PROMISSORY NOTE AND SECURITY AGREEMENT by Vuzix Corp
Company: Vuzix Corp
SEC CIK: 1463972
SEC Type: EX-10.1
SIC Code: 3577
SIC Industry: COMPUTER PERIPHERAL EQUIPMENT, NEC
Date Filed: 2012-05-24
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
THIS NOTE IS
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AND OTHER PROVISIONS AS SET FORTH HEREIN.
|$500,000||May 19, 2012|
|New York, New York|
PROMISSORY NOTE AND SECURITY AGREEMENT
For value received, and on the terms and subject to the conditions set forth herein, VUZIX CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay LC CAPITAL MASTER FUND, LTD., a Cayman Islands corporation (the "Lender"), on the Termination Date (as hereinafter defined) the principal sum of Five Hundred Thousand Dollars ($500,000) (the "Loan") or, if less, the aggregate unpaid principal amount of the Advances from time to time outstanding made available by the Lender to the Borrower pursuant to this promissory note and security agreement (this "Note"). The Borrower hereby promises to pay interest on the unpaid principal amount of the Loan on the dates and at the rates provided for in this Note.
Section 1. Certain Terms Defined. The following terms for all purposes of this Note shall have the respective meanings specified below.
"Advance" shall have the meaning set forth in Section 3.
"Additional Percentage" means (i) zero percent (0%) on and after the Closing Date but prior to the three month anniversary of the Closing Date or (ii) five percent (5%) on and after the three month anniversary of the Closing Date.
"Agreed Interest Rate" means a rate per annum equal to the sum of (a) ten percent (10%) plus (b) the Additional Percentage.]
"Applicable Law" shall mean any Law of any Authority, including, without limitation, all national, Federal, state and local banking or securities laws, to which the person in question is subject or by which it or any of its material property is bound.
"Authority" shall mean any governmental or quasi-governmental authority, whether executive, legislative, judicial, administrative or other, or any combination thereof, including, without limitation, any national, Federal, state, local, territorial, county, municipal or other government or governmental or quasi-governmental agency, arbitrator, board, body, branch, bureau, commission, corporation, court, department, instrumentality, master, mediator, panel, referee, system or other political unit or subdivision or other entity of any of the foregoing, whether domestic or foreign.
"Availability Period" shall mean the period commencing the date hereof and ending on the earlier of (i) the Termination Date or (ii) June 15, 2012.
"Borrower" shall have the meaning set forth in the preamble.
"Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized by law to close.
"Closing Date" means the date of this Note.
"Collateral" means the assets, tangible and intangible, as set forth from time to time on Schedule 1.
"Dollars" or "$" means the legal currency of the United States of America.
"Drawdown Notice" shall have the meaning set forth in Section 3.
"Existing LC Loan Agreement" means that certain loan and security agreement dated as of December 23, 2010, as amended from time to time (as so amended and as the same may be further amended, restated, supplemented, modified, renamed, extended or refinanced from time to time in accordance with its provisions) by and among the Borrower, as borrower, the Lender, as lender.
"Indemnified Party" shall have the meaning set forth in Section 18.
"Law" shall mean any law, rule, regulation or official code, consent decree, constitution, decree, directive, enactment, guideline, injunction, interpretation, judgment, order, ordinance, policy statement, proclamation, promulgation, requirement, rule of law, rule of public policy, settlement agreement, statute, or writ.
"Lender" shall have the meaning set forth in the preamble.
"Loan" shall have the meaning set forth in the preamble.
"Person" means and includes any natural person, individual, partnership, joint venture, corporation, trust, limited liability company, limited company, joint stock company, unincorporated organization, government entity or any political subdivision or agency thereof, or any other entity.
"Prepayment Date" shall have the meaning set forth in Section 5.
"Subsidiary" means any Person (i) which is directly or indirectly controlled by the Borrower, (ii) in which the Borrower owns, directly or indirectly, at least fifty percent (50.0%) of the share capital, or (iii) which is a Subsidiary of a company described in clause (i) or (ii) above. As used in this definition of "Subsidiary", the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a company, whether through ownership of voting securities, by contract, or otherwise.
"Termination Date" means the earlier of (i) the declaration of an Event of Default and acceleration of the Loan pursuant to Section 11 hereof and (ii) November 15, 2012 (or if such day is not a Business Day, then the next succeeding Business Day).
"Transaction Documents" means this Note and any other documents that may be executed as security for the Loan and the Borrower's obligations in connection therewith.
Section 2. Conditions to Lending.
