them in accordance with GAAP and all financial computations shall be
computed, unless specifically provided herein, in accordance with GAAP
consistently applied.
(c) Other Terms. All other terms used in this Agreement and
defined in the UCC, shall have the meaning given therein unless otherwise
defined herein.
(d) Rules of Construction. All Schedules, Addenda, Annexes
and Exhibits hereto or expressly identified to this Agreement are incorporated
herein by reference and taken together with this Agreement constitute but a
single agreement. The words "herein", hereof" and "hereunder" or other words of
similar import refer to this Agreement as a whole, including the Exhibits,
Addenda, Annexes and Schedules thereto, as the same may be from time to time
amended, modified, restated or supplemented, and not to any particular section,
subsection or clause contained in this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and the plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, the feminine and the
neuter. The term "or" is not exclusive. The term "including" (or any form
thereof) shall not be limiting or exclusive. All references to statutes and
related regulations shall include any amendments of same and any successor
statutes and regulations. All references in this Agreement or in the Schedules,
Addenda, Annexes and Exhibits to this Agreement to sections, schedules,
disclosure schedules, exhibits, and attachments shall refer to the corresponding
sections, schedules, disclosure schedules, exhibits, and attachments of or to
this Agreement. All references to any instruments or agreements, including
references to any of this Agreement or the Ancillary Agreements shall include
any and all modifications or amendments thereto and any and all extensions or
renewals thereof.
2. Credit Advances.
(a)
(i) Subject to the terms and conditions set forth herein and in the Ancillary
Agreements, Laurus may make revolving credit advances (the "Revolving Credit
Advances") to the Company from time to time during the Term which, in the
aggregate at any time outstanding, will not exceed the lesser of (x) (I) the
Capital Availability Amount minus (II) such reserves as Laurus may reasonably in
its good faith judgment deem proper and necessary from time to time (the
"Reserves") or (y) an amount equal to (I) the Accounts Availability minus (II)
the Reserves. The amount derived at any time from Section 2(a)(i)(y)(I) minus
2(a)(i)(y)(II) shall be referred to as the "Formula Amount".
(ii) Notwithstanding the limitations set forth above, Laurus retains the right
to lend to the Company from time to time such amounts in excess of such
limitations as Laurus may determine in its sole discretion.
(iii) Company acknowledges that the exercise of Laurus' discretionary rights
hereunder may result during the Term in one or more increases or decreases in
the advance percentages used in determining Accounts Availability and Company
hereby consents to any such increases or decreases which may limit or restrict
advances requested by Company.
(iv) If the Company does not pay any interest, fees, costs or charges to Laurus
when due, the Company shall thereby be deemed to have requested, and Laurus is
hereby authorized at its discretion to make and charge to the Company's account,
a Revolving Credit Advance to the Company as of such date in an amount equal to
such unpaid interest, fees, costs or charges.
(v) If the Company at any time fails to perform or observe any of the covenants
contained in this Agreement or any Ancillary Agreement and such failure shall
mature into an Event of Default under this Agreement or the Ancillary
Agreements, Laurus may, but need not, perform or observe such covenant on behalf
and in the name, place and stead of the Company (or, at Laurus' option, in
Laurus' name) and may, but need not, take any and all other actions which Laurus
may deem necessary to cure or correct such failure (including the payment of
taxes, the satisfaction of Liens, the performance of obligations owed to Account
Debtors, lessors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments). The amount of all monies
expended and all costs and expenses (including attorneys' fees and legal
expenses) incurred by Laurus in connection with or as a result of the
performance or observance of such agreements or the taking of such action by
Laurus shall be charged to the Company's account as a Revolving Credit Advance
and added to the Obligations. To facilitate Laurus' performance or observance of
such covenants of the Company, the Company hereby irrevocably appoints Laurus
(which appointment shall automatically terminate upon the Company's full and
irrevocable performance of all of the Obligations), or Laurus' delegate, acting
alone, as the Company's attorney in fact (which appointment is coupled with an
interest) with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file in the name and on behalf
of the Company any and all instruments, documents, assignments, security
agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed delivered or endorsed
by the Company.
(vi) Laurus will account to the Company monthly with a statement of all Loans
and other advances, charges and payments made pursuant to this Agreement, and
such account rendered by Laurus shall be deemed final, binding and conclusive
unless Laurus is notified by the Company in writing to the contrary within
fifteen (15) days of the date each account was rendered specifying the item or
items to which objection is made.
(vii) During the Term, the Company may borrow, prepay and reborrow Revolving
Credit Advances, all in accordance with the terms and conditions hereof.
(viii) (a) If any Eligible Account is not paid by the Account Debtor within
ninety (90) days after the date that such Eligible Account was invoiced or if
any Account Debtor asserts a deduction, dispute, contingency, set-off, or
counterclaim with respect to any Eligible Account (a "Delinquent Account"), the
Company shall (i) reimburse Laurus for the amount of the Revolving Credit
Advance made with respect to such Delinquent Account plus an adjustment fee in
an amount equal to one-half of one percent (0.50%) of the gross face amount of
such Delinquent Account or (ii) immediately replace such Delinquent Account with
an otherwise Eligible Account.
(b)
Following the occurrence of an Event of Default, Laurus may, at its option,
elect to convert the credit facility contemplated hereby to an accounts
receivable purchase facility. Upon such election by Laurus (subsequent notice of
which Laurus shall provide to the Company), the Company shall be deemed to
hereby have sold, assigned, transferred, conveyed and delivered to Laurus, and
Laurus shall be deemed to have purchased and received from the Company, all
right, title and interest of the Company in and to all Accounts which shall at
any time constitute Eligible Accounts (the "Receivables Purchase"). All
outstanding Loans hereunder shall be deemed obligations under such accounts
receivable purchase facility. The conversion to an accounts receivable purchase
facility in accordance with the terms hereof shall not be deemed an exercise by
Laurus of its secured creditor rights under Article 9 of the UCC. Immediately
following Laurus' request, the Company shall execute all such further
documentation as may be required by Laurus to more fully set forth the accounts
receivable purchase facility herein contemplated, including, without limitation,
Laurus' standard form of accounts receivable purchase agreement and account
debtor notification letters, but the Company's failure to enter into any such
documentation shall not impair or affect the Receivables Purchase in any manner
whatsoever. The accounts receivable purchase facility shall terminate on the
full and irrevocable performance by the Company of all of the Obligations
hereunder.
3. Repayment of the Loans. The Company shall be required to
(a) make a mandatory payment hereunder within five (5) days of the date on which
the aggregate outstanding principal balance of the Revolving Credit Advances
made by Laurus to the Company hereunder is in excess of the Formula Amount, in
an amount equal to such excess; and (b) repay on the expiration of the Term (i)
the then aggregate outstanding principal balance of the Loans made by Laurus to
the Company hereunder together with accrued and unpaid interest, fees and
charges and (ii) all other amounts owed Laurus under this Agreement and the
Ancillary Agreements. Any payments of principal, interest, fees or any other
amounts payable hereunder or under any Ancillary Agreement shall be made prior
to 12:00 noon (New York time) on the due date thereof in immediately available
funds.
4. Procedure for Revolving Credit Advances. On any Business Day, the
Company may, by written notice delivered to Laurus prior to 12:00 noon (New
York time) on such Business Day, request a borrowing of Revolving Credit
Advances. Each request for a Revolving Credit Advance (or at such other
intervals as Laurus may request), delivered to Laurus shall be accompanied by a
Borrowing Base Certificate in the form of Exhibit A, which shall be certified as
true and correct by the Chief Executive Officer or Chief Financial Officer of
the Company together with all supporting documentation relating thereto. If the
properly documented request for a Revolving Credit Advance is received by Laurus
prior to 12:00 noon on such Business Day and the Company is otherwise eligible
to receive a Revolving Credit Advance, such request will be honored on the
Business Day such request is made, otherwise such request will be honored on the
following Business Day, provided, however, that Laurus shall have five (5)
Business Days in which to cure any failure to honor such request for a Revolving
Credit Advance. All Revolving Credit Advances shall be disbursed from whichever
office or other place Laurus may designate from time to time and shall be
charged to the Company's account on Laurus' books. The proceeds of each
Revolving Credit Advance made by Laurus shall be made available to the Company
on the Business Day following the Business Day so requested in accordance with
the terms of this Section 4 by way of credit to the Company's operating account
by wire transfer maintained with such bank as the Company designated to Laurus.
Any and all Obligations due and owing hereunder may be charged to the Company's
account and shall constitute Revolving Credit Advances.
5. Interest and Payments.
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(a) Interest.
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(i) Except as modified by Section 5(a)(iii) below, the Company shall
pay interest at the Contract Rate on the unpaid principal balance of each Loan
and any fees due and owing in relation to such Loan until such time as such Loan
is collected in full in good funds in dollars of the United States of America.
Provided, however, that if Laurus shall fail to perform it's obligations to the
Company as set forth in Sections 4, 9(b) and 9(c) hereof, and such failure to
perform is not cured within any applicable cure period, then the Company shall
not be required to pay interest on such pending Revolving Credit Advance, such
credit of proceeds to the Company's Account or as required by Section 9(c)
hereof, as applicable, until such time as such failure to perform shall have
been waived or cured.
(ii) Interest, fees and other payments hereunder shall be computed on the
basis of actual days elapsed in a year of 360 days and shall be due and payable
on the last Business Day of each calendar month. At Laurus' option, Laurus may
charge the Company's account for said interest.
(iii) Effective upon the occurrence of any Event of Default and for so long
as any Event of Default shall be continuing, the Contract Rate shall
automatically be increased to one and one-half percent (1.5%) per month (such
increased rate, the "Default Rate"), and all outstanding Obligations, including
unpaid interest, shall continue to accrue interest from the date of such Event
of Default at the Default Rate applicable to such Obligations until such Event
of Default shall have been cured or the Company has irrevocably performed all of
its Obligations hereunder.
(iv) In no event shall the aggregate interest payable hereunder exceed the
maximum rate permitted under any applicable law or regulation, as in effect from
time to time (the "Maximum Legal Rate") and if any provision of this Agreement
or Ancillary Agreement is in contravention of any such law or regulation,
interest payable under this Agreement and each Ancillary Agreement shall be
computed on the basis of the Maximum Legal Rate (so that such interest will not
exceed the Maximum Legal Rate).
(v) The Company shall pay principal, interest and all other amounts payable
hereunder, or under any Ancillary Agreement, without any deduction whatsoever,
including any deduction for any set-off or counterclaim.
(b) Payments.
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(i) Closing/Annual Payments. Upon execution of this Agreement by the Company and
Laurus, the Company shall pay to Laurus Capital Management, LLC a closing
payment in an amount equal to two percent (2%) of the Capital Availability
Amount. On each anniversary of the Closing Date (or earlier upon termination of
this Agreement), the Company shall pay to Laurus Capital Management, LLC an
annual payment equal to one percent (1%) of the Capital Availability Amount (the
"Annual Payment"). The payments set forth in this Section 5(b)(i) shall be
deemed fully earned on the Closing Date and shall not be subject to rebate or
proration for any reason. Notwithstanding the immediately and each successive
anniversary date foregoing sentence, Laurus will refund the Annual Payment to
the Company if the Initial Term is not extended as contemplated in Section 17
hereof.
