NOTE AND SECURITY AGREEMENT (SILICON VALLEY BANK PLEDGORS)
Exhibit
10.3 Form of
Note and Security Agreement dated as of January 15, 2010 between Braintech, Inc.
and each of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇.
(SILICON
VALLEY BANK PLEDGORS)
THIS NOTE AND SECURITY
AGREEMENT (this “Agreement”) dated as of
January 15, 2010 (the “Effective Date”) among (a)
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇
▇▇▇▇▇, and any other person listed in Exhibit
A (each, a “Pledgor,” and collectively,
“Pledgors”), and (b)
BRAINTECH, INC., a
Nevada corporation (“Braintech, Inc”), BRAINTECH INDUSTRIAL, INC., a
Delaware corporation (“Braintech Industrial”) and BRAINTECH GOVERNMENT & DEFENSE,
INC., a Delaware corporation (“Braintech Government”) (hereinafter,
Braintech, Inc., Braintech Industrial and Braintech Government are jointly and
severally, individually and collectively, referred to as “Borrower”), provides the terms
on which Pledgors shall lend to Borrower and Borrower shall repay
Pledgors. The parties agree as follows:
WHEREAS:
A. Borrower
has entered into a Loan and Security Agreement (Term Loan) dated as of October
30, 2009 (“Term Loan
Agreement”) with Silicon Valley Bank (“SVB”) for a term loan (“Term Loan”) of up to
$2,200,000.00.
B. Each
Pledgor has provided a Pledge (as defined hereinafter) to SVB as collateral
security to enable Borrower to receive extensions of credit under the Term
Loan.
C. Each
Pledgor has entered into a Subordination Agreement dated as of October 30, 2009
in favor of SVB, and either a Non-Recourse Letter of Credit Agreement or a
Non-Recourse Pledged Account Agreement dated as of October 30, 2009 in favor of
SVB.
D. Braintech
and each Pledgor have executed a Pledge and Stock Purchase Agreement of even
date herewith (“PSPA”).
Now
therefore, in consideration of the actions described in the above recitals and
the terms and conditions of this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
21. NOTE
AND TERMS OF PAYMENT
21.1 Note. Borrower
hereby issues this note (“Note”) to each Pledgor in the
amount indicated in Exhibit
A.
21.2 Promise to Pay. The
amount of a Pledge is deemed to be advanced to Borrower only in the event that
SVB draws on the Letter of Credit or takes funds from a Pledged Account (any
such draw on the Letter of Credit or such taking of funds from a Pledged
Account, a “Draw”). In such
event, (i) the Return shall be added to the amount of the Note of the affected
Pledgor, and (ii) Borrower hereby unconditionally promises to pay the affected
Pledgor the outstanding principal amount of his Note and the applicable
Return. By way of example and not limitation:
(i) If
SVB draws on the Letter of Credit in the amount of $100,000, a Return of $50,000
shall be added to the $750,000 face amount of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇’▇ Note, for a total
Note amount of $800,000.
(ii) If
SVB draws on the Letter of Credit in the amount of $750,000, a Return of
$375,000 shall be added to the $750,000 face amount of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇’▇ Note,
for a total Note amount of $1,125,000.
(iii) If
SVB takes $50,000 from a Pledged Account containing $100,000, a Return of
$25,000 shall be added to the $100,000 face amount of the applicable Pledgor’s
Note, for a total Note amount of $125,000.
(iv) If
SVB takes $100,000 from a Pledged Account containing $100,000, a Return of
$50,000 shall be added to the $100,000 face amount of the applicable Pledgor’s
Note, for a total Note amount of $150,000.
21.3 Interest. Interest
on the outstanding principal amount of a Note of the affected Pledgor and the
corresponding Return shall accrue from the date of a Draw on the Pledged Account
of such Pledgor, until such Draw and the corresponding Return is paid in
full. Interest shall accrue at the rate of eight percent (8%) per
annum payable monthly on the first business day of each month commencing the
month after the date of such Draw until such Draw and the corresponding Return
is repaid in full. In computing interest, the date of the Draw shall
be included and the date of payment shall be excluded. Interest shall
be computed on the basis of a 360-day year for the actual number of days
elapsed. For the avoidance of doubt, interest shall be paid only on
the face amount of the affected Pledgor’s Note and the corresponding Return, and
shall not be paid on any expenses or on any other amount so long as any such
expense or other amounts are promptly paid.
21.4 Repayment. Payment
of each Draw and the corresponding Return shall be due within 30 days of the
date of such Draw. Payment of the outstanding principal amount of
this Note, including any outstanding Returns, together with all accrued
interest, less the amount of any Pledge held in connection with a Pledged
Account that is released to the Pledgor by SVB, and any amount not drawn by SVB
under a Non-Recourse Letter of Credit Agreement upon its cancellation,
expiration or return by SVB to the issuing bank, shall be fully due and payable
upon the Maturity Date.
22. CREATION
OF SECURITY INTEREST
22.1 Grant of Security
Interest. Borrower hereby grants Pledgors, and each of them,
on a pari passu basis, to secure the payment and performance in full of all of
the Obligations, a continuing security interest in, and pledges to Pledgors, the
Collateral, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof.
22.2 Priority of Security
Interest. Borrower represents, warrants, and covenants that
the security interest granted herein is and shall at all times continue to be a
first priority perfected security interest in the Collateral (subject only to
Permitted Liens that may have superior priority to Pledgors’ Lien under this
Agreement). If Borrower shall acquire a commercial tort claim,
Borrower shall promptly notify Pledgors in a writing signed by Borrower of the
general details thereof and grant to Pledgors in such writing a security
interest therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance reasonably satisfactory
to Pledgors.
If this
Agreement is terminated, Pledgors’ Lien in the Collateral shall continue until
the Obligations (other than inchoate indemnity obligations) are repaid in full
in cash. Upon payment in full in cash of the Obligations, Pledgors
shall, at Borrower’s sole cost and expense, release its Liens in the Collateral
and all rights therein shall revert to Borrower.
22.3 Authorization to File Financing
Statements. Borrower hereby authorizes Pledgors to file
financing statements, without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Pledgors’ interest or rights hereunder,
including a notice that any disposition of the Collateral, by either Borrower or
any other Person, shall be deemed to violate the rights of Pledgors under the
Code. Such financing statements may indicate the Collateral as “all
assets of the Debtor” or words of similar effect, or as being of an equal or
lesser scope, or with greater detail, all in Pledgors’ discretion.
