Exhibit 10.1

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS AGREEMENT. THE
COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE CONFIDENTIALITY
REQUEST. A COMPLETE VERSION OF THIS AGREEMENT HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

 

AMENDMENT NO. 1 TO AGREEMENTS

 

This Amendment No. 1 to Agreements (“Amendment No. 1”), dated as of October 4,
2018 (the “Effective Date”), is entered into by and between TDG Acquisition
Company, LLC, a Delaware limited liability company (“Buyer”) and Vuzix
Corporation, a Delaware corporation (“Seller,” and together with Buyer the
“Parties,” and each, a “Party”).

 

WHEREAS, the Parties entered into an Asset Purchase Agreement dated June 15,
2012 (as amended, supplemented or otherwise modified from time to time in
accordance with its provisions) (the “APA”) and certain other ancillary
agreements, as well as the Vuzix Authorized Reseller Agreement between the
Parties dated June 15, 2012 (the “Reseller Agreement”);

 

WHEREAS, the Parties desire to amend the APA to adjust the scope of the
non-competition provisions and to provide for Seller to pay Buyer commissions on
certain sales, all on the terms and subject to the conditions set forth herein;
and

 

WHEREAS, the Parties desire to amend the Reseller Agreement to change the
discount that the Buyer receives under that Agreement; and

 

WHEREAS, given the changes to the APA, the Buyer has agreed to provide certain
waivers and clarifications to Paul Travers, the CEO of the Seller, in connection
with that certain Restrictive Covenants Agreement between the Buyer and him
dated June 15, 2012 (the “Travers Non-Compete”); and

 

WHEREAS, pursuant to Section 10.02(a) of the APA and Section 14.2 of the
Reseller Agreement, the amendments contemplated by the Parties must be contained
in a written agreement signed by each Party.

 

NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:

 

1.       Definitions. Capitalized terms used and not defined in this Amendment
No. 1 have the respective meanings assigned to them in the APA.

 

2.       Amendments to the APA. As of the Effective Date, the APA is hereby
amended or modified as follows:

 

(a)       The definition of “Defense and Security Organizations” now appearing
in Section 1.01 of the APA is hereby deleted in its entirety and replaced with
the following:

 

“Defense and Security Organizations” means (1) business customers and
Governmental Entity customers that primarily provide security and/or defense
services, including police, fire fighters, EMTs, other first responders, and
private security service providers, and (2) any non-US Governmental Entity
authorizing or providing homeland and border security services; provided that, a
Military Organization is not a Defense and Security Organization.

 

 

 

 

(b)       The definition of “Military Organizations” now appearing in Section
1.01 of the APA is hereby deleted in its entirety and replaced with the
following:

 

“Military Organizations” means organizations, departments, or individuals
authorized by a Governmental Entity to defend or engage in combat for a country
or who otherwise engage in activities of a military nature. For purposes of
clarity, (i) US Homeland Security Agencies are Military Organizations, and (ii)
any individual retail consumer who purchased finished products for personal
non-military use is not a Military Organization.

 

(c)       Section 1.01 of the APA is hereby amended by inserting the following
new definitions in the appropriate alphabetical order:

 

“Approved Military Organization Transaction” means any sale, lease, disposition,
or other provision by Seller to a third party of heads-up display (HUD)
components or subsystems (and any services to support such sale) for
incorporation into a finished good or system for sale to a Military Organization
for which Seller: (i) provides to Buyer notice promptly after the commencement
of discussions with a third party regarding such potential transaction, provided
that Buyer agrees to be bound by any additional confidentiality obligations
reasonably required by the third party or Seller prior to receiving such notice,
and (ii) obtains Buyer’s consent (which Buyer shall not unreasonably withhold or
delay) before issuing any written proposal and before entering into any binding
obligation to sell, lease, dispose of, or otherwise provide heads-up display
(HUD) components or subsystems (and any services to support such sale), provided
that if Buyer has not provided notice to Seller of its objection to such
transaction within five (5) business days of Seller’s request for such consent,
which notice shall state in sufficient detail Buyer’s reasonable basis for
withholding its consent to such transaction, then Buyer’s consent shall be
deemed to have been given. Buyer acknowledges and agrees that Seller may, upon
notice to Buyer, engage in discussions and thereafter seek Buyer’s consent to
enter into an agreement or arrangement with the following third parties in
connection with procuring or performing Approved Military Organization
Transactions, and in no case will Buyer refuse to consent to an Approved
Military Organization Transaction solely because any of the following third
parties are involved in the transaction:

 

§Thales Group     

 

§Raytheon Company              

 

§The Boeing Company

 

§L-3 Technologies, Inc.          

 

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§Northrop Grumman Corporation           

 

§United Technologies Corporation        

 

§BAE Systems plc  

 

§Lockheed Martin Corporation

 

§Rockwell Collins, Inc. 