(ii) Collateral Management Payment. For underwriting, processing and supervising
the Company's Accounts, the Company shall pay Laurus a monthly collateral
management payment equal to fifty-five one hundredths of one percent (0.55%) of
the average of the aggregate outstanding Revolving Credit Advances during such
month, such fee being determined on the last Business Day of each such
40862587calendar month40862587rsslansky40862587 ▇▇▇ - On what balance? The
balance on the last day of the month? The average balance for the month?. This
payment shall be payable monthly by a charge by Laurus to the Company's account.
(iii) Unused Line Payment. If, for any month, the average outstanding Revolving
Advances (the "Average Revolving Amount") do not equal the Capital Availability
Amount, the Company shall pay to Laurus at the end of such month a payment
(calculated on a per annum basis) in an amount equal to 0.20% of the amount by
which the Capital Availability Amount exceeds the Average Revolving Amount.
(iv) Overadvance Payment. Without affecting the Company's obligation to
immediately repay any Loans which exceed the amounts permitted by Section 2
("Overadvances"), in the event an Overadvance occurs or is made by Laurus, all
such Overadvances shall bear interest at a monthly rate equal to 2% of the
amount of such Overadvances for each month or portion thereof as such amounts
shall be outstanding.
(v) Financial Information Default. Without affecting Laurus' other rights and
remedies, in the event the Company fails to deliver the financial information
required by Section 11 on or before the date required by this Agreement, the
Company shall pay Laurus a fee in the amount of $750.00 per week (or portion
thereof) for each such failure until such failure is cured to Laurus'
satisfaction or waived in writing by Laurus. Such fee shall be charged to the
Company's account upon the occurrence of each such failure. Such fee shall not
apply in the case where such failure of timely delivery was due to reasonable
cause.
6. Security Interest.
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(a) To secure the prompt payment to Laurus of the Obligations, the
Company hereby assigns, pledges and grants to Laurus a continuing security
interest in and Lien upon all of the Collateral. All of the Company's Books and
Records relating to the Collateral shall, until delivered to or removal by
Laurus, be kept by the Company in trust for Laurus until all Obligations have
been paid in full. Each confirmatory assignment schedule or other form of
assignment hereafter executed by the Company shall be deemed to include the
foregoing grant, whether or not the same appears therein.
(b) The Company hereby (i) authorizes Laurus to file any financing
statements, continuation statements or amendments thereto that (x) indicate the
Collateral (1) as all assets of the Company (or any portion of the Company's
assets) or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the UCC of
such jurisdiction, or (2) as being of an equal or lesser scope or with greater
detail, and (y) contain any other information required by Part 5 of Article 9 of
the UCC for the sufficiency or filing office acceptance of any financing
statement, continuation statement or amendment and (ii) ratifies its
authorization for Laurus to have filed any initial financing statements, or
amendments thereto if filed prior to the date hereof. The Company acknowledges
that it is not authorized to file any financing statement or amendment or
termination statement with respect to any financing statement without the prior
written consent of Laurus and agrees that it will not do so without the prior
written consent of Laurus, subject to the Company's rights under Section
9-509(d)(2) of the UCC.
(c) Subject to compliance with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 ("▇▇▇▇▇▇▇▇
-▇▇▇▇▇") the Company hereby grants to Laurus an irrevocable, non-exclusive
license (exercisable upon the termination of this Agreement due to an occurrence
and during the continuance of an Event of Default without payment of royalty or
other compensation to the Company) to use, transfer, license or sublicense any
Intellectual Property now owned, licensed to, or hereafter acquired by the
Company, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and to all computer and automatic machinery software and programs used for the
compilation or printout thereof, and represents, promises and agrees that any
such license or sublicense is not and will not be in conflict with the
contractual or commercial rights of any third Person; provided, that such
license will terminate on the termination of this agreement and the payment in
full of all Obligations. The powers granted to Laurus pursuant to this Section
6(c) shall not be exercised by Laurus unless and until an Event of Default shall
have occurred and be continuing.
7. Representations, Warranties and Covenants Concerning the Collateral.
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The Company represents, warrants (each of which such representations and
warranties shall be deemed repeated upon the making of each request for a
Revolving Credit Advance and made as of the time of each and every Revolving
Credit Advance hereunder) and covenants as follows:
(a) All of the Collateral (i) is owned by the Company free and clear of all
Liens (including any claims of infringement) except those in Laurus' favor and
Permitted Liens and (ii) is not subject to any agreement prohibiting the
granting of a Lien or requiring notice of or consent to the granting of a Lien.
(b) The Company shall not encumber, mortgage, pledge, assign or grant any
Lien in any Collateral of the Company or any of the Company's other assets to
anyone other than Laurus and except for Permitted Liens.
(c) The Liens granted pursuant to this Agreement, upon completion of the
filings and other actions listed on Exhibit 7(c) (which, in the case of all
filings and other documents referred to in said Exhibit, have been delivered to
Laurus in duly executed form) constitute valid perfected security interests in
all of the Collateral in favor of Laurus as security for the prompt and complete
payment and performance of the Obligations, enforceable in accordance with the
terms hereof against any and all creditors of and any purchasers from the
Company, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, and (b) general principles of equity that
restrict the availability of equitable or legal remedies, and such security
interest is prior to all other Liens in existence on the date hereof.
(d) No effective security agreement, mortgage, deed of trust, financing
statement, equivalent security or Lien instrument or continuation statement
covering all or any part of the Collateral is or will be on file or of record in
any public office, except those relating to Permitted Liens.
(e) The Company shall not dispose of any of the Collateral whether by sale,
lease or otherwise except for the sale of Inventory in the ordinary course of
business and for the disposition or transfer in the ordinary course of business
during any fiscal year of obsolete and worn-out Equipment having an aggregate
fair market value of not more than $25,000 and only to the extent that (i) the
proceeds of any such disposition are used to acquire replacement Equipment which
is subject to Laurus' first priority security interest or (ii) the proceeds of
which are remitted to Laurus in reduction of the Obligations.
(f) The Company shall defend the right, title and interest of Laurus in and
to the Collateral against the claims and demands of all Persons whomsoever, and
take such actions, including (i), all actions necessary to grant Laurus
"control" of any Investment Property, Deposit Accounts, Letter-of-Credit Rights
or electronic Chattel Paper owned by the Company, with any agreements
establishing control to be in form and substance satisfactory to Laurus, (ii),
the prompt (but in no event later than two Business Days following Laurus'
request therefor) delivery to Laurus of all original Instruments, Chattel Paper,
negotiable Documents and certificated Stock owned by a Company (in each case,
accompanied by stock powers, allonges or other instruments of transfer executed
in blank), (iii) notification of Laurus' interest in Collateral at Laurus'
request, and (iv) the institution of litigation against third parties as shall
be prudent in order to protect and preserve the Company's and Laurus' respective
and several interests in the Collateral.
(g) The Company shall promptly, and in any event within three (3) Business
Days after the same is acquired by it, notify Laurus of any commercial tort
claim (as defined in the UCC) acquired by it and unless otherwise consented by
Laurus, the Company shall enter into a supplement to this Agreement granting to
Laurus a Lien in such commercial tort claim.
(h) The Company shall place notations upon its Books and Records and any
financial statement of Company to disclose Laurus' Lien in the Collateral.
(i) If the Company retains possession of any Chattel Paper or Instrument
with Laurus' consent, such Chattel Paper and Instruments shall be marked with
the following legend: "This writing and obligations evidenced or secured hereby
are subject to the security interest of Laurus Master Fund, Ltd."
(j) The Company shall perform in a reasonable time all other steps
requested by Laurus to create and maintain in Laurus' favor a valid perfected
first Lien in all Collateral subject only to Permitted Liens.
(k) The Company shall notify Laurus promptly and in any event within two
(2) Business Days after obtaining knowledge thereof (i) of any event or
circumstance that to the Company's knowledge would cause Laurus to consider any
then existing Account as no longer constituting an Eligible Account; (ii) of any
material delay in the Company's performance of any of its obligations to any
Account Debtor; (iii) of any assertion by any Account Debtor of any material
claims, offsets or counterclaims; (iv) of any allowances, credits and/or monies
granted by the Company to any Account Debtor; (v) of all material adverse
information relating to the financial condition of an Account Debtor; (vi) of
any material return of goods; and (vii) of any loss, damage or destruction of
any of the Collateral.
(l) All Eligible Accounts (i) represent complete bona fide transactions
which require no further act under any circumstances on the Company's part to
make such Accounts payable by the Account Debtors, (ii) are not subject to any
present, contingent or, to the Company's knowledge, future offsets or
counterclaims, and (iii) do not represent ▇▇▇▇ and hold sales, consignment
sales, guaranteed sales, sale or return or other similar understandings or
obligations of any Affiliate or Subsidiary of the Company. The Company has not
made, and will not make, except in the ordinary course of business consistent
with past practice, any agreement with any Account Debtor for any extension of
time for the payment of any Account, any compromise or settlement for less than
the full amount thereof, any release of any Account Debtor from liability
therefor, or any deduction therefrom except a discount or allowance for prompt
or early payment allowed by the Company in the ordinary course of its business
consistent with historical practice and as previously disclosed to Laurus in
writing.
(m) The Company shall keep and maintain its Equipment in good operating
condition, except for ordinary wear and tear, and shall make all necessary
repairs and replacements thereof so that the value and operating efficiency
shall at all times be maintained and preserved. The Company shall not permit any
such items to become a Fixture to real estate or accessions to other personal
property.
(n) The Company shall maintain and keep all of its Books and Records
concerning the Collateral at the Company's executive offices listed in Exhibit
12(d).
(o) The Company shall maintain and keep the Collateral at the addresses
listed in Exhibit 12(d), provided, that the Company may change such locations or
open a new location, provided that the Company provides Laurus at least thirty
(30) days prior written notice of such changes or new location and (ii) prior to
such change or opening of a new location it executes and delivers to Laurus such
agreements as Laurus may request, including landlord agreements, mortgagee
agreements and warehouse agreements, each in form and substance satisfactory to
Laurus.
(p) Exhibit 7(p) lists all banks and other financial institutions at which
the Company maintains deposits and/or other accounts, and such Exhibit correctly
identifies the name, address and telephone number of each such depository, the
name in which the account is held, a description of the purpose of the account,
and the complete account number. The Company shall not establish any depository
or other bank account of any with any financial institution (other than the
accounts set forth on Exhibit 7(p)) without Laurus' prior written consent, which
consent shall not be unreasonably withheld.
