Exhibit 10.1

 

UNI-PIXEL, INC.

UNI-PIXEL DISPLAYS, INC.

 

WESTERN ALLIANCE BANK

 

LOAN AND SECURITY AGREEMENT

 

  

  

 

This Loan And Security Agreement is entered into as of October 18, 2016, by and
between WESTERN ALLIANCE BANK (“Bank”) and UNI-PIXEL, INC. (“Parent”), and
UNI-PIXEL DISPLAYS, INC. (“Uni-Pixel Displays”). Parent and Uni-Pixel Displays
are each referred to herein as a (“Borrower”, and collectively, as the
“Borrowers”).

 

Recitals

 

Borrowers wish to obtain credit from time to time from Bank, and Bank desires to
extend credit to Borrowers. This Agreement sets forth the terms on which Bank
will advance credit to Borrowers, and Borrowers will repay the amounts owing to
Bank.

 

Agreement

 

The parties agree as follows:

 

1. Definitions and Construction.

 

1.1 Definitions. As used in this Agreement, the following terms shall have the
following definitions:

 

“Accounts” means all presently existing and hereafter arising accounts, contract
rights, payment intangibles, and all other forms of obligations owing to a
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by a Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by a Borrower and such Borrower’s Books
relating to any of the foregoing.

 

“Affiliate” means, with respect to any Person, any Person that owns or controls
directly or indirectly such Person, any Person that controls or is controlled by
or is under common control with such Person, and each of such Person’s senior
executive officers, directors, and partners.

 

“Atmel Intellectual Property License Agreement” means that certain XSense
Intellectual Property License Agreement dated as of April 16, 2015 by and
between Atmel Corporation and Uni-Pixel Displays.

 

“Atmel Patent License Agreement” means that certain XSense Patent License
Agreement dated as of April 16, 2015 by and between Atmel Corporation and
Uni-Pixel Displays.

 

“Bank Expenses” means all: costs or expenses (including reasonable attorneys’
fees and expenses) incurred in connection with the preparation, negotiation,
administration, and enforcement of the Loan Documents; Collateral audit fees;
and Bank’s reasonable attorneys’ fees and expenses incurred in amending,
enforcing or defending the Loan Documents (including fees and expenses of
appeal), incurred before, during and after an Insolvency Proceeding, whether or
not suit is brought.

 

“Borrower Agreement” means the Export-Import Bank of the United States Working
Capital Guarantee Program Borrower Agreement between Bank and Borrowers.

 

“Borrower’s Books” means all of a Borrower’s books and records including:
ledgers; records concerning a Borrower’s assets or liabilities, the Collateral,
business operations or financial condition; and all computer programs, or tape
files, and the equipment, containing such information.

 

“Business Day” means any day that is not a Saturday, Sunday, or other day on
which banks in the State of California are authorized or required to close.

 

  

  

 

“Change in Control” shall mean a transaction in which (i) any “person” or
“group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or indirectly, of a
sufficient number of shares of all classes of stock then outstanding of a
Borrower ordinarily entitled to vote in the election of directors, empowering
such “person” or “group” to elect a majority of the Board of Directors of a
Borrower, who did not have such power before such transaction, or (ii) Parent
ceases to own all of the capital stock of Uni-Pixel Displays, Inc.

 

“CIT Intellectual Property License Agreement” means that certain FLT
Intellectual Property License Agreement dated as of April 16, 2015 by and
between CIT Technology Ltd and Uni-Pixel Displays.

 

“CIT Patent License Agreement” means that certain FLT Patent License Agreement
dated as of April 16 2015 by and between CIT Technology Ltd and Uni-Pixel
Displays, Inc.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the California Uniform Commercial Code.

 

“Collateral” means the property described on Exhibit A attached hereto.

 

“Contingent Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another;
(ii) any obligations with respect to undrawn letters of credit, corporate credit
cards, or merchant services issued or provided for the account of that Person;
and (iii) all obligations arising under any agreement or arrangement designed to
protect such Person against fluctuation in interest rates, currency exchange
rates or commodity prices; provided, however, that the term “Contingent
Obligation” shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by Bank in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.

 

“Copyrights” means any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof.

 

“Credit Extension” means each EXIM Advance, use of the International Sublimit,
or any other extension of credit by Bank for the benefit of Borrowers hereunder.

 

“Daily Balance” means the amount of the Obligations owed at the end of a given
day.

 

“Economic Impact Certification” means the Economic Impact Certification as
defined in the Borrower Agreement.

 

“Eligible Export-Related Accounts” means Eligible Export-Related Accounts
Receivable as defined in the Borrower Agreement.

 

“Equipment” means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which a Borrower has any interest.

 

“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.

 

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.

 

“Event of Default” has the meaning assigned in Article 8.

 

“EXIM” means the Export Import Bank of the United States.

 

“EXIM Advance” means a cash advance or cash advances under the EXIM Facility.

 

“EXIM Borrowing Base” means an amount equal to ninety percent (90%) of Eligible
Export-Related Accounts, as determined by Bank with reference to the most recent
EXIM Borrowing Base Certificate delivered by Borrowers; provided however, that
the EXIM Borrowing Base may be revised from time to time by Bank following each
Collateral audit or as Bank deems necessary in Bank’s reasonable judgment and
upon notification thereof to Borrowers.

 

“EXIM Facility” means the facility under which Borrowers may request Bank to
issue EXIM Advances, as specified in Section 2.1(a) hereof.

 

“EXIM Line” means a Credit Extension of up to Two Million Five Hundred Thousand
Dollars ($2,500,000).

 

“EXIM Maturity Date” means the second anniversary of the Closing Date.

 

“GAAP” means generally accepted accounting principles as in effect from time to
time.

 

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred
purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.

 

“Insolvency Proceeding” means any proceeding commenced by or against any person
or entity under any provision of the United States Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, extension
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

 

“Intellectual Property Collateral” means all of a Borrower’s right, title, and
interest in and to the following: Copyrights, Trademarks and Patents; all trade
secrets, all design rights, claims for damages by way of past, present and
future infringement of any of the rights included above, all licenses or other
rights to use any of the Copyrights, Patents or Trademarks all as more
specifically set forth on the exhibits attached to the intellectual property
security agreement between Borrowers and Bank dated as of the date hereof and as
amended from time to time, and all license fees and royalties arising from such
use to the extent permitted by such license or rights; all amendments, renewals
and extensions of any of the Copyrights, Trademarks or Patents; and all proceeds
and products of the foregoing, including without limitation all payments under
insurance or any indemnity or warranty payable in respect of any of the
foregoing.

 

“International Sublimit” means a sublimit for export related foreign exchange
services, commercial letters of credit, and standby letters of credit under the
EXIM Line not to exceed Four Hundred Thousand Dollars ($400,000).

 

“Inventory” means all inventory in which a Borrower has or acquires any
interest, including work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of a Borrower, including such inventory as
is temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and a Borrower’s Books relating to any
of the foregoing.

 

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“Investment” means any beneficial ownership of Equity Interests of any Person,
or any loan, advance or capital contribution or transfer of any assets to any
Person.

 

“IP Indebtedness Agreements” means the Atmel Patent License Agreement and the
CIT Patent License Agreement.

 

“Letter of Credit” or “Letters of Credit” is defined in Section 2.1(b)(ii)
hereof.

 

“Lien” means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

 

“Loan Documents” means, collectively, this Agreement, the Borrower Agreement,
any note or notes, and any other documents, instruments or agreements entered
into by a Borrower or any guarantor or other third party in connection with this
Agreement, all as amended or extended from time to time.

 

“Material Adverse Effect” means a material adverse effect on (i) the business
operations, condition (financial or otherwise) or prospects of a Borrower or
(ii) the ability of Borrowers to repay the Obligations or otherwise perform its
obligations under the Loan Documents or (iii) the value or priority of Bank’s
security interests in the Collateral.

 

“Negotiable Collateral” means all letters of credit of which a Borrower is a
beneficiary, notes, drafts, instruments, securities, documents of title, and
chattel paper, and such each Borrower’s Books relating to any of the foregoing.

 

“Obligations” means all debt, principal, interest, Bank Expenses and other
amounts owed to Bank by Borrowers pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrowers to others that Bank may have obtained by assignment or otherwise.

 

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

 

“Periodic Payments” means all installments or similar recurring payments that
Borrowers may now or hereafter become obligated to pay to Bank pursuant to the
terms and provisions of any instrument, or agreement now or hereafter in
existence between Borrowers and Bank.

 

“Permitted Indebtedness” means:

 

(a) Indebtedness of Borrowers in favor of Bank arising under this Agreement or
any other Loan Document;

 

(b) unsecured Indebtedness owing to trade creditors in the ordinary course of
business;

 

(c) Indebtedness existing on the Closing Date and disclosed in the Schedule;

 

(d) Indebtedness secured by a lien described in clause (c) of the defined term
“Permitted Liens,” provided (i) such Indebtedness does not exceed the lesser of
the cost or fair market value of the equipment financed with such Indebtedness
and (ii) such Indebtedness does not exceed $500,000 in the aggregate at any
given time;

 

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(e) Indebtedness whether now existing or hereafter arising under the Atmel
Intellectual Property License Agreement and/or the Atmel Patent License
Agreement as each are in effect on the date hereof;

 

(f) Indebtedness whether now existing or hereafter arising under the CIT
Intellectual Property License Agreement and/or the CIT Patent License Agreement
as each are in effect on the date hereof; and

 

(g) Subordinated Debt.