 

§Airbus SE

  

“US Homeland Security Agencies” means the US Department of Homeland Security
(including all its Operational and Support Components) and any similar US state
homeland and border security agencies.

 

“Net Sales Price” means the gross price at which Seller sells, leases, disposes
of, or otherwise provides goods and services to a customer, as reflected on the
applicable invoice, less (a) any rebates or discounts taken or allowed; (b)
credits or allowances given or made for rejections or return of any previously
sold or provided goods or services; (c) to the extent included in such gross
invoice price, any tax or government charge imposed on the production, import,
export, sale, delivery or use of such good or service, including, without
limitation, any value added or similar tax or government charge, but not
including any tax levied with respect to income or similar tax; and (d) to the
extent included in such gross invoice price, any documented packaging, freight,
transportation, insurance and similar distribution charges. Net Sales Price will
not include goods or services provided without monetary consideration as samples
or other use to promote sales of good or services.

 

(d)       Section 7.04 of the APA is hereby deleted in its entirety and replaced
with the following:

 

Section 7.04 Certain Permitted Transactions.

 

(a)       The Defense Advanced Research Projects Agency (DARPA) and Other
Government Funded Projects. During the Restricted Period, other than with
respect to the projects and related follow-ons being funded by DARPA with
respect to advancement of waveguide technology as more fully described on
Schedule 7.04, Seller shall not enter into any contract with, or seek or accept
any funding from, any Governmental Entity (including DARPA) to develop, produce,
or sell any technology, products, or services that are directly or indirectly
competitive with the Business. In addition and notwithstanding the foregoing,
during the Restricted Period, Seller may enter into contracts with, and seek and
accept funding from, (i) TSWG (Tactical Support Working Group) operates as a
program element under the Combating Terrorism Technical Support Office (CTTSO));
(ii) Air Force Research Labs (AFRL); (iii) Night Vision Labs (NVL); (iv) NATICK;
and (v) Navy Research Labs, SBIR, with respect to advancement of waveguide
technology, provided Seller obtains the advance written consent of Buyer prior
to entering into any such contract or seeking or accepting any such funding
pursuant to Section 7.04(a)(i), (ii), (iii), (iv) or (v), which consent will not
be unreasonably delayed or withheld. Any products developed as a result of any
research or other activities funded by any Governmental Entity (including DARPA
and those described in (i) through (v) herein), shall be subject, as between the
Parties, to the exclusive right of Buyer to market, sell, and otherwise
distribute such products pursuant to the Authorized Reseller Agreement.

 

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(b)       Approved Military Organization Transactions and Certain Sales to
Defense and Security Organizations and US Homeland Security Agencies. During the
Restricted Period, Seller may: (1) engage in Approved Military Organization
Transactions, (2) sell, lease, license, dispose of and provide goods and
services to US Homeland Security Agencies, and (3) sell, lease, license, dispose
of and provide goods and services to Defense and Security Organizations.

 

(c)       Commissions. The Seller will owe the Buyer the following commissions
in connection with the transactions contemplated by Section 7.04(b) made during
the Restricted Period: (1) [*] percent ([*]%) of the Net Sales Price of each
Approved Military Organization Transaction; (2) [*] percent ([*]%) of the Net
Sales Price for the transactions contemplated by Section 7.04(b)(2), and (3) [*]
percent ([*]%) of the Net Sales Price for the transactions contemplated by
Section 7.04(b)(3).

 

(d)       Commission Payments. Any commission due under Section 7.04(c) shall be
earned and deemed payable to the extent Seller receives any payment toward the
Net Sales Price, and if a customer makes payments to Seller in increments or
installments, Seller shall pay Buyer pro rata commission corresponding to the
incremental or installment payments made toward the Net Sales Price. No later
than thirty (30) days following the end of each calendar quarter, Seller shall
issue to Buyer payment for all commissions earned in the immediately preceding
calendar quarter. Seller shall keep accurate records of all sales for which
commission is due under this Amendment No. 1 and shall submit to Buyer with the
above payment a report indicating all such sales, the amount of payments
received by Seller with respect to such sales, and the amount of commission owed
to Buyer for such sales.

 

(e)       Audit Rights. Buyer may, with no less than ten (10) business day’s
prior written request to Seller, inspect those of Seller’s records that relate
to transactions for which Buyer is owed a commission, so as to confirm the
amounts paid under Section 7.04(d) are consistent with the commission amounts
set out in Section 7.04(c). Such records may be inspected no more than once each
calendar year, and only during Seller’s standard business hours at Seller’s
principal office or other mutually agreed upon location by an independent
auditor engaged and paid for by Buyer (the “Auditor”) who shall maintain the
confidentiality of such records pursuant to a reasonable confidentiality
agreement. If any such inspection reveals that Seller owes Buyer additional
commissions, such additional commissions shall be paid within thirty (30) days
following completion of the respective inspection. If the inspection report
reflects that Seller underpaid the commissions due for the audited period by
five percent (5%) or more, Seller shall bear the reasonable documented fees and
expenses of the Auditor. If any such inspection by Buyer reveals that Seller
overpaid Buyer commissions, Seller shall be entitled to a credit against future
commissions due hereunder in the amount of such overpayment; provided, however,
that in no event will Buyer have to refund Seller any portion of such
overpayment even if Seller does not use all of such overpayment in the form of
credits. Notwithstanding the foregoing, if any audit reflects that Seller
underpaid the commissions due for the audited period by five percent (5%) or
more, then Buyer may perform up to two (2) audits in the immediately following
calendar year.