8. Payment of Accounts.
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(a) The Company will direct all present and future Account Debtors and
other Persons obligated to make payments constituting Collateral to make such
payments directly to the lockbox maintained by the Company (the "Lockbox") with
North Fork Bank pursuant to the terms of the Lockbox Agreement dated June 3,
2003 or such other financial institution accepted by Laurus in writing as may be
selected by the Company (the "Lockbox Bank"). On or prior to the Closing Date,
the Company shall and shall cause the Lockbox Bank to enter into all such
documentation acceptable to Laurus pursuant to which, among other things, the
Lockbox Bank agrees to: (a) sweep the Lockbox on a daily basis and deposit all
checks received therein to an account designated by Laurus in writing and (b)
comply with the instructions or other directions of Laurus concerning the
Lockbox, as long as any of the Company's Obligations hereunder remain
outstanding. All of the Company's invoices, account statements and other written
or oral communications directing, instructing, demanding or requesting payment
of any Account of the Company or any other amount constituting Collateral shall
conspicuously direct that all payments be made to the Lockbox or such other
Lockbox as Laurus may direct in writing. If, notwithstanding the instructions to
Account Debtors, the Company receives any payments, the Company shall
immediately remit such payments to Lockbox in their original form with all
necessary endorsements. Until so remitted, the Company shall hold all such
payments in trust for and as the property of Laurus and shall not commingle such
payments with any of its other funds or property. The Company shall pay Laurus
the greater of five percent (5%) of the amount of any payment, in excess of
$5,000, so received by the Company and not delivered in kind to Lockbox within
ten (10) Business Days following the Company's receipt thereof and $500, such
amount to be paid in consideration of Laurus' administration expenses relating
thereto.
(b) At Laurus' election, if an Event of Default has occurred and is
continuing, Laurus may notify the Company's Account Debtors of Laurus' security
interest in the Accounts, collect them directly and charge the collection costs
and expenses thereof to the Company's account.
9. Collection and Maintenance of Collateral.
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(a) Laurus may verify the Company's Accounts utilizing an audit control
company or any other agent of Laurus. So long as no Default or Event of Default
shall have occurred and be continuing and/or Laurus does not believe such
verifications are necessary to preserve or protect the Collateral or its rights
and remedies under this Agreement and applicable law, Laurus shall not verify
the Company's Accounts more than two (2) times during any calendar year and not
more than one (1) time during any consecutive six (6) month period. If, during
any audit, a Material Error is discovered, Laurus may double the number of
verifications required by the Company for the succeeding twelve (12) month
period. A Material Error shall be defined as actual auditable Collateral being
lower than reported Collateral by five percent (5%) or more.
(b) Laurus will credit (conditional upon final collection) all proceeds of
Accounts to the Company's account two (2) Business Days after receipt by Laurus
of good funds in dollars of the United States of America in Laurus' account,
provided, however, that Laurus shall have five (5) Business Days in which to
cure any failure to credit such proceed of Accounts to the Company's account.
Any amount received by Laurus after 12:00 noon (New York time) on any Business
Day shall be deemed received on the next Business Day.
(c) As Laurus receives the proceeds of Accounts, it shall apply such
proceeds to (A) Revolving Credit Advances including Overadvances made by Laurus,
if any, (B) the interest and fees earned by Laurus with respect to such
Accounts, and (C) any amounts otherwise due Laurus including, without
limitation, and pursuant to Sections 2, 5(b), 22 and 25 hereof which have
theretofore not been paid, and if no Revolving Credit Advances are then
outstanding, pay to the Company in daily intervals the aggregate amount so
collected when such amount shall exceed $5,000, provided, however, that Laurus
shall have five (5) Business Days in which to cure any failure to pay such
aggregate amount to the Company's accountFollowing the occurrence and during the
continuance of an Event of Default, Laurus shall have the right to apply all
proceeds of Accounts to the Obligations in such order as Laurus shall elect.
10. Inspections and Appraisals. At all times during normal business
hours, Laurus, and/or any agent of Laurus shall have the right to (a) have
access to, visit, inspect, review, evaluate and make physical verification and
appraisals of the Company's properties and the Collateral, (b) inspect, audit
and copy and make extracts from the Company's Books and Records, including
management letters prepared by independent accountants, and (c) discuss with the
Company's principal officers, and independent accountants, the Company's
business, assets, liabilities, financial condition, results of operations and
business prospects. The Company will deliver to Laurus any instrument necessary
for Laurus to obtain records from any service bureau maintaining records for the
Company. If any internally prepared financial information, including that
required under this Section is unsatisfactory in any manner to Laurus, Laurus
may request that the Accountants review the same.
11. Financial Reporting. The Company will deliver, or cause to be
delivered, to Laurus each of the following, which shall be in form and detail
acceptable to Laurus:
(a) As soon as available, and in any event within ninety (90) days
after the end of each fiscal year of the Company, the Company's audited
financial statements with a report of independent certified public accountants
of recognized standing selected by Company and acceptable to Laurus (the
"Accountants"), which annual financial statements shall include the Company's
balance sheet as at the end of such fiscal year and the related statements of
the Company's income, retained earnings and cash flows for the fiscal year then
ended, prepared, if Laurus so requests, on a consolidating and consolidated
basis, all in reasonable detail and prepared in accordance with GAAP, together
with (i) copies of any management letters prepared by such Accountants; and (ii)
a certificate of the Company's President, Chief Executive Officer or Chief
Financial if any Officer stating that such financial statements have been
prepared in accordance with GAAP and whether or not such officer has knowledge
of the occurrence of any Default or Event of Default hereunder and, if so,
stating in reasonable detail the facts with respect thereto;
(b) As soon as available and in any event within forty five (45) days after
the end of each quarter, an unaudited/internal balance sheet and statements of
income, retained earnings and cash flows of the Company as at the end of and for
such quarter and for the year to date period then ended, prepared, if Laurus so
requests, on a consolidating and consolidated basis to include any Affiliates,
in reasonable detail and stating in comparative form the figures for the
corresponding date and periods in the previous year, all prepared in accordance
with GAAP, subject to year-end adjustments and accompanied by a certificate of
the Company's President, Chief Executive Officer or Chief Financial Officer,
stating (i) that such financial statements have been prepared in accordance with
GAAP, subject to year-end audit adjustments, and (ii) whether or not such
officer has knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto;
(c) Within twenty (20) days after the end of each month (or more frequently
if Laurus so requests), agings of the Company's Accounts, unaudited trial
balances and its accounts payable and a calculation of the Company's Accounts,
Eligible Accounts and Inventory as at the end of such month or shorter time
period; and,
(d) Promptly after (i) the filing thereof, copies of the Company's most
recent registration statements and annual, quarterly, monthly or other regular
reports which the Company files with the Securities and Exchange Commission, and
(ii) the issuance thereof, copies of such financial statements, reports and
proxy statements as the Company shall send to its stockholders.
12. Additional Representations and Warranties. The Company represents
and warrants (each of which such representations and warranties shall be deemed
repeated upon the making of a request for a Revolving Credit Advance and made as
of the time of each Revolving Credit Advance made hereunder), as follows:
(a) The Company is a corporation duly incorporated and validly existing
under the laws of the jurisdiction of its incorporation and duly qualified and
in good standing in every other state or jurisdiction in which the nature of the
Company's business requires such qualification.
(b) The execution, delivery and performance of this Agreement and the
Ancillary Agreements (i) have been duly authorized, (ii) are not in
contravention of the Company's certificate of incorporation, by-laws or of any
indenture, agreement or undertaking to which the Company is a party or by which
the Company is bound and (iii) are within the Company's corporate powers.
(c) This Agreement and the Ancillary Agreements executed and delivered by
the Company are the Company's legal, valid and binding obligations, enforceable
in accordance with their terms.
(d) Exhibit 12(d) sets forth the Company's name as it appears in official
filing in the state of its incorporation, the type of entity of the Company, the
organizational identification number issued by the Company's state of
incorporation or a statement that no such number has been issued, the Company's
state of incorporation, and the location of the Company's chief executive
office, corporate offices, warehouses, other locations of Collateral and
locations where records with respect to Collateral are kept (including in each
case the county of such locations) and, except as set forth in such Exhibit
12(d), such locations have not changed during the preceding twelve (12) months.
As of the Closing Date, during the prior five (5) years, except as set forth in
Exhibit 12(d), the Company has not been known as or conducted business in any
other name (including trade names). The Company has only one state of
incorporation.
(e) Based upon the Employee Retirement Income Security Act of 1974
("ERISA"), and the regulations and published interpretations thereunder: (i) the
Company has not engaged in any Prohibited Transactions as defined in Section 406
of ERISA and Section 4975 of the Internal Revenue Code, as amended; (ii) the
Company has met all applicable minimum funding requirements under Section 302 of
ERISA in respect of its plans; (iii) the Company has no knowledge of any event
or occurrence which would cause the Pension Benefit Guaranty Corporation to
institute proceedings under Title IV of ERISA to terminate any employee benefit
plan(s); (iv) the Company has no fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than the Company's
employees; and (v) the Company has not withdrawn, completely or partially, from
any multi-employer pension plan so as to incur liability under the Multiemployer
Pension Plan Amendments Act of 1980.
(f) Except as disclosed on Schedule 12(f) hereto, the Company is otherwise
solvent, able to pay its debts as they mature, has capital sufficient to carry
on its business and all businesses in which the Company is about to engage and
the fair saleable value of its assets (calculated on a going concern basis) is
in excess of the amount of its liabilities.
(g) There is no pending or threatened litigation, action or proceeding
which involves the possibility of having a Material Adverse Effect.
(h) All balance sheets and income statements which have been delivered to
Laurus fairly, accurately and properly state the Company's financial condition
on a basis consistent with that of previous financial statements and there has
been no material adverse change in the Company's financial condition as
reflected in such statements since the balance sheet date of the statements last
delivered to Laurus and such statements do not fail to disclose any fact or
facts which might have a Material Adverse Effect on the Company's financial
condition.
(i) The Company possesses all of the Intellectual Property necessary to
conduct its business. There has been no assertion or claim of violation or
infringement with respect to any Intellectual Property. Exhibit 12(i)sets forth
all Intellectual Property of the Company.
(j) Neither this Agreement, the exhibits and schedules hereto, the
Ancillary Agreements nor any other document delivered by the Company to Laurus
or its attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, contain any untrue statement of a
material fact nor omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading. Any financial projections and other estimates
provided to Laurus by the Company were based on the Company's experience in the
industry and on assumptions of fact and opinion as to future events which the
Company, at the date of the issuance of such projections or estimates, believed
to be reasonable. As of the date hereof no facts have come to the attention of
the Company that would, in its opinion, require the Company to revise or amplify
in any material respect the assumptions underlying such projections and other
estimates or the conclusions derived therefrom.
(k) The offer, sale and issuance of the Note will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any of its Affiliates, nor any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with the
offer or sale of the Securities.
(l) The common stock of the Company is registered pursuant to Section 12(b)
or 12(g) of the Exchange Act and the Company has timely filed all proxy
statements, reports, schedules, forms, statements and other documents required
to be filed by it under the Exchange Act. The Company has furnished Laurus with
copies of (i) its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2002 as amended and (ii) its Quarterly Reports on Form 10-QSB for
the fiscal quarters ended March 31, 2003 (collectively, the "SEC Reports"). Each
SEC Report was, at the time of its filing, in substantial compliance with the
requirements of its respective form and none of the SEC Reports, nor the
financial statements (and the notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in
the SEC Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed) and fairly present in all material respects the financial
position of the Company and its subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(m) The Company's common stock is listed for trading on the OTCBB and
satisfies all requirements for the continuation of such listing. The Company has
not received any notice that its common stock will be delisted from the OTCBB or
that its common stock does not meet all requirements for the continuation of
such listing.
