Amendedand Restated SENIOR SUBORDINATED CONVERTIBLE LOAN AND SECURITY AGREEMENT

EX-10.37 2 v434973_ex10-37.htm EXHIBIT 10.37

 

Exhibit 10.37

 

Execution Copy

 

Amended and Restated SENIOR SUBORDINATED CONVERTIBLE
LOAN AND SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED SENIOR SUBORDINATED CONVERTIBLE LOAN AND SECURITY AGREEMENT (this “Agreement”) is made and entered into as of the 28^th day of March, 2016 by and between Blonder Tongue Laboratories, Inc., a Delaware corporation (the “Company”), R.L. Drake Holdings, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“Drake” and, collectively with the Company, “Borrower”), Robert J. Pallé (“RJP”) and Carol M. Pallé (collectively, “Initial Lenders”), Steven L. Shea, and James H. Williams, and such other Persons who may from time to time become party hereto as lenders (collectively, the “Supplemental Lenders”; and together with the Initial Lenders, collectively, the “Lenders”), and Robert J. Pallé, as Agent for the Lenders (in such capacity, the “Agent”).

 

BACKGROUND

 

A.           Borrower and Initial Lenders are party to that certain Senior Subordinated Convertible Loan and Security Agreement dated as of February 11, 2016 (the “Existing Agreement”).

 

B.           The Parties hereto desire to make certain modifications to the credit accommodations provided under the Existing Agreement, including an increase in the Term Loan facility currently provided for under the Existing Agreement and the appointment of RJP as Agent for the benefit of all Lenders, and in furtherance thereof, desire to amend and restate the Existing Agreement and memorialize their further agreements all as more particularly set forth herein.

 

C.           It is the intention of the parties hereto that the execution and delivery of this Agreement shall not (except as specifically set forth herein) impair, modify, or otherwise abrogate any of the rights and obligations of any party to any of the other Loan Documents and references to the “Agreement” contained in any of the other Loan Documents shall mean and refer to the Existing Agreement as amended and restated by this Agreement and all obligations of Borrower to Initial Lenders as of the date hereof shall mean and refer to and constitute obligations of Borrower to Lenders hereunder and to Agent, for the benefit of all Lenders, including, without limitation, the Initial Advance of $200,000 made to Borrower by Initial Lenders under the Existing Agreement which, as more particularly set forth in Section 2.1 hereof, shall constitute a portion of the Tranche A Term Loan hereunder.

 

D.           Capitalized terms used herein will have the meanings set forth therefor in Section 1 of this Agreement.

 

NOW, THEREFORE, in consideration of the terms and conditions contained herein, and of any extensions of credit now or hereafter made to or for the benefit of Borrower by Lender, the parties hereto, intending to be legally bound hereby, agree as follows:

 

1.          DEFINITIONS.

 

1.1           Defined Terms. The following words and phrases as used in capitalized form in this Agreement, whether in the singular or plural, shall have the meanings indicated:

 

(a)          “Accreted Principal Amount” means, at any time, the outstanding principal amount of the Term Loan, including the aggregate amount of all Advances as well as all PIK Interest added thereto.

 

(b)          “Additional Shares of Common Stock” shall be as defined in Section 4.4(e)(ii).

 

(c)          “Advance” means any extension of credit by Lenders (or any of them) to Borrower under Section 2.1 of this Agreement.

 

(d)          “Advance Request” shall be as defined in Section 2.3.

 

 

(e)          “Affiliate” as to any Person, means (i) each other Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person in question and (ii) any person who is an officer, director, member, manager or partner of (A) such Person, (B) any Subsidiary of such Person, or (C) any Person described in the preceding clause (i).

 

(f)          “Agent” means RJP, in his capacity as Agent hereunder for Initial Lenders and the other Lenders.

 

(g)          “Aggregate Tranche A Commitments” means, at any time, the combined Tranche A Commitments of all Tranche A Lenders, all as more particularly set forth on Schedule 1.1 hereof.

 

(h)          “Aggregate Tranche B Commitments” means, at any time, the combined Tranche B Commitments of all Tranche B Lenders, all as more particularly set forth on Schedule 1.1 hereof.

 

(i)          “Aggregate Tranche C Commitments” means, at any time, the combined Tranche C Commitments of all Tranche C Lenders, all as more particularly set forth on Schedule 1.1 hereof.

 

(j)          “Basic Interest Rate” shall be as defined in Section 3.1.

 

(k)          “Borrower” means the Company and Drake, both individually and collectively (as applicable), and shall include all permitted successors and assigns of such Persons.

 

(l)          “Business Day” means any day except a Saturday, Sunday or other day on which money center commercial banks located in New York, New York are authorized by law to close.

 

(m)          “Cash Interest” shall be as defined in Section 4.1.

 

(n)          “Collateral” shall be as defined in Section 5.3.

 

(o)          “Commitment” means, as to each Lender as of any date of determination, such Lender’s Tranche A Commitment, Tranche B Commitment or Tranche C Commitment.

 

(p)          “Commitment Percentage” means, as to each Lender, a fractional amount expressed as a percentage, the numerator of which is the amount of such Lender’s Commitment and the denominator of which is the aggregate Commitments of all Lenders.

 

(q)          “Commitments” means, at any time, the sum of, the Aggregate Tranche A Commitments, the Aggregate Tranche B Commitments and the Aggregate Tranche C Commitments. As of the date hereof, the aggregate Commitments are $750,000.

 

(r)          “Common Stock” shall be as defined in Section 4.4(a).

 

(s)          “Company” shall have the meaning given such term in the introductory paragraph of this Agreement and shall include all permitted successors and assigns of such Person.

 

(t)          “Contingent Convertible Portion” shall be as defined in Section 4.4(b).

 

(u)          “Contract Period” means the period of time commencing on the date hereof and continuing through and including the Final Maturity Date, subject to acceleration as provided herein following any Event of Default.

 

(v)         “Conversion Date” shall be as defined in Section 4.4(a).

 

(w)          “Corporation” means a corporation, partnership, limited liability company, trust, unincorporated organization, association, joint stock company or joint venture.

 

 

(x)          “Default” means any event which with the giving of notice, passage of time or both, could constitute an Event of Default.

 

(y)          “Drake” shall have the meaning given such term in the introductory paragraph of this Agreement and shall include all permitted successors and assigns of such Person.

 

(z)          “Effective Date” means the date that Agent receives an original (or faxed or electronic copy) of (i) this Agreement, duly authorized, executed and delivered by Borrower, Agent and Lenders; (ii) the Mortgage; (iii) the Subordination Agreement; and (iv) a UCC-3 Amendment naming Agent as the secured party with respect to any UCC heretofore filed by the Initial Lenders, and such date shall be the date set forth on the first page of this Agreement.

 

(aa)         “Effective Price” shall be as defined in Section 4.4(e)(ii).

 

(bb)         “Event of Default” means each of the events specified in Section 9.1.

 

(cc)         “Existing Obligations” shall mean all “Obligations” owing by Borrower under, and as such quoted term is defined in, the Existing Agreement immediately prior to the effectiveness of this Agreement.

 

(dd)         “Final Maturity Date” shall be as defined in Section 4.2.

 

(ee)         “GAAP” means generally accepted accounting principles in the United States of America, in effect from time to time, consistently applied and maintained.

 

(ff)          “IL Conversion Price” shall mean $0.54 per share of Common Stock, subject to adjustment as contemplated by Section 4.4(e).

 

(gg)         “Indebtedness”, as applied to a Person, means:

 

(i)          all items (except items of capital stock or of surplus) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date as of which Indebtedness is to be determined;

 

(ii)         to the extent not included in the foregoing, all indebtedness, obligations, and liabilities secured by any mortgage, pledge, lien, conditional sale or other title retention agreement or other security interest to which any property or asset owned or held by such Person is subject, whether or not the indebtedness, obligations or liabilities secured thereby shall have been assumed by such Person; and

 

(iii)        to the extent not included in the foregoing, all indebtedness, obligations and liabilities of others which such Person has directly or indirectly guaranteed, endorsed (other than for collection or deposit in the ordinary course of business), sold with recourse, or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable.

 

(hh)         “Interest Payment Date” shall be as defined in Section 4.1.

 

(ii)         “Initial Advance” means $200,000, comprised of the sum of the Advances by the Initial Lenders to Borrower of (i) $100,000 on December 24, 2015, plus (ii) $100,000 on February 11, 2016, all of which constitutes a portion of the Tranche A Term Loan.

 

(jj)         “Lender Indebtedness” means all Indebtedness of Borrower to Agent and Lenders, whether now or hereafter owing or existing, including, without limitation, all obligations under the Loan Documents, all other obligations or undertakings now or hereafter made by or for the benefit of Borrower to or for the benefit of Agent or Lenders under any other agreement, promissory note or undertaking now existing or hereafter entered into by Borrower with Agent or Lenders, together with all interest and other sums payable in connection with any of the foregoing.