 

“Permitted Investment” means:

 

(a) Investments existing on the Closing Date disclosed in the Schedule;

 

(b) (i) marketable direct obligations issued or unconditionally guaranteed by
the United States of America or any agency or any State thereof maturing within
one (1) year from the date of acquisition thereof, (ii) commercial paper
maturing no more than one (1) year from the date of creation thereof and
currently having rating of at least A-2 or P-2 from either Standard & Poor’s
Corporation or Moody’s Investors Service, (iii) certificates of deposit maturing
no more than one (1) year from the date of investment therein issued by Bank and
(iv) Bank’s money market accounts; and

 

(c) Investments in a to be formed joint development company with General
Interface Solution Ltd. (a subsidiary of Foxconn Technology Group) (the “JV
Entity”) to which Borrowers shall own fifty percent (50%) of the voting Equity
Interests of such JV Entity, and that does not (i) require Borrowers to assume
or otherwise become liable for the obligations of such JV Entity or any third
party related to or arising out of such arrangement, (ii) require Borrowers to
transfer ownership of or contribute any cash or other property, other than (A)
the property listed on Schedule 4.6 attached hereto (as such Schedule may be
modified by Borrower and accepted by Bank) and such other tangible property
collectively with an aggregate book value in excess of $1,000,000 and (B) the
non-exclusive license of Borrowers’ Intellectual Property to the JV Entity that
could not result in any legal transfer of title of the licensed property.

 

“Permitted Liens” means the following:

 

(a) Any Liens existing on the Closing Date and disclosed in the Schedule or
arising under this Agreement or the other Loan Documents;

 

(b) Liens for taxes, fees, assessments or other governmental charges or levies,
either not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of Bank’s security
interests;

 

(c) Liens (i) upon or in any equipment which was not financed by Bank acquired
or held by Borrowers or any of its Subsidiaries to secure the purchase price of
such equipment or indebtedness incurred solely for the purpose of financing the
acquisition or leasing of such equipment, or (ii) existing on such equipment at
the time of its acquisition or lease, provided that the Lien is confined solely
to the property so acquired or leased and improvements thereon, and the proceeds
of such equipment;

 

(d) Liens incurred in connection with the extension, renewal or refinancing of
the indebtedness secured by Liens of the type described in clauses (a) through
(c) above, provided that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and the principal amount
of the indebtedness being extended, renewed or refinanced does not increase; and

 

(e) Liens upon Collateral incurred as contemplated in connection with and
arising under the IP Indebtedness Agreements and granted in connection with the
indebtedness permitted under clauses (e) and (f) of the definition of Permitted
Indebtedness, to the extent such Lien is subject to a subordination agreement in
form and substance satisfactory to Bank.

 

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“Person” means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.

 

“Prime Rate” means the greater of three and one half percent (3.50%) per year,
or the variable rate of interest, per annum, most recently announced by Bank, as
its “prime rate”, whether or not such announced rate is the lowest rate
available from Bank.

 

“Responsible Officer” means each of the Chief Executive Officer, the Chief
Financial Officer and the Vice President of Finance of each Borrower.

 

“Schedule” means the schedule of exceptions attached hereto and approved by
Bank, if any.

 

“Shares” is one hundred percent (100%) of the issued and outstanding capital
stock, membership units or other securities owned or held of record by a
Borrower or any Subsidiary of Borrower, in any direct or indirect Subsidiary.

 

“Subordinated Debt” means any debt incurred by Borrowers that is subordinated to
the debt owing by Borrowers to Bank on terms acceptable to Bank (and identified
as being such by Borrowers and Bank), pursuant to a subordination agreement in
form and substance satisfactory to Bank.

 

“Subsidiary” means, 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 (including any Affiliate), 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. For the avoidance of doubt,
the JV Entity is not a Subsidiary for any purpose under this Agreement.

 

“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrowers connected with
and symbolized by such trademarks.

 

1.2 Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP and all calculations made hereunder shall
be made in accordance with GAAP. When used herein, the terms “financial
statements” shall include the notes and schedules thereto.

 

2. Loan and Terms Of Payment.

 

2.1 Credit Extensions.

 

Each Borrower promises to pay to the order of Bank, in lawful money of the
United States of America, the aggregate unpaid principal amount of all Credit
Extensions made by Bank to Borrowers hereunder. Borrowers shall also pay
interest on the unpaid principal amount of such Credit Extensions at rates in
accordance with the terms hereof.

 

(a) EXIM Advances.

 

(i) Subject to and upon the terms and conditions of this Agreement, Borrower may
request EXIM Advances in an aggregate outstanding amount not to exceed the
lesser of (A) the EXIM Line or (B) the EXIM Borrowing Base, minus in each case
the aggregate amounts outstanding under the International Sublimit. Amounts
borrowed pursuant to this Section 2.1(a) may be repaid and reborrowed at any
time prior to the EXIM Maturity Date, at which time all EXIM Advances under this
Section 2.1(a) shall be immediately due and payable. Borrower may prepay any
EXIM Advances without penalty or premium.

 

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(ii) Whenever Borrower desires an EXIM Advance, Borrower will notify Bank by
facsimile transmission of an advance request in substantially the form of
Exhibit B hereto no later than noon Pacific Time on the Business Day that is one
(1) Business Day prior to the Business Day on which an EXIM Advance is made.
Bank is authorized to make EXIM Advances under this Agreement, based upon
instructions received from a Responsible Officer or a designee of a Responsible
Officer. Bank will credit the amount of EXIM Advances made under this Section
2.1(a) to a Borrower’s deposit account at Bank.

 

(iii) Borrower shall pay interest on the aggregate outstanding principal amount
of the EXIM Advances on the tenth day of each month for so long as any EXIM
Advances are outstanding. All EXIM Advances shall be due and payable on the EXIM
Maturity Date.

 

(b) International Sublimit.

 

(i) Letters of Credit. Subject to the terms and conditions of this Agreement, at
any time prior to the EXIM Maturity Date, Bank agrees to issue letters of credit
for the account of Borrower (each, a “Letter of Credit” and collectively, the
“Letters of Credit”), provided, however, the aggregate outstanding face amount
of all Letters of Credit shall not exceed the International Sublimit
outstanding, and for purposes of determining availability under the EXIM Line,
the aggregate outstanding face amount of all Letters of Credit (whether drawn or
undrawn) shall decrease, on a dollar-for-dollar basis, the amount available for
other Advances. All Letters of Credit shall be, in form and substance,
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank’s form of standard application and letter of credit agreement
(the “Application”), which Borrower hereby agrees to execute, including Bank’s
standard fees. On any drawn but unreimbursed Letter of Credit, the unreimbursed
amount shall be deemed an EXIM Advance under Section 2.1(a). The obligation of
Borrower to reimburse Bank for drawings made under Letters of Credit shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, the Application, and such Letters
of Credit, under all circumstances whatsoever. Borrower shall indemnify, defend,
protect, and hold Bank harmless from any loss, cost, expense or liability,
including, without limitation, attorneys’ fees, arising out of or in connection
with any Letters of Credit, except for expenses caused by Bank’s gross
negligence or willful misconduct.

 

(ii) If at any time the EXIM Facility is terminated or otherwise ceases to
exist, Borrower shall immediately secure in cash all obligations under the
International Sublimit on terms reasonably acceptable to Bank.

 

2.2 Overadvances. If the aggregate amount of the outstanding EXIM Advances plus
the aggregate amounts outstanding under the International Sublimit exceeds the
lesser of the EXIM Line or the EXIM Borrowing Base at any time (as determined by
Bank with reference to the most recent EXIM Borrowing Base Certificate delivered
by Borrowers), Borrowers shall immediately pay to Bank, in cash, the amount of
such excess.

 

2.3 Interest Rates, Payments, and Calculations.

 

(a) Interest Rates.

 

(i) EXIM Advances. Except as set forth in Section 2.3(b), the EXIM Advances
shall bear interest, on the outstanding Daily Balance thereof, at a rate equal
to one and one quarter percent (1.25%) above the Prime Rate.

 

(b) Late Fee; Default Rate. If any payment is not made within ten (10) days
after the date such payment is due, Borrowers shall pay Bank a late fee equal to
the lesser of (i) five percent (5%) of the amount of such unpaid amount or (ii)
the maximum amount permitted to be charged under applicable law, not in any case
to be less than $25.00. At Bank’s election, all Obligations shall bear interest,
from and after the occurrence and during the continuance of an Event of Default,
at a rate equal to five (5) percentage points above the interest rate applicable
immediately prior to the occurrence of the Event of Default.

 

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(c) Payments. Interest hereunder shall be due and payable on the tenth calendar
day of each month during the term hereof. Bank shall, at its option, charge such
interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s
deposit accounts or against the EXIM Line, in which case those amounts shall
thereafter accrue interest at the rate then applicable hereunder. Any interest
not paid when due shall be compounded by becoming a part of the Obligations, and
such interest shall thereafter accrue interest at the rate then applicable
hereunder. All payments shall be free and clear of any taxes, withholdings,
duties, impositions or other charges, to the end that Bank will receive the
entire amount of any Obligations payable hereunder, regardless of source of
payment.

 

(d) Computation. In the event the Prime Rate is changed from time to time
hereafter, the applicable rate of interest hereunder shall be increased or
decreased, effective as of the day the Prime Rate is changed, by an amount equal
to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.

 

2.4 Crediting Payments. Prior to the occurrence of an Event of Default, Bank
shall credit a wire transfer of funds, check or other item of payment to such
deposit account or Obligation as Borrowers specify. After the occurrence of an
Event of Default, the receipt by Bank of any wire transfer of funds, check, or
other item of payment shall be immediately applied to conditionally reduce
Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received
by Bank after 12:00 noon Pacific time shall be deemed to have been received by
Bank as of the opening of business on the immediately following Business Day.
Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a Business Day, such
payment shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of such
extension.