(n) Other than previously disclosed to Laurus, neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Rule 506 under the Securities Act, or
any applicable exchange-related stockholder approval provisions. Nor will the
Company or any of its affiliates or subsidiaries take any action or steps that
would cause the offering of the Securities to be integrated with other
offerings.
(o) The Securities are restricted securities as of the date of this
Agreement. The Company will not issue any stop transfer order or other order
impeding the sale and delivery of any of the Securities at such time as the
Securities are registered for public sale or an exemption from registration is
available, except as required by federal securities laws.
(p) The Company understands the nature of the Securities being sold hereby
and recognizes that they may have a potential dilutive effect. The Company
specifically acknowledges that its obligation to issue the shares of Common
Stock upon conversion of the Note is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company.
(q) There is no agreement that has not been filed with the SEC as an
exhibit to a registration statement or other applicable form the breach of which
could have a material and adverse effect as to the Company and its subsidiaries,
or would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement or the
Registration Rights Agreement executed by the Company in favor of Laurus in any
material respect.
13. Covenants. The Company covenants as follows:
(a) The Company will not, without the prior written consent of Laurus,
which consent shall not be unreasonably withheld, change (i) its name as it
appears in the official filings in the state of its incorporation or formation,
(ii) the type of legal entity it is, (iii) its organization identification
number, if any, issued by its state of incorporation, (iv) its state of
incorporation or (v) amend its certificate of incorporation, by-laws or other
organizational document.
(b) The operation of the Company's business is and will continue to be in
compliance in all material respects with all applicable federal, state and local
laws, rules and ordinances, including to all laws, rules, regulations and orders
relating to taxes, payment and withholding of payroll taxes, employer and
employee contributions and similar items, securities, employee retirement and
welfare benefits, employee health safety and environmental matters.
(c) The Company will pay or discharge when due all taxes, assessments and
governmental charges or levies imposed upon the Company or any of the Collateral
unless such amounts are being diligently contested in good faith by appropriate
proceedings provided that (i) adequate reserves with respect thereto are
maintained on the books of the Company in conformity with GAAP and (ii) the
related Lien shall have no effect on the priority of the Liens in favor of
Laurus or the value of the assets in which Laurus has a Lien.
(d) The Company will promptly inform Laurus in writing of: (i) the
commencement of all proceedings and investigations by or before and/or the
receipt of any notices from, any governmental or nongovernmental body and all
actions and proceedings in any court or before any arbitrator against or in any
way concerning any event which might singly or in the aggregate, have a Material
Adverse Effect; (ii) any amendment of the Company's certificate of
incorporation, by-laws or other organizational document; (iii) any change which
has had or might have a Material Adverse Effect; (iv) any Event of Default or
Default; (v) any default or any event which with the passage of time or giving
of notice or both would constitute a default under any agreement for the payment
of money to which the Company is a party or by which the Company or any of the
Company's properties may be bound which would have a Material Adverse Effect and
(vi) any change in the Company's name or any other name used in its business.
(e) The Company will not, without the prior written consent of Laurus,
which consent shall not be unreasonably withheld (i) create, incur, assume or
suffer to exist any indebtedness (exclusive of trade debt) whether secured or
unsecured other than the Company's indebtedness to Laurus and as set forth on
Exhibit 13(e)(i)attached hereto and made a part hereof; (ii) cancel any debt
owing to it in excess of $50,000 in the aggregate during any 12 month period;
(iii) assume, guarantee, endorse or otherwise become directly or contingently
liable in connection with any obligations of any other Person, except the
endorsement of negotiable instruments by a Company for deposit or collection or
similar transactions in the ordinary course of business; (iv) directly or
indirectly declare, pay or make any dividend or distribution on any class of its
Stock or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any Stock of a Company; (v) purchase or hold beneficially
any Stock or other securities or evidences of indebtedness of, make or permit to
exist any loans or advances to, or make any investment or acquire any interest
whatsoever in, any other Person, including any partnership or joint venture,
except (x) travel advances, (y) loans to the Company's officers and employees
not exceeding at any one time an aggregate of $10,000 or an aggregate of $50,000
and (z) the Existing Loans; (vi) create or permit to exist any Subsidiary, other
than any Subsidiary in existence on the date hereof and listed in Exhibit
13(e)(ii)unless such new Subsidiary is designated by Laurus as either a
co-borrower or guarantor hereunder; (vii) directly or indirectly, prepay any
indebtedness (other than to Laurus), or repurchase, redeem, retire or otherwise
acquire any indebtedness; (viii) without Laurus' prior written consent, which
shall not be unreasonably withheld, enter into any merger, consolidation or
other reorganization with or into any other Person or acquire all or a portion
of the assets or Stock of any Person or permit any other Person to consolidate
with or merge with it; (ix) materially change the nature of the business in
which it is presently engaged; (x) change its fiscal year or make any changes in
accounting treatment and reporting practices without prior written notice to
Laurus except as required by GAAP or in the tax reporting treatment or except as
required by law; (xi) enter into any transaction with any employee, director or
Affiliate, except in the ordinary course on arms-length terms; or (xii) ▇▇▇▇
Accounts under any name except the present name of the Company.
(f) None of the proceeds of the Loans hereunder will be used directly or
indirectly to "purchase" or "carry" "margin stock" or to repay indebtedness
incurred to "purchase" or "carry" "margin stock" within the respective meanings
of each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect.
(g) The Company will bear the full risk of loss from any loss of any nature
whatsoever with respect to the Collateral. At the Company's own cost and expense
in amounts and with carriers acceptable to Laurus, the Company shall (i) keep
all its insurable properties and properties in which it has an interest insured
against the hazards of fire, flood, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to the
Company's including business interruption insurance; (ii) maintain a bond in
such amounts as is customary in the case of companies engaged in businesses
similar to the Company's insuring against larceny, embezzlement or other
criminal misappropriation of insured's officers and employees who may either
singly or jointly with others at any time have access to the assets or funds of
the Company either directly or through Governmental Authority to draw upon such
funds or to direct generally the disposition of such assets; (iii) maintain
public and product liability insurance against claims for personal injury, death
or property damage suffered by others; (iv) maintain all such worker's
compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which the Company is engaged in business; and (v) furnish
Laurus with (x) copies of all policies and evidence of the maintenance of such
policies at least thirty (30) days before any expiration date, (y) endorsements
to such policies naming Laurus as "co-insured" or "additional insured" and
appropriate loss payable endorsements in form and substance satisfactory to
Laurus, naming Laurus as loss payee, and (z) evidence that as to Laurus the
insurance coverage shall not be impaired or invalidated by any act or neglect of
the Company and the insurer will provide Laurus with at least thirty (30) days
notice prior to cancellation. The Company shall instruct the insurance carriers
that in the event of any loss thereunder, the carriers shall make payment for
such loss to Laurus and not to the Company and Laurus jointly. If any insurance
losses are paid by check, draft or other instrument payable to the Company and
Laurus jointly, Laurus may endorse the Company's name thereon and do such other
things as Laurus may deem advisable to reduce the same to cash. Laurus is hereby
authorized to adjust and compromise claims. All loss recoveries received by
Laurus upon any such insurance may be applied to the Obligations, in such order
as Laurus in its sole discretion shall determine. Any surplus shall be paid by
Laurus to the Company within seven (7) business days of receipt of such funds or
applied as may be otherwise required by law. Any deficiency thereon shall be
paid by the Company to Laurus, on demand.
(h) The Company will at its Annual Meeting of Stockholders on July 18, 2003
obtain, and at all times thereafter maintain, an authorized, reserved and
sufficient number of shares of Common Stock for the full conversion of the Notes
and exercise of the Warrant and the Additional Warrants.
14. Further Assurances. At any time and from time to time, upon the
written request of Laurus and at the sole expense of the Company, the Company
shall promptly and duly execute and deliver any and all such further instruments
and documents and take such further action as Laurus may reasonably request (a)
to obtain the full benefits of this Agreement and the Ancillary Agreements, (b)
to protect, preserve and maintain Laurus' rights in the Collateral and under
this Agreement or any Ancillary Agreement, or (c) to enable Laurus to exercise
all or any of the rights and powers herein granted or any Ancillary Agreement.
15. Representations and Warranties of Laurus.
---------------------------------------------
Laurus hereby represents and warrants to the Company as follows:
(a) Requisite Power and Authority. Laurus has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Ancillary Agreements and to carry out their provisions. All
corporate action on Laurus' part required for the lawful execution and delivery
of this Agreement and the Ancillary Agreements have been or will be effectively
taken prior to the Closing Date. Upon their execution and delivery, this
Agreement and the Ancillary Agreements will be valid and binding obligations of
Laurus, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, and (b) as
limited by general principles of equity that restrict the availability of
equitable and legal remedies.
(b) Investment Representations. Laurus understands that the Securities are
being offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon Laurus' representations contained in this
Agreement, including, without limitation, that Laurus is an "accredited
investor" within the meaning of Regulation D under the Securities Act. Laurus
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to
the Note to be purchased by it under this Agreement and the Securities acquired
by it upon the conversion of the Note.
(c) Laurus Bears Economic Risk. Laurus has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. Laurus must bear the economic risk of this investment until the
Securities are sold pursuant to (i) an effective registration statement under
the Securities Act, or (ii) an exemption from registration is available.
(d) Acquisition for Own Account. Laurus is acquiring the Securities for its
own account for investment only, and not as a nominee or agent and not with a
view towards or for resale in connection with their distribution.
(e) Laurus Can Protect Its Interest. Laurus represents that by reason of
its, or of its management's, business and financial experience, Laurus has the
capacity to evaluate the merits and risks of its investment in the Note, and the
Securities and to protect its own interests in connection with the transactions
contemplated in this Agreement, and the Ancillary Agreements. Further, Laurus is
aware of no publication of any advertisement in connection with the transactions
contemplated in the Agreement or the Ancillary Agreements.
(f) Accredited Investor. Laurus represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
16. Power of Attorney. Subject to compliance with ▇▇▇▇▇▇▇▇-▇▇▇▇▇, the
Company hereby appoints Laurus, or any other Person whom Laurus may designate as
the Company's attorney, with power to: (i) endorse the Company's name on any
checks, notes, acceptances, money orders, drafts or other forms of payment or
security that may come into Laurus' possession; (ii) sign the Company's name on
any invoice or ▇▇▇▇ of lading relating to any Accounts, drafts against Account
Debtors, schedules and assignments of Accounts, notices of assignment, financing
statements and other public records, verifications of Account and notices to or
from Account Debtors; (iii) verify the validity, amount or any other matter
relating to any Account by mail, telephone, telegraph or otherwise with Account
Debtors; (iv) do all things necessary to carry out this Agreement, any Ancillary
Agreement and all related documents; and (v) on or after the occurrence and
continuation of an Event of Default, notify the post office authorities to
change the address for delivery of the Company's mail to an address designated
by Laurus, and to receive, open and dispose of all mail addressed to the
Company. Neither Laurus, nor the attorney will be liable for any acts or
omissions or for any error of judgment or mistake of fact or law. This power,
which may not be exercised unless an Event of Default under this Agreement or
the Ancillary Agreements has occurred and is continuing, is being coupled with
an interest, is irrevocable so long as Laurus has a security interest and, will
automatically terminate upon the full and irrevocable satisfaction of the
Obligations hereunder .
