Document:

Exhibit 10.4

 

EXECUTION COPY

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

THIS INTELLECTUAL PROPERTY
SECURITY AGREEMENT (together with all amendments, if any, from time to time, this “Agreement”), dated as of
August 29, 2014, is made by Nephros, Inc., a Delaware corporation (“Grantor”), and Lambda
Investors LLC (“Lender”).

 

WITNESSETH:

 

WHEREAS, Grantor has
requested a $1,750,000 loan from Lender (the “Loan”); and

 

WHEREAS, Lender has
agreed to make the Loan subject in part to Grantor entering into this Agreement.

 

NOW, THEREFORE, in
consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.        DEFINED TERMS.
All capitalized terms used but not otherwise defined herein have the meanings given to them in the Security Agreement. All other
terms contained in this Agreement, unless the context indicates otherwise, and not defined herein have the meanings provided for
by the UCC to the extent the same are used or defined therein. In addition, as used herein, the following terms shall have (unless
otherwise provided elsewhere in this Agreement) the following respective meanings (such meanings being equally applicable to both
the singular and plural form of the terms defined):

 

“Copyright
License” means copyright rights under any written agreement now owned or hereafter acquired by Grantor granting any rights
with respect to any Copyright or Copyright registration.

 

“Copyrights”
means all of the following now owned or hereafter adopted or acquired by Grantor: (a) all copyrights and General Intangibles
of like nature (whether registered or unregistered), all registrations and recordings thereof; and all applications in connection
therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office
or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof, and
(b) all reissues, extensions or renewals thereof.

 

“License”
means any Copyright License, Patent License, Trademark License or other license of rights, entire interests, and partial interests
now held or hereafter acquired by any Grantor.

 

“Patent License”
means patent rights under any written agreement now owned or hereafter acquired by any Grantor granting any rights with respect
to any invention on which a Patent is in existence.

 

    	 

    	 

    

 

“Patents”
means all of the following in which Grantor now holds or hereafter acquires any interest: (a) all letters patent of the United
States or of any other country, all registrations and recordings thereof, and all applications for letters patent of the United
States or of any other country, including registrations, recordings and applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any state, or any other country, and (b) all divisionals,
reissues, continuations, continuations-in-part or extensions thereof.

 

“Promissory
Note” means that certain Senior Secured Note, dated as of the date hereof, made by Grantor payable to the order of Lender
in the original principal sum of $1,750,000, and any Senior Secured Note or Notes subsequently issued upon exchange or transfer
thereof, and shall include all amendments, supplements and other modifications thereto.

 

“Security
Agreement” means that certain Security Agreement, dated as of the date hereof, between Grantor and Lender, as the same
may be amended from time to time.

 

“Trademark
License” means trademark rights under any written agreement now owned or hereafter acquired by any Grantor granting any
rights with respect to any Trademark.

 

“Trademarks”
means all of the following now owned or hereafter existing or adopted or acquired by Grantor: (a) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on
which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered),
all registrations and recordings thereof; and all pending applications in connection therewith, including registrations, recordings
and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision thereof; (b) all reissues, extensions or renewals
thereof; and (c) all goodwill associated with or symbolized by any of the foregoing.

 

2.        GRANT
OF SECURITY INTEREST IN INTELLECTUAL PROPERTY COLLATERAL. To secure the prompt and complete payment, performance and observance
of all the Secured Obligations, Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates and transfers to Lender
a continuing security interest in and Lien upon all of its right, title and interest in, to and under the following, whether presently
existing or hereafter created or acquired by or arising in favor of Grantor and whether owned or consigned by or to, or licensed
from or to, Grantor (collectively, the “Intellectual Property Collateral”):

 

(i)        all of its Patents
and Patent Licenses to which it is a party, including those referred to on Schedule I hereto;

 

(ii)        all of its
Trademarks and Trademark Licenses to which it is a party, including those referred to on Schedule II hereto;

 

(iii)        all of its
Copyrights and Copyright Licenses to which it is a party, including those referred to on Schedule III hereto;

 

(iv)        all
divisionals, reissues, continuations or extensions, as may be appropriate, of the foregoing;

 

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(v)        all goodwill
of the business connected with the use of, and symbolized by, each Patent, each Patent License, each Trademark, each Trademark
License, each Copyright and each Copyright License, as appropriate; and

(vi)        all products
and Proceeds of the foregoing, including, without limitation, any claim by Grantor against third parties for past, present or future
(A) infringement of any Patent or Patent licensed under any Patent License, (B) injury to the goodwill associated with
any Patent or any Patent licensed under any Patent License, (C) infringement or dilution of any Trademark or Trademark licensed
under any Trademark License, (D) injury to the goodwill associated with any Trademark or any Trademark licensed under any
Trademark License, (E) infringement of any Copyright or Copyright licensed under any Copyright License.