23. REPRESENTATIONS
AND WARRANTIES
Borrower represents and warrants as follows:
23.1 Due Organization and
Authorization. Except for Shafi, Inc. and Shafi Innovation,
Inc., Borrower and each of its Subsidiaries are duly existing and in good
standing as Registered Organizations in their respective jurisdictions of
formation and are qualified and licensed to do business and are in good standing
in any jurisdiction in which the conduct of their respective business or
ownership of property requires that they be qualified except where the failure
to do so could not reasonably be expected to have a material adverse effect on
Borrower’s business. In connection with this Agreement, Borrower has
delivered to Pledgors a completed certificate signed by Borrower (the
“Perfection Certificate”). Borrower represents and warrants to
Pledgors that (a) Borrower’s exact legal name is that indicated on the
Perfection Certificate and on the signature page hereof; (b) Borrower is an
organization of the type and is organized in the jurisdiction set forth in the
Perfection Certificate; (c) the Perfection Certificate accurately sets forth
Borrower’s organizational identification number or accurately states that
Borrower has none; (d) the Perfection Certificate accurately sets forth
Borrower’s place of business, or, if more than one, its chief executive office
as well as Borrower’s mailing address (if different than its chief executive
office); (e) Borrower (and each of its predecessors) has not, in the past
five (5) years, changed its jurisdiction of formation, organizational structure
or type, or any organizational number assigned by its jurisdiction; and (f) all
other information set forth on the Perfection Certificate pertaining to Borrower
and each of its Subsidiaries (except for Shafi, Inc. and Shafi Innovation, Inc.)
is accurate and complete (it being understood and agreed that Borrower may from
time to time update certain information in the Perfection Certificate after the
Effective Date to the extent permitted by one or more specific provisions in
this Agreement). If Borrower is not now a Registered Organization but
later becomes one, Borrower shall promptly notify Pledgors of such occurrence
and provide Pledgors with Borrower’s organizational identification
number.
The
execution, delivery and performance by Borrower of the Pledgor Loan Documents to
which it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any its Subsidiaries or any of their property or assets may be
bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect), or (v) constitute an event of default under any
material agreement by which Borrower is bound. Borrower is not in
default under any agreement to which it is a party or by which it is bound in
which the default could have a material adverse effect on Borrower’s business.
Concurrently with this Agreement and the other Pledgor Loan Documents, Borrower
will deliver to Pledgors a certificate of the Secretary of each Borrower with
respect to articles, bylaws, incumbency and resolutions adopted by such
Borrower’s board of directors authorizing the execution and delivery of this
Agreement and the other Pledgor Loan Documents to which such Borrower is a party
and the transactions contemplated thereby and certifying that (a) such
Person has the authority to execute, deliver, and perform its obligations under
each of the Pledgor Loan Documents to which it is a party, (b) that
attached as Exhibit A to such certificate is a true, correct, and complete copy
of the resolutions then in full force and effect authorizing and ratifying the
execution, delivery, and performance by such Person of the Pledgor Loan
Documents to which it is a party, (c) the name(s) of the Person(s) authorized to
execute the Pledgor Loan Documents on behalf of such Person, together with a
sample of the true signature(s) of such Person(s), and (d) that Pledgors
may conclusively rely on such certificate unless and until such Person shall
have delivered to Pledgors a further certificate canceling or amending such
prior certificate.
23.2 Collateral. Borrower
has good title, has rights in, and the power to transfer each item of the
Collateral upon which it purports to ▇▇▇▇▇ ▇ ▇▇▇▇ hereunder, free and clear of
any and all Liens except Permitted Liens. Borrower has no deposit
accounts other than the deposit accounts with SVB, the deposit accounts, if any,
described in the Perfection Certificate delivered to Pledgors in connection
herewith, or of which Borrower has given Pledgors notice and taken such actions
as are necessary to give Pledgors a perfected security interest
therein. The Accounts are bona fide, existing obligations of the
Account Debtors. All Inventory is in all material respects of good
and marketable quality, free from material defects.
The Collateral is not in the possession
of any third party bailee (such as a warehouse) except as otherwise provided in
the Perfection Certificate. None of the components of the Collateral
shall be maintained at locations other than as provided in the Perfection
Certificate or as permitted pursuant to Section 5.2. In the event
that Borrower, after the date hereof, intends to store or otherwise deliver any
portion of the Collateral to a bailee, then Borrower will first receive the
written consent of Pledgors and such bailee must execute and deliver a bailee
agreement in form and substance satisfactory to Pledgors in its sole
discretion.
Borrower is the sole owner of its
intellectual property, except for non-exclusive licenses granted to its
customers in the ordinary course of business. Each patent is valid
and enforceable, and no part of the intellectual property has been judged
invalid or unenforceable, in whole or in part, and to the best of Borrower’s
knowledge, no claim has been made that any part of the intellectual property
violates the rights of any third party except to the extent such claim could not
reasonably be expected to have a material adverse effect on Borrower’s
business. Except as noted on the Perfection Certificate, Borrower is
not a party to, nor is bound by, any material license or other agreement with
respect to which Borrower is the licensee (a) that prohibits or otherwise
restricts Borrower from granting a security interest in Borrower’s interest in
such license or agreement or any other property, or (b) for which a default
under or termination of could interfere with Pledgors’ right to sell any
Collateral. Without prior consent from Pledgors, Borrower shall not
enter into, or become bound by, any such license or agreement which is
reasonably likely to have a material impact on Borrower’s business or financial
condition. Borrower shall take such steps as Pledgors requests to
obtain the consent of, or waiver by, any person whose consent or waiver is
necessary for all such licenses or contract rights to be deemed “Collateral” and
for Pledgors to have a security interest in it that might otherwise be
restricted or prohibited by law or by the terms of any such license or
agreement, whether now existing or entered into in the future.
23.3 Litigation. Except
as set forth on the Perfection Certificate, there are no actions or proceedings
pending or, to the knowledge of Borrower’s Responsible Officers, threatened in
writing by or against Borrower or any Subsidiary in which an adverse decision
could reasonably be expected to cause a Material Adverse Change.
23.4 No Material Deterioration in
Financial Statements. All consolidated financial statements
for Borrower and any Subsidiaries delivered to Pledgors fairly present in all
material respects Borrower’s consolidated financial condition and Borrower’s
consolidated results of operations. There has not been any material
deterioration in Borrower’s consolidated financial condition since the date of
the most recent financial statements submitted to Pledgors.
23.5 Solvency. The fair
salable value of Borrower’s assets (including goodwill minus disposition costs)
exceeds the fair value of its liabilities; Borrower is not left with
unreasonably small capital after the transactions in this Agreement; and
Borrower is able to pay its debts (including trade debts) as they
mature.
23.6 Regulatory
Compliance. Borrower is not an “investment company” or a
company “controlled” by an “investment company” under the Investment Company Act
of 1940, as amended. Borrower is not engaged as one of its important
activities in extending credit for margin stock (under Regulations X, T and U of
the Federal Reserve Board of Governors). Neither Borrower nor any of
its Subsidiaries is a “holding company” or an “affiliate” of a “holding company”
or a “subsidiary company” of a “holding company” as each term is defined and
used in the Public Utility Holding Company Act of 2005. Borrower has
complied in all material respects with the Federal Fair Labor Standards
Act. Borrower has not violated any laws, ordinances or rules, the
violation of which could reasonably be expected to cause a Material Adverse
Change. None of Borrower’s or any Subsidiary’s properties or assets
has been used by Borrower or any Subsidiary or, to the best of Borrower’s
knowledge, by previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than legally. Borrower and
each of its Subsidiaries have obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all Government Authorities that are necessary to continue their respective
businesses as currently conducted.