17. Term of Agreement. Laurus' agreement to make Loans and extend financial
accommodations under and in accordance with the terms of this Agreement or any
Ancillary Agreement shall continue in full force and effect until the expiration
of the Initial Term. At the expiration of the Initial Term, this Agreement
shall be deemed to be automatically renewed for an additional period equal to
the Initial Term and thereafter to be automatically renewed by succeeding terms
of equal length at the end of the first and each succeeding renewal term (each,
a "Renewal Term"), unless (i) the Company or Laurus shall (a) deliver written
notice of cancellation to Laurus not earlier than 90 days and not later than 30
days prior to the expiration date of the Initial Term or any succeeding Renewal
Term and (b) has paid in full in cash all Obligations on or prior to the
expiration date of the Initial Term or any Renewal Term, as applicable, (ii)
Laurus shall deliver written notice of cancellation to the Company not earlier
than 90 days and not later than 30 days prior to the expiration date of the
Initial Term or any succeeding Renewal Term or (iii) if Laurus shall fail to
perform its obligations to the Company as set forth in Sections 4, 9(b) and 9(c)
hereof, and if such failure to perform is not cured on or before the last day of
such applicable cure period ("Laurus Performance Failure"), then the Company may
elect to terminate this Agreement if any Laurus Performance Failure shall occur
more than two (2) times in any three month period. If the Company shall
terminate this Agreement due to the occurrence of more than two (2) Laurus
Performance Failures in any three month period, then the Company shall not be
required to pay any Early Payment Fee (as defined below) but shall otherwise be
required to pay any and all other Obligations due any owing at the time the
Agreement is so terminated by the Company. At Laurus' election following the
occurrence of an Event of Default, Laurus may terminate this Agreement. The
termination of the Agreement shall not affect any of Laurus' rights hereunder or
any Ancillary Agreement and the provisions hereof and thereof shall continue to
be fully operative until all transactions entered into, rights or interests
created and the Obligations have been disposed of, concluded or liquidated.
Upon early termination by the Company and notwithstanding the foregoing, Laurus
shall release its security interests at any time after thirty (30) days notice
upon payment to it of all Obligations if Company shall have (i) provided Laurus
with an executed release of any and all claims which Company may have or
thereafter have under this Agreement and all Ancillary Agreements and (ii) paid
to Laurus an early payment fee (the "Early Payment Fee") in an amount equal to
(x) four percent (4%) of the Capital Availability Amount if such payment occurs
prior to the first anniversary of the Initial Term or any applicable Renewal
Term (y) three percent (3%) of the Capital Availability Amount if such payment
occurs after the first anniversary and prior to the second anniversary of the
Initial Term or any Renewal Term and (z) two percent (2%) of the Capital
Availability Amount; such fee being intended to compensate Laurus for its costs
and expenses incurred in initially approving this Agreement or extending same.
Such Early Payment Fee shall also be due and payable by Company to Laurus upon
termination of this Agreement by Laurus after the occurrence of an Event of
Default.
18. Termination of Lien. The Liens and rights granted to Laurus hereunder
and any Ancillary Agreements and the financing statements filed in connection
herewith or therewith shall continue in full force and effect, notwithstanding
the termination of this Agreement or the fact that the Company's account may
from time to time be temporarily in a zero or credit position, until (a) all of
the Obligations of the Company have been paid or performed in full after the
termination of this Agreement and (b) the Company has an executed release of any
and all claims which the Company may have or thereafter have under this
Agreement and all Ancillary Agreements. Accordingly, subject to compliance with
Sarabanes-Oxley, the Company waives any rights which it may have under the UCC
to demand the filing of termination statements with respect to the Collateral,
and Laurus shall not be required to send such termination statements to the
Company, or to file them with any filing office, unless and until this Agreement
and the Ancillary Agreements shall have been terminated in accordance with their
terms and all Obligations paid in full in immediately available funds.
19. Events of Default. The occurrence of any of the following shall
constitute an Event of Default:
(a) failure to make payment of any of the Obligations when required
hereunder; provided, however, that in the event such failure to pay arises from
the occurrence of an Overadvance, then the Company shall have five (5) business
days to cure such failure;
(b) failure to pay any taxes when due unless such taxes are being contested
in good faith by appropriate proceedings and with respect to which adequate
reserves have been provided on the Company's books; provided, however, that in
the event that such failure is curable, the Company shall have ten (10) business
days to cure such failure;
(c) failure to perform under and/or committing any material breach of this
Agreement or any Ancillary Agreement or any other agreement between the Company
and Laurus; provided, however, in the event that such failure is curable, the
Company shall have seven (7) business days from the occurrence thereof to cure
such failure;
(d) the occurrence of a default under any agreement to which the Company is
a party with third parties which has a Material Adverse Effect; provided,
however, that in the event that such failure is curable, the Company shall have
ten (10) business days to cure such failure;
(e) any representation, warranty or statement made by the Company
hereunder, in any Ancillary Agreement, any certificate, statement or document
delivered pursuant to the terms hereof, or in connection with the transactions
contemplated by this Agreement should at any time be false or misleading in any
material respect; provided, however, in the event such breach is curable, the
Company shall have seven (7) business days from the occurrence thereof to cure
such breach;
(f) an attachment or levy is made upon the Company's assets having an
aggregate value in excess of $100,000 or a judgment is rendered against the
Company or the Company's property involving a liability of more than $100,000
which shall not have been vacated, discharged, stayed or bonded pending appeal
within thirty (30) days from the entry thereof;
(g) any change in the Company's condition or affairs (financial or
otherwise) which in Laurus' reasonable, good faith opinion, impairs the
Collateral or the ability of the Company to perform its Obligations; provided,
however, that in the event that such failure is curable, the Company shall have
seven (7) business days to cure such failure;
(h) any Lien created hereunder or under any Ancillary Agreement for any
reason ceases to be or is not a valid and perfected Lien having a first priority
interest;
(i) if the Company shall (i) apply for, consent to or suffer to exist the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
(j) the Company shall admit in writing its inability, or be generally
unable to pay its debts as they become due or cease operations of its present
business;
(k) any Subsidiary, shall (i) apply for, consent to or suffer to exist the
appointment of, or the taking possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property, (ii) admit
in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business, (iii) make a general
assignment for the benefit of creditors, (iv) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated
a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws or (viii) take any action for the
purpose of effecting any of the foregoing;
(l) the Company directly or indirectly sells, assigns, transfers, conveys,
or suffers or permits to occur any sale, assignment, transfer or conveyance of
any assets of the Company or any interest therein, except as permitted herein;
(m) a default by the Company in the payment, when due, of any principal of
or interest on any other indebtedness for money borrowed in an amount greater
than $25,000, which is not cured within any applicable cure or grace period;
(n) the occurrence of a change in controlling ownership of the Company,
provided, however, solely for the purposes of this Section 19(n) any reduction
in the beneficial ownership of the Company's Common Stock by Mr. ▇▇▇▇▇ ▇▇▇▇▇▇
(other than by sale or transfer) which reduces ▇▇. ▇▇▇▇▇▇'▇ beneficial ownership
to less than 50% shall not be deemed a change of control ;
(o) the indictment or threatened indictment of the Company, any officer of
the Company under any criminal statute, or commencement or threatened
commencement of criminal or civil proceeding against the Company or any officer
of the Company pursuant to which statute or proceeding penalties or remedies
sought or available include forfeiture of any of the property of the Company;
(p) if an Event of Default shall occur under and as defined in the Note and
the Default Notice Period (as defined in such Note) has expired; or
(q) the Company shall breach any term or provision of any Ancillary
Agreement which is not cured within any applicable cure or grace period. 20.
Remedies. If an Event of Default has occurred and is continuing, Laurus shall
have the right to demand repayment in full of all Obligations, whether or not
otherwise due. Until all Obligations have been fully satisfied, Laurus shall
retain its Lien in all Collateral. Laurus shall have, in addition to all other
rights provided herein, the rights and remedies of a secured party under the
UCC, and under other applicable law, all other legal and equitable rights to
which Laurus may be entitled, including the right to take immediate possession
of the Collateral, to require a Company to assemble the Collateral, at the
Company's expense, and to make it available to Laurus at a place designated by
Laurus which is reasonably convenient to both parties and to enter any of the
premises of a Company or wherever the Collateral shall be located, with or
without force or process of law, and to keep and store the same on said premises
until sold (and if said premises be the property of the Company, the Company
agrees not to charge Laurus for storage thereof), and the right to apply for the
appointment of a receiver for the Company's property. Further, Laurus may, at
any time or times after the occurrence of an Event of Default, sell and deliver
all Collateral held by or for Laurus at public or private sale for cash, upon
credit or otherwise, at such prices and upon such terms as Laurus, in Laurus'
sole discretion, deems advisable or Laurus may otherwise recover upon the
Collateral in any commercially reasonable manner as Laurus, in its sole
discretion, deems advisable. The requirement of reasonable notice shall be met
if such notice is mailed postage prepaid to the Company at the Company's address
as shown in Laurus' records, at least ten (10) days before the time of the event
of which notice is being given. Laurus may be the purchaser at any sale, if it
is public. In connection with the exercise of the foregoing remedies, Laurus is
granted permission to use all of the Company's trademarks, tradenames,
tradestyles, patents, patent applications, licenses, franchises and other
proprietary rights. The proceeds of sale shall be applied first to all
reasonable costs and expenses of sale, including attorneys' fees, and second to
the payment (in whatever order Laurus elects) of all Obligations. After the
indefeasible payment and satisfaction in full in cash of all of the Obligations,
and after the payment by Laurus of any other amount required by any provision of
law, including Section 608(a)(1) of the Code (but only after Laurus has received
what Laurus considers reasonable proof of a subordinate party's security
interest), the surplus, if any, shall be paid to the Company or its
representatives or to whosoever may be lawfully entitled to receive the same, or
as a court of competent jurisdiction may direct. The Company shall remain liable
to Laurus for any deficiency. In addition, Companies shall pay Laurus a
liquidation fee ("Liquidation Fee") in the amount of five percent (5%) of the
face amount of each Account outstanding at any time during a "liquidation
period". For purposes hereof, "liquidation period" means a period: (i) beginning
on the earliest date of (x) an event referred to in Section 19(i) or 19(j), or
(y) the cessation of any Company's business; and (ii) ending on the date on
which Laurus has actually received all Obligations due and owing it under this
Agreement and the Ancillary Agreements. The Liquidation Fee shall be paid on the
earlier to occur of: (i) the date on which Laurus collects the applicable
Account; and (ii) the 90th day from the invoice of such Account by deduction
from any amount otherwise due from Laurus to the Company directly, at the option
of Laurus. The Company and Laurus acknowledge that the actual damages that would
be incurred by Laurus after the occurrence of an Event of Default would be
difficult to quantity and that the Company and Laurus have agreed that the fees
and obligations set forth in this Section and in this Agreement would constitute
fair and appropriate liquidated damages in the event of any such termination.
