Exhibit 10.4

 

MAKE-WHOLE AGREEMENT

 

This MAKE-WHOLE AGREEMENT (this “Agreement”) effective as of [__], 2014 (the
“Effective Time”) is between Optex Systems Holdings, Inc., a Delaware
corporation (the “Company”), Sileas Corp., a principal shareholder of the
Company (“Sileas”), and the investor signatory hereto (the “Purchaser”).
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to them in the Purchase Agreement or the Note (as such terms are
defined herein).

 

RECITALS

 

WHEREAS, the Company and certain investors (including the Purchaser)
(collectively, the “Buyers”) entered into the Note Purchase Agreement dated as
of the Effective Date (the “Purchase Agreement”) pursuant to which the Company
sold and the Buyers signatory thereto purchased, 12.0% convertible promissory
notes of the Company (the “Notes”), upon the terms and subject to the conditions
set forth in the Purchase Agreement;

 

WHEREAS, the Company anticipates listing its shares of Common Stock on The
NASDAQ Capital Market (“NASDAQ” and the uplisting of the Common Stock to NASDAQ,
the “Uplisting”);

 

WHEREAS, Sileas holds approximately 102,184,347 shares of the Company’s Common
Stock and 926 shares of the Company’s Series A Preferred Stock which are
convertible into an aggregate of 635,267,484 shares of the Company’s Common
Stock (the “Conversion Shares” and, collectively with the 102,184,347 shares of
the Company’s Common Stock, the “Make-Whole Shares”) and has agreed to assign
certain of such Make-Whole Shares to the Buyer, pursuant to the terms and
conditions set forth herein, until such time as the Company consummates the
Uplisting (such date, the “Make Whole Termination Date”);

 

WHEREAS, concurrently herewith, Buyers (other than the Purchaser) (the “Other
Buyers”), are executing agreements, waivers and consents identical to this
Agreement (the “Other Agreements” and, together with this Agreement, the
“Agreements”).

 

NOW THEREFORE, in consideration of the respective covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows,
intending to be legally bound hereby:

 

1.            Make-Whole. Until the Make Whole Termination Date, on each
Make-Whole Date, any applicable Make-Whole Amount (the “Additional Obligations”)
on such Conversion Amount being converted or redeemed, as applicable, shall be
payable to Purchaser, in shares of Make-Whole Shares (“Additional Shares”);
provided however, that Sileas may, at its option following written notice to the
Purchaser, pay such Additional Obligations on any Make-Whole Date in cash (“Cash
Additional Payment”) or in a combination of Cash Additional Payment and
Additional Shares. Sileas shall deliver a written notice (each, an “Additional
Election Notice”) to Purchaser on or prior to the second (2nd) Trading Day
immediately following the applicable Make-Whole Trigger Date (an “Additional
Notice Due Date” and the date such notice is delivered to the Purchaser, the
“Additional Notice Date”) which notice either (A) confirms that the Additional
Obligations to be paid on such Make-Whole Date shall be paid entirely in
Additional Shares or (B) elects to pay the Additional Obligations as a Cash
Additional Payment or a combination of a Cash Additional Payment and Additional
Shares and specifies the amount of Additional Obligations that shall be paid as
a Cash Additional Payment and the amount of Additional Obligations, if any, that
shall be paid in Additional Shares. Additional Obligations to be paid on a
Make-Whole Date in Additional Shares shall be paid in a number of fully paid and
non-assessable shares (rounded to the nearest whole share) of the Company’s
Common Stock held by Sileas equal to the quotient of (1) the amount of
Additional Obligations payable on such Make-Whole Date less any related Cash
Additional Payment paid on such Make-Whole Date and (2) the Company Conversion
Price in effect on the Make-Whole Date. To the extent such Make Whole Shares to
be issued are Conversion Shares, Sileas shall take all action necessary to
effect the conversion of its shares of the Company’s Series A Preferred Stock,
including obtaining all required opinions of counsel and representation letters,
at its own expense, in connection therewith, as soon as possible, but in no
event later than one (1) Trading Day after the applicable Make-Whole Date.