 

 

(kk)         “Lender Parties” means, individually and collectively, Agent and Lenders

 

(ll)         “Lenders” shall have the meaning given such term in the introductory paragraph of this Agreement and shall include all permitted successors and assigns of such Person(s).

 

(mm)         “Loan Documents” means this Agreement, the Subordination Agreement, the Mortgage and all other documents, executed or delivered by Borrower or any other Person pursuant to this Agreement or in connection herewith, as they may be amended, modified or restated from time to time.

 

(nn)         “Mortgage” means that certain Amended and Restated Mortgage and Security Agreement, dated on or about the date of this Agreement, between the Company and Agent, granting to Agent, for the benefit of Lenders, a mortgage lien on the Mortgaged Property.

 

(oo)         “Mortgaged Property” means and refers to the premises situate at One Jake Brown Road, Old Bridge NJ 08857 and all improvements thereon and all rights, licenses, permits and approvals relating thereto, together with an assignment of all rents and leases related thereto.

 

(pp)         “Notice of Conversion” shall be as defined in Section 4.4(a).

 

(qq)         “NYSE MKT Threshold” shall be as defined in Section 4.4(b).

 

(rr)         “Percentage Share” means, with respect to each Lender, such Lender’s Percentage Share of the Tranche A Term Loan, the Tranche B Tem Loan or the Tranche C Term Loan, as the case may be, as set forth on Schedule 1.1 hereto

 

(ss)         “Person” means an individual, a Corporation or a government or any agency or subdivision thereof, or any other entity.

 

(tt)         “PIK Interest” shall be as defined in Section 4.1.

 

(uu)         “Pro Rata Percentage” means, as to each Lender, a fraction, expressed as a percentage, the numerator of which is the principal amount of the Advances then owed to such Lender hereunder and the denominator of which is the principal amount of Advances then owed to all Lenders hereunder, as reflected by Agent’s records).

 

(vv)         “Required Lenders” means (i) those Lenders holding at least eighty-one percent (81%) of the total Commitments or (ii) in the event that the Commitments of the Lenders hereunder have terminated, those Lenders holding at least eighty-one percent (81%) of the outstanding principal amount of the Term Loan outstanding hereunder, as reflected by Agent’s records; except, that, if RJP resigns as an officer of Company or is removed as an officer of the Company by the Company’s Board of Directors for cause, Required Lenders shall mean either (i) all of the Supplemental Lenders, or (ii) the Initial Lenders and at least one Supplemental Lender.

 

(ww)         “Requested Advance Date” shall be as defined in Section 2.3.

 

(xx)        “RJP Termination Date” shall be as defined in Section 16.9(b).

 

(yy)         “Santander” means Santander Bank, N.A.

 

(zz)         “Santander Credit Agreement” means the Revolving Credit, Term Loan and Security Agreement dated August 6, 2008 between Borrower and Santander, as amended.

 

 

(aaa)        “Senior Indebtedness” means (i) the Indebtedness of Borrower and/or one or more of Borrower’s Affiliates owed to Santander under the Santander Credit Agreement, (ii) any Indebtedness of Borrower and/or one or more of Borrower’s Affiliates that may arise under, out of, or in connection with any obligation of any of such entities to commercial lenders for money advanced to any of such entities and (iii) any renewal, replacement or refinancing of any of the foregoing, in each case whether or not such Indebtedness is expressly subordinated hereto.

 

(bbb)        “Senior Indebtedness Debt Cap” means the sum of (a) the aggregate principal amount of Senior Indebtedness (including the undrawn or unreimbursed amount of all letters of credit constituting Senior Indebtedness up to the sum of Six Million Dollars ($6,000,000) plus (b) the amount of all overadvances by the holder of Senior Indebtedness, up to $1,000,000; plus (c) 85% of all Eligible Receivables, plus (d) 50% of all Eligible Inventory (as such terms are defined in the Santander Credit Agreement or any subsequent credit agreement memorializing Senior Indebtedness) acquired in connection with any acquisition by Borrower of the assets of a person that is not a Borrower; plus (e) amounts in respect of accrued, unpaid interest, fees and expenses attributable to the items described in clauses (a) through (d) above.

 

(ccc)        “SL Conversion Price” shall mean $0.54]¹ per share of Common Stock, subject to adjustment as contemplated by Section 4.4(e)

 

(ddd)        “Subordination Agreement” means the Amended and Restated Subordination Agreement dated on or about the date hereof between Agent (for itself and on behalf of all Lenders) and Santander or between Agent and any subsequent holder of Senior Indebtedness.

 

(eee)        “Subsidiary” means a corporation or limited liability company (i) which is organized under the laws of the United States or any State thereof, or any other county or jurisdiction, (ii) which conducts substantially all of its business and has substantially all of its assets within the United States and (iii) of which more than fifty percent (50%) of its outstanding voting stock of every class (or other voting equity interest) is owned by Borrower or one or more of its Subsidiaries.

 

(fff)        “Supplemental Interest” means cash interest at the rate of five percent (5%) per annum, paid in addition to the Base Rate Interest on the outstanding amount of the applicable Lender’s Commitment Percentage of the Contingent Convertible Portion of the Term Loan, in accordance with Section 3.1.

 

(ggg)        “Supplemental Interest Commencement Date”, shall be as defined in Section 4.4(b).

 

(hhh)        “Term Loan” means, collectively, the Tranche A Term Loan, the Tranche B Term Loan and the Tranche C Tem Loan.

 

(iii)        “Tranche A Commitment” means the Tranche A Commitment of each Tranche A Lender as set forth on Schedule 1.1 hereto.

 

(jjj)        “Tranche A Lenders” means each Lender with a Tranche A Commitment as set forth on Schedule 1.1 hereto.

 

(kkk)        “Tranche A Term Loan” shall be as defined in Section 2.1.

 

(lll)        “Tranche B Commitment” means the Tranche B Commitment of each Tranche B Lender as set forth on Schedule 1.1 hereto.

 

 

¹ The SL Conversion Price has been determined based on the greater of (a) 110% of the average closing price of the Common Stock on the NYSE MKT during the ten trading days ended on the earlier of (i) the business day immediately preceding the date the Supplemental Lenders’ agreement to provide the financing pursuant to this agreement is publicly announced and (ii) the business day immediately preceding the date of closing, and (b) fifty four cents ($0.54).

 

 

(mmm)        “Tranche B Lenders” means each Lender with a Tranche B Commitment as set forth on Schedule 1.1 hereto.

 

(nnn)        “Tranche B Term Loan” shall be as defined in Section 2.1.

 

(ooo)        “Tranche C Commitment” means the Tranche C Commitment of each Tranche C Lender as set forth on Schedule 1.1 hereto.

 

(ppp)        “Tranche C Lenders” means each Lender with a Tranche C Commitment as set forth on Schedule 1.1 hereto.

 

(qqq)        “Tranche C Term Loan” shall be as defined in Section 2.1.

 

(rrr)        “Undrawn Tranche A Availability” means, as of any date of measurement, an amount equal to (i) $300,000, minus (ii) the aggregate principal amount of all Tranche A Loans which have been made as of such date. As of the Effective Date, the Undrawn Tranche A Availability is $0.00.

 

(sss)        “Undrawn Tranche B Availability” means, as of any date of measurement, an amount equal to (i) $200,000, minus (ii) the aggregate principal amount of all Tranche B Loans which have been made as of such date. As of the Effective Date, the Undrawn Tranche B Availability is $200,000.

 

(ttt)        “Undrawn Tranche C Availability” means, as of any date of measurement, an amount equal to (i) $250,000, minus (ii) the aggregate principal amount of all Tranche C Loans which have been made as of such date. As of the Effective Date, the Undrawn Tranche C Availability is $250,000.

 

1.2           Accounting Terms. As used in this Agreement, or any certificate, report or other document made or delivered pursuant to this Agreement, accounting terms not defined elsewhere in this Agreement shall have the respective meanings given to them under GAAP.

 

1.3           UCC Terms. All terms used herein and defined in the Uniform Commercial Code as in effect in the State of Delaware from time to time shall have the meanings given therein unless otherwise defined herein.