 

3.        REPRESENTATIONS
AND WARRANTIES. Except for interests in Patents, Trademarks, and Copyrights that are, collectively, not material in
value, Grantor represents and warrants that Grantor does not have any interest in, or title to, any Patent, Trademark or
Copyright except as set forth in Schedule I, Schedule II and Schedule III, respectively, hereto. This
Agreement is effective to create a valid and continuing Lien on and, upon the filing hereof with the United States Patent and
Trademark Office and the United States Copyright Office and the filing of appropriate financing statements listed on Schedule
I to the Security Agreement, perfected security interests in favor of Lender in all of Grantor’s Patents,
Trademarks and Copyrights and such perfected security interests are enforceable as such as against any and all creditors of,
and purchasers from, Grantor. Upon the filing by Lender of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office and the filing of appropriate financing statements listed on Schedule I to the
Security Agreement, all action necessary to protect and perfect Lender’s Lien on Grantor’s Patents, Trademarks
and Copyrights shall have been duly taken.

 

4.        COVENANTS.
Grantor covenants and agrees with Lender, for the benefit of Lender, that from and after the date of this Agreement and until
this Agreement is terminated pursuant to Section 9 hereof:

 

(a)        Grantor
shall notify Lender promptly, in writing, if it knows or has reason to know that any application or registration relating to any
Patent, Trademark or Copyright (now or hereafter existing) may become abandoned or dedicated to the public, or of any adverse determination
or development (including the institution of, or any such determination or development in, any proceeding in the United States
Patent and Trademark Office, the United States Copyright Office or any court) regarding Grantor’s ownership of any Patent,
Trademark or Copyright, its right to register the same, or to keep and maintain the same in each case unless Grantor has elected
as determined in its reasonable business judgment to abandon any application or registration which Grantor deems to be no longer
material to the conduct of its business or operations.

 

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(b)        If Grantor,
either directly or through any agent, employee, licensee or designee, files an application for the registration of any Patent,
Trademark or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar office
or agency, Grantor shall give Lender written notice of such filed applications on or before the end of the Fiscal Quarter during
which such application was made and Grantor shall execute and deliver a supplement hereto (in form of Exhibit B attached
hereto) to evidence Lender’s Lien on such Patent, Trademark or Copyright, and the General Intangibles of Grantor relating
thereto or represented thereby.

 

(c)        Grantor
shall take all actions necessary to maintain and pursue each application, to obtain the relevant registration and to maintain the
registration of each of the Patents or Trademarks (now or hereafter existing), including the filing of renewals, Section 8 affidavits
of use, Section 15 affidavits of non-contestability, opposition, interference and cancellation proceedings unless Grantor has elected,
in its reasonable business judgment, to abandon any application or registration which Grantor deems in its reasonable business
judgment to be no longer material to the conduct of its business or operations.

 

(d)        In the
event that any of the material Intellectual Property Collateral is infringed upon, or misappropriated or diluted by a third party,
Grantor shall notify Lender in writing reasonably promptly after Grantor learns thereof unless it shall reasonably determine that
such Intellectual Property Collateral is in no way material to the conduct of its business or operations in its reasonable business
judgment. Grantor shall, unless it shall reasonably determine that such Intellectual Property Collateral is in no way material
to the conduct of its business or operations, promptly take such actions to enforce its rights and protect such Intellectual Property
Collateral, whether by action, suit, proceeding or otherwise, as Grantor shall deem necessary or appropriate under the circumstances
in its reasonable business judgment.

 

5.        SECURITY AGREEMENT.
The security interests granted pursuant to this Agreement are granted in conjunction with the security interests granted to Lender
pursuant to the Security Agreement. Grantor hereby acknowledges and affirms that the rights and remedies of Lender with respect
to the security interest in the Intellectual Property Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

 

6.        REINSTATEMENT.
This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Grantor
for liquidation or reorganization, should Grantor become insolvent or make an assignment for the benefit of any creditor or creditors
or should a receiver or trustee be appointed for all or any significant part of Grantor’s assets, and shall continue to
be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee
of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise,
all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not
so rescinded, reduced, restored or returned.

 

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7.        NOTICES.
Whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by any other party, or whenever any of the parties desires to give or serve upon
another any such communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration
or other communication shall be in writing and shall be addressed to the party to be notified at the address set forth in the Promissory
Note, and given in the manner required by the Promissory Note.

 

8.        ADDITIONAL GRANTORS.
From time to time subsequent to the date hereof, additional Persons may become parties hereto as additional Grantors (each, an
“Additional Grantor”), by executing a counterpart of this Agreement substantially in the form of Exhibit
A attached hereto, and the written consent of Grantor, which consent shall not be unreasonably withheld. Upon delivery of
any such counterpart to Lender, and written notice thereof to Grantor, each Additional Grantor shall be a Grantor and shall be
as fully a party hereto as if such Additional Grantor were an original signatory hereto. Grantor expressly agrees that its obligations
arising hereunder shall not be affected or diminished by the addition or release of any other Grantor hereunder nor by any election
of Lender not to cause any Person to become an Additional Grantor hereunder. This Agreement shall be fully effective as to any
Grantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a
Grantor hereunder.

 

9.        TERMINATION.
Subject to Section 6 hereof, this Agreement and the security interests granted hereby shall terminate in accordance with
the Security Agreement.

 

10.        ADVICE OF COUNSEL.
Each of the parties represents to each other party hereto that it has discussed this Agreement with its counsel.

 

11.        GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF DELAWARE SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS AGREEMENT WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.

 

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IN WITNESS WHEREOF, Grantor
has caused this Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

	 	NEPHROS, INC.
	 	 	 
	 	By: 	/s/ John C. Houghton
	 	Name:	John C. Houghton
	 	Title:	President and Chief Executive Officer

 

    	 

    	 

    

 

ACCEPTED
AND ACKNOWLEDGED:

 

Lambda
Investors LLC

 

	By:	/s/ Christopher Taylor	 
	Name:	Christopher Taylor	 
	Title:	Chief Financial Officer, Secretary

and TreasurerExhibit 10.1 SixthAmendmenttoCreditAgreementOrionv2

EXHIBIT 10.1
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT, dated as of  August 29, 2014 (this "Amendment") is by and among JPMORGAN CHASE BANK, N.A., a national banking association (the "Bank"), ORION ENERGY SYSTEMS, INC., a Wisconsin corporation (the "Borrower"), ORION ASSET MANAGEMENT, LLC, a Wisconsin limited liability company ("OAM"), CLEAN ENERGY SOLUTIONS, LLC, a Wisconsin limited liability company ("CES"), GREAT LAKES ENERGY TECHNOLOGIES, LLC, a Wisconsin limited liability company ("GLET"), HARRIS MANUFACTURING, INC., a Florida corporation ("HMI"), and HARRIS LED, LLC, a Florida limited liability company ("HLED" and together with the Borrower, OAM, CES, GLET and HMI each individually, a "Loan Party" and collectively, the "Loan Parties"), and amends and supplements that certain Credit Agreement dated as of June 30, 2010, as amended to date (as so amended, the "Credit Agreement"), by and among the Bank and the Loan Parties.
RECITALS
A.    Events of Default exist under (i) section 7.1(c) of the Credit Agreement because the Loan Parties have violated [a] section 6.12(c) (Debt Service Coverage Ratio) as of the measurement period ended June 30, 2014 and [b] section 6.12(d) (Funded Debt to EBITDA Ratio) as of the measurement period ended June 30, 2014  and (ii) section 7.1(m) of the Credit Agreement (collectively, the "Existing Default").
B.    The Loan Parties have requested that the Bank waive the Existing Default and amend the Credit Agreement.
C.    The Bank is willing to waive the Existing Defaults and amend the Credit on the terms and subject to the conditions set forth herein.
AGREEMENTS
In consideration of the Recitals, the promises and agreements set forth in the Credit Agreement, as amended hereby, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1.Definitions and References.  Capitalized terms not otherwise defined herein have the meanings assigned in the Credit Agreement.  All references to the Credit Agreement contained in the Collateral Documents and the other Loan Documents shall, upon fulfillment of the conditions specified in section 4 below, mean the Credit Agreement as amended by this Amendment.
2.    Amendments to the Credit Agreement.  
(a)    The defined term "Revolving Note Maturity Date" appearing in section 1.1 of the Credit Agreement is amended by deleting the date "August 30, 2014" appearing therein and inserting the date "August 31, 2015" in its place.

(b)    Clause (b) of the defined term "Unused Fee Triggering Event" is amended by deleting the amount "$10,000,000" appearing therein and inserting the amount "$5,000,000" in its place.
(c)    Section 6.12 of the Credit Agreement is amended and restated in its entirety to read as follows:
6.12    Financial Covenants.
(a)    Unencumbered Liquidity.  Prior to the Debt Service Period, permit the average Unencumbered Liquidity to be less than $20,000,000 during any period of three consecutive Business Days through and including the Revolving Loan Maturity Date.
(b)    Minimum EBITDA.  Permit, EBITDA to be less than            (i) $(3,500,000) as of September 30, 2014 for the 6-month period ending on such date, (ii) $500,000 as of December 31, 2014 for the 9-month period ending on such date and (iii) $3,000,000 as of March 31, 2015 for the 12-month period ending on such date.
(c)    Debt Service Coverage Ratio.  Permit the Debt Service Coverage Ratio to be less than 1.25:1.00 as of the last day of any fiscal quarter, commencing with the fiscal quarter ending June 30, 2015.
(d)    Funded Debt to EBITDA Ratio.  Permit the Funded Debt to EBITDA Ratio to be greater than 2.50:1.00 as of the last day of any fiscal quarter, commencing with the fiscal quarter ending March 31, 2015.
3.    Effectiveness of the Amendment.  This Amendment shall become effective upon execution and delivery hereof by the parties and receipt by the Bank of (i) an amendment fee in the amount of $75,000 which shall be fully earned, due and payable on the date hereof and (ii) such other amendments, forms, certificates, agreements, documents and instruments as the Bank may reasonably request.
4.    Limited Waiver.  The Loan Parties acknowledge the existence of the Existing Default.  The Bank waives the Existing Default (the "Waiver").  Other than the Waiver, nothing contained herein nor the making of future Loans under the Credit Agreement shall be construed by any Loan Party as a waiver by the Bank of: (i) any of its right and remedies under the Credit Agreement, the Loan Documents, at law or in equity or (ii) such Loan Party's continued compliance with each representation, warranty, covenant and provision of the Credit Agreement and the other Loan Documents.  Other than the Waiver, each Loan Party acknowledges and agrees that no waiver of any provision of the Credit Agreement or the other Loan Documents by the Bank has occurred (or will occur by the making of future Loans under the Credit Agreement), except for those specifically given by the Bank in writing, and that nothing contained herein shall impair the right of the Bank to require strict performance by each Loan Party of the Credit Agreement and the other Loan Documents.  Further, as provided in section 9.9 of the Credit Agreement, each Loan Party acknowledges and agrees that no delay by the Bank in exercising any right, power or privilege under the Credit Agreement or any other Loan Document shall operate as a waiver thereof, and no single or partial 