23.7 Subsidiaries;
Investments. Except for Shafi, Inc. and Shafi Innovation,
Inc., Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
23.8 Tax Returns and Payments; Pension
Contributions. Except for Shafi, Inc. and Shafi Innovation,
Inc., Borrower and each Subsidiary have timely filed all required tax returns
and reports, and Borrower and each Subsidiary have timely paid all foreign,
federal, state and local taxes, assessments, deposits and contributions owed by
Borrower and each Subsidiary. Borrower may defer payment of any
contested taxes, provided that Borrower (a) in good faith contests its
obligation to pay the taxes by appropriate proceedings promptly and diligently
instituted and conducted, (b) notifies Pledgors in writing of the commencement
of, and any material development in, the proceedings, (c) posts bonds or takes
any other steps required to prevent the governmental authority levying such
contested taxes from obtaining a Lien upon any of the Collateral that is other
than a “Permitted Lien”. Borrower is unaware of any claims or
adjustments proposed for any of Borrower's prior tax years which could result in
additional taxes becoming due and payable by Borrower. Borrower has
paid all amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with respect to,
any such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.
23.9 Use of
Proceeds. Draws may only be made hereunder in the manner and
for the purposes described in Section 1.2 above and not for personal, family,
household or agricultural purposes.
23.10 Full Disclosure. No
written representation, warranty or other statement of Borrower in any
certificate or written statement given to Pledgors, as of the date such
representation, warranty, or other statement was made, taken together with all
such written certificates and written statements given to Pledgors, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading (it being recognized by Pledgors that projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are not
viewed as facts and that actual results during the period or periods covered by
such projections and forecasts may differ from the projected or forecasted
results).
23.11 Inactive
Subsidiary. Braintech Consumer & Service, Inc., Borrower’s
Subsidiary, does not and will not conduct any business or own any assets and
will remain an inactive entity. Pledgors hereby reserves the right to
require that such entity be joined as a co-borrower or guarantor in the future,
and Borrower hereby agrees to execute all documentation required by Pledgors in
connection with such joinder.
24. AFFIRMATIVE
COVENANTS
Borrower
shall do all of the following:
24.1 Government
Compliance. Except for Shafi, Inc. and Shafi Innovation, Inc.,
maintain its and all its Subsidiaries’ legal existence and good standing in
their respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
have a material adverse effect on Borrower’s business or
operations. Borrower shall comply, and have each Subsidiary comply,
with all laws, ordinances and regulations to which it is subject, noncompliance
with which could have a material adverse effect on Borrower’s
business.
24.2 Financial Statements, Reports,
Certificates. Deliver to Pledgors concurrently with the
delivery to SVB copies of all reporting, certificates and other information
delivered to SVB pursuant to Section 6.2 of the Term Loan
Agreement. In addition, upon request, Borrower’s CEO ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
shall provide a quarterly briefing/update to the Pledgors, either in person for
those who can attend or by conference call for those who cannot.
24.3 Taxes. Borrower
shall make, and cause each Subsidiary (except for Shafi, Inc. and Shafi
Innovation, Inc.) to make, timely payment of all federal, state, and local taxes
or assessments (other than taxes and assessments which Borrower is contesting in
good faith, with adequate reserves maintained in accordance with GAAP) and will
deliver to Pledgors, on demand, appropriate certificates attesting to such
payments.
24.4 Insurance. Keep its
business and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location, and as Pledgors may reasonably
request. Insurance policies shall be in a form, with companies, and
in amounts that are satisfactory to Pledgors. At Pledgors’ request,
Borrower shall deliver certified copies of policies and evidence of all premium
payments. If this Note is not fully paid after the earlier to occur
of (a) both (i) payment in full of all amounts due to SVB under Loan Documents
(as defined in the Term Loan Agreement) and (ii) termination of the Term Loan
Agreement and the Working Capital Loan Agreement, then all liability policies
shall show, or have endorsements showing Pledgors as an additional
insured. All policies (or the additional insured endorsements) shall
provide that the insurer must give Pledgors at least twenty (20) days notice
before canceling, amending, or declining to renew its
policy. Proceeds payable under any policy shall, at Pledgors’ option,
be payable to Pledgors on account of the Obligations. If Borrower
fails to obtain insurance as required under this Section 4.4 or to pay any
amount or furnish any required proof of payment to third persons and Pledgors,
Pledgors may make all or part of such payment or obtain such insurance policies
required in this Section 4.4, and take any action under the policies Pledgors
deem prudent.
24.5 Accounts. Borrower
shall identify to Pledgors, in writing, any deposit or securities account opened
by Borrower with any institution, including SVB. In addition, for
each such account and any other account that Borrower at any time opens or
maintains, Borrower shall, at Pledgors’ request and option, pursuant to an
agreement in form and substance acceptable to Pledgors, use reasonable best
efforts to cause SVB or the depository bank or securities intermediary, as
applicable, to agree that such account is the collateral of Pledgors pursuant to
the terms hereunder, which control agreement may not be terminated without the
prior written consent of Pledgors. The provisions of the previous
sentence shall not apply to deposit accounts exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of Borrower’s employees. Such control agreements shall be subject to
the terms of this Agreement and the Subordination Agreement between each Pledgor
and SVB.
24.6 Inventory;
Returns. Keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower
and its Account Debtors shall follow Borrower’s customary practices as they
exist at the Effective Date. Borrower must promptly notify Pledgors
of all returns, recoveries, disputes and claims that involve more than One
Hundred Thousand Dollars ($100,000.00).
24.7 Protection and Registration of
Intellectual Property Rights. Borrower shall: (a)
protect, defend and maintain the validity and enforceability of its intellectual
property; (b) promptly advise Pledgors in writing of material infringements of
its intellectual property; and (c) not allow any intellectual property material
to Borrower’s business to be abandoned, forfeited or dedicated to the public
without Pledgors’ written consent. If Borrower (i) obtains any
patent, registered trademark or servicemark, registered copyright, registered
mask work, or any pending application for any of the foregoing, whether as
owner, licensee or otherwise, or (ii) applies for any patent or the registration
of any trademark or servicemark, then Borrower shall promptly provide written
notice thereof to Pledgors and shall execute such intellectual property security
agreements and other documents and take such other actions as Pledgors shall
request in its good faith business judgment to perfect and maintain a first
priority perfected security interest in favor of Pledgors in such
property. If Borrower decides to register any copyrights or mask
works in the United States Copyright Office, Borrower shall: (x) provide
Pledgors with at least fifteen (15) days prior written notice of Borrower’s
intent to register such copyrights or mask works together with a copy of the
application it intends to file with the United States Copyright Office
(excluding exhibits thereto); (y) execute an intellectual property security
agreement and such other documents and take such other actions as Pledgors may
request in its good faith business judgment to perfect and maintain a first
priority perfected security interest in favor of Pledgors in the copyrights or
mask works intended to be registered with the United States Copyright Office;
and (z) record such intellectual property security agreement with the
United States Copyright Office contemporaneously with filing the copyright or
mask work application(s) with the United States Copyright
Office. Borrower shall promptly provide to Pledgors copies of all
applications that it files for patents or for the registration of trademarks,
servicemarks, copyrights or mask works, together with evidence of the recording
of the intellectual property security agreement necessary for Pledgors to
perfect and maintain a first priority perfected security interest in such
property. Each Borrower shall execute and deliver to Pledgors
concurrently with this Agreement an Intellectual Property Security Agreement in
substantially the form of the SVB IP Agreement given by each such Borrower to
SVB.