 

2.          THE TERM LOAN; USE OF PROCEEDS.

 

2.1           Term Loan.

 

(a)          Agent and Lenders will establish for Borrower, during the Contract Period and subject to the terms and conditions hereof, a convertible, delayed draw term loan facility consisting of (i) a term loan in the principal amount of $300,000 (“Tranche A Term Loan”), which Tranche A Term Loan has heretofore been funded in full by the Initial Lenders in their Percentage Share under the Existing Agreement and constitutes Lender Indebtedness hereunder, which is due and owing by Borrower as of the date hereof without offset, defense or counterclaim, (ii) a delayed draw term loan in the principal amount of $200,000 (“Tranche B Term Loan”), which Tranche B Term Loan shall be made in accordance with Section 2.1(b), and (iii) a delayed draw term loan in the aggregate principal amount of $250,000 (“Tranche C Term Loan”), which Tranche C Term Loan shall be made in accordance with Section 2.1(c). The Term Loan is not a revolving loan, so that if Borrower repays all or any portion of the Term Loan at any time, such amount so repaid may not be re-borrowed. The Term Loan shall be subject to all terms and conditions set forth in all of the Loan Documents, which terms and conditions are incorporated herein. Notwithstanding anything to the contrary contained in this Section 2.1, no Lender will be required or have any obligation to make any extensions of credit hereunder if a Default then exists or could reasonably be expected to result by virtue of the making thereof. Notwithstanding anything to the contrary contained herein, in no event shall Lenders be obligated to make to Borrower, or Borrower be entitled to borrow or receive from Lenders, any loans, advances or extensions of credit hereunder other than the Term Loan.

 

 

(b)          Since as of the Effective Date the Undrawn Tranche A Availability is $0, Borrower shall have the right from time to time, at any time during the Contract Period, to request that Tranche B Lenders make Advances under the Tranche B Term Loan to Borrower in an amount not to exceed the then Undrawn Tranche B Availability. In connection with such request, each Tranche B Lender agrees severally (not jointly and not jointly and severally) to make, in accordance with Section 2.3 below, a Tranche B Term Loan to Borrower in an amount equal to such Lender’s Percentage Share of such request.

 

(c)          At any time during the Contract Period, when the Undrawn Tranche B Availability is $0, Borrower shall have the right, from time to time, to request that Tranche C Lenders make Advances under the Tranche C Term Loan to Borrower in an amount not to exceed the then Undrawn Tranche C Availability. In connection with each such request, each Tranche C Lender agrees severally (not jointly and not jointly and severally) to make, in accordance with Section 2.3 below, a Tranche C Term Loan to Borrower in an amount equal to such Lender’s Percentage Share of such Advance request.

 

2.2           Use of Proceeds. Borrower agrees to use Advances under the Term Loan for working capital and general corporate purposes.

 

2.3           Method of Advances. On any Business Day, Borrower may request an Advance by delivering to Agent a written request therefor (each an “Advance Request”), which Advance Request may be submitted by the Chief Financial Officer of the Company, subject to the prior approval of the Chief Executive Officer of the Company; provided, however, if (a) the Chief Executive Officer is unavailable for a period of more than 24 hours from the time an Advance Request is proposed to be delivered by the Chief Financial Officer or (b) the Chief Executive Officer determines not to approve an Advance Request proposed to be delivered by the Chief Financial Officer, then under either of such circumstances, the Advance Request proposed by the Chief Financial Officer may be presented to the Board of Directors of the Company for its consideration and approval (either at a meeting or by consent in writing of a majority of the Board), which, if given, would supersede any failure of approval or disapproval by the Chief Executive Officer. Each such request shall specify (i) the amount of the requested Advance, which shall be at least $50,000.00 or, if less, the current amount of Undrawn Availability, and (ii) the date (the “Requested Advance Date”) upon which Borrower desires Lenders to fund the Advance, which date shall be at least one (1) Business Day subsequent to Agent’s receipt of the Advance Request. Any Advance Request made after 1:00 p.m. on any Business Day shall be deemed to be made on the next following Business Day. Following Agent’s receipt of an Advance Request, Agent will make the requested Advance on the Requested Advance Date, by transferring immediately available funds via wire transfer or ACH transfer to an account previously designated to Agent in writing by Borrower.

 

3.          INTEREST.

 

3.1           Interest Rate. Interest on outstanding Advances will accrue from the date of advance until final payment (or conversion, as contemplated by Section 4.4 below) thereof, at the rate of twelve percent (12%) per annum (the “Basic Interest Rate”), which interest may be paid as Cash Interest or as PIK Interest, in the discretion of Borrower, as more fully contemplated by Section 4.1 below. For purposes of clarification, PIK Interest at the Basic Interest Rate shall be deemed to have commenced accruing on (i) each of the individual Advances comprising the Initial Advance, on the date of each such Advance, (ii) the Advance in the amount of $50,000 made on February 23, 2016, as of the date of such Advance, and (iii) the Advance in the amount of $50,000 made on February 25, 2016, as of the date of such Advance. If following receipt by the Company of a Notice of Conversion by any Lender with respect to such Lender’s Commitment Percentage of the Contingent Convertible Portion of the Term Loan, conversion thereof into Common Stock has not occurred on or prior to the Supplemental Interest Commencement Date, then Supplemental Interest will accrue on the outstanding Contingent Convertible portion of such Lender’s Term Loan from the Supplemental Interest Commencement Date until final payment (or conversion, as contemplated by Section 4.4 below) thereof, as more fully contemplated by Section 4.1 below. Interest will be computed on the basis of a year of 360 days and paid for the actual number of days elapsed.

 

 

3.2           Limitation of Interest to Maximum Lawful Rate. In no event will the rate of interest payable hereunder exceed the maximum rate of interest permitted to be charged by applicable law (including the choice of law rules) and any interest paid in excess of the permitted rate will be refunded to Borrower. Such refund will be made by application of the excessive amount of interest paid against any sums outstanding hereunder and will be applied in such order as Agent may determine. If the excessive amount of interest paid exceeds the sums outstanding, the portion exceeding the sums outstanding will be refunded in cash by Agent, for the account of Lenders. Any such crediting or refunding will not cure or waive any default by Borrower. Borrower agrees, however, that in determining whether or not any interest payable hereunder exceeds the highest rate permitted by law, any non-principal payment, including without limitation prepayment fees and late charges, will be deemed to the extent permitted by law to be an expense, fee, premium or penalty rather than interest.

 

4.          PAYMENTS AND CONVERSION.

 

4.1           Interest Payments. Accrued interest shall be due and payable monthly in arrears on the first day of each calendar month (an “Interest Payment Date”) commencing on the first day of the first calendar month following the date of the Initial Advance to Borrower hereunder. Interest will be payable in-kind (“PIK Interest”) on the Accreted Principal Amount of the Term Loan by the automatic increase of the principal amount of the Term Loan on each Interest Payment Date by the amount of accrued interest payable at that time. Notwithstanding the foregoing, at the option of Borrower, Borrower may pay interest in cash (“Cash Interest”) on any one or more Interest Payment Dates in lieu of PIK Interest. Supplemental Interest if due and payable, shall be due and payable monthly in arrears on each Interest Payment Date commencing on the Supplemental Interest Commencement Date.

 

4.2           Principal Payments. If not paid earlier (or converted into Common Stock as contemplated by Section 4.4), Borrower will pay the entire Accreted Principal Amount of the Term Loan, and any other sums due pursuant to the terms hereof, on the third anniversary of the date of this Agreement (the “Final Maturity Date”).

 

4.3           Prepayment. Borrower may prepay all or any part of the amounts due on the Term Loan at any time without any premium or penalty, following delivery of not less than five (5) Business Days prior written notice to Agent. All prepayments will be applied on a pro rata basis against the then outstanding balance of the respective Term Loans of the Lenders.

 

4.4           Conversion by Lenders.

 

(a)          Subject to Section 4.4(b) below, each of the Lenders may, at any time, convert all but not less than all (unless prior written consent of Borrower is obtained), of the Accreted Principal Amount of such Lender’s Term Loan plus any accrued and unpaid interest (but in no event in excess of such Lender’s Commitment Percentage of the NYSE MKT Threshold) into shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”) at the IL Conversion Price, in the case of conversion by the Initial Lenders, and at the SL Conversion Price in the case of conversion by any of the Supplemental Lenders, in each case, subject to adjustment as provided below, by delivering written notice thereof to the Company. Such notice of conversion or any subsequent notice of conversion (each, a “Notice of Conversion”) shall be irrevocable once given and shall specify the amount of the applicable Lender’s Term Loan intended to be converted. The Company shall effect such conversion as promptly as practicable following its receipt of such Notice of Conversion (such date the “Conversion Date”) and interest on the portion of the Term Loan so converted shall cease to accrue on such Conversion Date.