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exercise of any right, power or privilege thereunder shall preclude other or further exercise thereof or the exercise of any other right, power or privilege.
5.    Representations and Warranties.  Each of the Loan Parties represents and warrants to the Bank that:
(a)    The execution and delivery of this Amendment and the other agreements, documents and instruments referred to in section 4, is within its power and authority, has been duly authorized by all proper action on the part of such Loan Party, is not in violation of any existing law, rule or regulation of any governmental agency or authority, any order or decision of any court, the organizational documents of such Loan Party or the terms of any agreement, restriction or undertaking to which such Loan Party is a party or by which it is bound, and do not require the approval or consent of the holders of Equity Interests of any of the Loan Parties, any governmental body, agency or authority or any other person or entity other than those consents and approvals in full force and effect.
(b)    This Amendment has been duly executed and delivered by each Loan Party and constitutes a legal, valid and binding obligation of each Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
(c)    After giving effect to the Waiver, the representations and warranties contained in the Credit Agreement are correct and complete in all respects (in the case of representations and warranties qualified by materiality, whether by reference to "material," "in all material respects," or "Material Adverse Effect" or similar terms or phrase) or in all material respects (in the case of all other representations and warranties) as of the date of this Amendment (except to the extent such representation or warranty relates to a stated earlier date in which case it shall continue to be true and correct in all respects (in the case of representations and warranties qualified by materiality, whether by reference to "material," "in all material respects," or "Material Adverse Effect" or similar terms or phrase) or in all material respects (in the case of all other representations and warranties) as of such date), and no condition or event exists or act has occurred that, with or without the giving of notice or the passage of time, would constitute a Default or an Event of Default under the Credit Agreement.
6.    Miscellaneous.
(a)    Expenses and Fees. The Loan Parties, jointly and severally, agree to pay on demand all reasonable out-of-pocket costs and expenses paid or incurred by the Bank in connection with the negotiation, preparation, execution and delivery of this Amendment, and all amendments, forms, certificates agreements, documents and instruments related hereto and thereto, including the reasonable fees and expenses of the Bank's outside counsel.
(b)    Amendments and Waivers.  This Amendment may not be changed or amended orally, and no waiver hereunder may be oral, but any change or amendment hereto or any waiver hereunder must be in writing and signed by the party or parties against whom such change, amendment or waiver is sought to be enforced.

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(c)    Headings.  The headings in this Amendment are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Amendment.
(d)    Affirmation.  Each party hereto affirms and acknowledges that the Credit Agreement as amended by this Amendment remains in full force and effect in accordance with its terms, as amended hereby.
(e)    Counterparts.  This Amendment may be executed in one or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one and the same instrument.  Delivery of an executed counterpart hereto by facsimile or by electronic transmission of a portable document file (PDF or similar file) shall be as effective as delivery of a manually executed counterpart signature page hereto.
7.    Acknowledgment, Consent and Reaffirmation of Guaranty.  Each of the Loan Guarantors hereby acknowledges that pursuant to the Credit Agreement, it has absolutely and unconditionally guaranteed to the Bank the prompt payment when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter, of the Guaranteed Obligations, as affected hereby; acknowledges, consents and agrees to the Bank and the Loan Parties entering into this Amendment; and reaffirms that its obligations under the Credit Agreement, as amended hereby, remain in full force and effect.  Notwithstanding anything to the contrary herein, in the Credit Agreement, in any Collateral Document or in any other Loan Document, no Loan Guarantor shall be deemed to have guaranteed, or granted any security interest to secure, any Related Rate Management Transaction if such Loan Guarantor is not an "eligible contract participant" ("ECP") under Section 2(e) of the Commodity Exchange Act (or any successor provision) at the time at which such Related Rate Management Transaction is entered into or at such other time as such Loan Guarantor is required to be an ECP under the Commodity Exchange Act or any other applicable Requirement of Law in order to guaranty, or grant a security interest to secure, any Related Rate Management Transaction.
[remainder of page intentionally left blank; signature page follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment to Credit Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
	
			
	BANK:

	 
	 
	 

	JPMORGAN CHASE BANK, N.A.

	 
	 
	 

	By:
	/s/ John Altenbach

	 
	John Altenbach, Authorized Signor

	
			
	BORROWER:

	 
	 
	 

	ORION ENERGY SYSTEMS, INC.

	 
	 
	 

	By:
	/s/ Scott R. Jensen

	 
	Scott R. Jensen, Chief Financial Officer

	
			
	LOAN PARTIES:

	 
	 
	 

	ORION ASSET MANAGEMENT, LLC

	 
	 
	 

	By:
	/s/ Scott R. Jensen

	 
	Scott R. Jensen, Manager

	 
	 
	 

	CLEAN ENERGY SOLUTIONS, LLC

	 
	 

	By:
	/s/ Scott R. Jensen

	 
	Scott R. Jensen, Manager

	 
	 
	 

	GREAT LAKES ENERGY TECHNOLOGIES, LLC

	 
	 

	By:
	/s/ Scott R. Jensen

	 
	Scott R. Jensen, Manager

	 
	 
	 

	HARRIS MANUFACTURING, INC.

	 
	 

	By:
	/s/ Scott R. Jensen

	 
	Scott R. Jensen, Director

	 
	 
	 

	HARRIS LED, LLC

	 
	 

	By:
	/s/ Scott R. Jensen

	 
	Scott R. Jensen, Director

Signature Page to Sixth Amendment to Credit Agreement

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