 

 

 

 

2.            Payment in Additional Shares. When any Additional Shares are to be
paid on a Make-Whole Date, Sileas shall deliver certificates representing such
Additional Shares to be assigned to the transfer agent for the Company’s Common
Stock (the “Transfer Agent”), along with dully executed medallion guaranteed
stock powers endorsed for transfer to the Purchaser, along with any required
instructions or additional documentation required by the Transfer Agent to
effect the assignment of the Additional Shares to the Purchaser and, if
required, counsel to the Company shall provide any required opinions of counsel
to the Transfer Agent in connection therewith promptly upon request.

 

3.            Representations and Warranties of Sileas. Sileas hereby makes the
following representations and warranties to the Purchaser, which may be relied
on by any subsequent purchasers of the Purchaser’s Additional Shares and their
counsel:

 

(a)            Sileas owns the Make-Whole Shares free and clear of all any and
all liens, claims, encumbrances, preemptive rights, right of first refusal and
adverse interests of any kind. No creditor of Sileas, as of any date on which
Sileas is required to assign Make-Whole Shares pursuant to the terms hereof, has
any secured interest in or existing lien against, such Make-Whole Shares to be
assigned.

 

(b)            Sileas has the requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby and otherwise
to carry out Sileas’s obligations hereunder. No consent, approval or agreement
of any individual or entity is required to be obtained by Sileas in connection
with the execution and performance by Sileas of this Agreement or the execution
and performance by Sileas of any agreements, instruments or other obligations
entered into in connection with this Agreement.

 

(c)            There is no private or governmental action, suit, proceeding,
claim, arbitration or investigation pending before any agency, court or
tribunal, foreign or domestic, or, to Sileas’s knowledge, threatened against
Sileas or any of Sileas’s properties. There is no judgment, decree or order
against Sileas that could prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement.

 

(d)            There are no material claims, actions, suits, proceedings,
inquiries, labor disputes or investigations pending or, to Sileas’s knowledge,
threatened against Sileas or any of its assets, at law or in equity or by or
before any governmental entity or in arbitration or mediation. No bankruptcy,
receivership or debtor relief proceedings are pending or, to Sileas’s knowledge,
threatened against Sileas.

 

(e)            Sileas owns in excess of 50.1% of the issued and outstanding
Series A Preferred Stock of the Company, and, as required by Section 6 of the
certificate of designation for the Series A Preferred Stock, it hereby consents
to the transactions set forth in the Purchase Agreement, including the issuance
of the convertible notes being issued thereunder and the conversion of all such
notes into common stock of the Company, and issuance of all shares with respect
thereto.

 

4.            Representations and Warranties of Purchaser. The Purchaser hereby
makes the following represents and warranties to Sileas:

 

 (a)     Purchaser has the requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby and otherwise
to carry out its obligations hereunder. No consent, approval or agreement of any
individual or entity is required to be obtained by the Purchaser in connection
with the execution and performance by the Purchaser of this Agreement or the
execution and performance by the Purchaser of any agreements, instruments or
other obligations entered into in connection with this Agreement.

 

5.            Certain Definitions.

 

(a)“Make-Whole Amount” means the amount equal to the difference obtained by
subtracting (1) the amount of interest (calculated at the Treasury Rate) that
the Purchaser would earn on an investment equal to the applicable Make-Whole
Remaining Interest for the period from the date of the applicable related event
resulting in the reduction of the Principal amount

 

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  outstanding under the Note until the Maturity Date from (2) the applicable
Make-Whole Remaining Interest.

 

(b)“Make-Whole Date” (i) each Conversion Date, (ii) Change of Control Redemption
Date, (iii) Event of Default Redemption Date, (iv) the Maturity Date and (v) any
other applicable date when payment of a Make-Whole Amount may be due under the
Note in connection with a payment, redemption or conversion thereunder.