 

2.5 Fees and Expenses. Borrowers shall pay to Bank the following:

 

(a) Facility Fees. On the Closing Date and on the first anniversary of the
Closing Date, a fee with respect to the EXIM Facility equal to $25,000, each of
which are fully earned and nonrefundable;

 

(b) EXIM Fees. Such fees as EXIM may charge from time to time, including a $100
application fee payable on the Closing Date; and

 

(c) Bank Expenses. On the Closing Date, all Bank Expenses incurred through the
Closing Date, including reasonable attorneys’ fees and expenses and, after the
Closing Date, all Bank Expenses, including attorneys’ fees and expenses, as and
when they are incurred by Bank.

 

2.6 Term. This Agreement shall become effective on the Closing Date and, subject
to Section 13.7, shall continue in full force and effect for so long as any
Obligations remain outstanding or Bank has any obligation to make Credit
Extensions under this Agreement. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank’s Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.

 

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3. Conditions of Loans.

 

3.1 Conditions Precedent to Initial Credit Extension. The obligation of Bank to
make the initial Credit Extension is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, the
following:

 

(a) this Agreement;

 

(b) a certificate of the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Agreement;

 

(c) UCC National Form Financing Statements;

 

(d) an intellectual property security agreement;

 

(e) agreement to provide insurance;

 

(f) current financial statements of Borrowers;

 

(g) an audit of the Collateral, the results of which shall be satisfactory to
Bank;

 

(h) EXIM approval;

 

(i) the fully executed Borrower Agreement and other related EXIM documents
requested by Bank;

 

(j) an Economic Impact Certification;

 

(k) the EXIM Guarantee;

 

(l) evidence of the termination of Lien in favor of Atmel Corporation;

 

(m) payment of the fees and Bank Expenses then due specified in Section 2.5
hereof; and

 

(n) such other documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate.

 

3.2 Conditions Precedent to all Credit Extensions. The obligation of Bank to
make each Credit Extension, including the initial Credit Extension, is further
subject to the following conditions:

 

(a) timely receipt by Bank of the Advance Request Form as provided in Section
2.1;

 

(b) with respect to any EXIM Advance request, an EXIM Borrowing Base Certificate
signed by a Responsible Officer in substantially the form of Exhibit C hereto;
and

 

(c) the representations and warranties contained in Section 5 shall be true and
correct in all material respects on and as of the date of such Advance Request
Form and on the effective date of each Credit Extension as though made at and as
of each such date, and no Event of Default shall have occurred and be
continuing, or would exist after giving effect to such Credit Extension. The
making of each Credit Extension shall be deemed to be a representation and
warranty by Borrower on the date of such Credit Extension as to the accuracy of
the facts referred to in this Section 3.2.

 

4. Creation of Security Interest.

 

4.1 Grant of Security Interest. Each Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by such Borrower of each
of its covenants and duties under the Loan Documents. Such security interest
constitutes a valid, first priority security interest in the presently existing
Collateral, and will constitute a valid, first priority security interest in
Collateral acquired after the date hereof.

 

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4.2 Delivery of Additional Documentation Required. Borrowers shall from time to
time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue the
perfection of Bank’s security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
Borrowers from time to time may deposit with Bank specific time deposit accounts
to secure specific Obligations. Each Borrower authorizes Bank to hold such
balances in pledge and to decline to honor any drafts thereon or any request by
a Borrower or any other Person to pay or otherwise transfer any part of such
balances for so long as the Obligations are outstanding.

 

4.3 Right to Inspect. Bank (through any of its officers, employees, or agents)
shall have the right, upon reasonable prior notice, from time to time during
Borrowers’ usual business hours but no more than twice a year (unless an Event
of Default has occurred and is continuing), to inspect a Borrower’s Books and to
make copies thereof and to check, test, and appraise the Collateral in order to
verify each Borrower’s financial condition or the amount, condition of, or any
other matter relating to, the Collateral

 

4.4 EXIM. EXIM has agreed to guarantee the EXIM Advances pursuant to certain
guarantee agreements and other documents and instruments (collectively, the
“EXIM Guarantee”).

 

(a) If, at any time after the EXIM Guarantee has been entered into by Bank, for
any reason other than due to any action or inaction of a Borrower under the EXIM
Guarantee, (i) the EXIM Guarantee shall cease to be in full force and effect, or
(ii) if EXIM declares the EXIM Guarantee void or revokes any obligations
thereunder or denies liability thereunder, and any overadvance results from
either of the foregoing, Bank shall provide notice of such overadvance to
Borrowers, and Borrowers shall immediately pay the amount of the excess to Bank
or provide additional Collateral in such amounts as the Bank deems reasonably
necessary to cure such overadvance.

 

(b) If, at any time after the EXIM Guarantee has been entered into by Bank, for
any reason other than the one described in Section 4.4(a), (i) the EXIM
Guarantee shall cease to be in full force and effect, or (ii) the EXIM declares
the EXIM Guarantee void or revokes any obligations thereunder or denies
liability thereunder, any such event shall constitute an Event of Default under
this Agreement.

 

(c) Nothing in any confidentiality provision in this Agreement or in any other
agreement shall restrict Bank’s right to make disclosures and provide
information to the EXIM in connection with the EXIM Guarantee. Upon the
occurrence and continuation of an Event of Default, in the event EXIM seeks to
exercise remedies with respect to the Collateral, Bank may assign such portion
of its security interest in the Loan Documents and the Collateral as EXIM
reasonably requests to effect such exercise. The terms of the Borrower Agreement
shall control in the event of any conflict between the terms of this Agreement
and the Borrower Agreement.

 

4.5 Pledge of Shares. Each Borrower hereby pledges, assigns and grants to Bank,
a security interest in all the Shares, together with all proceeds and
substitutions thereof, all cash, stock and other moneys and property paid
thereon, all rights to subscribe for securities declared or granted in
connection therewith, and all other cash and noncash proceeds of the foregoing,
as security for the performance of the Obligations. Within ten (10) days of the
Closing Date, or, to the extent not certificated as of the Closing Date, within
ten (10) days of the certification of any Shares, the certificate or
certificates for the Shares will be delivered to Bank, accompanied by an
instrument of assignment duly executed in blank by Borrowers. To the extent
required by the terms and conditions governing the Shares, Borrowers shall cause
the books of each entity whose Shares are part of the Collateral and any
transfer agent to reflect the pledge of the Shares. Upon the occurrence of an
Event of Default hereunder, Bank may effect the transfer of any securities
included in the Collateral (including but not limited to the Shares) into the
name of Bank and cause new (as applicable) certificates representing such
securities to be issued in the name of Bank or its transferee. Borrowers will
execute and deliver such documents, and take or cause to be taken such actions,
as Bank may reasonably request to perfect or continue the perfection of Bank’s
security interest in the Shares. Unless an Event of Default shall have occurred
and be continuing, Borrowers shall be entitled to exercise any voting rights
with respect to the Shares and to give consents, waivers and ratifications in
respect thereof, provided that no vote shall be cast or consent, waiver or
ratification given or action taken which would be inconsistent with any of the
terms of this Agreement or which would constitute or create any violation of any
of such terms. All such rights to vote and give consents, waivers and
ratifications shall terminate upon the occurrence and continuance of an Event of
Default.

 

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4.6 Release of Collateral. Upon providing evidence satisfactory to Bank of the
creation and consummation of the JV Entity, Bank’s security interest in the
assets listed on Schedule 4.6 (as such Schedule may be modified by Borrower and
accepted by Bank) (the “Released Collateral”) shall terminate automatically and
upon Borrower’s request, Bank shall file a UCC Financing Statement amendment in
the appropriate filing office deleting the Released Collateral from the Bank’s
previously filed UCC Financing Statement. Bank consents to the transfer of the
Released Collateral to the JV Entity without further notice to the Bank.

 

5. Representations and Warranties.

 

Each Borrower represents and warrants as follows:

 

5.1 Due Organization and Qualification. Each Borrower and each Subsidiary is a
corporation duly existing under the laws of its state of incorporation and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified.

 

5.2 Due Authorization; No Conflict. The execution, delivery, and performance of
the Loan Documents are within each Borrower’s powers, have been duly authorized,
and are not in conflict with nor constitute a breach of any provision contained
in a Borrower’s Certificate/Articles of Incorporation or Bylaws, nor will they
constitute an event of default under any material agreement to which a Borrower
is a party or by which a Borrower is bound. No Borrower is in default under any
material agreement to which it is a party or by which it is bound.

 

5.3 No Prior Encumbrances. Each Borrower has good and marketable title to its
property, free and clear of Liens, except for Permitted Liens.

 

5.4 Bona Fide Accounts. The Accounts are bona fide existing obligations. The
property giving rise to such Accounts has been delivered to the account debtor
or to the account debtor’s agent for immediate shipment to and unconditional
acceptance by the account debtor. Any services giving rise to such Accounts have
been provided to the account debtor.

 

5.5 Merchantable Inventory. All Inventory is in all material respects of good
and marketable quality, free from all material defects, except for Inventory for
which adequate reserves have been made.

 

5.6 Intellectual Property Collateral. Each Borrower is the sole owner of the
Intellectual Property Collateral, except for non-exclusive licenses granted by a
Borrower to its customers in the ordinary course of business. Each of the
Patents owned or licensed by a Borrower is valid and enforceable, and no part of
the Intellectual Property Collateral owned or licensed by a Borrower has been
judged invalid or unenforceable, in whole or in part, and no claim has been made
that any part of the Intellectual Property Collateral owned or licensed by a
Borrower violates the rights of any third party. Except as set forth in the
Schedule, each Borrower’s rights as a licensee of intellectual property do not
give rise to more than five percent (5%) of its gross revenue in any given
month, including without limitation revenue derived from the sale, licensing,
rendering or disposition of any product or service. Except as set forth in the
Schedule, no Borrower is a party to, or bound by, any agreement that restricts
the grant by such Borrower of a security interest in such Borrower’s rights
under such agreement.