21. Waivers. To the full extent permitted by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and other
applicable law, the Company waives (a) presentment, demand and protest, and
notice of presentment, dishonor, intent to accelerate, acceleration, protest,
default, nonpayment, maturity, release, compromise, settlement, extension or
renewal of any or all of this Agreement and the Ancillary Agreements or any
other notes, commercial paper, Accounts, contracts, Documents, Instruments,
Chattel Paper and guaranties at any time held by Laurus on which the Company may
in any way be liable, and hereby ratifies and confirms whatever Laurus may do in
this regard; (b) all rights to notice and a hearing prior to Laurus' taking
possession or control of, or to Laurus' replevy, attachment or levy upon, any
Collateral or any bond or security that might be required by any court prior to
allowing Laurus to exercise any of its remedies; and (c) the benefit of all
valuation, appraisal and exemption laws. The Company acknowledges that it has
been advised by counsel of its choices and decisions with respect to this
Agreement, the Ancillary Agreements and the transactions evidenced hereby and
thereby.
22. Expenses. The Company shall pay all of Laurus' reasonable out-of-pocket
costs and expenses, including fees and disbursements of in-house or outside
counsel and appraisers, in connection with the preparation, execution and
delivery of this Agreement and the Ancillary Agreements, and in connection with
the prosecution or defense of any action, contest, dispute, suit or proceeding
concerning any matter in any way arising out of, related to or connected with
this Agreement or any Ancillary Agreement provided that Laurus is the prevailing
party in the action , contest, dispute, suit or proceeding. The Company shall
also pay all of Laurus' reasonable fees, charges, out-of-pocket costs and
expenses, including fees and disbursements of counsel and appraisers, in
connection with (a) the preparation, execution and delivery of any waiver, any
amendment thereto or consent proposed or executed in connection with the
transactions contemplated by this Agreement or the Ancillary Agreements, (b)
Laurus' obtaining performance of the Obligations under this Agreement and any
Ancillary Agreements, including, but not limited to, the enforcement or defense
of Laurus' security interests, assignments of rights and Liens hereunder as
valid perfected security interests, (c) any attempt to inspect, verify, protect,
collect, sell, liquidate or otherwise dispose of any Collateral, (d) any
appraisals or re-appraisals of any property (real or personal) pledged to Laurus
by the Company as Collateral for, or any other Person as security for, the
Company's Obligations hereunder and (e) any consultations in connection with any
of the foregoing. The Company shall also pay Laurus' customary bank charges for
all bank services (including wire transfers) performed or caused to be performed
by Laurus for the Company at the Company's request or in connection with the
Company's loan account with Laurus. All such costs and expenses together with
all filing, recording and search fees, taxes and interest payable by the Company
to Laurus shall be payable on demand and shall be secured by the Collateral. If
any tax by any Governmental Authority is or may be imposed on or as a result of
any transaction between the Company and Laurus which Laurus is or may be
required to withhold or pay, the Company agrees to indemnify and hold Laurus
harmless in respect of such taxes, and the Company will repay to Laurus the
amount of any such taxes which shall be charged to the Company's account; and
until the Company shall furnish Laurus with indemnity therefor (or supply Laurus
with evidence satisfactory to it that due provision for the payment thereof has
been made), Laurus may hold without interest any balance standing to the
Company's credit and Laurus shall retain its Liens in any and all Collateral.
23. Assignment By Laurus. Subject to applicable securities laws, Laurus may
assign any or all of the Obligations together with any or all of the security
therefor and any transferee shall succeed to all of Laurus' rights with respect
thereto; provided, however, that in the event that such assignee or transferee
is not an affiliate of Laurus, Laurus shall request the approval of the Company
prior to any such assignment or transfer, which such approval shall not be
unreasonably withheld. Upon such transfer, Laurus shall be released from all
responsibility for the Collateral to the extent same is assigned to any
transferee. Laurus may from time to time sell or otherwise grant participations
in any of the Obligations and the holder of any such participation shall,
subject to the terms of any agreement between Laurus and such holder, be
entitled to the same benefits as Laurus with respect to any security for the
Obligations in which such holder is a participant. The Company agrees that each
such holder may exercise any and all rights of banker's lien, set-off and
counterclaim with respect to its participation in the Obligations as fully as
though the Company were directly indebted to such holder in the amount of such
participation.
24. No Waiver; Cumulative Remedies. Failure by Laurus to exercise any
right, remedy or option under this Agreement, any Ancillary Agreement or any
supplement hereto or thereto or any other agreement between the Company and
Laurus or delay by Laurus in exercising the same, will not operate as a waiver;
no waiver by Laurus will be effective unless it is in writing and then only to
the extent specifically stated. Laurus' rights and remedies under this
Agreement and the Ancillary Agreements will be cumulative and not exclusive of
any other right or remedy which Laurus may have.
25. Application of Payments. The Company waives the right to direct the
application of any and all payments at any time or times hereafter received by
Laurus from or on the Company's behalf and the Company hereby agrees that Laurus
shall have the continuing exclusive right to apply and reapply any and all
payments received at any time or times hereafter against the Obligations
hereunder in such manner as Laurus may deem advisable notwithstanding any entry
by Laurus upon any of Laurus' books and records.
26. Indemnity. The Company agrees to indemnify and hold Laurus, and
its respective affiliates, employees, attorneys and agents (each, an
"Indemnified Person"), harmless from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses of any kind or
nature whatsoever (including attorneys' fees and disbursements and other costs
of investigation or defense, including those incurred upon any appeal) which may
be instituted or asserted against or incurred by any such Indemnified Person as
the result of credit having been extended, suspended or terminated under this
Agreement or any of the Ancillary Agreements or with respect to the execution,
delivery, enforcement, performance and administration of, or in any other way
arising out of or relating to, this Agreement, the Ancillary Agreements or any
other documents or transactions contemplated by or referred to herein or therein
and any actions or failures to act with respect to any of the foregoing, except
to the extent that any such indemnified liability is finally determined by a
court of competent jurisdiction to have resulted solely from such Indemnified
Person's gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE
RESPONSIBLE OR LIABLE TO THE COMPANY OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.
27. Revival. The Company further agrees that to the extent the Company
makes a payment or payments to Laurus, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy act, state or federal law, common law or equitable cause,
then, to the extent of such payment or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if said payment had not been made.
28. Notices. Any notice or request hereunder may be given to the Company or
Laurus at the respective addresses set forth below or as may hereafter be
specified in a notice designated as a change of address under this Section. Any
notice or request hereunder shall be given by registered or certified mail,
return receipt requested, hand delivery, overnight mail or telecopy (confirmed
by mail). Notices and requests shall be, in the case of those by hand delivery,
deemed to have been given when delivered to any officer of the party to whom it
is addressed, in the case of those by mail or overnight mail, deemed to have
been given when deposited in the mail or with the overnight mail carrier, and,
in the case of a telecopy, when confirmed. Notices shall be provided as follows:
Notices shall be provided as follows:
If to Laurus: Laurus Master Fund, Ltd.
c/o Laurus Capital Management, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ Grin
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Loeb & Loeb LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company: Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
SpaceDev, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
29. Governing Law, Jurisdiction and Waiver of JuryTrial.
(a) THIS AGREEMENT AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE.
(b) BOTH PARTIES HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS
LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY
AND LAURUS PERTAINING TO THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS OR TO
ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE ANCILLARY
AGREEMENTS; PROVIDED, THAT LAURUS AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY
OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LAURUS FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS,
TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LAURUS. BOTH PARTIES
EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION
WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS. BOTH PARTIES HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION
27 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH
PARTIES ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID.
(c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS AND THE
COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY
ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED THERETO.
30. Limitation of Liability. The Company acknowledges and understands
that in order to assure repayment of the Obligations hereunder Laurus may be
required to exercise any and all of Laurus' rights and remedies hereunder and
agrees that neither Laurus nor any of Laurus' agents shall be liable for acts
taken or omissions made in connection herewith or therewith except for actual
bad faith.
31. No Shorting. Neither Laurus nor any of its Affiliates nor investment
partners shall cause any Person or entity to directly or indirectly engage in
"short sales" or other hedging strategies of the Company's Common Stock.
32. Entire Understanding. This Agreement and the Ancillary Agreements
contain the entire understanding between the Company and Laurus and any
promises, representations, warranties or guarantees not herein contained shall
have no force and effect unless in writing, signed by the Company's and Laurus'
respective officers. Neither this Agreement, the Ancillary Agreements, nor any
portion or provisions thereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by the
party to be charged.
33. Severability. Wherever possible each provision of this Agreement or the
Ancillary Agreements shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement or the
Ancillary Agreements shall be prohibited by or invalid under applicable law such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
thereof.
34. Captions. All captions are and shall be without substantive meaning or
content of any kind whatsoever.
35. Counterparts; Telecopier Signatures. This Agreement may be executed in
one or more counterparts, each of which shall constitute an original and all of
which taken together shall constitute one and the same agreement. Any signature
delivered by a party via telecopier transmission shall be deemed to be any
original signature hereto.
36. Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
37. Publicity. The Company hereby authorize Laurus to make appropriate
announcements of the financial arrangement entered into by and between the
Company and Laurus, including, without limitation, announcements which are
commonly known as tombstones, in such publications and to such selected parties
as Laurus shall in its sole and absolute discretion deem appropriate.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.
SPACEDEV, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
LAURUS MASTER FUND, LTD.
By: /s/ ▇▇▇▇▇ Grin
------------------
Name: ▇▇▇▇▇ Grin
Title: President
------
Annex A - Definitions
---------------------
"Account Debtor" means any Person who is or may be obligated with respect
to, or on account of, an Account.
"Accountants" has the meaning given to such term in Section 11(a).
"Accounts" means all "accounts", as such term is defined in the UCC, now
owned or hereafter acquired by any Person, including: (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper or Instruments) (including
any such obligations that may be characterized as an account or contract right
under the UCC); (b) all of such Person's rights in, to and under all purchase
orders or receipts for goods or services; (c) all of such Person's rights to any
goods represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (d) all rights to payment due to such
Person for Goods or other property sold, leased, licensed, assigned or otherwise
disposed of, for a policy of insurance issued or to be issued, for a secondary
obligation incurred or to be incurred, for energy provided or to be provided,
for the use or hire of a vessel under a charter or other contract, arising out
of the use of a credit card or charge card, or for services rendered or to be
rendered by such Person or in connection with any other transaction (whether or
not yet earned by performance on the part of such Person); and (e) all
collateral security of any kind given by any Account Debtor or any other Person
with respect to any of the foregoing.
"Accounts Availability" means the amount of Revolving Credit Advances
against Eligible Accounts Laurus may from time to time make available to the
Company up to eighty five percent (85%) of the net face amount of the Company's
Eligible Accounts.
"Affiliate" of any Person means (a) any Person (other than a Subsidiary)
which, directly or indirectly, is in control of, is controlled by, or is under
common control with such Person, or (b) any Person who is a director or officer
(i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, (i) to vote five percent
(5.00%) or more of the securities having ordinary voting power for the election
of directors of such Person, or (ii) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Ancillary Agreements" means, the Note, Registration Rights Agreement, all
documents, instruments and agreements evidencing the Term Loan, and all other
agreements, instruments, documents, mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, trust agreements
and guarantees whether heretofore, concurrently, or hereafter executed by or on
behalf of the Company or any other Person or delivered to Laurus, relating to
this Agreement or to the transactions contemplated by this Agreement or
otherwise relating to the relationship between the Company and Laurus.
"Books and Records" means all books, records, board minutes, contracts,
licenses, insurance policies, environmental audits, business plans, files,
computer files, computer discs and other data and software storage and media
devices, accounting books and records, financial statements (actual and pro
forma), filings with Governmental Authorities and any and all records and
instruments relating to the Collateral or otherwise necessary or helpful in the
collection thereof or the realization thereupon.
"Business Day" means a day on which Laurus is open for business and that is
not a Saturday, a Sunday or other day on which banks are required or permitted
to be closed in the State of New York.
"Capital Availability Amount" on any business day, shall mean the lesser of
(i) $1,000,000 and (ii) an amount determined by multiplying eighty-five percent
(85%) by Eligible Accounts on such business day.
"Chattel Paper" means all "chattel paper," as such term is defined in the
UCC, including electronic chattel paper, now owned or hereafter acquired by any
Person.
"Closing Date" means the date hereof.
"Collateral" means all of the Company's property and assets, whether real
or personal, tangible or intangible, and whether now owned or hereafter
acquired, or in which it now has or at any time in the future may acquire any
right, title or interests including all of the following property in which it
now has or at any time in the future may acquire any right, title or interest:
(a) all Inventory;
(b) all Equipment;
(c) all Fixtures;
(d) all General Intangibles;
(e) all Accounts;
(f) all Deposit Accounts, other bank accounts and all funds on deposit
therein;
(g) all Investment Property;
(h) all Stock;
(i) all Chattel Paper;
(j) all Letter-of-Credit Rights;
(k) all Instruments;
(l) all commercial tort claims set forth on Exhibit 1(A);
(m) all Books and Records;
(n) all Supporting Obligations including letters of credit and guarantees
issued in support of Accounts, Chattel Paper, General Intangibles and Investment
Property;
(o) (i) all money, cash and cash equivalents and (ii) all cash held as cash
collateral to the extent not otherwise constituting Collateral, all other cash
or property at any time on deposit with or held by Laurus for the account of
Company (whether for safekeeping, custody, pledge, transmission or otherwise);
and
(p) (i) all products and Proceeds of all or any of the foregoing, tort
claims and all claims and other rights to payment including insurance claims
against third parties for loss of, damage to, or destruction of, and (ii)
payments due or to become due under leases, rentals and hires of any or all of
the foregoing and Proceeds payable under, or unearned premiums with respect to
policies of insurance in whatever form.
"Contract Rate" means an interest rate per annum equal to the Prime Rate
plus three fourths of one percent (0.75%), but in no event less than five
percent (5%) per annum.
"Default" means any act or event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" has the meaning given to such term in Section 5(a)(iii).
"Deposit Accounts" means all "deposit accounts" as such term is defined in
the UCC, now or hereafter held in the name of any Person.
"Documents" means all "documents", as such term is defined in the UCC, now
owned or hereafter acquired by any Person, wherever located, including all bills
of lading, dock warrants, dock receipts, warehouse receipts, and other documents
of title, whether negotiable or non-negotiable.
"Eligible Accounts" means and includes each Account which conforms to the
following criteria: (a) shipment of the merchandise or the rendition of services
has been completed; (b) no return, rejection or repossession of the merchandise
has occurred; (c) merchandise or services shall not have been rejected or
disputed by the Account Debtor and there shall not have been asserted any
offset, defense or counterclaim; (d) continues to be in full conformity with the
representations and warranties made by the Company to Laurus with respect
thereto; (e) Laurus is, and continues to be, satisfied with the credit standing
of the Account Debtor in relation to the amount of credit extended; (f) there
are no facts existing or threatened which are likely to result in any adverse
change in an Account Debtor's financial condition; (g) is documented by an
invoice in a form approved by Laurus and shall not be unpaid more than ninety
(90) days from invoice date; (h) not more than twenty-five percent (25%) of the
unpaid amount of invoices due from such Account Debtor remains unpaid more than
ninety (90) days from invoice date; (i) is not evidenced by chattel paper or an
instrument of any kind with respect to or in payment of the Account unless such
instrument is duly endorsed to and in possession of Laurus or represents a check
in payment of a Account; (j) the Account Debtor is located in the United States;
(k) Laurus has a first priority perfected Lien in such Account and such Account
is not subject to any Lien other than Permitted Liens; (l) does not arise out of
transactions with any employee, officer, agent, director, stockholder or
Affiliate of the Company; (m) is payable to the Company; (n) does not arise out
of a ▇▇▇▇ and hold sale prior to shipment and does not arise out of a sale to
any Person to which the Company is indebted; (o) is net of any returns,
discounts, claims, credits and allowances; (p) if the Account arises out of
contracts between the Company and the United States, any state, or any
department, agency or instrumentality of any of them, the Company has so
notified Laurus, in writing, prior to the creation of such Account, and there
has been compliance with any governmental notice or approval requirements,
including compliance with the Federal Assignment of Claims Act; (q) is a good
and valid account representing an undisputed bona fide indebtedness incurred by
the Account Debtor therein named, for a fixed sum as set forth in the invoice
relating thereto with respect to an unconditional sale and delivery upon the
stated terms of goods sold by the Company, or work, labor and/or services
rendered by the Company; (r) excluding any Accounts arising out of contracts
between the Company and The United States, any state or any department or
instrumentality of any of them, the total unpaid Accounts from Account Debtor
does not exceed twenty-five percent (25%) of all Eligible Accounts; (s) the
Company's right to payment is absolute and not contingent upon the fulfillment
of any condition whatsoever; (t) such Company is able to bring suit and enforce
its remedies against the Account Debtor through judicial process; (u) does not
represent interest payments, late or finance charges or service charges owing to
the Company and (v) is otherwise satisfactory to Laurus as determined by Laurus
in the exercise of its reasonable discretion.
"Equipment" means all "equipment" as such term is defined in the UCC, now
owned or hereafter acquired by any Person, wherever located, including any and
all machinery, apparatus, equipment, fittings, furniture, fixtures, motor
vehicles and other tangible personal property (other than Inventory) of every
kind and description that may be now or hereafter used in such Person's
operations or that are owned by such Person or in which such Person may have an
interest, and all parts, accessories and accessions thereto and substitutions
and replacements therefor.
"ERISA" shall have the meaning given to such term in Section 12(g).
"Event of Default" means the occurrence of any of the events set forth in
Section 19.
"Existing Loans" means the loans set forth on Schedule 12(f) hereto
"Fixtures" means all "fixtures" as such term is defined in the UCC, now
owned or hereafter acquired by any Person.
"Formula Amount" has the meaning set forth in Section 2(a).
"GAAP" means generally accepted accounting principles, practices and
procedures in effect from time to time in the United States of America.
"General Intangibles" means all "general intangibles" as such term is
defined in the UCC, now owned or hereafter acquired by any Person including all
right, title and interest that such Person may now or hereafter have in or under
any contract, all Payment Intangibles, customer lists, Licenses, Intellectual
Property, interests in partnerships, joint ventures and other business
associations, permits, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, Software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials, Books and Records, Goodwill
(including the Goodwill associated with any Intellectual Property), all rights
and claims in or under insurance policies (including insurance for fire, damage,
loss, and casualty, whether covering personal property, real property, tangible
rights or intangible rights, all liability, life, key-person, and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, deposit accounts, rights to receive tax refunds and other
payments, rights to received dividends, distributions, cash, Instruments and
other property in respect of or in exchange for pledged Stock and Investment
Property, and rights of indemnification.
"Goods" means all "goods", as such term is defined in the UCC, now owned or
hereafter acquired by any Person, wherever located, including embedded software
to the extent included in "goods" as defined in the UCC, manufactured homes,
standing timber that is cut and removed for sale and unborn young of animals.
"Goodwill" means all goodwill, trade secrets, proprietary or confidential
information, technical information, procedures, formulae, quality control
standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter acquired by any Person.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Indemnified Person" shall have the meaning given to such term in Section
26.
"Initial Term" means the Closing Date through the close of business on the
third anniversary of the Closing Date, subject to acceleration at the option of
Laurus upon the occurrence of an Event of Default hereunder or other termination
hereunder.
"Instruments" means all "instruments", as such term is defined in the UCC,
now owned or hereafter acquired by any Person, wherever located, including all
certificated securities and all promissory notes and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
"Intellectual Property" means any and all Licenses, patents, patent
registrations, copyrights, copyright registrations, trademarks, trademark
registrations, trade secrets and customer lists.
"Inventory" means all "inventory", as such term is defined in the UCC, now
owned or hereafter acquired by any Person, wherever located, including all
inventory, merchandise, goods and other personal property that are held by or on
behalf of such Person for sale or lease or are furnished or are to be furnished
under a contract of service or that constitute raw materials, work in process,
finished goods, returned goods, or materials or supplies of any kind, nature or
description used or consumed or to be used or consumed in such Person's business
or in the processing, production, packaging, promotion, delivery or shipping of
the same, including all supplies and embedded software.
"Investment Property" means all "investment property", as such term is
defined in the UCC, now owned or hereafter acquired by any Person, wherever
located.
"Letter-of-Credit Rights" means "letter-of-credit rights" as such term is
defined in the UCC, now owned or hereafter acquired by any Person, including
rights to payment or performance under a letter of credit, whether or not such
Person, as beneficiary, has demanded or is entitled to demand payment or
performance.
"License" means any rights under any written agreement now or hereafter
acquired by any Person to use any trademark, trademark registration, copyright,
copyright registration or invention for which a patent is in existence or other
license of rights or interests now held or hereafter acquired by any Person.
"Lien" means any mortgage, security deed, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including any conditional sale or
other title retention agreement, any lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement under the UCC or comparable law of any
jurisdiction.
"Loans" means the Revolving Credit Advances and all extensions of credit
hereunder and under any Ancillary Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
condition, operations, assets, business or prospects of the Company, (b) the
Company's ability to pay or perform the Obligations in accordance with the terms
hereof or any Ancillary Agreement, (c) the value of the Collateral, the Liens on
the Collateral or the priority of any such Lien or (d) the practical realization
of the benefits of Laurus' rights and remedies under this Agreement and the
Ancillary Agreements.
"Maximum Legal Rate" shall have the meaning given to such term in Section
5(a)(iv).