 

(b)          Notwithstanding anything herein to the contrary, initially each Lender’s conversion rights under this Section 4.4 shall be limited to such Lender’s Commitment Percentage of the lesser of (i) such number of shares of Common Stock as equals less than 20% of all presently outstanding Common Stock, as contemplated by Section 713(a) of the NYSE MKT Rules or (ii) the maximum number of shares of Common Stock that will not cause the ownership of the Company by any or all Lenders to reach or exceed the “change in control” threshold amount under Section 713(b) of the NYSE MKT Rules, as amended from time to time, in each case, so long as such Rules continue to be applicable to the Company (the “NYSE MKT Threshold”). The Company will, at its sole cost and expense, include within the agenda for its annual meeting of stockholders to be held in 2016, a proposal for stockholder approval of the transactions contemplated by this Agreement, including the conversion of the entire amount of the Term Loan (including, without limitation, the portion of the outstanding Term Loan that would cause the ownership of the Company by Lenders to exceed the NYSE MKT Threshold (the “Contingent Convertible Portion”)) into shares of Common Stock at the IL Conversion Price and/or the SL Conversion Price, as applicable. If the Company is unable to obtain stockholder approval or otherwise take alternative steps necessary to permit conversion of a Lender’s Commitment Percentage of the Contingent Convertible Portion within fifteen (15) Business Days after the later of (i) the date of such annual meeting of stockholders, or (ii) the date on which such Lender delivers a Notice of Conversion with respect to such Lender’s Commitment Percentage of the Contingent Convertible Portion of the Term Loan to the Company (the “Supplemental Interest Commencement Date”), then the Company will be required to pay to such Lender so providing a Notice of Conversion, Supplemental Interest on such Lender’s Commitment Percentage of the Contingent Convertible Portion of the Term Loan as provided in Section 3.1 above.

 

 

(c)          The Company covenants and agrees that the shares of Common Stock that may be issued upon the exercise of any Lender’s conversion rights hereunder will, upon issuance, be validly issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the time that principal or interest is owed pursuant to this Agreement, have authorized and reserved, free from preemptive rights, a sufficient number of shares of its Common Stock to provide for the conversion rights set forth herein. If at any time while Lenders have conversion rights hereunder, the number of authorized but unissued shares of Common Stock shall not be sufficient to permit conversion of amounts owed hereunder, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

 

(d)          Upon a conversion hereunder, the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, and in lieu of any fractional shares which would otherwise be issuable, the Company shall issue the next lowest whole number of shares of Common Stock.

 

(e)          (i)          In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, splits, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the IL Conversion Price and the SL Conversion Price shall be correspondingly adjusted to give Lenders, on exercise for the same aggregate IL Conversion Price or SL Conversion Price, as applicable, the total number, class, and kind of shares as Lenders would have owned had the Term Loan been converted prior to the event and had the Lenders continued to hold such shares until after the event requiring adjustment.

 

(ii)         If during the time that principal or interest is owed on the Term Loan, the Company issues or sells Additional Shares of Common Stock (as defined below) other than pursuant to clause (i) above for a price (the “Effective Price”) less than the then effective IL Conversion Price or SL Conversion Price, as the case may be, then and in each such case, the then-existing IL Conversion Price or SL Conversion Price, as the case may be, shall be reduced, as of the opening of business on the date of such issue or sale, to a price equal to the greater of (i) Ten Cents ($0.10) per share or (ii) such Effective Price. “Additional Shares of Common Stock” shall mean all shares of Common Stock, or options, warrants or other rights to acquire Common Stock, issued by the Company, other than (A) options, warrants or shares of Common Stock issued to employees, directors and consultants as a part of an equity incentive plan or agreement approved by the Company’s Board of Directors (including pursuant to any Director Stock Purchase Plan or Employee Stock Purchase Plan under which compensation payments can be applied to or accepted in lieu of cash), (B) shares of Common Stock issued as a consideration for a merger, acquisition or other business combination approved by the Company’s Board of Directors, (C) shares of Common Stock issued or issuable to any Person that may hereafter become a Lender hereunder, (D) options, warrants or shares issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement or debt financing from a bank or similar financial institution approved by the Company’s Board of Directors; and (E) shares of Common Stock issued upon the exercise of an option, warrant or other right to acquire Common Stock pursuant to which an adjustment of the IL Conversion Price or the SL Conversion Price, as the case may be, under this Section 4.4(e) has already been made.

 

4.5           Payments to Agent. All payments in respect to the Term Loan shall be paid to Agent, for the ratable benefit of the Lenders, to an account specified by Agent to Borrower from time to time.

 

 

5.          SECURITY.

 

5.1           Personal Property. As security for the full and timely payment and performance of all Lender Indebtedness, Borrower hereby grants to Agent, for itself and the benefit of Lenders, a security interest in all existing and after-acquired property of Borrower of any nature including, without limitation:

 

(a)          All present and future accounts, contract rights, chattel paper, instruments and documents and all other rights to the payment of money whether or not yet earned, for services rendered or goods sold, consigned, leased or furnished by Borrower or otherwise, together with (i) all goods (including any returned, rejected, repossessed or consigned goods), the sale, consignment, lease or other furnishing of which shall be given or may give rise to any of the foregoing, (ii) all of Borrower’s rights as a consignor, consignee, unpaid vendor or other lien or in connection therewith, including stoppage in transit, set-off, detinue, replevin and reclamation, (iii) all general intangibles related thereto, (iv) all guaranties, mortgages, security interests, assignments, and other encumbrances on real or personal property, leases and other agreements or property securing or relating to any accounts, (v) choses-in-action, claims and judgments, and (vi) any returned or unearned premiums, which may be due upon cancellation of any insurance policies.

 

(b)          All present and future inventory of Borrower (including but not limited to goods held for sale or lease or furnished or to be furnished under contracts for service, raw materials, work-in-process, finished goods and goods used or consumed in Borrower’s business) whether owned, consigned or held on consignment, together with all merchandise, component materials, supplies, packing, packaging and shipping materials, and all returned, rejected or repossessed goods sold, consigned, leased or otherwise furnished by such Borrower and all embedded software related thereto.

 

(c)          All present and future general intangibles (including but not limited to payment intangibles, tax refunds and rebates, manufacturing and processing rights, designs, patents, patent rights and applications therefor, trademarks and registration or applications therefor, trade names, brand names, logos, inventions, copyrights and all applications and registrations therefor), licenses, permits, approvals, software and computer programs, license rights, royalties, trade secrets, methods, processes, know-how, formulas, drawings, specifications, descriptions, label designs, plans, blueprints, patterns and all memoranda, notes and records with respect to any research and development.

 

(d)          All present and future machinery, equipment, furniture, fixtures, motor vehicles, tools, dies, jigs, molds and other articles of tangible personal property of every type together with all parts, substitutions, accretions, accessions, attachments, accessories, additions, components and replacements thereof, and all manuals of operation, maintenance or repair, and all embedded software related thereto.

 

(e)          All present and future general ledger sheets, files, books and records, customer lists, books of account, invoices, bills, certificates or documents of ownership, bills of sale, business papers, correspondence, credit files, tapes, cards, computer runs and all other data and data storage systems whether in the possession of Borrower or any service bureau.

 

(f)          All present and future letter of credit rights and supporting obligations, including without limitation, all letters of credit and letter of credit rights now existing or hereafter issued naming Borrower as a beneficiary or assigned to Borrower, including the right to receive payment thereunder, and all documents and records associated therewith.

 

(g)          All present and future financial assets and investment property of Borrower.

 

(h)          All funds, instruments, documents, policies and evidence and certificates of insurance and rights thereunder, securities, chattel paper and other assets of Borrower or in which Borrower has an interest and all proceeds thereof, now or at any time hereafter on deposit with or in the possession or control of Lender Parties or owing by Lender Parties to Borrower or in transit by mail or carrier to Lender Parties or in the possession of any other Person acting on any Lender Party’s behalf, without regard to whether any Lender Party received the same in pledge, for safekeeping, as agent for collection or otherwise, or whether any Lender Party has conditionally released the same, and in all assets of Borrower in which Lender Parties now have or may at any time hereafter obtain a lien, mortgage, or security interest for any reason.

 

 

(i)          All products and proceeds of each of the items described in the foregoing subparagraphs (a)-(i) and all supporting obligations related thereto.

 

5.2           Real Property. As further security for the Lender Indebtedness, the Company shall grant to Agent, for the benefit of itself and the Lenders, a mortgage lien encumbering the Mortgaged Property, subject and junior to any liens thereon granted by the Company to Santander or any other institutional Lender providing financing or refinancing to the Company secured by the Mortgaged Property. In the event of any refinancing of the Mortgaged Property, Agent, on behalf of itself and the Lenders, will execute such subordination of mortgage, as reasonably requested by the new Lender, bearing like tenor to and no less favorable to such new Lender than the Santander Subordination Agreement.

 

5.3           General.

 

(a)          The collateral described above in Sections 5.1 and 5.2 is collectively referred to herein as the “Collateral”. The above-described security interests, assignments and liens shall not be rendered void by the fact that no Lender Indebtedness exists as of any particular date, but shall continue in full force and effect until the Lender Indebtedness has been repaid or converted into Common Stock. Lender Parties have no agreement or commitment outstanding pursuant to which Lender Parties may extend credit to or on behalf of Borrower and Lender Parties have executed termination statements or releases with respect thereto.