24.8 Litigation
Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Pledgors, without expense to
Pledgors, Borrower and its officers, employees and agents and Borrower's books
and records, to the extent that Pledgors may deem them reasonably necessary to
prosecute or defend any third-party suit or proceeding instituted by or against
Pledgors with respect to any Collateral or relating to Borrower.
24.9 Further
Assurances. Execute any further instruments and take further
action as Pledgors reasonably requests to perfect or continue Pledgors’ Lien in
the Collateral or to effect the purposes of this Agreement.
25. NEGATIVE
COVENANTS
Borrower
shall not do any of the following without the Pledgor Committee’s prior written
consent:
25.1 Dispositions. Convey,
sell, lease, transfer, assign, or otherwise dispose of (collectively a
“Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (a) of Inventory in the ordinary
course of business; (b) of worn-out or obsolete Equipment; and (c) in connection
with Permitted Liens and Permitted Investments.
25.2 Changes in Business, Ownership,
Management, or Business Locations. Engage in or permit any of
its Subsidiaries to engage in any business other than the businesses currently
engaged in by Borrower or reasonably related thereto, or have a material change
in its ownership (other than by the sale of Borrower’s equity securities in a
public offering or to venture capital investors so long as Borrower identifies
to Pledgors the venture capital investors prior to the closing of the
investment), or have a change in management such that any Key Person ceases to
hold such office with Borrower and a replacement reasonably satisfactory to
Pledgors is not made within ninety (90) days after such Key Person’s departure
from Borrower. Borrower shall not, without at least thirty (30) days
prior written notice to Pledgors: (a) relocate its chief executive office, or
add any new offices or business locations, including
warehouses (unless such new offices or business locations contain
less than Fifty Thousand Dollars ($50,000.00) in Borrower’s assets or property),
or (b) change its jurisdiction of organization, or (c) change its organizational
structure or type, or (d) change its legal name, or (e) change any
organizational number (if any) assigned by its jurisdiction of
organization.
25.3 Mergers or
Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person. A Subsidiary may merge
or consolidate into another Subsidiary or into Borrower.
25.4 Indebtedness. Create,
incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do
so, other than (a) Permitted Indebtedness, and (b) with respect to Shafi, Inc.
and Shafi Innovation, Inc., Indebtedness existing on the Effective Date and
disclosed on the Perfection Certificate.
25.5 Encumbrance. Create,
incur, allow, or suffer any Lien on any of its property, or assign or convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries to do so, except for (a) Permitted Liens and (b) with respect
to Shafi, Inc. and Shafi Innovation, Inc., Liens existing on the Effective Date
and disclosed on the Perfection Certificate, or permit any Collateral not to be
subject to the first priority security interest granted herein, or enter into
any agreement, document, instrument or other arrangement (except with or in
favor of Pledgors) with any Person which directly or indirectly prohibits or has
the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging,
pledging, granting a security interest in or upon, or encumbering any of
Borrower’s or any Subsidiary’s intellectual property, except as is otherwise
permitted in Section 5.1 hereof and the definition of “Permitted Liens”
herein.
25.6 Distributions;
Investments. (a) Directly or indirectly acquire or own any
Person, or make any Investment in any Person, other than Permitted Investments,
or permit any of its Subsidiaries to do so; or (b) pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital
stock.
25.7 Transactions with
Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower, except for
transactions that are in the ordinary course of Borrower’s business, upon fair
and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated
Person.
25.8 Compliance. Become
an “investment company” or a company controlled by an “investment company”,
under the Investment Company Act of 1940, as amended, or undertake as one of its
important activities extending credit to purchase or carry margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve
System), or use the proceeds of the Term Loan for that purpose; fail to meet the
minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, each as defined in ERISA, to occur; fail to comply with the Federal
Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or
permit any Subsidiary to withdraw from participation in, permit partial or
complete termination of, or permit the occurrence of any other event with
respect to, any present pension, profit sharing and deferred compensation plan
which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.
26. EVENTS
OF DEFAULT
Any one
of the following shall constitute an event of default (an “Event of Default”) under this
Agreement:
26.1 Default under Term Loan
Agreement. An Event of Default has occurred under the Term
Loan Agreement and such default has not been cured within any applicable cure
period under the Term Loan Agreement;
26.2 SVB Action on any
Pledge. SVB exercises any rights or remedies with respect to
any Pledge in connection with an Event of Default under the Term Loan
Agreement;
26.3 Breach. The
occurrence of a breach of Borrower’s obligations, covenants, representations or
warranties under this Agreement; or
26.4 Misrepresentations. Borrower
or any Person acting for Borrower makes any representation, warranty, or other
statement now or later in this Agreement, any Pledgor Loan Document or in
writing delivered to Pledgors or to induce Pledgors to enter this Agreement or
any Pledgor Loan Document, and such representation, warranty, or other statement
is incorrect in any material respect when made.
27. PLEDGORS’
RIGHTS AND REMEDIES
27.1 Rights and
Remedies. While an Event of Default occurs and continues
Pledgors may, without notice or demand, do any or all of the
following:
(i) declare
all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 of the Term Loan Agreement occurs all Obligations are
immediately due and payable without any action by Pledgors);
(ii) settle
or adjust disputes and claims directly with Account Debtors for amounts on terms
and in any order that Pledgors considers advisable, notify any Person owing
Borrower money of Pledgors’ security interest in such funds, and verify the
amount of such account;
(iii) make
any payments and do any acts it considers necessary or reasonable to protect the
Collateral and/or its security interest in the Collateral. Borrower
shall assemble the Collateral if Pledgors request and make it available as
Pledgors designates. Pledgors may enter premises where the Collateral
is located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrower grants Pledgors
a license to enter and occupy any of its premises, without charge, to exercise
any of Pledgors’ rights or remedies;
(iv) apply
to the Obligations (i) any balances and deposits of Borrower held by Pledgors,
or (ii) any amount held by Pledgors owing to or for the credit or the
account of Borrower;
(v) ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell the Collateral. Pledgors are hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name,
trade secrets, trade names, Trademarks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with
Pledgors’ exercise of their rights under this Section 7.1, Borrower’s rights
under all licenses and all franchise agreements inure to Pledgors’
benefit;
(vi) place
a “hold” on any account maintained with Pledgors and/or deliver a notice of
exclusive control, any entitlement order, or other directions or instructions
pursuant to any Control Agreement or similar agreements providing control of any
Collateral;
(vii) demand
and receive possession of Borrower’s Books; and
(viii) exercise
all rights and remedies available to Pledgors under the Pledgor Loan Documents
or at law or equity, including all remedies provided under the Code (including
disposal of the Collateral pursuant to the terms thereof).
27.2 Power of
Attorney. Borrower hereby irrevocably appoints the members of
the Pledgor Committee, and each of them, as its lawful attorney-in-fact,
exercisable upon the occurrence and during the continuance of an Event of
Default, to: (a) endorse Borrower’s name on any checks or other forms of payment
or security; (b) sign Borrower’s name on any invoice or ▇▇▇▇ of lading for any
Account or drafts against Account Debtors; (c) settle and adjust disputes and
claims about the Accounts directly with Account Debtors, for amounts and on
terms Pledgors determine reasonable; (d) make, settle, and adjust all claims
under Borrower’s insurance policies; (e) pay, contest or settle any Lien,
charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the name
of Pledgors or a third party as the Code permits. Borrower hereby
appoints the members of the Pledgor Committee, and each of them, as its lawful
attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of Pledgors’ security interest in the Collateral
regardless of whether an Event of Default has occurred until all Obligations
have been satisfied in full, SVB is under no further obligation to make advances
under the Term Loan Agreement, and SVB has released the Pledged Accounts and
returned the Letter(s) of Credit to the issuing bank(s) or the undrawn Letter(s)
of Credit has expired or been cancelled, as applicable. Pledgors’
foregoing appointment as Borrower’s attorney in fact, and all of Pledgors’
rights and powers, coupled with an interest, are irrevocable until all
Obligations have been fully repaid and performed, all amounts due under the Term
Loan Agreement have been repaid, and SVB’s obligation to make advances under the
Term Loan Agreement terminates.
27.3 Protective
Payments. If Borrower fails to obtain the insurance called for
by Section 4.4 or fails to pay any premium thereon or fails to pay any other
amount which Borrower is obligated to pay under this Agreement or any other
Pledgor Loan Document, Pledgors may obtain such insurance or make such payment,
and all amounts so paid by Pledgors are Pledgors Expenses and immediately due
and payable, bearing interest at the then highest rate applicable to the
Obligations, and secured by the Collateral. Pledgors will make
reasonable efforts to provide Borrower with notice of Pledgors obtaining such
insurance at the time it is obtained or within a reasonable time
thereafter. No payments by Pledgors are deemed an agreement to make
similar payments in the future or Pledgors’ waiver of any Event of
Default.
27.4 Application of Payments and Proceeds
Upon Default. If an Event of Default has occurred and is
continuing, Pledgors may apply any funds in their possession, whether from
Borrower account balances, payments, proceeds realized as the result of any
collection of Accounts or other disposition of the Collateral, or otherwise, to
the Obligations in such order as Pledgors shall determine in their sole
discretion. Any surplus shall be paid to Borrower or other Persons
legally entitled thereto; Borrower shall remain liable to Pledgors for any
deficiency. If Pledgors, in their good faith business judgment,
directly or indirectly enter into a deferred payment or other credit transaction
with any purchaser at any sale of Collateral, Pledgors shall have the option,
exercisable at any time, of either reducing the Obligations by the principal
amount of the purchase price or deferring the reduction of the Obligations until
the actual receipt by Pledgors of cash therefor.
27.5 Pledgors’ Liability for
Collateral. So long as Pledgors comply with reasonable secured
lender practices regarding the safekeeping of the Collateral in the possession
or under the control of Pledgors, Pledgors shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other
Person. Borrower bears all risk of loss, damage or destruction of the
Collateral.
27.6 No Waiver; Remedies
Cumulative. Pledgors’ failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement or any
other Pledgor Loan Document shall not waive, affect, or diminish any right of
Pledgors thereafter to demand strict performance and compliance herewith or
therewith. No waiver hereunder shall be effective unless signed by
the party granting the waiver and then is only effective for the specific
instance and purpose for which it is given. Pledgors’ rights and
remedies under this Agreement and the other Pledgor Loan Documents are
cumulative. Pledgors have all rights and remedies provided under the
Code, by law, or in equity. Pledgors’ exercise of one right or remedy
is not an election and shall not preclude Pledgors from exercising any other
remedy under this Agreement or other remedy available at law or in equity, and
Pledgors’ waiver of any Event of Default is not a continuing
waiver. Pledgors’ delay in exercising any remedy is not a waiver,
election, or acquiescence.
27.7 Demand
Waiver. Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Pledgors on which Borrower is
liable.
27.8 Borrower
Liability. Each Borrower hereby appoints the others as agent
for the other for all purposes hereunder. Each Borrower hereunder
shall be jointly and severally obligated to repay all Notes regardless of which
Borrower actually receives the benefit of the applicable Pledge as if each
Borrower hereunder directly received the benefit of all Pledges. Each
Borrower waives (a) any suretyship defenses available to it under the Code
or any other applicable law, and (b) any right to require Pledgors to: (i)
proceed against any Borrower or any other person; (ii) proceed against or
exhaust any security; or (iii) pursue any other remedy. Pledgors may
exercise or not exercise any right or remedy they have against any Borrower or
any security they hold (including the right to foreclose by judicial or
non-judicial sale) without affecting any Borrower’s liability.
Notwithstanding any other provision of this Agreement or other related document,
each Borrower irrevocably waives all rights that it may have at law or in equity
(including, without limitation, any law subrogating Borrower to the rights of
Pledgors under this Agreement) to seek contribution, indemnification or any
other form of reimbursement from any other Borrower, or any other Person now or
hereafter primarily or secondarily liable for any of the Obligations, for any
payment made by Borrower with respect to the Obligations in connection with this
Agreement or otherwise and all rights that it might have to benefit from, or to
participate in, any security for the Obligations as a result of any payment made
by Borrower with respect to the Obligations in connection with this Agreement or
otherwise. Any agreement providing for indemnification, reimbursement or
any other arrangement prohibited under this Section 7 shall be null and
void. If any payment is made to a Borrower in contravention of this
Section 7, such Borrower shall hold such payment in trust for Pledgors and such
payment shall be promptly delivered to Pledgors for application to the
Obligations, whether matured or unmatured.
28. NOTICES
All
notices, consents, requests, approvals, demands, or other communication by any
party to this Agreement or any other Pledgor Loan Document must be in writing
and shall be deemed to have been validly served, given, or delivered: (a) upon
the earlier of actual receipt and three (3) Business Days after deposit in the
U.S. mail, first class, registered or certified mail return receipt requested,
with proper postage prepaid; (b) upon transmission, when sent by electronic mail
or facsimile transmission; (c) one (1) Business Day after deposit with a
reputable overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below. Pledgors or Borrower may change their respective mailing or
electronic mail address or facsimile number by giving the other party written
notice thereof in accordance with the terms of this Section 8.
Braintech
Industrial, Inc.
Braintech Government & Defense,
Inc.