The obligation of the Lender to make the Loan and any Advance thereunder available to the Borrower under this Note shall be expressly subject to the following conditions precedent:
(a) Corporate Documents. The Lender shall have received such evidence as it may reasonably require as to the authority of the officers or attorneys-in-fact executing the Transaction Documents including, but not limited to, the following:
|(i)||a certificate of the Borrower, certifying as true and complete as of the date hereof the constitutional documents of the Borrower, in such form and substance as the Lender shall reasonably require;|
|(ii)||a copy, certified as true and complete by an officer of the Borrower of the resolutions of its board of directors evidencing approval of the Transaction Documents and authorizing an appropriate officer or officers or attorney-in-fact or attorneys-in-fact to execute the same on its behalf;|
|(iii)||a copy, certified as true and complete by an officer of the Borrower of all documents evidencing any other necessary action, approvals or consents for the Transaction Documents; and|
|(iv)||all such other agreements, instruments, documents and certificates (including a certificate of good standing) of the Borrower as the Lender deems necessary or advisable.|
(b) The Note. The Borrower shall have duly executed and delivered this Note to the Lender.
(c) Drawdown Notice. The Lender shall have received a Drawdown Notice in accordance with the terms of Section 3.
(d) Uniform Commercial Code Searches and Filings. The Lender shall have received copies of all Uniform Commercial Code searches as it shall deem necessary and the Borrower and Guarantor shall have agreed to the filing of all such Uniform Commercial Code Financing Statements (Form UCC-1) and other security recordation documents as the Lender shall require.
Section 3. The Loan.
On the terms and subject to the conditions of this Note, the Lender hereby agrees that it may, at its sole discretion, make Five Hundred Thousand Dollars ($500,000) of the Loan available to the Borrower in multiple advances, each in an amount of no less than One Hundred Thousand Dollars ($100,000) (other than the final advance, which may be in an amount of less than $100,000 if there is less than $100,000 available to be borrowed under this Note) (each, an "Advance"), for working capital purposes; provided, however, that the Borrower shall not request any Advance if the amount of such Advance when aggregated with the principal amount of all other Advances under the Loan then outstanding would exceed Five Hundred Thousand Dollars ($500,000).
The Borrower shall during the Availability Period, in respect of all Advances, provide the Lender with written notice (the "Drawdown Notice"), at least three (3) Business Days prior to the date of the proposed Advance. Each Drawdown Notice shall specify (a) the date of the proposed borrowing (which shall be a Business Day) and (b) the disbursement instructions for the proceeds of such Advance. Each Drawdown Notice shall be effective upon receipt by the Lender and shall be irrevocable. In addition, the Borrower shall not be permitted to provide more than one (1) Drawdown Notice in any seven day period.
The Loan shall mature, and the principal amount thereof shall become immediately due and payable (together with interest accrued thereon), on the Termination Date.
Section 4. Interest and Principal.
The unpaid principal amount of the Loan, consisting of Advances made to or at the request of Borrower, shall bear interest on each such Advance from the time it is made, at the Agreed Interest Rate. Interest shall be paid on the Termination Date or, if applicable, such earlier date that is the Prepayment Date. Interest shall be computed on the basis of a year of 365 days and paid for the actual number of days elapsed (including the first day but excluding the last day). The Lender shall keep the official records relating to the Advances and payments under the Loan.
Any overdue principal of or interest on the Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Agreed Interest Rate plus three percent (3%).
The outstanding principal balance of the Loan, any interest accrued thereon and any outstanding fees, expenses or charges, shall be payable on the Termination Date.
It is the intent of the parties that the rate of interest and other charges to the Borrower under this Note shall be lawful; therefore, if for any reason the interest or other charges payable under this Note are found by a court of competent jurisdiction, in a final determination, to exceed the limit which Lender may lawfully charge the Borrower, then the obligation to pay interest and other charges shall automatically be reduced to such limit and, if any amount in excess of such limit shall have been paid, then such amount shall be refunded to the Borrower.
Section 5. Optional Prepayments.
The Borrower may prepay the Loan in whole, but not in part, at any time without penalty by paying the entire outstanding principal amount together with interest accrued thereon to the date of prepayment (the "Prepayment Date").
Section 6. General Provisions as to Payments.
All payments of principal of and interest on the Loan by the Borrower hereunder shall be made not later than 12:00 Noon (New York City time) on the date when due by cashier's check or by wire transfer of immediately available funds to the Lender's account or accounts at a bank or banks in the United States specified by the Lender in writing to the Borrower promptly after Borrower's request therefor, without reduction by reason of any set-off or counterclaim.
Section 7. Taxation.
All payments in respect of or relating to this Note by Borrower shall be made without withholding or deduction for, or on account of, any