 

5.7 Name; Location of Chief Executive Office. Except as disclosed in the
Schedule, no Borrower has done business under any name other than that specified
on the signature page hereof. The chief executive office of each Borrower is
located at the address indicated in Section 10 hereof. All of Borrowers’
Inventory and Equipment is located only at the locations set forth in Section 10
hereof.

 

5.8 Litigation. Except as set forth in the Schedule, there are no actions or
proceedings pending by or against a Borrower or any Subsidiary before any court
or administrative agency.

 

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5.9 No Material Adverse Change in Financial Statements. All consolidated and
consolidating financial statements related to Borrowers and any Subsidiary that
Bank has received from Borrowers fairly present in all material respects
Borrowers’ financial condition as of the date thereof and Borrowers’
consolidated and consolidating results of operations for the period then ended.
There has not been a material adverse change in the consolidated or the
consolidating financial condition of Borrowers since the date of the most recent
of such financial statements submitted to Bank.

 

5.10 Solvency, Payment of Debts. Borrowers on a consolidated basis are solvent
and able to pay their debts (including trade debts) as they mature.

 

5.11 Regulatory Compliance. Each Borrower and each Subsidiary have met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA, and no event has occurred resulting from a Borrower’s failure
to comply with ERISA that could result in Borrower’s incurring any material
liability thereunder. No Borrower is an “investment company” or a company
“controlled” by an “investment company” within the meaning of the Investment
Company Act of 1940. No Borrower is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations T and U
of the Board of Governors of the Federal Reserve System). Each Borrower has
complied with all the provisions of the Federal Fair Labor Standards Act. No
Borrower has violated any statutes, laws, ordinances or rules applicable to it,
violation of which could have a Material Adverse Effect.

 

5.12 Environmental Condition. None of Borrowers’ or any Subsidiary’s properties
or assets has ever been used by a Borrower or any Subsidiary or, to the best of
Borrowers’ knowledge, by previous owners or operators, in the disposal of, or to
produce, store, handle, treat, release, or transport, any hazardous waste or
hazardous substance other than in accordance with applicable law; to the best of
Borrowers’ knowledge, none of Borrowers’ properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection statute; no lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned by a Borrower or any Subsidiary; and
neither Borrower nor any Subsidiary has received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal, state
or other governmental agency concerning any action or omission by a Borrower or
any Subsidiary resulting in the releasing, or otherwise disposing of hazardous
waste or hazardous substances into the environment.

 

5.13 Taxes. Each Borrower and each Subsidiary have filed or caused to be filed
all tax returns required to be filed, and have paid, or have made adequate
provision for the payment of, all taxes reflected therein.

 

5.14 Subsidiaries. Except as set forth on the Schedule, no Borrower owns any
stock, partnership interest or other equity securities of any Person, except for
Permitted Investments.

 

5.15 Government Consents. Each Borrower and each Subsidiary have obtained all
material consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of such Borrower’s business as currently
conducted.

 

5.16 Accounts. As of the Closing Date, all of Borrowers’ and any Subsidiary’s
operating, depository or investment accounts maintained or invested with a
Person other than Bank are set forth on the Schedule. On and after the 60th day
following the Closing Date, none of a Borrower’s nor any Subsidiary’s operating,
depository or investment accounts are maintained or invested with a Person other
than Bank, except as permitted under Section 6.8.

 

5.17 Shares. Each Borrower has full power and authority to create a first lien
on the Shares and no disability or contractual obligation exists that would
prohibit such Borrower from pledging the Shares pursuant to this Agreement. To
Borrowers’ knowledge, there are no subscriptions, warrants, rights of first
refusal or other restrictions on transfer relative to, or options exercisable
with respect to the Shares. The Shares have been and will be duly authorized and
validly issued, and are fully paid and non-assessable. To Borrowers’ knowledge,
the Shares are not the subject of any present or threatened suit, action,
arbitration, administrative or other proceeding, and Borrower knows of no
reasonable grounds for the institution of any such proceedings.

 

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5.18 Full Disclosure. No representation, warranty or other statement made by a
Borrower in any certificate or written statement furnished to Bank contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained in such certificates or statements not
misleading.

 

6. Affirmative Covenants.

 

Each Borrower shall do all of the following:

 

6.1 Good Standing. Each Borrower shall maintain its and each of its
Subsidiaries’ corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which it is
required under applicable law. Borrower shall maintain, and shall cause each of
its Subsidiaries to maintain, in force all licenses, approvals and agreements,
the loss of which could have a Material Adverse Effect.

 

6.2 Government Compliance. Each Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Each Borrower shall comply, and
shall cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect.

 

6.3 Financial Statements, Reports, Certificates. Borrowers shall deliver the
following to Bank: (a) as soon as available, but in any event within thirty (30)
days after the last day of each month, with aged listings of accounts receivable
and accounts payable by invoice date, along with due date aging for export
related accounts receivable; (b) as soon as available, but in any event within
thirty (30) days after the last day of each month, an EXIM Borrowing Base
Certificate signed by a Responsible Officer in substantially the form of Exhibit
C hereto and a Compliance Certificate signed by a Responsible Officer in
substantially the form of Exhibit D hereto; (c) as soon as available, but in any
event within forty five (45) days after the end of each calendar quarter, a
company prepared consolidated balance sheet, income statement, and cash flow
statement covering Borrowers’ consolidated operations during such period,
prepared in accordance with GAAP, consistently applied, in a form acceptable to
Bank and certified by a Responsible Officer, together with a Compliance
Certificate signed by a Responsible Officer in substantially the form of Exhibit
D hereto; (d) as soon as available, but in any event within one hundred eighty
(180) days after the end of each Borrower’s fiscal year, audited consolidated
financial statements of each Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (e) as soon as available, but in any event within five (5)
days of filing, Borrowers’ tax returns with schedules, prepared by an
independent certified public accounting firm reasonably acceptable to Bank; (f)
as soon as available, but in any event no later than (1) the earlier to occur of
thirty (30) days following the beginning of each fiscal year or the date of
review by such Borrower’s board of directors/managers, an annual operating
budget and financial projections (including income statements, balance sheets
and cash flow statements) for such fiscal year, presented in a monthly format,
reviewed by such Borrower’s board of directors/managers, and in form and
substance acceptable to Bank (each, a “Financial Plan”); (g) copies of all
statements, reports and notices sent or made available generally by a Borrower
to its members or stockholders or to any holders of Subordinated Debt and, if
applicable, all reports on Forms 10-Q and 10-K filed with the Securities and
Exchange Commission (acknowledging that Bank’s timely receipt of Borrower’s Form
10-Q and Form 10-K shall satisfy Borrower’s obligation to deliver financial
statements under Section 6.3(c) and Section 6.3(d), respectively); (h) promptly
upon receipt of notice thereof, a report of any legal actions pending or
threatened in writing against a Borrower or any Subsidiary that could result in
damages or costs to a Borrower or any Subsidiary of One Hundred Twenty Five
Thousand Dollars ($125,000) or more; (i) upon Bank’s request (but no more
frequently than quarterly), a report of Borrowers’ adjusted EBITDA; (j) copies
of any financial statements or other reporting with respect to the JV Entity
when such is available; and (k) such budgets, sales projections, operating plans
or other financial information as Bank may reasonably request from time to time.

 

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6.4 Audits. Bank shall have a right from time to time hereafter to audit a
Borrower’s Accounts and appraise Collateral at such Borrower’s expense, provided
that such audits will be conducted no more often than every six (6) months (or
as frequently as is required by EXIM) unless an Event of Default has occurred
and is continuing. Audit costs may range from $800-1,200 per day plus expenses,
with the duration and scope of each audit to be determined at the time of such
audit.

 

6.5 Inventory; Returns. Borrowers shall keep all Inventory in good and
marketable condition and free from all material defects, except for Inventory
for which adequate reserves have been made. Returns and allowances, if any, as
between Borrowers and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrowers, as they exist at the
time of the execution and delivery of this Agreement. Borrowers shall promptly
notify Bank of all returns and recoveries and of all disputes and claims, where
the return, recovery, dispute or claim involves more than Fifty Thousand Dollars
($50,000).

 

6.6 Taxes. Borrowers shall make, and shall cause each Subsidiary to make, due
and timely payment or deposit of all federal, state, and local taxes,
assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrowers will make, and will cause each Subsidiary to
make, timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrowers.

 

6.7 Insurance.

 

(a) Borrowers, at their expense, shall keep the Collateral insured against loss
or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as ordinarily insured against by other owners in
similar businesses conducted in the locations where a Borrower’s business is
conducted on the date hereof. Borrowers shall also maintain insurance relating
to Borrowers’ business, ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrowers’.

 

(b) All such policies of insurance shall be in such form, with such companies,
and in such amounts as are reasonably satisfactory to Bank. All such policies of
property insurance shall contain a lender’s loss payable endorsement, in a form
satisfactory to Bank, showing Bank as an additional loss payee thereof, and all
liability insurance policies shall show the Bank as an additional insured and
shall specify that the insurer must give at least twenty (20) days’ notice to
Bank before canceling its policy for any reason. Upon Bank’s request, Borrower
shall deliver to Bank certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. All proceeds payable under
any such policy shall, at the option of Bank, be payable to Bank to be applied
on account of the Obligations.