▇▇▇▇ ▇▇▇▇▇’▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
If to
Pledgors: Pledgor
Committee
▇▇▇▇ ▇▇▇▇▇’▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇
▇▇▇▇▇▇, Chairman
Fax: ▇▇▇-▇▇▇-▇▇▇▇
29. CHOICE
OF LAW, VENUE, JURY TRIAL WAIVER, AND JUDICIAL REFERENCE
Nevada
law governs this Agreement and the other Pledgor Loan Documents without regard
to principles of conflicts of law. Borrower and Pledgors each submit
to the exclusive jurisdiction of the State and Federal courts in Las Vegas,
Nevada; provided, however, that nothing in this Agreement shall be deemed to
operate to preclude Pledgors from bringing suit or taking other legal action in
any other jurisdiction to realize on the Collateral or any other security for
the Obligations, or to enforce a judgment or other court order in favor of
Pledgors. Borrower expressly submits and consents in advance to such
jurisdiction in any action or suit commenced in any such court, and Borrower
hereby waives any objection that it may have based upon lack of personal
jurisdiction, improper venue, or forum non conveniens and hereby consents to the
granting of such legal or equitable relief as is deemed appropriate by such
court. Borrower hereby waives personal service of the summons,
complaints, and other process issued in such action or suit and agrees that
service of such summons, complaints, and other process may be made by registered
or certified mail addressed to Borrower at the address set forth in Section 8 of
this Agreement and that service so made shall be deemed completed upon the
earlier to occur of Borrower’s actual receipt thereof or three (3) days after
deposit in the U.S. mails, proper postage prepaid.
BORROWER AND PLEDGORS EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS
COUNSEL.
30. GENERAL
PROVISIONS
30.1 Successors and
Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. Borrower may not
assign this Agreement or any rights or obligations under it without Pledgors’
prior written consent (which may be granted or withheld in Pledgors’
discretion). Pledgors has the right, without the consent of or notice
to Borrower, to sell, transfer, assign, negotiate, or grant participation in all
or any part of, or any interest in, Pledgors’ obligations, rights, and benefits
under this Agreement and the other Loan Documents.
30.2 Indemnification. Borrower
agrees to indemnify, defend and hold each of the Pledgors, or any other Person
affiliated with or representing Pledgors (each, an “Indemnified Person”) harmless
against: (a) all obligations, demands, claims, and liabilities
(collectively, “Claims”)
claimed or asserted by any other party in connection with the transactions
contemplated by the Pledgor Loan Documents; and (b) all losses or expenses
(including Pledgors Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising
from transactions between Pledgors and Borrower (including reasonable attorneys’
fees and expenses), except for Claims and/or losses directly caused by such
Indemnified Person’s gross negligence or willful misconduct.
30.3 Time of
Essence. Time is of the essence for the performance of all
Obligations in this Agreement.
30.4 Severability of
Provisions. Each provision of this Agreement is severable from
every other provision in determining the enforceability of any
provision.
30.5 Amendments in Writing; Waiver;
Integration. No purported amendment or modification of this
Agreement, or waiver, discharge or termination of any obligation under this
Agreement, shall be enforceable or admissible unless, and only to the extent,
expressly set forth in a writing signed by the party against which enforcement
or admission is sought. Without limiting the generality of the
foregoing, no oral promise or statement, nor any action, inaction, delay,
failure to require performance or course of conduct shall operate as, or
evidence, an amendment, supplement or waiver or have any other effect on this
Agreement. Any waiver granted shall be limited to the specific
circumstance expressly described in it, and shall not apply to any subsequent or
other circumstance, whether similar or dissimilar, or give rise to, or evidence,
any obligation or commitment to grant any further waiver. This
Agreement, together with the Pledgor Loan Documents and the other documents
described herein, represents the entire agreement about this subject matter and
supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the other Pledgor Loan Documents.
30.6 Counterparts. This
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, is an
original, and all taken together, constitute one Agreement.
30.7 Survival. All
covenants, representations and warranties made in this Agreement continue in
full force until this Agreement has terminated pursuant to its terms and all
Obligations (other than inchoate indemnity obligations and any other obligations
which, by their terms, are to survive the termination of this Agreement) have
been paid in full and satisfied. The obligation of Borrower in
Section 10.2 to indemnify Pledgors shall survive until the statute of
limitations with respect to such claim or cause of action shall have
run.
30.8 Confidentiality. In
handling any confidential information, Pledgors shall exercise the same degree
of care that they exercise for their own proprietary information, but disclosure
of information may be made: (a) as required by law, regulation, subpoena,
or other order; (b) to Pledgors’ regulators or as otherwise required in
connection with Pledgors’ examination or audit; (c) as Pledgors consider
appropriate in exercising remedies under this Agreement; and (d) to third-party
service providers of Pledgors so long as such service providers have executed a
confidentiality agreement with Pledgors with terms no less restrictive than
those contained herein. Confidential information does not include
information that is either: (i) in the public domain or in Pledgors’
possession when disclosed to Pledgors, or becomes part of the public domain
after disclosure to Pledgors; or (ii) disclosed to Pledgors by a third party if
Pledgors does not know that the third party is prohibited from disclosing the
information.
30.9 Attorneys’ Fees, Costs and
Expenses. In any action or proceeding between Borrower and
Pledgors arising out of or relating to the Pledgor Loan Documents, the
prevailing party shall be entitled to recover its reasonable attorneys’ fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled.
30.10 Right of Set
Off. Borrower hereby grants to Pledgors, a lien, security
interest and right of set off as security for all Obligations to Pledgors,
whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Pledgors or any entity under the control of Pledgors
(including a Pledgors subsidiary) or in transit to any of them. At
any time after the occurrence and during the continuance of an Event of Default,
without demand or notice, Pledgors may set off the same or any part thereof and
apply the same to any liability or obligation of Borrower even though unmatured
and regardless of the adequacy of any other collateral securing the
Obligations. ANY AND ALL RIGHTS TO REQUIRE PLEDGORS TO EXERCISE THEIR
RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE
OBLIGATIONS, PRIOR TO EXERCISING THEIR RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
30.11 Electronic Execution of
Documents. The words “execution,” “signed,” “signature” and
words of like import in any Pledgor Loan Document shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of
which shall be of the same legal effect, validity and enforceability as a
manually executed signature or the use of a paper-based recordkeeping systems,
as the case may be, to the extent and as provided for in any applicable law,
including, without limitation, any state law based on the Uniform Electronic
Transactions Act.
30.12 Captions. The
headings used in this Agreement are for convenience only and shall not affect
the interpretation of this Agreement.
30.13 Construction of
Agreement. The parties mutually acknowledge that they and
their attorneys have participated in the preparation and negotiation of this
Agreement. In cases of uncertainty this Agreement shall be construed
without regard to which of the parties caused the uncertainty to
exist.
30.14 Relationship. The
relationship of the parties to this Agreement is determined solely by the
provisions of this Agreement. The parties do not intend to create any
agency, partnership, joint venture, trust, fiduciary or other relationship with
duties or incidents different from those of parties to an arm’s-length
contract.
30.15 Third
Parties. Nothing in this Agreement, whether express or
implied, is intended to: (a) confer any benefits, rights or remedies under or by
reason of this Agreement on any persons other than the express parties to it and
their respective permitted successors and assigns; (b) relieve or discharge the
obligation or liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.
31. DEFINITIONS
31.1 Definitions. As
used in the Pledgor Loan Documents, the word “shall” is mandatory, the word
“may” is permissive, the word “or” is not exclusive, the words “includes” and
“including” are not limiting, the singular includes the plural, and numbers
denoting amounts that are set off in brackets are negative. As used
in this Agreement, the following capitalized terms have the following
meanings:
“Account” is any “account” as
defined in the Code with such additions to such term as may hereafter be made,
and includes, without limitation, all accounts receivable and other sums owing
to Borrower.