 

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3.       Payments. As consideration for this Amendment No. 1, Seller shall pay
to Buyer the sum of One Million Five Hundred Thousand Dollars ($1,500,000), as
follows: (a) Seven Hundred Fifty Thousand Dollars ($750,000), within three (3)
days after the Effective Date of this Agreement; (b) Five Hundred Thousand
Dollars ($500,000), on or before January 4, 2019; and (c) Two Hundred Fifty
Thousand Dollars ($250,000), on or before April 5, 2019.

 

4.       Additional Commercial Terms.

 

a.Reseller Agreement. The Parties agree that (1) the discount Buyer receives
under the Reseller Agreement for all sales Buyer makes to Military Organizations
will be reduced to [*] percent ([*]%) for all orders above $5,000; and (2) that
Seller will not be obligated to provide Buyer similar discounts that Seller
provides to other resellers of its products and that any such language in the
Reseller Agreement, including Schedule C, is hereby deleted and of no further
force or effect.

 

b.Sale of Waveguides. Seller will offer to sell Buyer at its standard commercial
pricing and on its standard terms and conditions of sale its standard waveguide
display modules and components for incorporation into the goods Buyer sells to
Military Organizations.

 

c.Meetings. The Parties will meet at least once each calendar quarter to discuss
potential business opportunities, but neither party will be obligated to enter
into any transactions or execute any agreements in connection therewith.

 

 

d.Travers Non-Compete. The Buyer confirms that any actions taken by Travers as
an officer and director of the Seller consistent with and in furtherance of
Seller’s rights under Section 7.04 of the APA, as amended hereby, are not deemed
a violation of the Travers Non-Compete and Buyer waives any right to claim that
such activities are a violation of the Travers Non-Compete.

 

5.       Representations and Warranties. Each Party hereby represents and
warrants to the other Party that this Amendment No. 1 has been executed and
delivered by such Party through its duly authorized representative and (assuming
due authorization, execution, and delivery by the other Party hereto)
constitutes the legal, valid, and binding obligation of such Party, enforceable
against such Party in accordance with its terms.

 

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6.       Date of Effectiveness; Limited Effect. This Amendment No. 1 will be
deemed effective as of the Effective Date. Except as expressly provided in this
Amendment No. 1, all the terms and provisions of the APA and Reseller Agreement
are and will remain in full force and effect and are hereby ratified and
confirmed by the Parties. Without limiting the generality of the foregoing, the
amendments contained herein will not be construed as an amendment to or waiver
of any other provision of the APA or of any other transaction documents or as a
waiver of or consent to any further or future action on the part of either Party
that would require the waiver or consent of the other Party. On and after the
Effective Date, each reference in each of the APA or the Reseller Agreement to
“this Agreement,” “the Agreement,” “hereunder,” “hereof,” “herein,” or words of
like import, and each reference to the APA or the Reseller Agreement in any
other agreements, documents, or instruments executed and delivered pursuant to,
or in connection therewith will mean and be a reference to the APA or the
Reseller Agreement, as applicable as amended by this Amendment No. 1.

 

7.       Miscellaneous. This Amendment No .1: (a) is governed by, and construed
in accordance with, the laws of the State of New York, without giving effect to
the conflict of laws provisions thereof; (b) shall inure to the benefit of and
be binding upon each of the Parties and each of their respective successors and
permitted assigns; (c) may be executed in counterparts, each of which is deemed
an original, but all of which constitute one and the same agreement; and (d)
constitutes the sole and entire agreement between the Parties with respect to
the subject matter contained herein, and supersedes all prior and
contemporaneous understandings, agreements, representations and warranties, both
written and oral, with respect to such subject matter. Delivery of an executed
counterpart of this Amendment No. 1 electronically in portable document format
(.pdf) shall be effective as delivery of an original executed counterpart of
this Amendment No. 1.

 

Signatures appear on the following page.

 

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IN WITNESS WHEREOF, each of the Parties has executed or caused this Agreement to
be executed by its duly authorized officer or other authorized person, as of the
date first above written.

 

    TDG Acquisition Company, LLC                     By: /s/ Richard Ryan      
      Name: Richard Ryan             Title: CEO                                
      Vuzix Corporation                     By: /s/ Grant Russell            
Name: Grant Russell             Title: EVP & CFO  

 

 

 

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