 

6.8 Accounts. Borrowers shall maintain and shall cause each of their
Subsidiaries to maintain its primary domestic depository, operating, and
investment accounts with Bank; provided however that Borrowers shall have
forty-five (45) days from the Closing Date to transition and close its accounts
maintained outside of Bank. Borrowers shall endeavor to utilize and shall cause
each of their Subsidiaries to endeavor to utilize Bank’s International Banking
Division for any international banking services required by Borrowers,
including, but not limited to, foreign currency wires, hedges, swaps, foreign
exchange contracts, and Letters of Credit. For each deposit, operating, or
investment domestic account that a Borrower maintains outside of Bank on and
after the 60th day following the Closing Date, such Borrower shall cause the
applicable bank or financial institution at or with which any such account is
maintained to execute and deliver an account control agreement or other
appropriate instrument in form and substance satisfactory to Bank.
Notwithstanding the foregoing, Borrowers may maintain a deposit account at Fubon
Bank in Taiwan without compliance with the foregoing sentence as long as the
average daily balance (measured monthly) of the aggregate deposits in such
account does not exceed $50,000 (or such greater amount as Bank may agree to
from time to time).

 

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6.9 Financial Covenants.

 

(a) Asset Coverage Ratio. Borrowers shall maintain at all times a ratio of
Borrowers’ unrestricted cash maintained in accounts at Bank plus Eligible
Export-Related Accounts to all Obligations owing to Bank with respect to the
EXIM Facility (including under the International Sublimit) of at least 1.50 to
1.00.

 

6.10 Intellectual Property Rights.

 

(a) Borrowers shall promptly give Bank written notice of any applications or
registrations of intellectual property rights filed with the United States
Patent and Trademark Office, including the date of such filing and the
registration or application numbers, if any. Borrowers shall (i) give Bank not
less than 30 days prior written notice of the filing of any applications or
registrations with the United States Copyright Office, including the title of
such intellectual property rights to be registered, as such title will appear on
such applications or registrations, and the date such applications or
registrations will be filed, and (ii) prior to the filing of any such
applications or registrations, shall execute such documents as Bank may
reasonably request for Bank to maintain its perfection in such intellectual
property rights to be registered by Borrowers, and upon the request of Bank,
shall file such documents simultaneously with the filing of any such
applications or registrations. Upon filing any such applications or
registrations with the United States Copyright Office, Borrowers shall promptly
provide Bank with (i) a copy of such applications or registrations, without the
exhibits, if any, thereto, (ii) evidence of the filing of any documents
requested by Bank to be filed for Bank to maintain the perfection and priority
of its security interest in such intellectual property rights, and (iii) the
date of such filing.

 

(b) Bank may audit Borrowers’ Intellectual Property Collateral to confirm
compliance with this Section, provided such audit may not occur more often than
twice per year, unless an Event of Default has occurred and is continuing. Bank
shall have the right, but not the obligation, to take, at Borrowers’ sole
expense, any actions that Borrowers are required under this Section to take but
which Borrowers fail to take, after 15 days’ notice to Borrowers. Borrowers
shall reimburse and indemnify Bank for all costs and expenses incurred in the
exercise of its rights under this Section.

 

6.11 Notices of Commercial Tort Claims; Event of Default. Without limiting or
contradicting any other more specific provision of this Agreement, promptly (and
in any event within three (3) Business Days) upon a Borrower becoming aware of
the existence of any Event of Default or event described in Section 8 which,
with the giving of notice or passage of time, or both, would constitute an Event
of Default, such Borrower shall give written notice to Bank of such occurrence,
which such notice shall include a reasonably detailed description of such Event
of Default or event which, with the giving of notice or passage of time, or
both, would constitute an Event of Default. If a Borrower shall acquire a
commercial tort claim (as defined in the Code), such Borrower shall promptly
notify Bank in writing of the general details thereof and grant to the Bank 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 the Bank.

 

6.12 Formation or Acquisition of Subsidiaries. Notwithstanding and without
limiting the negative covenants contained in Sections 7.3 and 7.7 hereof, at the
time that Borrower forms any direct or indirect Subsidiary or acquires any
direct or indirect Subsidiary, Borrower shall (a) cause such new Subsidiary to
provide to Bank a joinder to this Agreement to cause such Subsidiary to become a
co-borrower hereunder, together with such appropriate financing statements
and/or control agreements, all in form and substance satisfactory to Bank
(including being sufficient to grant Bank a first priority Lien (subject to
Permitted Liens) in and to the assets of such newly formed or acquired
Subsidiary), (b) provide to Bank appropriate certificates and powers and
financing statements, pledging all of the direct or beneficial ownership
interest in such new Subsidiary, in form and substance satisfactory to Bank, and
(c) provide to Bank all other documentation in form and substance satisfactory
to Bank that in its opinion is appropriate with respect to the execution and
delivery of the applicable documentation referred to above.

 

6.13 Post-Closing Covenants. On the earlier to occur of thirty (30) days
following the renewal of Borrower’s existing lease on its Colorado Springs,
Colorado location or October 31, 2017 (or such longer period as Bank may agree
to in writing), Borrowers shall deliver to Bank, a landlord consent with respect
to Borrowers’ leased location in Colorado Springs, Colorado, in form and
substance reasonably satisfactory to Bank, or such other agreements, documents,
instruments and/or the provision of such other arrangements as Bank may require
in lieu of receipt of such landlord consent.

 

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6.14 Further Assurances. At any time and from time to time Borrowers shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.

 

7. Negative Covenants.

 

Borrowers will not do any of the following:

 

7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a “Transfer”), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than: (i) Transfers of Inventory
in the ordinary course of business; (ii) Transfers of non-exclusive licenses and
similar arrangements for the use of the property of a Borrower or its
Subsidiaries in the ordinary course of business; or (iii) Transfers of worn-out
or obsolete Equipment which was not financed by Bank.

 

7.2 Change in Business or Executive Office. Engage in any business, or permit
any of its Subsidiaries to engage in any business, other than the businesses
currently engaged in by Borrower and any business substantially similar or
related thereto (or incidental thereto); or cease to conduct business in the
manner conducted by Borrowers as of the Closing Date; or without thirty (30)
days prior written notification to Bank, relocate its chief executive office or
state of incorporation or change its legal name; or without Bank’s prior written
consent, change the date on which its fiscal year ends.

 

7.3 Change in Control/Mergers or Acquisitions. (i) Merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate, with or into any other
business organization, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person; or
(ii) suffer or permit a Change in Control; provided however, only advance
written notice to the Bank will be required for any action restricted by this
Section 7.3 if all Obligations are paid in full in cash out of the proceeds of
the initial closing of such action and such payment is listed as a condition to
the consummation of such action. Notwithstanding the foregoing, a Subsidiary may
merge or consolidate with or into another Borrower with written notice to Bank.

 

7.4 Indebtedness. Create, incur, assume or be or remain liable with respect to
any Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness.

 

7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with respect
to any of its property (including without limitation, its Intellectual Property
Collateral), or assign or otherwise convey any right to receive income,
including the sale of any Accounts, or permit any of its Subsidiaries to do so,
except for Permitted Liens, or agree with any Person other than Bank not to
grant a security interest in, or otherwise encumber, any of its property
(including without limitation, its Intellectual Property Collateral), or permit
any Subsidiary to do so.

 

7.6 Distributions. Pay any dividends or make any other distribution or payment
on account of or in redemption, retirement or purchase of any capital stock, or
permit any of its Subsidiaries to do so, except that (i) Parent may repurchase
the stock of former employees pursuant to stock repurchase agreements as long as
an Event of Default does not exist prior to such repurchase or would not exist
after giving effect to such repurchase; and (ii) any Subsidiary may make
distributions to Parent without restriction at any time; or

 

7.7 Investments. Directly or indirectly acquire or own, or make any Investment
in or to any Person, or permit any of its Subsidiaries so to do, other than
Permitted Investments; or maintain or invest any of its property with a Person
other than Bank or permit any of its Subsidiaries to do so unless such Person
has entered into an account control agreement with Bank in form and substance
satisfactory to Bank; or suffer or permit any Subsidiary to be a party to, or be
bound by, an agreement that restricts such Subsidiary from paying dividends or
otherwise distributing property to Borrowers.

 

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7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrowers except for
transactions that are in the ordinary course of Borrowers’ business, upon fair
and reasonable terms that are no less favorable to Borrowers than would be
obtained in an arm’s length transaction with a non-affiliated Person.

 

7.9 Subordinated Debt. Make any payment in respect of any Subordinated Debt, or
permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision contained in
any documentation relating to the Subordinated Debt without Bank’s prior written
consent.

 

7.10 Inventory and Equipment. Store the Inventory or the Equipment with a
bailee, warehouseman, or other third party unless the third party has been
notified of Bank’s security interest and Bank (a) has received an acknowledgment
from the third party that it is holding or will hold the Inventory or Equipment
for Bank’s benefit or (b) is in pledge possession of the warehouse receipt,
where negotiable, covering such Inventory or Equipment. Store or maintain any
Equipment or Inventory at a location other than the location set forth in
Section 10 of this Agreement.

 

7.11 Compliance. Become an “investment company” or be controlled by an
“investment company,” within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect, or a material
adverse effect on the Collateral or the priority of Bank’s Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.

 

7.12 Capital Expenditures. Make or contract to make, without Bank’s prior
written consent, capital expenditures (including leasehold improvements) or
incur liability for rentals of property (including both real and personal
property) in an aggregate amount in any fiscal year in excess of $500,000, or
such greater amount as may be approved by Borrower’s board of directors and set
forth in Borrower’s Financial Plan acceptable to Bank.

 

8. Events of Default.

 

Any one or more of the following events shall constitute an Event of Default by
Borrower under this Agreement:

 

8.1 Payment Default. If Borrowers fail to pay, when due, any of the Obligations;

 

8.2 Covenant Default.

 

(a) If a Borrower fails to perform any obligation under Article 6 or violates
any of the covenants contained in Article 7 of this Agreement; or

 

(b) If a Borrower fails or neglects to perform or observe any other material
term, provision, condition, covenant contained in this Agreement, in any of the
Loan Documents, or in any other present or future agreement between a Borrower
and Bank and as to any default under such other term, provision, condition or
covenant that can be cured, has failed to cure such default within thirty days
after a Borrower receives notice thereof or any officer of a Borrower becomes
aware thereof; provided, however, that if the default cannot by its nature be
cured within the ten day period or cannot after diligent attempts by Borrowers
be cured within such thirty day period, and such default is likely to be cured
within a reasonable time, then Borrowers shall have an additional reasonable
period (which shall not in any case exceed 30 days) to attempt to cure such
default, and within such reasonable time period the failure to have cured such
default shall not be deemed an Event of Default but no Credit Extensions will be
made.

 

8.3 Material Adverse Effect. If there occurs any circumstance or circumstances
that could have a Material Adverse Effect;

 

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8.4 Attachment. If any portion of a Borrower’s assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any trustee, receiver or person acting in a similar capacity and
such attachment, seizure, writ or distress warrant or levy has not been removed,
bonded, discharged or rescinded within twenty (20) days, or if a Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of a
Borrower’s assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of a Borrower’s assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, and the same is not paid
within twenty (20) days after a Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest
by Borrowers (provided that no Credit Extensions will be required to be made
during such cure period);

 

8.5 Insolvency. If a Borrower becomes insolvent, or if an Insolvency Proceeding
is commenced by a Borrower, or if an Insolvency Proceeding is commenced against
a Borrower and is not dismissed or stayed within thirty (30) days (provided that
no Credit Extensions will be made prior to the dismissal of such Insolvency
Proceeding);

 

8.6 Other Agreements. If there is a default or other failure to perform (a) in
any credit, loan or financing agreement to which a Borrower is a party or by
which it is bound resulting in a right by a third party or parties, whether or
not exercised, to accelerate the maturity of any Indebtedness in an amount in
excess of One Hundred Twenty Five Thousand Dollars ($125,000) (other than trade
amounts payable incurred in the ordinary course of business that are not more
than 60 days past due); or (b) in any other agreement to which a Borrower is a
party or by which it is bound that could reasonably be expected to result in a
Material Adverse Effect;

 

8.7 Judgments. If a judgment or judgments for the payment of money in an amount,
individually or in the aggregate, of at least One Hundred Twenty Five Thousand
Dollars ($125,000) (not covered by independent third-party insurance as to which
liability has been accepted by such insurance carrier) shall be rendered against
a Borrower and shall remain unsatisfied and unstayed for a period of twenty (20)
days (provided that no Credit Extensions will be made prior to the satisfaction
or stay of such judgment);

 

8.8 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document; or

 

8.9 EXIM Defaults. (a) If the EXIM Guarantee ceases for any reason to be in full
force and effect or if EXIM declares the EXIM Guarantee void or revokes any
obligations under the EXIM Guarantee, or (b) if any default occurs under the
Borrower Agreement.

 

9. Bank’s Rights and Remedies.

 

9.1 Rights and Remedies. Upon the occurrence and during the continuance of an
Event of Default, Bank may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Borrowers:

 

(a) Declare all Obligations, whether evidenced by this Agreement, by any of the
other Loan Documents, or otherwise, immediately due and payable (provided that
upon the occurrence of an Event of Default described in Section 8.5, all
Obligations shall become immediately due and payable without any action by
Bank);

 

(b) Cease advancing money or extending credit to or for the benefit of Borrowers
under this Agreement or under any other agreement between Borrowers and Bank;

 

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(c) Settle or adjust disputes and claims directly with account debtors for
amounts, upon terms and in whatever order that Bank reasonably considers
advisable;

 

(d) Make such payments and do such acts as Bank considers necessary or
reasonable to protect its security interest in the Collateral. Borrowers agree
to assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate. Each Borrower authorizes Bank to enter
the premises where the Collateral is located, to take and maintain possession of
the Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in Bank’s determination appears to be
prior or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any of a Borrower’s owned premises, each
Borrower hereby grants Bank a license to enter into possession of such premises
and to occupy the same, without charge, in order to exercise any of Bank’s
rights or remedies provided herein, at law, in equity, or otherwise;

 

(e) Set off and apply to the Obligations any and all (i) balances and deposits
of Borrowers held by Bank, or (ii) indebtedness at any time owing to or for the
credit or the account of Borrowers held by Bank;

 

(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell (in the manner provided for herein) the Collateral.
Bank is hereby granted a license or other right, solely pursuant to the
provisions of this Section 9.1, to use, without charge, a Borrower’s labels,
Patents, Copyrights, rights of use of any name, trade secrets, trade names,
Trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section 9.1, Borrowers’ rights under all
licenses and all franchise agreements shall inure to Bank’s benefit;

 

(g) Dispose of the Collateral by way of one or more contracts or transactions,
for cash or on terms, in such manner and at such places (including Borrowers’
premises) as Bank determines is commercially reasonable, and apply any proceeds
to the Obligations in whatever manner or order Bank deems appropriate;

 

(h) Bank may credit bid and purchase at any public sale; and

 

(i) Any deficiency that exists after disposition of the Collateral as provided
above will be paid immediately by Borrowers.

 

9.2 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, each Borrower hereby irrevocably appoints
Bank (and any of Bank’s designated officers, or employees) as such Borrower’s
true and lawful attorney to: (a) send requests for verification of Accounts or
notify account debtors of Bank’s security interest in the Accounts; (b) endorse
such Borrower’s name on any checks or other forms of payment or security that
may come into Bank’s possession; (c) sign such Borrower’s name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all
claims under and decisions with respect to such Borrower’s policies of
insurance; (f) settle and adjust disputes and claims respecting the accounts
directly with account debtors, for amounts and upon terms which Bank determines
to be reasonable; and (g) to file, in its sole discretion, one or more financing
or continuation statements and amendments thereto, relative to any of the
Collateral. The appointment of Bank as each Borrower’s attorney in fact, and
each and every one of Bank’s rights and powers, being coupled with an interest,
is irrevocable until all of the Obligations have been fully repaid and performed
and Bank’s obligation to provide Credit Extensions hereunder is terminated.

 

9.3 Accounts Collection. At any time after the occurrence of an Event of
Default, Bank may notify any Person owing funds to Borrowers of Bank’s security
interest in such funds and verify the amount of such Account. Borrowers shall
collect for Bank all amounts owing to Borrowers, receive in trust all such
payments as Bank’s trustee, and immediately deliver such payments to Bank in
their original form as received from the account debtor, with proper
endorsements for deposit.

 

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9.4 Bank Expenses. If Borrowers fail to pay any amounts or furnish any required
proof of payment due to third persons or entities, as required under the terms
of this Agreement, then Bank may do any or all of the following after reasonable
notice to Borrowers: (a) make payment of the same or any part thereof; (b) set
up such reserves under the a loan facility in Section 2.1 as Bank deems
necessary to protect Bank from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type discussed in Section 6.7 of
this Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.

 

9.5 Bank’s Liability for Collateral. So long as Bank complies with reasonable
banking practices, Bank shall not in any way or manner be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any diminution
in the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other person whomsoever. All risk of loss, damage
or destruction of the Collateral shall be borne by Borrowers.

 

9.6 Shares. Borrowers recognize that Bank may be unable to effect a public sale
of any or all the Shares, by reason of certain prohibitions contained in federal
securities laws and applicable state and provincial securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Borrowers acknowledge and
agree that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. Bank shall be under no obligation to
delay a sale of any of the Shares for the period of time necessary to permit the
issuer thereof to register such securities for public sale under federal
securities laws or under applicable state and provincial securities laws, even
if such issuer would agree to do so. Upon the occurrence of an Event of Default
which continues, Bank shall have the right to exercise all such rights as a
secured party under the Code as it, in its sole judgment, shall deem necessary
or appropriate, including without limitation the right to liquidate the Shares
and apply the proceeds thereof to reduce the Obligations. Effective only upon
the occurrence and during the continuance of an Event of Default, each Borrower
hereby irrevocably appoints Bank (and any of Bank’s designated officers, or
employees) as such Borrower’s true and lawful attorney to enforce such
Borrower’s rights against any Subsidiary, including the right to compel any
Subsidiary to make to the Bank or a Borrower any payments or distributions
respecting the Shares which are owing to such Borrower.

 

9.7 Remedies Cumulative. Bank’s rights and remedies under this Agreement, the
Loan Documents, and all other agreements shall be cumulative. Bank shall have
all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by Bank of one right or remedy shall be
deemed an election, and no waiver by Bank of any Event of Default on a
Borrower’s part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.

 

9.8 Demand; Protest. Each Borrower waives demand, protest, notice of protest,
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 at
any time held by Bank on which Borrowers may in any way be liable.

 

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10. Notices.

 

All notices, consents, requests, approvals, demands, or other communication by
any party to this Agreement or any other 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. Bank or a Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 10.