 

(b)          Borrower hereby irrevocably authorizes Agent at any time and from time to time to file UCC financing statements with respect to the Collateral, naming Borrower as debtor, and agrees to provide Agent promptly with any information requested by Agent in connection with any such financing statements.

 

(c)          Borrower shall furnish to Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Agent may reasonably request, all in reasonable detail. Borrower shall promptly execute and deliver to Agent any instruments and documents, and shall promptly take such further action, as Agent may reasonably request to obtain the benefit of the security interests granted by this Section 5.

 

6.          REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as follows:

 

6.1           Borrower Representations and Warranties. Borrower represents and warrants as follows:

 

(a)          Valid Organization, Good Standing and Qualification. Borrower is duly formed, validly existing and in good standing under the laws of the State of Delaware, and has full power and authority to execute, deliver and comply with the Loan Documents and to carry on its business as it is now being conducted.

 

(b)          Due Authorization; No Legal Restrictions. The execution and delivery by Borrower of the Loan Documents, the consummation of the transactions contemplated by the Loan Documents and the fulfillment and compliance with the respective terms, conditions and provisions of the Loan Documents: (a) have been duly authorized by all requisite corporate action of Borrower, (b) will not conflict with or result in a breach of, or constitute a default (or might, upon the passage of time or the giving of notice or both, constitute a default) under, any of the terms, conditions or provisions of any applicable statute, law, rule, regulation or ordinance, or Borrower’s organizational documents or any indenture, mortgage, loan, credit agreement or other document or instrument to which Borrower is a party or by which Borrower may be bound or affected, or any judgment or order of any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, and (c) will not result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of Borrower under the terms or provisions of any such agreement or instrument, except liens in favor of Lender Parties.

 

 

(c)          Enforceability. The Loan Documents have been duly executed by Borrower and delivered to Agent and constitute legal, valid and binding obligations of Borrower, enforceable in accordance with their terms, except as enforceability may be limited by any bankruptcy, insolvency, reorganization, moratorium or other laws or equitable principles affecting creditors’ rights generally.

 

(d)          Governmental Consents. No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of Borrower is required in connection with the execution, delivery or performance by Borrower of the Loan Documents or the consummation of the transactions contemplated thereby.

 

(e)          Title to Collateral. The Collateral is and will be owned by Borrower free and clear of all liens and other encumbrances of any kind (including liens or other encumbrances upon properties acquired or to be acquired under conditional sales agreements or other title retention devices), excepting only liens in favor of Agent and those liens and encumbrances permitted under Section 7.4 below. Borrower will defend the Collateral against any claims of all persons or entities other than Agent or such other permitted lienholders as are set forth in Section 7.4.

 

6.2           Lender Parties’ Representations and Warranties. Lender Parties represent and warrant as follows:

 

(a)          Qualification; No Legal Restrictions. Lender Parties have full power and authority to execute, deliver and comply with the Loan Documents. The execution and delivery by Lender Parties of the Loan Documents, the consummation of the transactions contemplated by the Loan Documents and the fulfillment and compliance with the respective terms, conditions and provisions of the Loan Documents will not conflict with or result in a breach of, or constitute a default (or might, upon the passage of time or the giving of notice or both, constitute a default) under, any of the terms, conditions or provisions of any applicable statute, law, rule, regulation or ordinance, or any indenture, mortgage, loan, credit agreement or other document or instrument to which any Lender Party is a party or by which any Lender Party may be bound or affected, or any judgment or order of any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign.

 

(b)          Enforceability. The Loan Documents have been duly executed by Lender Parties and delivered to Borrower and constitute legal, valid and binding obligations of Lender Parties, enforceable in accordance with their terms, except as enforceability may be limited by any bankruptcy, insolvency, reorganization, moratorium or other laws or equitable principles affecting creditors’ rights generally.

 

(c)          Governmental Consents. No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of any Lender Party is required in connection with the execution, delivery or performance by Lender Parties of the Loan Documents or the consummation of the transactions contemplated thereby.

 

7.          GENERAL COVENANTS. Borrower will comply with the following:

 

7.1           Maintenance of Borrower’s Existence. Borrower shall keep in full force and effect: (a) its legal existence in good standing under the law of its jurisdiction of organization and (b) its qualification to do business in each jurisdiction in which such qualification is required.

 

7.2           Restrictions on Indebtedness. Borrower shall not, without the prior written consent of Agent, incur any indebtedness for borrowed money except for (a) Senior Indebtedness and (b) Lender Indebtedness and (c) trade indebtedness incurred in the ordinary course of business.

 

 

7.3           Defaults. Borrower shall promptly notify Agent of any event of default under any document related to Senior Indebtedness, or any event or condition which with the passage of time or the giving of notice would become such an event of default.

 

7.4           Removal of Collateral. Except with the prior written consent of Agent, Borrower shall not (i) remove any of the Collateral from the location specified above other than in the ordinary course of business or (ii) change its name or its jurisdiction of incorporation, relocate its principal place of business or reincorporate or reorganize itself.

 

7.5           Maintenance of Collateral. Borrower shall keep the Collateral in good order and repair, not waste any Collateral, not use any Collateral in violation of law or any policy of insurance, comply in all material respects with its obligations with respect to the Collateral, and make the Collateral available for inspection by Agent (or its Agents, attorneys or accountants) at all reasonable times.

 

8.          CONDITIONS TO ADVANCES. Advances shall be conditioned upon the following conditions and each request by Borrower for an Advance shall constitute a representation by Borrower to Lender Parties that each condition has been met or satisfied:

 

8.1           Representations and Warranties. All representations and warranties of Borrower contained herein or in any other Loan Document shall be true at and as of the date of such Advance as if made on such date, and each request for an Advance shall constitute reaffirmation by Borrower that such representations and warranties are then true.

 

8.2           No Default. No condition or event shall exist or have occurred at or as of the date of such Advance which would constitute a Default or Event of Default hereunder.

 

8.3           Other Requirements. Lender Parties shall have received all certificates, authorizations, affidavits, schedules and other documents which are provided for hereunder or under the Loan Documents, or which Lender Parties may reasonably request.

 

9.          DEFAULT AND REMEDIES.

 

9.1           Events of Default. The occurrence of any one or more of the following events shall constitute an Event of Default hereunder:

 

(a)          The failure of Borrower to pay any amount of principal, interest or any other amount payable hereunder, or any other Lender Indebtedness on the date on which such payment is due, whether at the stated maturity or due date thereof, or by reason of any requirement for the prepayment thereof, by acceleration or otherwise, and such failure continues unremedied for a period of ten (10) days after the date such payment is first due;

 

(b)          The failure of Borrower to duly perform or observe any obligation, covenant or agreement on its part contained herein or in any other Loan Document not otherwise specifically constituting an Event of Default under this Section 9.1 and such failure continues unremedied for a period of thirty (30) days after notice from Agent to Borrower of the existence of such failure;

 

(c)          The failure of Borrower to pay any Indebtedness for borrowed money due to any third Person or the existence of any other event of default under any loan, security agreement, mortgage or other agreement pertaining thereto binding Borrower, after the expiration of any notice and/or grace periods permitted in such documents;

 

(d)          The adjudication of Borrower as a bankrupt or insolvent, or the entry of an order appointing a receiver or trustee for Borrower or any of its respective property or approving a petition seeking reorganization or other similar relief under the bankruptcy or other similar laws of the United States or any state or any other competent jurisdiction;

 

 

(e)          A proceeding under any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of debt or receivership law is filed by or against (unless dismissed within thirty (30) days and provided that Lender Parties shall have no obligation to make Advances during such thirty (30) day period Borrower, or Borrower makes an assignment for the benefit of creditors, or Borrower takes any action to authorize any of the foregoing;

 

(f)          The suspension of the operation of Borrower’s present business, Borrower becoming unable to meet its debts as they mature or the admission in writing by Borrower to such effect, or Borrower calling any meeting of all or any material portion of its creditors for the purpose of debt restructure;

 

(g)          All or any part of the Collateral or the assets of Borrower are attached, seized, subjected to a writ or distress warrant, or levied upon, or come within the possession or control of any receiver, trustee, custodian or assignee for the benefit of creditors;

 

(h)          Any representation or warranty of Borrower in any of the Loan Documents is discovered to be untrue in any material respect or any statement, certificate or data furnished by Borrower pursuant hereto is discovered to be untrue in any material respect as of the date as of which the facts therein set forth are stated or certified;

 

(i)          Any material uninsured damage to, or loss, theft, or destruction of, a material portion of the Collateral occurs;

 

(j)          The loss, suspension, revocation or failure to renew any license or permit now held or hereafter acquired by Borrower, which loss, suspension, revocation or failure to renew will have a material adverse effect on the business profits, assets or financial condition of Borrower;

 

(k)          The occurrence of an event of default under any of the other Loan Documents; or

 

(l)          The validity or enforceability of this Agreement, or any of the Loan Documents, is contested by Borrower or any stockholder of Borrower, or Borrower denies that it has any or any further liability or obligation hereunder or thereunder.

 

9.2           Remedies. At the option of Agent, or at the request of Required Lenders, upon the occurrence of an Event of Default, or at any time thereafter:

 

(a)          The entire unpaid principal of the Term Loan, all other Lender Indebtedness, or any part thereof, all interest accrued thereon, all fees due hereunder and all other obligations of Borrower to Lender Parties hereunder or under any other agreement, note or otherwise arising will become immediately due and payable without any further demand or notice;

 

(b)          The Term Loan will immediately terminate and Borrower will receive no further extensions of credit thereunder;

 

(c)          Agent may enter any premises occupied by Borrower and take possession of the Collateral and any records relating thereto; and/or

 

(d)          Lender Parties may exercise each and every right and remedy granted to it under the Loan Documents, under the Uniform Commercial Code and under any other applicable law or at equity.

 

If an Event of Default occurs under Section 9.1(d) or (e), all Lender Indebtedness shall become immediately due and payable.

 

 

9.3           Sale or Other Disposition of Collateral. The sale, lease or other disposition of the Collateral, or any part thereof, by Agent after an Event of Default may be for cash, credit or any combination thereof, and Agent, for itself and on behalf of the Lenders, may purchase all or any part of the Collateral at public or, if permitted by law, private sale, and in lieu of actual payment of such purchase price, may set-off the amount of such purchase price against the Lender Indebtedness then owing. Any sales of the Collateral may be adjourned from time to time with or without notice. Agent may cause the Collateral to remain on Borrower’s premises or otherwise or to be removed and stored at premises owned by other persons, at Borrower’s expense, pending sale or other disposition of the Collateral. Borrower, at Agent’s request, shall assemble the Collateral consisting of inventory and tangible assets and make such assets available to Agent at a place to be designated by Agent. Agent shall have the right to conduct such sales on Borrower’s premises, at Borrower’s expense, or elsewhere, on such occasion or occasions as Agent may see fit. Any notice required to be given by Agent of a sale, lease or other disposition or other intended action by Agent with respect to any of the Collateral which is deposited in the United States mail, postage prepaid and duly addressed to Borrower at the address specified in Section 11.1 below, at least ten (10) business days prior to such proposed action, shall constitute fair and reasonable notice to Borrower of any such action. The net proceeds realized by Agent upon any such sale or other disposition, after deduction for the expenses of retaking, holding, storing, transporting, preparing for sale, selling or otherwise disposing of the Collateral incurred by Lender Parties in connection therewith and all other costs and expenses related thereto including attorney fees, shall be applied in such order as Agent, in its sole discretion, elects, toward satisfaction of the Lender Indebtedness. Agent shall account to Borrower for any surplus realized upon such sale or other disposition, and Borrower shall remain liable for any deficiency. The commencement of any action, legal or equitable, or the rendering of any judgment or decree for any deficiency shall not affect Agent’s security interest in the Collateral. Borrower agrees that Lender Parties have no obligation to preserve rights to the Collateral against any other parties. Agent is hereby granted a license or other right to use, after an Event of Default, without charge, Borrower’s labels, general intangibles, intellectual property, equipment, real estate, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale and selling any inventory or other Collateral and Borrower’s rights under all contracts, licenses, approvals, permits, leases and franchise agreements shall inure to Lender Parties’ benefit. Lender Parties shall be under no obligation to marshal any assets in favor of Borrower or any other party or against or in payment of any or all of the Lender Indebtedness.

 

9.4           Set-Off. Without limiting the rights of Lender Parties under applicable law, Lender Parties have and may exercise a right of set-off, a lien against and a security interest in all property of Borrower now or at any time in any Lender Party’s possession in any capacity whatsoever, including but not limited to any balance of any deposit, trust or agency account, or any other Lender Party account with Agent, as security for all Lender Indebtedness. At any time and from time to time following the occurrence of an Event of Default, or an event which with the giving of notice or passage of time or both would constitute an Event of Default, Lender Parties may without notice or demand, set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by any Lender Party to or for the credit of Borrower against any or all of the Lender Indebtedness and Borrower’s obligations under the Loan Documents.

 

9.5           Delay or Omission Not Waiver. Neither the failure nor any delay on the part of any Lender Party to exercise any right, remedy, power or privilege under the Loan Documents upon the occurrence of any Event of Default or otherwise shall operate as a waiver thereof or impair any such right, remedy, power or privilege. No waiver of any Event of Default shall affect any later Event of Default or shall impair any rights of any Lender Party. No single, partial or full exercise of any rights, remedies, powers and privileges by any Lender Party shall preclude further or other exercise thereof. No course of dealing between any Lender Party and Borrower shall operate as or be deemed to constitute a waiver of any Lender Party’s rights under the Loan Documents or affect the duties or obligations of Borrower.

 

9.6           Remedies Cumulative; Consents. The rights, remedies, powers and privileges provided for herein shall not be deemed exclusive, but shall be cumulative and shall be in addition to all other rights, remedies, powers and privileges in Lender Parties’ favor at law or in equity. Whenever Agent’s consent or approval is required, such consent or approval shall be at the sole and absolute discretion of Agent.

 

9.7           Certain Fees, Costs, Expenses, Expenditures and Indemnification. Borrower agrees to pay on demand all costs and expenses of Lender Parties, including without limitation:

 

 

(a)          all costs and expenses in connection with the preparation, review, negotiation, execution, delivery and administration of the Loan Documents, and the other documents to be delivered in connection therewith, or any amendments, extensions and increases to any of the foregoing (including, without limitation, attorney’s fees and expenses); and

 

(b)          all losses, costs and expenses in connection with the enforcement, protection and preservation of any Lender Party’s rights or remedies under the Loan Documents, or any other agreement relating to any Lender Indebtedness, or in connection with legal advice relating to the rights or responsibilities of any Lender Party (including without limitation court costs and attorney’s fees).

 

In the event Borrower shall fail to pay taxes, insurance, assessments, costs or expenses which it is required to pay hereunder, or fails to keep the Collateral free from security interests or liens (except as expressly permitted herein), or fails to maintain or repair the Collateral as required hereby, or otherwise breaches any obligations under the Loan Documents, Agent in its discretion, may make expenditures for such purposes and the amount so expended (including attorney’s fees and expenses, filing fees and other charges) shall be payable by Borrower on demand and shall constitute part of the Lender Indebtedness.

 

Borrower’s obligations under this Section shall survive termination of this Agreement and repayment of the Lender Indebtedness.

 

9.8           Time is of the Essence. Time is of the essence in Borrower’s performance of its obligations under the Loan Documents.

 

10.         SUBORDINATION.

 

10.1         Subordination. Notwithstanding anything to the contrary contained in this Agreement:

 

(a)          The Loan Documents and all of the Lender Indebtedness shall be subordinate to the Senior Indebtedness, as provided in the Subordination Agreement. Lender Parties agree that upon any replacement, renewal or refinancing of Senior Indebtedness, they will enter into any new or replacement subordination documentation with respect to Senior Indebtedness as may be reasonably requested by the Company, so long as such subordination documentation is on terms substantially similar to the Subordination Agreement. Borrower will not permit the Senior Indebtedness to exceed the Senior Indebtedness Debt Cap, without the prior written consent of Lender.

 

(b)          Lender Parties may enforce rights granted under this Agreement or any other Loan Document only in a manner not inconsistent with the Subordination Agreement. Any assignee of Santander, and any commercial Lender providing financing to Borrower or any Affiliate (including financing undertaken for the purpose of refinancing Senior Indebtedness), shall have the benefit of this Article 10 and of the other provisions of this Agreement.

 

(c)          Notwithstanding any provision in this Agreement or the other Loan Documents, each of the Lender Parties irrevocably authorizes and instructs Agent to enter into the Subordination Agreement .

 

11.         COMMUNICATIONS AND NOTICES.

 

11.1         Communications and Notices. All notices, requests and other communications made or given in connection with the Loan Documents shall be in writing and, unless receipt is stated herein to be required, shall be deemed to have been validly given if delivered personally to the individual or division or department to whose attention notices to a party are to be addressed, or by private carrier, or registered or certified mail, return receipt requested, or by telecopy (to the extent a telecopy number is set forth below) with the original forwarded by first-class mail, in all cases, with charges prepaid, addressed as follows, until some other address (or individual or division or department for attention) shall have been designated by notice given by one party to the other:

 

 

To Borrower:

 

Blonder Tongue Laboratories, Inc.

One Jake Brown Road

Old Bridge, New Jersey 08857

Attention: Eric Skolnik, Chief Financial Officer

Telecopy No.: 732 ###-###-####

 

To Lenders

c/o Agent:

 

Robert J. Pallé

21 Desai Court

Freehold, NJ 07728

 

12.         WAIVERS.

 

12.1         Waivers. In connection with any proceedings under the Loan Documents, including without limitation any action by Agent in replevin, foreclosure or other court process or in connection with any other action related to the Loan Documents or the transactions contemplated hereunder, Borrower waives:

 

(a)          all errors, defects and imperfections in such proceedings;

 

(b)          all benefits under any present or future laws exempting any property, real or personal, or any part of any proceeds thereof from attachment, levy or sale under execution, or providing for any stay of execution to be issued on any judgment recovered under any of the Loan Documents or in any replevin or foreclosure proceeding, or otherwise providing for any valuation, appraisal or exemption;

 

(c)          presentment for payment, demand, notice of demand, notice of non-payment, protest and notice of protest of any of the Loan Documents;

 

(d)          any requirement for bonds, security or sureties required by statute, court rule or otherwise;

 

(e)          any demand for possession of Collateral prior to commencement of any suit; and

 

12.2         Forbearance. Agent may release, compromise, forbear with respect to, waive, suspend, extend or renew any of the terms of the Loan Documents, without notice to Borrower.

 

13.         SUBMISSION TO JURISDICTION.

 

13.1         Submission to Jurisdiction. Borrower hereby consents to the exclusive jurisdiction of any state or federal court located within the State of New Jersey, and irrevocably agrees that, subject to Agent’s election, all actions or proceedings relating to the Loan Documents or the transactions contemplated hereunder shall be litigated in such courts, and Borrower waives any objection which it may have based on lack of personal jurisdiction, improper venue or forum non conveniens to the conduct of any proceeding in any such court and waives personal service of any and all process upon it, and consents that all such service of process be made by mail or messenger directed to it at the address set forth in Section 11.1. Nothing contained in this Section 13.1 shall affect the right of Agent to serve legal process in any other manner permitted by law or affect the right of any Lender Party to bring any action or proceeding against Borrower or its property in the courts of any other jurisdiction.

 

14.         MISCELLANEOUS.

 

14.1         Survival. All covenants, agreements, representations and warranties made by Borrower in the Loan Documents or made by or on its behalf in connection with the transactions contemplated herein shall be true at all times this Agreement is in effect and shall survive the execution and delivery of the Loan Documents, any investigation at any time made by any Lender Party or on its behalf and the making by any Lender Party of the loans or advances to Borrower. All statements contained in any certificate, statement or other document delivered by or on behalf of Borrower pursuant hereto or in connection with the transactions contemplated hereunder shall be deemed representations and warranties by Borrower.

 

 

14.2         No Assignment. Borrower may not assign any of its rights or obligations hereunder without the prior written consent of Agent, and any such assignment without consent shall be void and of no force or effect. Any Lender Party may assign its rights and obligations hereunder in its discretion.

 

14.3         Binding Effect. This Agreement and all rights and powers granted hereby will bind and inure to the benefit of the parties hereto and their respective permitted successors and permitted assigns.

 

14.4         Severability. The provisions of this Agreement and all other Loan Documents are deemed to be severable, and the invalidity or unenforceability of any provision shall not affect or impair the remaining provisions which shall continue in full force and effect.

 

14.5         No Third Party Beneficiaries. The rights and benefits of this Agreement and the Loan Documents shall not inure to the benefit of any third party.

 

14.6         Modifications. No modification of this Agreement or any of the Loan Documents shall be binding or enforceable unless in writing and signed by or on behalf of the party against whom enforcement is sought.

 

14.7         Business Day Convention. If the day provided herein for the payment of any amount or the taking of any action falls on a Saturday, Sunday or public holiday at the place for payment or action, then the due date for such payment or action will be the next succeeding Business Day.

 

14.8         Law Governing. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware without regard to conflict of law principles.

 

14.9         Integration. The Loan Documents shall be construed as integrated and complementary of each other, and as augmenting and not restricting any Lender Party’s rights, powers, remedies and security. The Loan Documents contain the entire understanding of the parties thereto with respect to the matters contained therein and supersede all prior agreements and understandings between the parties with respect to the subject matter thereof and do not require parol or extrinsic evidence in order to reflect the intent of the parties. In the event of any inconsistency between the terms of this Agreement and the terms of the other Loan Documents, the terms of this Agreement shall prevail.

 

14.10         Headings. The headings of the Articles, Sections, paragraphs and clauses of this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement.

 

14.11         Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart.

 

14.12         Waiver of Right to Trial by Jury. BORROWER AND LENDER WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER ANY OF THE LOAN DOCUMENTS OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF BORROWER OR LENDER WITH RESPECT TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. BORROWER AND LENDER AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWER AND LENDER TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. BORROWER ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL REGARDING THIS SECTION, THAT IT FULLY UNDERSTANDS ITS TERMS, CONTENT AND EFFECT, AND THAT IT VOLUNTARILY AND KNOWINGLY AGREES TO THE TERMS OF THIS SECTION.

 

 

15.         AGREEMENTS REGARDING PAYMENTS TO LENDERS.

 

15.1         Payments of Principal, Interest and Fees. After Agent’s receipt of any principal or interest payments under this Agreement, Agent agrees to remit promptly to the Lenders their respective Percentage Share of such payments.

 

16.         AGENCY.

 

16.1         Appointment of Agent; Powers. Each Lender hereby irrevocably designates and appoints RJP to act as Agent for such Lender under this Agreement and the other Loan Documents, and irrevocably authorizes RJP, as Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and perform such duties as are expressly delegated to Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. In performing its functions under this Agreement, RJP is acting solely as an Agent of the Lenders, and RJP does not assume, and shall not be deemed to have assumed, an agency or other fiduciary relationship with Borrower. Agent shall not have any (a) duty, responsibility, obligation or liability to any Lender, except for those duties, responsibilities, obligations and liabilities expressly set forth in this Agreement, or (b) fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the other Loan Documents, or otherwise exist against Agent.

 

16.2         Delegation of Agent’s Duties. Agent may execute any of its duties under this Agreement and all ancillary documents by or through agents or attorneys, and shall be entitled to the advice of counsel concerning all matters pertaining to such duties.

 

16.3         Disclaimer of Agent’s Liabilities. Agent shall not be liable to any Lender for any action lawfully taken or not taken by Agent under or in connection with the Agreement and the other Loan Documents (except for Agent’s or such person’s gross negligence or willful misconduct). Without limiting the generality of the foregoing, Agent shall not be liable to the Lenders for (a) any recital, statement, representation or warranty made by Borrower or any officer thereof contained in (i) this Agreement, (ii) any other Loan Document or (iii) any certificate, report, audit, statement or other document referred to or provided for in this Agreement or received by Agent under or in connection with this Agreement, (b) the value, validity, effectiveness, enforceability or sufficiency of this Agreement, the other Loan Documents or Agent’s security interests in the Collateral, (c) any failure of Borrower to perform their respective obligations under this Agreement and the other Loan Documents, (d) any loss or depreciation in the value of, delay in collecting the proceeds of, or failure to realize on, any Collateral, (e) Agent’s delay in the collection of the Obligations or enforcing Agent’s rights against Borrower, or the granting of indulgences or extensions to Borrower or any account debtor of Borrower, or (f) for any mistake, omission or error in judgment in passing upon or accepting any Collateral. In addition, Agent shall have no duty or responsibility to ascertain or to inquire as to the observance or performance of any of the terms, conditions, covenants or other agreements of Borrower contained in this Agreement or the other Loan Documents, or to inspect, verify, examine or audit the assets, books or records of Borrower at any time.

 

16.4         Reliance and Action by Agent. Agent shall be entitled to rely, and shall be fully protected in relying, upon legal counsel, independent public accountants and experts selected by Agent, and shall not be liable to the Lenders for any action taken or not taken in good faith based upon the advice of such counsel, accountants or experts. In addition, Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document believed by Agent in good faith to be genuine and correct, and to have been signed, sent or made by the proper person or persons. Agent shall be fully justified in taking or refusing to take any action under this Agreement and the other Loan Documents unless Agent (a) receives the advice or consent of the Lenders or the Required Lenders, as the case may be, in a manner that Agent deems appropriate, or (b) is indemnified by the Lenders to Agent’s satisfaction against any and all liability, cost and expense which may be incurred by Agent by reason of taking or refusing to take any such action. Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of all Lenders or the Required Lenders, as the case may be, and such request and any action taken or failure to act pursuant thereto shall be binding upon all Lenders.