“Account Debtor” is any
“account debtor” as defined in the Code with such additions to such term as may
hereafter be made.
“Affiliate” is, with respect to
any Person, each other Person that owns or controls directly or indirectly the
Person, any Person that controls or is controlled by or is under common control
with the Person, and each of that Person’s senior executive officers, directors,
partners and, for any Person that is a limited liability company, that Person’s
managers and members.
“Agreement” is defined in the
preamble hereof.
“Borrower” is defined in the
preamble hereof.
“Borrower’s Books” are all
Borrower’s books and records including ledgers, federal and state tax returns,
records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or any
equipment containing such information.
“Business Day” is any day that
is not a Saturday, Sunday or a day on which Pledgors is closed.
“Code” is the Uniform
Commercial Code, as the same may, from time to time, be enacted and in effect in
the State of Nevada; provided, that, to the extent that the Code is used to
define any term herein or in any Pledgor Loan Document and such term is defined
differently in different Articles or Divisions of the Code, the definition of
such term contained in Article or Division 9 shall govern; provided further,
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,
Pledgors’ Lien on any Collateral is governed by the Uniform Commercial Code in
effect in a jurisdiction other than the State ofNevada, the term “Code” shall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction solely for
purposes of the provisions thereof relating to such attachment, perfection,
priority, or remedies and for purposes of definitions relating to such
provisions.
“Collateral” is any and all
properties, rights and assets of Borrower described on Exhibit
B.
“Collateral Account” is any
Deposit Account, Securities Account, or Commodity Account.
“Commodity Account” is any
“commodity account” as defined in the Code with such additions to such term as
may hereafter be made.
“Contingent Obligation” is, for
any Person, any direct or indirect liability, contingent or not, of that Person
for (a) any indebtedness, lease, dividend, letter of credit or other obligation
of another such as an obligation, in each case, directly or indirectly
guaranteed, endorsed, co-made, discounted or sold with recourse by that Person,
or for which that Person is directly or indirectly liable; (b) any obligations
for undrawn letters of credit for the account of that Person; and (c) all
obligations from any interest rate, currency or commodity swap agreement,
interest rate cap or collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; but “Contingent Obligation” does not include
endorsements in the ordinary course of business. The amount of a
Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
any guarantee or other support arrangement.
“Control Agreement” is any
control agreement entered into among the depository institution at which
Borrower maintains a Deposit Account or the securities intermediary or commodity
intermediary at which Borrower maintains a Securities Account or a Commodity
Account, Borrower, and Pledgors pursuant to which Pledgors obtain control
(within the meaning of the Code) over such Deposit Account, Securities Account,
or Commodity Account.
“Deposit Account” is any
“deposit account” as defined in the Code with such additions to such term as may
hereafter be made.
“Dollars,” “dollars” or use of the sign
“$” means only lawful
money of the United States and not any other currency, regardless of whether
that currency uses the “$” sign to denote its currency or may be readily
converted into lawful money of the United States.
“Draw” is defined in Section
1.2.
“Effective Date” is defined in
the preamble hereof.
“Equipment” is all “equipment”
as defined in the Code with such additions to such term as may hereafter be
made, and includes without limitation all machinery, fixtures, goods, vehicles
(including motor vehicles and trailers), and any interest in any of the
foregoing.
“ERISA” is the Employee
Retirement Income Security Act of 1974, and its regulations.
“Event of Default” is defined
in Section 6.
“Exchange Act” is the
Securities Exchange Act of 1934, as amended.
“GAAP” is generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other Person as may be
approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.
“Governmental Approval” is any
consent, authorization, approval, order, license, franchise, permit,
certificate, accreditation, registration, filing or notice, of, issued by, from
or to, or other act by or in respect of, any Governmental
Authority.
“Governmental Authority” is any
nation or government, any state or other political subdivision thereof, any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative functions of or pertaining to government, any securities exchange
and any self-regulatory organization.
“Guarantor” is any present or future
guarantor of the Obligations. For the avoidance of doubt, the
Pledgors are not Guarantors.
“Indebtedness” is (a)
indebtedness for borrowed money or the deferred price of property or services,
such as reimbursement and other obligations for surety bonds and letters of
credit, (b) obligations evidenced by notes, bonds, debentures or similar
instruments, (c) capital lease obligations, and (d) Contingent
Obligations.
“Indemnified Person” is defined
in Section 10.2.
“Insolvency Proceeding” is any
proceeding by or against any Person under the United States Bankruptcy Code, or
any other bankruptcy or insolvency law, including assignments for the benefit of
creditors, compositions, extensions generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
“Intellectual Property
Collateral” is defined in the SVB IP Agreement.
“Intellectual Property Security
Agreement” is (a) that certain Intellectual Property Security Agreement
dated as of the Effective Date between Pledgors and Braintech, Inc., (b) that
certain Intellectual Property Security Agreement dated as of the Effective Date
between Pledgors and Braintech Industrial, and (c) that certain Intellectual
Property Security Agreement dated as of the Effective Date between Pledgors and
Braintech Government as described in Section 4.7.
“Inventory” is all “inventory”
as defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process
and finished products, including without limitation such inventory as is
temporarily out of Borrower’s custody or possession or in transit and including
any returned goods and any documents of title representing any of the
above.
“Investment” is any beneficial
ownership interest in any Person (including stock, partnership interest or other
securities), and any loan, advance or capital contribution to any
Person.
“Key Person” is either of
Borrower’s Chief Executive Officer or Chief Financial Officer.
“Letter of Credit” is that
certain letter of credit from ▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
“Lien” is a claim, mortgage,
deed of trust, levy, charge, pledge, security interest or other encumbrance of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise against any property.
“Majority Pledgors” is defined
in the PSPA.
“Material Adverse Change” is
(a) a material impairment in the perfection or priority of Pledgors’ Lien in the
Collateral or in the value of such Collateral; (b) a material adverse change in
the business, operations, or condition (financial or otherwise) of Borrower; (c)
a material impairment of the prospect of repayment of any portion of the
Obligations; or (d)
Pledgors determine, based upon information available to them and in their
reasonable judgment, that there is a reasonable likelihood that Borrower shall
fail to comply with one or more of the financial covenants in the Term Loan
Agreement during the next succeeding financial reporting period.
“Maturity Date” is the first
date upon which all of the following have occurred: (i) termination
of the Term Loan, (ii) release of all of the Pledged Accounts provided by
Pledgors to SVB (to the extent any funds remain in such Pledged Accounts), and
(iii) expiration, cancellation or return by SVB of the undrawn Non-Recourse
Letter(s) of Credit to the issuing bank(s) (to the extent any amounts remain
undrawn).
“Obligations” are Borrower’s
obligations to pay when due any debts, principal, interest, Pledgors Expenses
and other amounts Borrower owes Pledgors now or later, whether under this
Agreement, the other Pledgor Loan Documents or otherwise, including, without
limitation, any interest accruing after Insolvency Proceedings begin and debts,
liabilities or obligations of Borrower assigned to Pledgors, and to perform
Borrower’s duties under the Pledgor Loan Documents.
“Perfection Certificate” is
defined in Section 3.1.
“Permitted Indebtedness”
is:
(a) Indebtedness
to SVB under the Term Loan Agreement, the Working Capital Loan Agreement, or the
SVB Loan Documents;
(b) Indebtedness
incurred in the ordinary course of business;
(c) With
respect to Shafi, Inc. and Shafi Innovation, Inc., Indebtedness existing on the
Effective Date and disclosed on the Perfection Certificate; and
(d) Indebtedness
secured by Permitted Liens; and.
(e) Indebtedness
created under the Pledgor Loan Documents.
“Permitted Investments” are:
(i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any state maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard &
Poor’s Corporation or ▇▇▇▇▇’▇ Investors Service, Inc., (iii) Pledgors’
certificates of deposit issued maturing no more than 1 year after issue, (iv)
any other investments administered through Pledgors, and (v) investments made on
or prior to December 31, 2010 in Braintech Canada, Inc. for the ordinary and
necessary current operating expenses of such entity in an aggregate amount not
to exceed (a) Two Hundred Thousand Dollars ($200,000.00) from September 1, 2009
through and including December 31, 2009, and (b) One Hundred Thousand Dollars
($100,000.00) from January 1, 2010 through and including December 31,
2010.
“Permitted Liens”
are:
(a) Liens
arising under this Agreement or other Pledgor Loan Documents;
(b) Liens
in favor of SVB;
(c) Liens
for taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains
adequate reserves on its Books, if they have no priority over any of Pledgors’
security interests;
(d) Purchase
money Liens securing no more than One Hundred Thousand Dollars ($100,000.00) in
the aggregate amount outstanding (i) on equipment acquired or held by Borrower
incurred for financing the acquisition of the equipment, or (ii) existing
on equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the
equipment;
(e) Leases
or subleases and non-exclusive licenses or sublicenses granted in the ordinary
course of Borrower’s business, if the leases,
subleases, licenses and sublicenses permit granting Pledgors a security
interest;
(f) With
respect to Shafi, Inc. and Shafi Innovation, Inc., Liens existing on the
Effective Date and disclosed on the Perfection Certificate; and
(g) Liens
incurred in the extension, renewal or refinancing of the indebtedness secured by
Liens described in (a) through (f), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not
increase.
“Person” is any individual,
sole proprietorship, partnership, limited liability company, joint venture,
company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.
“Pledge(s)” are the Pledged
Accounts and the Letter of Credit.
“Pledged Accounts” are those
certain money market accounts pledged to SVB by (a) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, (b) ▇▇▇▇▇
▇▇▇▇▇, (c) ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and (d) ▇▇▇▇▇ ▇▇▇▇▇.
“Pledgor” is defined in the
preamble hereof.
“Pledgor Committee” is defined
in the PSPA.
“Pledgor Loan Documents” are,
collectively, this Agreement, the PSPA, the Perfection Certificate, the
Intellectual Property Security Agreement, any subordination agreements, any
note, or notes or guaranties executed by Borrower or any Guarantor for the
benefit of Pledgors, and any other present or future agreement between Borrower,
any Guarantor and the Pledgors in connection with this Agreement, all as
amended, restated, or otherwise modified.
“Pledgors Expenses” are all
initial and ongoing expenses relating to the establishment, transfer and/or
ongoing maintenance of the Pledges.
“PSPA” is defined in Recital
D. .
“Registered Organization” is
any “registered organization” as defined in the Code with such additions to such
term as may hereafter be made.
“Requirement of Law” is as to
any Person, the organizational or governing documents of such Person, and any
law (statutory or common), treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
“Responsible Officer” is any of
the Chief Executive Officer, President, Chief Financial Officer, Controller and
Manager of Accounting of Borrower.
“Return” is an additional
amount to be added to the amount of this Note in the event SVB takes any part of
a Pledged Account or draws on the Letter of Credit, which additional amount
shall be equal to fifty percent (50%) of the part of such Pledged Account taken
by SVB or fifty percent (50%) of the draw on the Letter of Credit.
“Securities Account” is any
“securities account” as defined in the Code with such additions to such term as
may hereafter be made.
“▇▇▇▇▇▇ Parties” is ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Ventures LLC.
“Subsidiary” is, as to any
Person, a corporation, partnership, limited liability company or other entity of
which shares of stock or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity are
at the time owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by such
Person. Unless the context otherwise requires, each reference to a
Subsidiary herein shall be a reference to a Subsidiary of Borrower.
“SVB” is defined in the
preamble hereof.
“SVB IP Agreement” is (a) that
certain Intellectual Property Security Agreement dated as of the Effective Date
between SVB and Braintech, Inc., (b) that certain Intellectual Property Security
Agreement dated as of the Effective Date between SVB and Braintech Industrial,
and (c) that certain Intellectual Property Security Agreement dated as of the
Effective Date between SVB and Braintech Government.
“SVB Loan Documents” are,
collectively, the Term Loan Agreement, the Working Capital Loan Agreement, the
SVB perfection certificate, the SVB IP Agreements, any subordination agreements,
any note, or notes or guaranties executed by Borrower or any guarantor as
defined in the Term Loan Agreement or the Working Capital Agreement, and any
other present or future agreement between Borrower any guarantor entity and/or
for the benefit of SVB in connection with the Term Loan Agreement, all as
amended, restated, or otherwise modified.
“Term Loan” is defined in the
recitals hereof.
“Term Loan Agreement” is
defined in the recitals hereof.
“Transfer” is defined in
Section 5.1.
“Working Capital Loan
Agreement” is that certain Loan and Security Agreement (Accounts
Receivable Line of Credit) between Borrower and SVB dated as of the Effective
Date, together with all documents delivered in connection therewith, as amended
from time to time.
[Signature page follows.]
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as a sealed instrument
under the laws of the State of Nevada as of the Effective Date.
BORROWER:
BRAINTECH,
INC.
By:_________________________________________
Name:______________________________________
Title:_______________________________________
BRAINTECH
INDUSTRIAL, INC.
By:_________________________________________
Name:______________________________________
Title:_______________________________________
BRAINTECH
GOVERNMENT & DEFENSE, INC.
By:_________________________________________
Name:______________________________________
Title:_______________________________________
PLEDGOR: __________________________________
(signature)
Name:______________________________________
EXHIBIT A –
PLEDGORS
EXHIBIT B – COLLATERAL
DESCRIPTION
The
Collateral consists of all of Borrower’s right, title and interest in and to the
following personal property:
All
goods, equipment, inventory, contract rights or rights to payment of money,
leases, license agreements, franchise agreements, general intangibles (including
payment intangibles) accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and
any copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work, whether published or
unpublished, now owned or later acquired; any patents, trademarks, service marks
and applications therefor; trade styles, trade names, any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing; and
All
Borrower’s books relating to the foregoing and any and all claims, rights and
interests in any of the above and all substitutions for, additions, attachments,
accessories, accessions and improvements to and replacements , products,
proceeds and insurance proceeds of any or all of the foregoing.