 

  If to Borrowers: UNI-PIXEL, INC.     4699 Old Ironsides Drive, Suite 300    
Santa Clara, CA 95054     Attn: Christine Russell     FAX: (____)
_______________     EMAIL: crussel@unipixel.com         If to Bank: Bridge Bank,
a division of Western Alliance Bank     55 Almaden Blvd.     San Jose, CA 95113
    Attn: Note Department     FAX: (408) 282-1681     EMAIL:
notedepartment@bridgebank.com

 

The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.

 

11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

 

This Agreement and all other Loan Documents (except as otherwise expressly
provided in any of the Loan Documents) shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard to
principles of conflicts of law. Borrowers and Bank each hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
Santa Clara, State of California. BORROWERS AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

12. General Provisions.

 

12.1 Successors and Assigns. This Agreement shall bind and inure to the benefit
of the respective successors and permitted assigns of each of the parties;
provided, however, that neither this Agreement nor any rights hereunder may be
assigned by a Borrower without Bank’s prior written consent, which consent may
be granted or withheld in Bank’s sole discretion. Bank shall have the right
after the occurrence of an Event of Default without the consent of or notice to
Borrowers to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank’s obligations, rights and benefits hereunder.
Prior to the occurrence of an Event of Default, Bank may sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights and benefits hereunder with the consent of the
Borrowers which consent shall not be unreasonably withheld; provided however no
such consent shall be required if such sale, transfer negotiation or
participation (i) is in connection with the sale or disposition of Bank or all
or a portion of Bank’s loan portfolio or (ii) does not result in Western
Alliance Bank (or any Affiliate thereof) no longer acting as “Bank” hereunder.

 

12.2 Indemnification. Each Borrower shall defend, indemnify and hold harmless
Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement; and (b) all
losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a
result of or in any way arising out of, following, or consequential to
transactions between Bank and a Borrower whether under this Agreement, or
otherwise (including without limitation attorneys’ fees and expenses), except
for losses caused by Bank’s gross negligence or willful misconduct.

 

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12.3 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.

 

12.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

 

12.5 Amendments in Writing, Integration. Neither this Agreement nor the Loan
Documents can be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Agreement and the Loan
Documents, if any, are merged into this Agreement and the Loan Documents.

 

12.6 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, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.

 

12.7 Survival. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding or Bank has any obligation to make Credit Extensions to
Borrowers. The obligations of each Borrower to indemnify Bank with respect to
the expenses, damages, losses, costs and liabilities described in Section 12.2
shall survive until all applicable statute of limitations periods with respect
to actions that may be brought against Bank have run.

 

12.8 Confidentiality. In handling any confidential information Bank and all
employees and agents of Bank, including but not limited to accountants, shall
exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with each Borrower, (ii) to prospective transferees or purchasers of
any interest in the Credit Extensions who are subject to comparable
confidentiality obligations in favor of Borrowers, (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order, (iv) as
may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.

 

12.9 Patriot Act Notice. Bank hereby notifies Borrowers that, pursuant to the
requirements of the USA Patriot Act, Title III of Pub. L. 107-56 (signed into
law on October 26, 2001) (the “Patriot Act”), it is required to obtain, verify
and record information that identifies the Borrowers, which information includes
names and addresses and other information that will allow Bank, as applicable,
to identify the Borrowers in accordance with the Patriot Act.

 

13. Co-Borrowers.

 

13.1 Co-Borrowers. Borrowers are jointly and severally liable for the
Obligations and Bank may proceed against one Borrower to enforce the Obligations
without waiving its right to proceed against any other Borrower. This Agreement
and the Loan Documents are a primary and original obligation of each Borrower
and shall remain in effect notwithstanding future changes in conditions,
including any change of law or any invalidity or irregularity in the creation or
acquisition of any Obligations or in the execution or delivery of any agreement
between Bank and any Borrower. Each Borrower shall be liable for existing and
future Obligations as fully as if all of the Credit Extensions were advanced to
such Borrower. Bank may rely on any certificate or representation made by any
Borrower as made on behalf of, and binding on, all Borrowers, including without
limitation advance request forms and compliance certificates. Each Borrower
appoints each other Borrower as its agent with all necessary power and authority
to give and receive notices, certificates or demands for and on behalf of all
Borrowers, to act as disbursing agent for receipt of any Credit Extensions on
behalf of each Borrower and to apply to Bank on behalf of each Borrower for any
Credit Extension, any waivers and any consents. This authorization cannot be
revoked, and Bank need not inquire as to one Borrower’s authority to act for or
on behalf of another Borrower.

 

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13.2 Subrogation and Similar Rights. Notwithstanding any other provision of this
Agreement or any other Loan Document, each Borrower irrevocably waives, until
all Obligations are paid in full and Bank has no further obligation to make
Credit Extensions to Borrowers, all rights that it may have at law or in equity
(including, without limitation, any law subrogating a Borrower to the rights of
Bank under the Loan Documents) 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 a Borrower with respect to the Obligations in connection with
the Loan Documents 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 a Borrower with respect to the Obligations in connection with
the Loan Documents or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section shall be
null and void. If any payment is made to a Borrower in contravention of this
Section, such Borrower shall hold such payment in trust for Bank and such
payment shall be promptly delivered to Bank for application to the Obligations,
whether matured or unmatured.

 

13.3 Waivers of Notice. Each Borrower waives, to the extent permitted by law,
notice of acceptance hereof; notice of the existence, creation or acquisition of
any of the Obligations; notice of an Event of Default except as set forth
herein; notice of the amount of the Obligations outstanding at any time; notice
of any adverse change in the financial condition of any other Borrower or of any
other fact that might increase a Borrower’s risk; presentment for payment;
demand; protest and notice thereof as to any instrument; and all other notices
and demands to which a Borrower would otherwise be entitled by virtue of being a
co-borrower or a surety. Each Borrower waives any defense arising from any
defense of any other Borrower, or by reason of the cessation from any cause
whatsoever of the liability of any other Borrower. Bank’s failure at any time to
require strict performance by any Borrower of any provision of the Loan
Documents shall not waive, alter or diminish any right of Bank thereafter to
demand strict compliance and performance therewith. Each Borrower also waives
any defense arising from any act or omission of Bank that changes the scope of a
Borrower’s risks hereunder. Each Borrower hereby waives any right to assert
against Bank any defense (legal or equitable), setoff, counterclaim, or claims
that such Borrower individually may now or hereafter have against another
Borrower or any other Person liable to Bank with respect to the Obligations in
any manner or whatsoever.

 

13.4 Subrogation Defenses. Until all Obligations are paid in full and Bank has
no further obligation to make Credit Extensions to Borrowers, each Borrower
hereby waives any defense based on impairment or destruction of its subrogation
or other rights against any other Borrower and waives all benefits which might
otherwise be available to it under California Civil Code Sections 2809, 2810,
2819, 2839, 2845, 2848, 2849, 2850, 2899, and 3433 and California Code of Civil
Procedure Sections 580a, 580b, 580d and 726, as those statutory provisions are
now in effect and hereafter amended, and under any other similar statutes now
and hereafter in effect.

 

13.5 Right to Settle, Release.

 

(a) The liability of Borrowers hereunder shall not be diminished by (i) any
agreement, understanding or representation that any of the Obligations is or was
to be guaranteed by another Person or secured by other property, or (ii) any
release or unenforceability, whether partial or total, of rights, if any, which
Bank may now or hereafter have against any other Person, including another
Borrower, or property with respect to any of the Obligations.

 

(b) Without notice to any given Borrowers and without affecting the liability of
any given Borrowers hereunder, Bank may (i) compromise, settle, renew, extend
the time for payment, change the manner or terms of payment, discharge the
performance of, decline to enforce, or release all or any of the Obligations
with respect to any other Borrower by written agreement with such other
Borrower, (ii) grant other indulgences to another Borrower in respect of the
Obligations, (iii) modify in any manner any documents relating to the
Obligations with respect to any other Borrower by written agreement with such
other Borrower, (iv) release, surrender or exchange any deposits or other
property securing the Obligations, whether pledged by a Borrower or any other
Person, or (v) compromise, settle, renew, or extend the time for payment,
discharge the performance of, decline to enforce, or release all or any
obligations of any guarantor, endorser or other Person who is now or may
hereafter be liable with respect to any of the Obligations.

 

13.6 Subordination. All indebtedness of a Borrower now or hereafter arising held
by another Borrower is subordinated to the Obligations and a Borrower holding
the indebtedness shall take all actions reasonably requested by Bank to effect,
to enforce and to give notice of such subordination.

 

14. Notice of Final Agreement. NOTICE OF FINAL AGREEMENT. BY SIGNING THIS
AGREEMENT EACH PARTY REPRESENTS AND AGREES THAT: (A) THIS WRITTEN AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES, (B) THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES, AND (C) THIS WRITTEN AGREEMENT MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.

 

[signature page follows]

 

 23 

  

 

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

 

  BORROWERS:   UNI-PIXEL, INC.         By: /s/ Christine Russell   Name:
Christine Russell   Title: CFO         UNI-PIXEL DISPLAYS, INC.         By: /s/
Christine Russell   Name: Christine Russell   Title: CFO         BANK:   WESTERN
ALLIANCE BANK         By: /s/ Kelly Cook   Name: Kelly Cook   Title: Senior Vice
President

 

 24 

  

 

EXHIBIT A

 

DEBTOR: UNI-PIXEL, INC. and UNI-PIXEL DISPLAYS, INC.     SECURED PARTY: WESTERN
ALLIANCE BANK

 

COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT

 

All personal property of each Borrower (herein referred to as “Borrower” or
“Debtor”) whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:

 

(a) all accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), commercial tort claims,
deposit accounts, documents (including negotiable documents), equipment
(including all accessions and additions thereto), general intangibles (including
payment intangibles and software), goods (including fixtures), instruments
(including promissory notes), inventory (including all goods held for sale or
lease or to be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor’s books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records; and

 

(b) any and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time.