"Note" means the Secured Convertible Note in the original principal amount
of $1,000,000 made by the Company in favor of Laurus dated as of the Closing
Date, as the same may be amended, modified and supplemented from time to time.
"Obligations" means all Loans, all advances, debts, liabilities,
obligations, covenants and duties owing by the Company to Laurus (or any
corporation that directly or indirectly controls or is controlled by or is under
common control with Laurus) of every kind and description (whether or not
evidenced by any note or other instrument and whether or not for the payment of
money or the performance or non-performance of any act), direct or indirect,
absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, whether existing by operation of law or otherwise
now existing or hereafter arising including any debt, liability or obligation
owing from the Company to others which Laurus may have obtained by assignment or
otherwise and further including all interest (including interest accruing at the
then applicable rate provided in this Agreement after the maturity of the Loans
and interest accruing at the then applicable rate provided in this Agreement
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding), charges or
any other payments the Company is required to make by law or otherwise arising
under or as a result of this Agreement and the Ancillary Agreements, together
with all reasonable expenses and reasonable attorneys' fees chargeable to the
Company's account or incurred by Laurus in connection with the Company's account
whether provided for herein or in any Ancillary Agreement.
"Payment Intangibles" means all "payment intangibles" as such term is
defined in the UCC, now owned or hereafter acquired by any Person, including, a
General Intangible under which the Account Debtor's principal obligation is a
monetary obligation.
"Permitted Liens" means (a) Liens of carriers, warehousemen, artisans,
bailees, mechanics and materialmen incurred in the ordinary course of business
securing sums not overdue; (b) Liens incurred in the ordinary course of business
in connection with workmen's compensation, unemployment insurance or other forms
of governmental insurance or benefits, relating to employees, securing sums (i)
not overdue or (ii) being diligently contested in good faith provided that
adequate reserves with respect thereto are maintained on the books of the
applicable Company in conformity with GAAP; (c) Liens in favor of Laurus; (d)
Liens for taxes (i) not yet due or (ii) being diligently contested in good faith
by appropriate proceedings, provided that adequate reserves with respect thereto
are maintained on the books of the applicable Company in conformity with GAAP
provided, that, the Lien shall have no effect on the priority of Liens in favor
of Laurus or the value of the assets in which Laurus has a Lien; (e) Purchase
Money Liens securing Purchase Money Indebtedness to the extent permitted in this
Agreement and (f) Liens specified on Exhibit 2 hereto.
"Person" means any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit
corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof), and shall include such Person's successors and assigns.
"Prime Rate" means the "base rate" or "prime rate" published in the Wall
Street Journal from time to time. The Prime Rate shall be increased or decreased
as the case may be for each increase or decrease in the Prime Rate in an amount
equal to such increase or decrease in the Prime Rate; each change to be
effective as of the day of the change in such rate.
"Proceeds" means "proceeds", as such term is defined in the UCC and, in any
event, shall include: (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to the Company or any other Person from time to
time with respect to any Collateral; (b) any and all payments (in any form
whatsoever) made or due and payable to the Company from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of any Collateral by any governmental body, governmental authority,
bureau or agency (or any person acting under color of governmental authority);
(c) any claim of the Company against third parties (i) for past, present or
future infringement of any Intellectual Property or (ii) for past, present or
future infringement or dilution of any trademark or trademark license or for
injury to the goodwill associated with any trademark, trademark registration or
trademark licensed under any trademark License; (d) any recoveries by the
Company against third parties with respect to any litigation or dispute
concerning any Collateral, including claims arising out of the loss or
nonconformity of, interference with the use of, defects in, or infringement of
rights in, or damage to, Collateral; (e) all amounts collected on, or
distributed on account of, other Collateral, including dividends, interest,
distributions and Instruments with respect to Investment Property and pledged
Stock; and (f) any and all other amounts , rights to payment or other property
acquired upon the sale, lease, license, exchange or other disposition of
Collateral and all rights arising out of Collateral.
"Purchase Money Indebtedness" means (a) any indebtedness incurred for the
payment of all or any part of the purchase price of any fixed asset, including
but not limited to equipment., (b) any indebtedness incurred for the sole
purpose of financing or refinancing all or any part of the purchase price of any
fixed asset, and (c) any renewals, extensions or refinancings thereof (but not
any increases in the principal amounts thereof outstanding at that time).
"Purchase Money Lien" means any Lien upon any fixed assets that secures the
Purchase Money Indebtedness related thereto but only if such Lien shall at all
times be confined solely to the asset the purchase price of which was financed
or refinanced through the incurrence of the Purchase Money Indebtedness secured
by such Lien and only if such Lien secures only such Purchase Money
Indebtedness.
"Renewal Term" has the meaning set forth in Section 17.
"Revolving Credit Advances" shall have the meaning given to such term in
Section 2(a)(i).
"Securities" means the Note, and the shares of the Company's Common Stock
underlying the Note.
"Software" means all "software" as such term is defined in the UCC, now
owned or hereafter acquired by any Person, including all computer programs and
all supporting information provided in connection with a transaction related to
any program.
"Stock" means all certificated and uncertificated shares, options,
warrants, membership interests, general or limited partnership interests,
participation or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).
"Subsidiary" of any Person means a corporation or other entity whose shares
of stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Supporting Obligations" means all "supporting obligations" as such term is
defined in the UCC.
"Term" means, as applicable, the Initial Term and any Renewal Term.
"UCC" means the Uniform Commercial Code as the same may, from time be in
effect in the State of New York; provided, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Laurus' Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions of
this Agreement relating to such attachment, perfection, priority or remedies and
for purposes of definitions related to such provisions; provided further, that
to the extent that UCC is used to define any term herein or in any Ancillary
Agreement and such term is defined differently in different Articles or
Divisions of the UCC, the definition of such term contained in Article or
Division 9 shall govern.
46
EXHIBITS
--------
Exhibit 1(A) - Commercial Tort Claims
Exhibit 2 - Permitted Liens
Exhibit 7(c) - Actions for Perfection
Exhibit 7(p) - Bank Accounts
Exhibit 12(d) - Corporate Information and Locations of Collateral
Exhibit 12(i) - Licenses, Patents, Trademarks and Copyrights
Exhibit 13(e)(i) - Permitted Indebtedness
Exhibit 13(e)(ii) - Existing Subsidiaries
Exhibit A - Form of Borrowing Base Certificate
------
Exhibit 1(A)
------------
Commercial Tort Claims
----------------------
None
------
Exhibit 2
---------
Permitted Liens
---------------
The Company's assets are subject to the following security interests:
None
Exhibit 7(c)
------------
Actions for Perfection
----------------------
None
Exhibit 7(p)
-------------
Bank Accounts
-------------
First National Bank
▇▇▇ ▇▇▇▇ ▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
------
Exhibit 12 (d)
--------------
Name: SpaceDev, Inc.
Type: Corporation
Organizational Identification Number: 19961166285
State of Incorporation Colorado
Location of Chief Executive Office: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The location of our principal business office has not changed in the past
twelve (12) months.
------
Exhibit 12(i)
-------------
Licenses, Patents, Trademarks and Copyrights
Trademark: ExploreSpace
Parents: Various Patents Acquired from the former American Rocket Company
------
Exhibit 13(e)(i)
----------------
Permitted Indebtedness
----------------------
$475,000 in Related Party Convertible Notes
------
Exhibit 13(e)(ii)
-----------------
Existing Subsidiaries
---------------------
Integrated Space Systems
SpaceDev Australia, Ltd.
SpaceDev, Inc., an Oklahoma Corporation
------
Exhibit A
----------
Borrowing Base Certificate
--------------------------
SPACEDEV, INC.
BORROWING BASE
5/28/03
EXAMINER INELIGIBLE
(000)'S CALCULATION NOTES
-------------------------------------- ------------- -------------------------------------------------------------------
Accounts Receivable per 5/28/03 Aging $ 352,147 LENDING AGAINST EARNED BUT UNBILLED PORTION OF GOVERNMENT CONTRACTS
Ineligibles
Past Due accounts (> 90 days) 0
Cross-age (>50% past due) 0
Credit Balances > 90 days 0
Foreign Receivables 0
Government Receivables 0 GOVERNMENT CONTRACTS HAVE BEEN APPROVED AS COLLATERAL
Affiliated Company Receivables 0
Contra A/R 2,000 UC BERKLEY A/R OF $110M AND UCSD A/P BALANCE OF $2M
Total Ineligibles $ 2,000
Eligible Accounts Receivable $ 350,147
Proposed Advance Rate 85.0%
Available Accounts Receivable $ 297,625
Total Availability $ 297,625
Add Term Loan $ 0
Less Outstanding Revolver $ 0
Less Term Loan $ 0
Less Fees $ 0
Excess (Deficit) Availability $ 297,625
=============
LAURUS MASTER FUND, LTD.
and
SpaceDev, Inc.
Dated: May 30, 2003
1. (a) General Definitions . . . . . . . . . . . . . . . . . . . . . . 1
(b) Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . 1
2. Credit Advances.. . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Repayment of the Loans. . . . . . . . . . . . . . . . . . . . . . . 3
4. Procedure for Revolving Credit Advances . . . . . . . . . . . . . . 4
5. Interest and Payments.. . . . . . . . . . . . . . . . . . . . . . . 4
(a) Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. Security Interest.. . . . . . . . . . . . . . . . . . . . . . . . . 6
7. Representations, Warranties and Covenants Concerning the Collateral 7
8. Payment of Accounts.. . . . . . . . . . . . . . . . . . . . . . . . 9
9. Collection and Maintenance of Collateral. . . . . . . . . . . . . . 10
10. Inspections and Appraisals. . . . . . . . . . . . . . . . . . . . . 10
11. Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . 11
12. Additional Representations and Warranties . . . . . . . . . . . . . 11
13. Covenants. The Company covenants as follows: . . . . . . . . . . . 15
14. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 17
15. Representations and Warranties of Laurus. . . . . . . . . . . . . . 17
(a) Requisite Power and Authority . . . . . . . . . . . . . . . . . . . 17
(b) Investment Representations. . . . . . . . . . . . . . . . . . . . . 17
(c) Laurus Bears Economic Risk. . . . . . . . . . . . . . . . . . . . . 17
(d) Acquisition for Own Account . . . . . . . . . . . . . . . . . . . . 18
(e) Laurus Can Protect Its Interest . . . . . . . . . . . . . . . . . . 18
(f) Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . 18
16. Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . 18
17. Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 18
18. Termination of Lien . . . . . . . . . . . . . . . . . . . . . . . . 19
19. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 19
20. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
21. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
22. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
23. Assignment By Laurus. . . . . . . . . . . . . . . . . . . . . . . . 23
24. No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . 24
25. Application of Payments . . . . . . . . . . . . . . . . . . . . . . 24
26. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
27. Revival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
28. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
29. Governing Law, Jurisdiction and Waiver of Jury. . . . . . . . . . . 25
30. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . 26
31. Entire Understanding. . . . . . . . . . . . . . . . . . . . . . . . 27
32. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
33. Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
34. Counterparts; Telecopier Signatures . . . . . . . . . . . . . . . . 27
35. Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
36. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