 

 

16.5         Events of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default hereunder unless Agent has received notice from Borrower or a Lender describing such Event of Default with specificity. In the event that Agent receives such a notice, Agent shall promptly give notice thereof to all Lenders. Agent shall take such action with respect to such Event of Default as shall be reasonably directed by the Lenders or Required Lenders, as the case may be, provided that (a) if appropriate, Agent may require indemnification from the Lenders under Section 16.4 prior to taking such action, (b) under no circumstances shall Agent have an obligation to take any action that Agent believes in good faith would violate any law or any provision of this Agreement or the other Loan Documents, and (c) unless and until Agent shall have received direction from the Lenders or Required Lenders, as the case may be, Agent may (but shall not be obligated to) take such action or refrain from taking action with respect to such Event of Default as Agent shall deem advisable and in the best interests of the Lenders.

 

16.6         Lenders’ Due Diligence. Each Lender expressly acknowledges that Agent has not made any representation or warranty to such Lender regarding the transactions contemplated by this Agreement or the financial condition of Borrower, and such Lender agrees that no action taken by Agent hereafter, including any review of the business or financial affairs of Borrower, shall be deemed to constitute a representation or warranty by Agent to any Lender. Each Lender also acknowledges that such Lender has, independently and without reliance upon Agent or any other Lender and based solely on such documents and information as such Lender has deemed appropriate (and with the advice and assistance of such legal counsel as such Lender has deemed appropriate), made its own independent (a) determination of the adequacy, efficacy, sufficiency, validity and enforceability of the Agreement and the other Loan Documents, (b) credit analysis, appraisal of and investigation into the business, operations, property, financial condition, Collateral and creditworthiness of Borrower, and (c) decision to enter into this Agreement. Each Lender agrees, independently and without reliance upon Agent or any other Lender and based on such documents and information as such Lender shall deem appropriate at the time, (i) to continue to make its own credit analyses and appraisals in deciding whether to take or not take action under this Agreement and (ii) to make such investigations as such Lender deems necessary to inform itself as to the business, operations, property, financial condition and creditworthiness of Borrower.

 

16.7         Right to Indemnification. The Lenders, jointly and severally, shall defend, indemnify and hold harmless Agent (and Agent’s heirs, successors and assigns) (to the extent not reimbursed by Borrower and without limiting the obligation of Borrower to do so), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time be imposed on, incurred by or asserted against Agent in any way relating to or arising out of (a) this Agreement or any other Loan Document, (b) the transactions contemplated hereby or (c) any action taken or not taken by Agent under or in connection with any of the foregoing, provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from Agent’s gross negligence or willful misconduct.

 

16.8         Other Transactions. Agent and any Lender may make loans to and generally engage in any kind of business with Borrower, as though Agent or such Lender were not Agent or a Lender hereunder. With respect to loans made by Agent under this Agreement as a Lender, Agent shall have the same rights and powers, duties and liabilities under this Agreement and the other Loan Documents as any other Lender, and may exercise the same as though it was not Agent, and the term “Lender” and “Lenders” shall include Agent in its individual capacity as such.

 

16.9         Resignation of Agent; Removal of Agent.

 

(a)          Agent may resign as Agent upon thirty (30) days’ notice to the Lenders, and such resignation shall be effective on the earlier of (a) the appointment of a successor Agent by the Lenders or (b) the date on which such 30-day period expires. If Agent provides the Lenders with notice of its intention to resign as Agent, the Lenders agree to appoint a successor to Agent as promptly as possible thereafter, whereupon such successor shall succeed to the rights, powers and duties of Agent, and the term “Agent” shall mean such successor effective upon its appointment. Upon the effective date of Agent’s resignation, such Agent’s rights, powers and duties as Agent hereunder immediately shall terminate, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After an Agent’s resignation hereunder, the provisions of this Section 16 shall continue to inure to such Agent’s benefit as to any actions taken or not taken by such Agent while acting as Agent.

 

 

(b)          If RJP resigns as an officer of the Company or is removed as an officer of the Company by the Company’s Board of Directors for cause (the date of resignation or removal for cause being referred to as the “RJP Termination Date”), RJP’s rights, powers and duties as Agent hereunder shall terminate on the RJP Termination Date, without any other or further act or deed on the part of RJP or any of the parties to this Agreement, and the Supplemental Lenders shall promptly appoint a successor Agent hereunder.

 

16.10         Voting Rights; Agent’s Discretionary Rights.

 

(a)          Notwithstanding anything contained in this Agreement to the contrary, without the prior written consent of all Lenders, Agent will not agree to:

 

(i)          amend or waive Borrower’s compliance with any term or provision of this Agreement; or

 

(ii)         except as otherwise expressly permitted or required hereunder, release any Collateral.

 

(b)           In all other respects Agent is authorized to take or to refrain from taking any action which Agent, in the exercise of its reasonable business judgment, deems to be advisable and in the best interest of the Lenders, unless this Agreement specifically requires Borrower or Agent to obtain the consent of, or act at the direction of, the Required Lenders.

 

16.11         Deemed Consent. If a Lender’s consent to a waiver amendment or other course of action is required under the terms of this Agreement and such Lender does not respond to any request by Agent for such consent within five (5) Business Days after the date of such request, such failure to respond shall be deemed a consent to the requested course of action.

 

16.12         Survival of Agreements of the Lenders. The obligations of the Lenders set forth in Section 16.7 hereof shall survive the termination of this Agreement.

 

17.         Amendment and Restatement. This Agreement is an amendment and restatement of, and replaces and supersedes, the Existing Agreement among Borrower and Initial Lenders, and it is not intended to be, nor shall it be construed as, a novation of Borrower’s responsibilities and obligations to Initial Lenders pursuant to the Existing Agreement or any other related documents previously executed in favor of Initial Lenders. It is specifically acknowledged and agreed that the security interests and rights granted to Initial Lenders pursuant to the Existing Agreement and related existing documents, including the Loan Documents, are to continue in full force and effect for the benefit of and shall in all respects be enforceable by Agent and the other Lenders (except to the extent, if any, modified herein), and the priority and perfection of all security interests in the Collateral shall continue to date from the dates originally established in connection with the Existing Agreement and related existing documents. The terms, conditions, agreements, covenants, representations and warranties set forth in the Existing Agreement are simultaneously amended and restated in their entirety, and as so amended and restated, replaced and superseded by the terms, conditions agreements, covenants, representations and warranties set forth in this Agreement and the other Loan Documents executed and/or delivered on or after the date hereof, and as of the Effective Date neither Borrower nor Agent and Lenders shall be subject to or bound by any of the terms of the Existing Agreement and shall only be subject to or bound by the terms and provisions of this Agreement, except that nothing herein or in the other Loan Documents shall, in any manner, be construed to constitute payment of, or impair, limit, cancel or extinguish, or constitute a novation in respect of any of the Existing Obligations or any other obligations, liabilities and indebtedness of Borrower evidenced by or arising under the Existing Agreement or impair or adversely affect the continuation of the Liens and other interests in the Collateral heretofore granted, pledged and/or assigned by Borrower to Agent. All Existing Obligations and all other loans, advances and other financial accommodations under the Existing Agreement of Borrower to Agent and Lenders that are outstanding and unpaid as of the date hereof pursuant to the Existing Agreement or otherwise shall be deemed Obligations of Borrower pursuant to the terms hereof, and shall constitute and be deemed Loans hereunder.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

	BLONDER TONGUE LABORATORIES, INC.
	By:	/s/ Eric Skolnik
	Name: Eric Skolnik
	Title: Sr. VP
	R.L. DRAKE HOLDINGS, LLC
	By:	/s/ Eric Skolnik
	Name: Eric Skolnik
	Title: VP
	/s/ Robert J. Pallé
	ROBERT J. PALLÉ, as Agent
	/s/ Robert J. Pallé
	ROBERT J. PALLÉ, as a Lender
	/s/ Carol M. Pallé
	CAROL M. PALLÉ, as a Lender
	/s/ Steven L. Shea
	STEVEN L. SHEA, as a Lender
	/s/ James H. Williams
	JAMES H. WILLIAMS, as a Lender

 

 

Schedule 1.1

 

LENDERS; COMMITMENTS; PERCENTAGE SHARES

 

THE AGGREGATE COMMITMENTS TOTAL: SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($750,000). ON AND AS OF THE EFFECTIVE DATE, THE COMMITMENTS OF LENDERS ARE AS FOLLOWS:

 

Lenders		Commitment				Percentage Share
Tranche A
Robert J. Pallé and Carol M. Pallé		$	300,000				100	%
TOTAL TRANCHE A		$	300,000				100	%
Tranche B
Steven L. Shea		$	100,000				50	%
Robert J. Pallé and Carol M. Pallé		$	50,000				25	%
James H. Williams		$	50,000				25	%
TOTAL TRANCHE B		$	200,000				100	%
Tranche C
Robert J. Pallé and Carol M. Pallé		$	250,000				100	%
TOTAL TRANCHE C		$	250,000				100	%