 

  

  

 

Exhibit B

 

EXIM ADVANCE REQUEST FORM

 

To: WESTERN ALLIANCE BANK         Fax: (408) 282-1681         Date:          
From: UNI-PIXEL, INC. and UNI-PIXEL DISPLAYS, INC.     Borrower’s Name          
      Authorized Signature                 Authorized Signer’s Name (please
print)                 Phone Number  

 

To Account #    

 

Borrowers hereby request funding of an EXIM Advance in the amount of $ _______
in accordance with the EXIM Facility as defined in the Loan and Security
Agreement dated October __, 2016 and as amended from time to time (the “Loan
Agreement”).

 

Borrowers hereby authorize Bank to rely on facsimile stamp signatures and treat
them as authorized by Borrowers for the purpose of requesting the above advance.

 

All representations and warranties of Borrowers stated in the Loan Agreement are
true, correct and complete in all material respects as of the date of this EXIM
Advance Request Form; provided that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.

 

Capitalized terms used herein and not otherwise defined have the meanings set
forth in the Loan Agreement.

 

  

  

 

EXHIBIT C

EXIM BORROWING BASE CERTIFICATE

BRIDGE BANK

55 Almaden Boulevard, San Jose, CA 95113

 

BORROWER: UNI-PIXEL, INC. and UNI-PIXEL DISPLAYS, INC.                

EXPORT-RELATED ACCOUNTS RECEIVABLES

                     1. Foreign Accounts Receivable Book Value as of :
____________________       $______  2. Additions (please explain on reverse) 
     $______  3. Total Export-Related Accounts Receivables       $______      
         DEDUCTIONS:           4. Less: Accounts with product US Content less
than 50%  $_______       5. Less: Accounts with terms of sale greater than 120
days  $_______       6. Less: Accounts for whom more than 50% of the A/Rs with
terms of sales longer than N120  $_______       7. Less: Accounts over 60 days
past original due date (90 days if insured through EXIM Bank insurance) 
$_______       8. Less: Accounts with 35% over 60 days past invoice due date 
$_______       9. Less: Accounts over 35% concentration of total foreign
accounts  $_______       10. Less: Accounts backed by LCs, not negotiated by
Bank or the L/C proceeds not assigned to the Bank  $_______       11. Less:
Military accounts, or arising from sales of defense articles  $_______       12.
Less: Accounts associated with nuclear power, enrichment, reprocessing, research
or heavy water production facilities  $_______       13. Less: Contra Accounts,
customer deposits or credit accounts  $_______       14. Less: Promotion, Demo
or Consignment Accounts, Bill and Hold, or any account where payment is
conditional or subject to acceptance (Retainage Accounts)  $_______       15.
Less: Inter-company/Employee and Affiliate Accounts  $_______       16. Less:
Disputed Accounts  $_______       17. Less: Accounts excluded under the EXIM
Borrower Agreement or the Loan and Security Agreement  $_______       18. Less:
Arising from inventory not originally located in and shipped from the US 
$_______       19. Less: Accounts not subject to a perfected first priority
security interest  $_______       20. Less: Accounts from sales not in the
ordinary course of business  $_______       21. Less: Accounts not owned by
Borrower or with offsetting claims  $_______       22. Less: Accounts without
invoices or export orders  $_______       23. Less: Accounts billed and
collected outside U.S. (except as may be approved in writing by EXIM Bank) 
$_______       24. Less: Accounts billed in non U.S. currency  $_______      
25. Less: Accounts in countries prohibited by EXIM as designated in the most
current Country Limitation Schedule  $_______       26. Less: Accounts backed by
L/C, goods have not been shipped or services have not been delivered  $_______  
    27. Less: Accounts determined doubtful or Buyer is insolvent or in
Bankruptcy  $_______       28. Less: Accounts covering items which have been
returned, rejected, or repossessed  $_______       29. Less: Any deduction of
sales price arising from sales contracts or agreements  $_______       30. Less:
Accounts covering goods or service which have not been accepted or which do not
represent final sales for any reason.  $_______       31. Less: Accounts
included as eligible receivable under any other credit facility to which
Borrower is a party  $_______       32. Less: Accounts from sales of Capital
Goods  $_______       33. Less: Others           34. Add: Lines 4 through 33 -
Total Ineligible Export- Related Accounts Receivables       $_______           
    35. NET ELIGIBLE EXPORT-RELATED ACCOUNTS RECEIVABLE           36.
Export-Related Account Receivable Advance Rate   90%      37. TOTAL EXIM A/R
BORROWING BASE  $_______       38. MAXIMUM EXIM LOAN AMOUNT  $2,500,000        
            39. Less: Current Loan Outstanding on EXIM Line of Credit          
40. Less: Reserves under International Sublimit       $______                41.
AVAILABLE FOR DRAW/NEED TO PAY       $______                  If line #41 is a
negative number, this amount must be remitted to the Bank immediately to bring
loan balance into compliance.          

 

  

  

 

The undersigned represents and warrants that as of the date hereof the foregoing
is true, complete and correct, that the information reflected in this EXIM
Borrowing Base Certificate complies with the representations and warranties set
forth in the Loan and Security Agreement, between Borrower and Bank, and the
EXIM Borrower Agreement, executed by Borrower and acknowledged by Bank, each
dated October __, 2016, as may be amended from time to time, as if all
representations and warranties were made as of the date hereof, and that
Borrower is, and shall remain, in full compliance with its agreements,
covenants, and obligations under such agreements. Such representations and
warranties include, without limitation, the following: Borrower is using
disbursements only for the purpose of enabling Borrower to finance the cost of
manufacturing, purchasing or selling items intended for export. Borrower is not
using disbursements for the purpose of: (a) servicing any of Borrower’s
unrelated pre-existing or future indebtedness; (b) acquiring fixed assets or
capital goods for the use of Borrower’s business; (c) acquiring, equipping, or
renting commercial space outside the United States; or (d) paying salaries of
non-U.S. citizens or non-U.S. permanent residents who are located in the offices
of the United States. Additionally, disbursements are not being used to finance
the manufacture, purchase or sale of all of the following: (a) Items to be sold
to a buyer located in a country in which the Export Import Bank of the United
States is legally prohibited from doing business; (b) that part of the cost of
the items which is not U.S. Content unless such part is not greater than fifty
percent (50%) of the cost of the items and is incorporated into the items in the
United States; (c) defense articles or defense services or items directly or
indirectly destined for use by military organizations designed primarily for
military use (regardless of the nature or actual use of the items); or (d) any
items to be used in the construction, alteration, operation or maintenance of
nuclear power, enrichment, reprocessing, research or heavy water production
facilities.

 

Capitalized terms used herein and not otherwise defined have the meanings set
forth in the Loan and Security Agreement.

 

Borrower hereby request funding in the amount of $___________in accordance with
this EXIM Borrowing Base Certificate. All representations and warranties of
Borrower stated in the Loan and Security Agreement are true, correct, and
complete in all material respects as of the date of this EXIM Borrowing Base
Certificate; provided that those representations and warranties expressly
referring to another date shall be true, correct, and complete in all material
respects as of such date.

 

The undersigned also certifies that any interest in any copyrights (whether
registered, or unregistered), patents or trademarks, and licenses have been
specifically disclosed to the Bank in writing.

 

    Date:     Prepared By:                       Date:     Bank Reviewed:      
 

 

 2 

  

 

Exhibit D

 

Compliance Certificate

 

TO:WESTERN ALLIANCE BANK    FROM:UNI-PIXEL, INC. and UNI-PIXEL DISPLAYS, INC.

 

The undersigned authorized officer of UNI-PIXEL, INC., on behalf of itself and
all other Borrowers, hereby certifies that in accordance with the terms and
conditions of the Loan and Security Agreement between Borrowers and Bank (the
“Agreement”), (i) each Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrowers stated in the Agreement are true and
correct as of the date hereof. Attached herewith are the required documents
supporting the above certification, if applicable. The Officer further certifies
that the financial statements and financial information provided hereunder are
prepared in accordance with Generally Accepted Accounting Principles (GAAP) and
are consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant   Required   Complies               A/R & A/P Agings by
invoice date   Monthly within 30 days   Yes   No Aged listing by due date aging
for export Related A/R   Monthly within 30 days   Yes   No EXIM Borrowing Base
Certificate   Monthly within 30 days   Yes   No Consolidated financial
statements (with Compliance Certificate)   Quarterly within 45 days   Yes   No
Compliance Certificate   Monthly within 30 days   Yes   No Annual audited
financial statements   FYE within 180 days   Yes   No Tax Returns with Schedules
  Within 5 days of filing   Yes   No Annual operating budget, sales projections
and operating plans reviewed by board of directors   Annually no later than 30
days after the beginning of each fiscal year   Yes   No               A/R Audit
  Initial and Semi-Annual   Yes   No               More than 50% US content of
product costs   (Quarterly certification)   Yes   No

 

Deposit balances with Bank  $___________________         Deposit balance outside
Bank  $___________________ 

 

Financial Covenant  Required   Actual   Complies                   Minimum Asset
Coverage Ratio   1.50 : 1.00    _____:1.00   Yes  No

 

Comments Regarding Exceptions: See Attached.   BANK USE ONLY            
Received by:   Sincerely,     AUTHORIZED SIGNER        

  Date:  

        Verified:   SIGNATURE     AUTHORIZED SIGNER

          Date:  

TITLE           Compliance Status Yes                          No       DATE