 

(c)“Make-Whole Remaining Interest” means the amount equal to any Interest, if
any, that, but for the applicable related event resulting in the reduction of
the Principal amount outstanding under the Note, would have accrued with respect
to the applicable Conversion Amount being converted or redeemed at the Interest
Rate (assuming the Interest Rate then in effect as of the applicable related
event resulting in the reduction of the Principal amount outstanding under this
Note is the Interest Rate through the Maturity Date) for the period from the
applicable related event resulting in the reduction of the Principal amount
outstanding under the Note through the Maturity Date.

 

(d)“Make-Whole Trigger Date” means the applicable date triggering the
requirement to pay the Make-Whole Amount.

 

6.            Sileas Covenant. Sileas agrees that, until the Termination Date,
it will maintain beneficial ownership over such number of Make Whole Shares as
may be required to fulfil its obligations in full under this Agreement.

 

7.            Independent Nature of Purchaser's Obligations and Rights. The
obligations of the Purchaser under this Agreement or any other Transaction
Document are several and not joint with the obligations of any Other Buyer, and
the Purchaser shall not be responsible in any way for the performance of the
obligations of any Other Buyer under any Transaction Document or Other
Agreement. Nothing contained herein or in any Other Agreement or any other
Transaction Document, and no action taken by the Purchaser pursuant hereto,
shall be deemed to constitute the Purchaser and Other Buyers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchaser and Other Buyers are in any way acting in concert
or as a group with respect to such obligations or the transactions contemplated
by this Agreement, any Other Agreement or any other Transaction Document, and
the Company acknowledges that the Purchaser and the Other Buyers are not acting
in concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement, any Other Agreement and any other Transaction
Document. The Company and the Purchaser confirm that the Purchaser has
independently participated in the negotiation of the transactions contemplated
hereby with the advice of its own counsel and advisors. The Purchaser shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement, any Other Agreement or out
of any other Transaction Documents, and it shall not be necessary for any Other
Buyer to be joined as an additional party in any proceeding for such purpose.

 

8.            No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

 

9.            Non-Public Information. Within the time constraints proscribed by
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the
Company shall file a Current Report on Form 8-K describing all the material
terms of the transactions contemplated by this Agreement and the Purchase
Agreement in the form required by the Exchange Act, and attaching the form of
this Agreement, the Purchase Agreement, the Note and any other required exhibit
(including all attachments, the “8-K Filing”). From and after the issuance of
the 8-K Filing, the Company shall have disclosed all material, non-public
information (if any) delivered to the Purchaser by the Company or any of its
subsidiaries, or any of their respective officers, directors, employees or
agents in connection with the transactions contemplated by the this Agreement.

 

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10.            Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute but one and the same instrument. In the
event that any signature is delivered by facsimile transmission or by an e-mail
which contains a portable document format (.pdf) file of an executed signature
page, such signature page shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such signature page were an original thereof.

 

11.            No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.

 

12.            Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

 

13.            Severability. If any provision of this Agreement is prohibited by
law or otherwise determined to be invalid or unenforceable by a court of
competent jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the broadest extent
that it would be valid and enforceable, and the invalidity or unenforceability
of such provision shall not affect the validity of the remaining provisions of
this Agreement so long as this Agreement as so modified continues to express,
without material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

 

14.            Scope. Except as explicitly set forth herein, the Transaction
Documents remain unmodified and in full force and effect.

 

15.            Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

16.            Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns
in accordance with the terms of the Note.

 

17.            Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS CONSENT OR ANY TRANSACTION CONTEMPLATED HEREBY

 

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18.            Most Favored Nation. The Company hereby represents and warrants
as of the date hereof and covenants and agrees from and after the date hereof
that none of the terms offered to any person with respect to the amendments,
waivers and consents contemplated hereby, is or will be more favorable to such
person than those of the Purchaser under this Agreement. The provisions of this
Section 17 shall apply similarly and equally to each Other Agreement.

 

[Signatures appear on following page.]

 

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IN WITNESS WHEREOF, the Purchaser and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above.

 

 

  COMPANY:       OPTEX SYSTEMS HOLDINGS, INC.               By:         Name:  
    Title:                     SILEAS CORP.               By:         Name:    
  Title:  

 

 

 

 

IN WITNESS WHEREOF, the Purchaser and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above.

 

 

  PURCHASER:                           By: