Document:

ex10-1.htm

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

(Dean Droegemueller)

This Employment Agreement (“Agreement”) is entered into as of September 13, 2012 and effective as of the 12th day of September, 2012 by and between Art’s-Way Manufacturing Co., Inc. (the “Company”), and Dean Droegemueller (“Employee”).

RECITALS

	
  

	
A.

	
Employee desires to be employed by the Company as its Director of Finance and the Company desires to employ Employee as its Director of Finance under the terms and conditions of this Agreement.

	
  

	
B.

	
Employee recognizes, agrees and understands that execution of this Agreement is an express condition of employment with the Company as its Director of Finance under the terms of this Agreement.

NOW, THEREFORE, in consideration of the Company employing Employee as its Director of Finance under this Agreement and/or other benefits now or hereafter paid or made available to Employee by the Company, Employee and the Company agree as follows:

ARTICLE 1

EMPLOYMENT AND TERMS OF AGREEMENT

1.1           Employment.  The Company hereby employs Employee and Employee hereby accepts employment as the Director of Finance of the Company.  This is a full-time position.

1.2           Term.  This Agreement is effective, and Employee’s employment hereunder shall commence, as of the effective date set forth above.  Employee’s employment with the Company shall be “at will,” meaning either Employee or the Company may terminate this Agreement and the employment relationship at any time, with or without cause, and with or without advance notice.  The circumstances under which this Agreement may be terminated are set forth in more detail in Section 3.1 of this Agreement.

1.3           Duties.

	
  

	
(a)

	
Employee agrees, during his employment with the Company, to devote his full business and professional time and best efforts to the business of the Company, including, without limitation, the performance of those duties and responsibilities reasonably and customarily associated with his position; provided, however, that Employee’s duties and responsibilities shall be subject to determination by the Board of Directors of the Company.

 

  

  

  

 

	
  

	
(b)

	
Employee shall report to, and at all times shall be subject to the direction of the Company’s Chief Executive Officer and the Board of Directors or either of their designee.

	
  

	
(c)

	
Employee shall, at all times during his employment with the Company, comply with the Company’s reasonable standards, regulations and policies as determined or set forth by the Company from time to time.

1.4           Outside Activities. During his employment with the Company, Employee shall not engage in any other business activity that would conflict or interfere with his ability to perform his duties under this Agreement.

ARTICLE 2

COMPENSATION AND BENEFITS

2.1           Base Salary.  Employee’s initial annual base salary under this Agreement shall be $92,500, subject to required and authorized deductions and withholdings.  This base salary is subject to upward or downward adjustment by the recommendations of the CEO, Chairman of the Board and Vice Chairman of the Board, the Compensation Committee and the final approval of the Board. This Compensation shall be reviewed at least annually.  The Company shall pay the base salary to Employee in accordance with its standard payroll practices.  Employee’s base salary may be subject to review and adjustment by the Company from time to time.

2.2           Incentive Pay.  Employee shall be eligible to receive incentive pay, including cash bonuses and equity awards under an equity incentive plan of the Company, from time to time in the exclusive discretion of the Company.  The form, amount, and other terms of any such incentive pay shall be determined by the Board of Directors (or a committee authorized by the Board).

2.3           Other Benefit Plans.  Employee shall be eligible to participate in any and all other employee benefit plans, health plans, or arrangements, if any, made available from time to time by the Company to its employees to the extent Employee meets the eligibility requirements to receive such benefits.  Nothing in this Agreement is intended to or shall in any way restrict the Company’s right to, or not to, offer, amend, modify or terminate any of its benefits or benefit plans during the terms of Employee’s employment.

2.4           Vacation & Sick Days.  Employee shall be eligible to accrue vacation in an amount to be determined by the Company in accordance with and subject to the Company’s employee policies as they may exist from time to time.  Currently the Employee is eligible to accrue vacation for up to three (3) weeks (21 work days) per year, accruing equally during the year as of each pay period.  In accordance with current policies, Employee may accrue and carry forward up to 160 hours of vacation time, which upon termination from the Company would be paid for pro rata for the then-current annual salary.  In addition, in accordance with current policies, the Employee may take sick leave in accordance with current Company policy.  Company reserves the right to modify and alter its vacation and sick day policies, and Employee’s benefits thereunder, in its sole discretion, provided, however, the Employee shall have the right to use then-existing accrued and carried vacation time up to the current maximum of 160 hours.

 

  

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2.5           Expense Reimbursement.  During the term of this Agreement, Employee shall be entitled to reimbursement of all ordinary and necessary expenses incurred by Employee for the Company, in accordance with the Company’s policies and practices with regard to documentation and payment of such expenses.

ARTICLE 3

TERMINATION OF EMPLOYMENT

3.1           Termination.  Employee’s employment with the Company may be terminated at any time upon occurrence of any of the following:

	
  

	
(a)

	
By mutual written agreement of the Company and Employee.

 

	
  

	
(b)

	
Immediately upon the death of Employee.

 

	
  

	
(c)

	
Immediately by the Company for Cause, which shall mean the following:

	
  

	
(i)

	
Failure of Employee to (A) faithfully, diligently or competently perform the material duties, requirements and responsibilities of his employment as contemplated by this Agreement or as reasonably assigned by the Company’s Board of Directors; or (B) Employee’s material breach of any provision of this Agreement or of the policies, regulations and directives of the Company as in effect from time to time;

	
  

	
(ii)

	
Any negligent or intentional act or omission on the part of Employee that is materially injurious (or would be reasonably likely to be materially injurious) to the reputation or business of the Company, including, but not limited to, professional or personal conduct of Employee which is dishonest, disloyal, or inconsistent with federal and state laws respecting harassment of, or discrimination against, one or more of the Company’s employees; or

	
  

	
(iii)

	
Commission by or conviction of Employee of, or a guilty or nolo contendere plea by Employee with respect to, any crime punishable as a felony.

	
  

	
(d)

	
Upon written notice by Employee for any reason, effective immediately, unless the Company, in its sole discretion, elects that Employee continue to provide services hereunder for up to six weeks from the date of such written notice, in which case the effective date shall be the date through which Employee provides services hereunder.  Employee will use best efforts to provide six weeks’ written notice of Employee’s intent to terminate employment under this subsection 3.1(d) and agrees to provide services for up to six weeks from the date of such notice if requested by the Company.

 

  

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(e)

	
Upon written notice by the Company for any reason, effective upon the date specified therein, which may, at the Company’s sole discretion, be a date that is up to six (6) weeks from the date of such written notice.

3.2           Compensation Upon Termination of Employee’s Employment.

	
  

	
(a)

	
In the event that Employee’s employment with the Company terminates, the following provisions shall govern as applicable:

	
  

	
(i)

	
If termination occurs pursuant to subsection 3.1(a), the agreement of the parties shall control.

	
  

	
(ii)

	
If termination occurs pursuant to subsection 3.1(b), all benefits and compensation shall terminate as of the date of Employee’s death.

	
  

	
(iii)

	
If termination occurs pursuant to subsection 3.1(c ), all benefits and compensation shall terminate as of the termination date.

	
  

	
(iv)

	
If termination occurs pursuant to subsection 3.1(d), all benefits and compensation shall terminate as of the date the Employee ceases to provide services.

 

	
  

	
(v)

	
If termination occurs pursuant to subsection 3.1(e), all benefits and compensation shall terminate as of the later of:  (A) the date the Employee ceases to provide services; or (B) the date that is 6 weeks from the date of the written notice provided by the Company, provided that any payments under this subsection 3.2(a)(v)(B) shall be contingent upon Employee’s compliance through this period with his obligations under Section 3.3 and Articles IV, V and VI of this Agreement and Employee’s execution, delivery, compliance with, and non-rescission of a full and final release of any and all claims in favor of the Company and any related entities, and all such entities’ officers, directors, shareholders, and employees, which release shall also affirm Employee’s compliance with his obligations under Sections 3.3 and Articles IV, V and VI of this Agreement.  If payments are made to Employee under this subsection 3.2(a)(v)(B), the first such payment shall be made on the next regularly scheduled payroll date, and provided that all payments due under 3.2(a)(v)(B) shall be made within 7 weeks of the date of the written notice provided by the Company.

 

  

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(b)

	
In addition to the consideration set forth in Section 2.3 of this Agreement, the parties acknowledge that the Company’s agreement to provide Separation Payments in accordance with the terms of this paragraph constitutes consideration for Employee’s acceptance of the terms and conditions of this Agreement, including the covenants in Article 5.

	
  

	
(c)

	
Notwithstanding anything in this Agreement to the contrary, if any of the payments described in this subsection 3.2 are subject to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”) and the Company determines that Employee is a “specified employee” as defined in Code Section 409A as of the date of Employee’s termination of employment, such payments shall not be paid or commence earlier than the first day of the seventh month following the date of Employee’s termination of employment.

3.3           Return of Property.  Immediately upon termination (or at such earlier time as requested by the Company or its designees), Employee shall deliver to the Company all of its property, including but not limited to all work in progress, research data, equipment, originals and copies of documents and software, client information and lists, financial information, and all other material in his possession or control that belongs to the Company or its clients or contains Confidential Information, as defined in Article 4.

ARTICLE 4

PROTECTION OF CONFIDENTIAL INFORMATION

4.1           Confidential Information.  “Confidential Information” shall mean any information not generally known or readily ascertainable by the Company’s competitors or the general public.  Confidential Information includes, but is not limited to, use of or customization to computer, software, and/or internet applications; data of any type that is created by Employee, which is provided, or to which access is provided, in the course of Employee’s employment by the Company; data or conclusions or opinions formed by Employee in the course of employment; manuals; trade secrets; methods, procedures or techniques pertaining to the business of the Company; specifications; systems; price lists; marketing plans; sales or service analyses; financial information; client names, contact information, requirements, purchase history or other information; supplier names or other information; employee names or other information; research and development data; diagrams; drawings; videotapes, audiotapes, or computerized media used as training regimens; and notes, memoranda, notebooks, and records or documents that are created, handled, seen, or used by Employee in the course of employment.  Confidential Information does not include information that Employee can demonstrate by reliable, corroborated documentary evidence (1) is generally available to the public or (2) became generally available to the public through no act or failure to act by Employee.

4.2           Confidentiality Restrictions.  Employee agrees at all times to use all reasonable means to keep Confidential Information secret and confidential.  Employee shall not at any time (including during and after termination of his employment with the Company) use, disclose, duplicate, record, or in any other manner reproduce in whole or in part any Confidential Information, except as necessary for the performance of Employee’s duties on behalf of the Company.  Employee shall not at any time provide services to any person or entity if providing such services would require or likely result in his using or disclosing Confidential Information.  Upon termination of Employee’s employment with the Company, or upon Company’s earlier request, Employee shall immediately return to the Company all originals and copies of Confidential Information and other Company materials and property in Employee’s possession. Employee acknowledges that use or disclosure of any of the Company’s confidential or proprietary information in violation of this Agreement would have a materially detrimental effect upon the Company, the monetary loss from which would be difficult, if not impossible, to measure.

 

  

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ARTICLE 5

COVENANT NOT TO COMPETE

5.1           Noncompetition.  During Employee’s employment with the Company and for a period of one year following the termination of his employment for any reason, whether voluntary or involuntary, Employee agrees that he will not, anywhere in the United States (which Employee acknowledges to be Employer’s trade area), directly or indirectly, on behalf of himself or another individual or entity, own, manage, operate, control, be employed by, consult for, participate in, or provide services to any business, entity or person that is in competition with Employer or sells or provides products or services that are the same as or similar to, or compete with, products or services offered by Employer at the time.

5.2           Nonsolicitation of Employees.  During Employee’s employment with the Company and for a period of one year following the termination of his employment for any reason, whether voluntary or involuntary, Employee agrees that he will not, directly or indirectly, on behalf of himself or another individual or entity, solicit or hire for employment or any other arrangement for compensation to perform services, any employee of the Company.  For purposes of this Section 5.2, an “employee” means any individual who is then employed by the Company or has been employed by the Company at any time within the six-month period prior to Employee’s separation from employment.

5.3           Nonsolicitation of Clients.  During Employee’s employment with the Company and for a period of one year following the termination of his employment for any reason, whether voluntary or involuntary, Employee agrees that he will not, directly or indirectly, on behalf of himself or another individual or entity, solicit or provide products or services that compete with the Company to any of the Company’s clients.  For purposes of this Section 5.3, a “client” means any individual or entity that is then a client of the Company or has been a client of the Company at any time within the twelve-month period prior to Employee’s separation from employment.

 

5.4           Understandings.  Employee hereby acknowledges and agrees that the Company informed him that the restrictions contained in this Article 5 would be required as part of the terms and conditions of his employment under this Agreement; that he signed and returned this Agreement to the Company prior to commencing employment under the terms of this Agreement; that he has carefully considered the restrictions contained in this Agreement and that they are reasonable; and that the restrictions in this Agreement will not unduly restrict him in securing other employment in the event of a termination from the Company.

 

  

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ARTICLE 6

INVENTIONS

6.1           Invention.  For purposes of this Agreement, the term “Invention” means ideas, discoveries, and improvements, whether or not shown or described in writing or reduced to practice, and whether patentable or not, relating to any of the Company’s present or future sales, research, or other business activities, or reasonably foreseeable business interests of the Company.

6.2           Disclosure.  Employee shall promptly and fully disclose to the Company, and will hold in trust for the Company’s sole right and benefit, any Invention which Employee, during the period of his employment, makes, conceives, or reduces to practice, or causes to be made, conceived, or reduced to practice, either alone or in conjunction with others, that:

	
  

	
(a)

	
Relates to any subject matter pertaining to Employee’s employment;

	
  

	
(b)

	
Relates to or is directly or indirectly connected with the business, products, projects, or Confidential Information of the Company; or

	
  

	
(c)

	
Involves the use of any time, material, or facility of the Company.

6.3           Assignment of Ownership.  Employee hereby assigns to the Company all of the Employee’s right, title, and interest in and to all such Inventions described in Section 6.2 and, upon request by the Company, Employee shall execute, verify, and deliver to the Company such documents, including, without limitation, assignments and applications for Letters Patent, and shall perform such other acts, including, without limitation, appearing as a witness in any action brought in connection with this Agreement that is necessary to enable the Company to obtain the sole right, title, and benefit to all such Inventions.

6.4           Excluded Inventions.  It is further agreed, and Employee is hereby so notified, that Section 6.3 does not apply to any invention for which no equipment, supplies, facility, or Confidential Information of the Company was used; which was developed entirely on Employee’s own time; and (a) which does not relate either to the Company’s businesses or actual or demonstrably anticipated research or development, or (b) which does not result from any work performed by Employee for the Company.

6.5           Prior Inventions.  Attached to this Agreement and initialed by both parties is a list of all of the Inventions, if any, in which Employee possesses any right, title, or interest prior to commencement of his employment with the Company, which are not subject to the terms of this Agreement.

 

  

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ARTICLE 7

MISCELLANEOUS PROVISIONS

7.1           Survival and Remedies.  The parties agree that the restrictions contained in Articles 4 - 6 shall survive the termination of this Agreement and Employee’s employment with the Company and shall apply no matter how Employee’s employment terminates and regardless of whether his termination is voluntary or involuntary.  The parties further acknowledge and agree that, if Employee breaches or threatens to breach the terms of Articles 4 - 6, the Company shall be entitled as a matter of right to injunctive relief, in addition to any other remedies available at law or equity.  In the event any litigation, mediation or arbitration or other process that is instituted by any party in order to interpret or enforce any term or condition of this Agreement, including the payment of money, injunctive relief, and the matter is addressed or the money is collected, and the services of an attorney or attorneys are utilized for the same, the prevailing party will be entitled to recover from the losing party all attorney fees and costs, including court costs and fees and costs incurred through any appeal, collection or enforcement, incurred by the prevailing party.

7.2           Notification.  Employee authorizes the Company to notify third parties (including, but not limited to, Employee’s actual or potential future employers and the Company’s clients and employees) of the provisions of Articles 4 - 6, those provisions necessary for the enforcement of such articles, and Employee’s obligations hereunder.

7.3           Governing Law and Jurisdiction.  This agreement shall be governed by and construed in accordance with the laws of the State of Iowa, without reference to its conflict of law provisions.  Each of the parties agrees that any dispute between the parties will be resolved only in the courts of the State of Iowa or the United States District Court for the Northern District of Iowa and the appellate courts having jurisdiction of appeals in such courts.

7.4           Entire Agreement.  This Agreement constitutes the entire understanding of the Company and Employee and supersedes all prior agreements, understandings, and negotiations between the parties, whether oral or written.  No modification, supplement, or amendment of any provision hereof shall be valid unless made in writing and signed by the parties.

7.5           Successors and Assigns.  This Agreement may be assigned by Company to its successors and assigns.  The services to be performed by Employee are personal and are not assignable.

7.6           No Conflicting Obligations.  Employee represents and warrants to the Company that he is not under, or bound to be under in the future, any obligation to any person or entity that is or would be inconsistent or in conflict with this Agreement or would prevent, limit, or impair in any way the performance by him of his obligations hereunder, including but not limited to any duties owed to any former employers not to compete or use or disclose confidential information.  Employee represents and agrees that he will not disclose to Company or use on behalf of Company any confidential information belonging to a third party.

7.7           Waivers.  The failure of a party to require the performance or satisfaction of any term or obligation of this Agreement, or the waiver by a party of any breach of this Agreement, shall not prevent subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

7.8           Severability.  In the event that any provision hereof is held invalid or unenforceable by a court of competent jurisdiction, the Company and Employee agree that that part should be modified by the court to make it enforceable to the maximum extent possible.  If the part cannot be modified, then that part may be severed and the other parts of this Agreement shall remain enforceable.

7.9           Counterparts.  More than one counterpart of this Agreement may be executed by the parties hereto, and each fully executed counterpart shall be deemed an original.

[Signature Page Follows]

 

  

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With the intention of being bound hereby, the parties have executed this Agreement as of the date set forth above.

EMPLOYEE

/s/ Dean Droegemueller                               

Dean Droegemueller

ART’S-WAY MANUFACTURING CO., INC.

/s/ Carrie Majeski                                       

Carrie Majeski

President, Chief Executive Officer and Chief Financial Officer

9ex10-1.htm

Exhibit 10.1

 

 

SECOND AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

 

This Second Amendment to Loan and Security Agreement (this “Amendment”) is entered into as of September 11, 2012, by and between Silicon Valley Bank (“Bank”) and Aehr Test Systems, a California corporation (“Borrower”) whose address is 400 Kato Terrace, Fremont, CA 94539.

 

Recitals

 

A.           Bank and Borrower have entered into that certain Loan and Security Agreement dated as of August 25, 2011, as amended by that certain First Amendment to Loan and Security Agreement by and between Bank and Borrower dated as of May 29, 2012 (as the same may from time to time be further amended, modified, supplemented or restated, the “Loan Agreement”).

 

B.           Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

 

C.           Borrower has requested that Bank amend the Loan Agreement to (i) increase the amount available to be borrowed under the revolving facility, and (ii) make certain other revisions to the Loan Agreement as more fully set forth herein.

 

D.           Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

 

Agreement

 

Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 

1.           Definitions.  Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

 

2.           Amendments to Loan Agreement.

 

2.1           Section 2.1.1 (Maximum Advances).  Section 2.1.1(b) is amended by replacing each reference to “Two Million Dollars ($2,000,000)” with “Two Million Five Hundred Thousand Dollars ($2,500,000)”.

 

2.2           Section 2.1.1 (Overadvances).  Section 2.1.1(j) is amended by replacing the reference to “Two Million Dollars ($2,000,000)” with “Two Million Five Hundred Thousand Dollars ($2,500,000)”.

 

2.3           Section 2.5 (Finance Charges).  The third sentence of Section 2.5 is amended in its entirety and replaced with the following:

 

  

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At all times that Borrower is Borrowing Base Eligible, Borrower will pay a Finance Charge on the unpaid principal balance of the Advances which is equal to the Applicable Rate divided by the Advance Rate divided by three hundred sixty (360) multiplied by the number of days each such Advance is outstanding multiplied by the unpaid principal balance of such Advance divided by the Advance Rate.

 

2.4           Section 13 (Definitions).  The following terms and their respective definitions set forth in Section 13.1 are amended in their entirety and replaced with the following:

 

“Applicable Rate” is a per annum rate equal to (a) at all times that Borrower’s Net Cash is greater than One Million Dollars ($1,000,000), the greater of either (i) the Prime Rate minus one-half of one percent (0.50%), or (ii) three and one-half percent (3.50%) and (b) at all times that Borrower’s Net Cash is less than or equal to One Million Dollars ($1,000,000), the greater of either (i) the Prime Rate plus three-quarters of one percent (0.75%), or (ii) four and three quarters percent (4.75%).

 

“Borrowing Base Eligible” means that Borrower’s Net Cash was greater than One Million Dollars ($1,000,000) at all times during the previous month; provided, however, that if an Event of Default has occurred and is continuing then Bank may, in its sole discretion, cause Borrower to no longer be Borrowing Base Eligible.  If Borrower is transitioning from not being Borrowing Base Eligible to being Borrowing Base Eligible then prior to becoming Borrowing Base Eligible Borrower must (a) maintain Net Cash in excess of One Million Dollars ($1,000,000) for two consecutive months and (b) deliver a current Borrowing Base Certificate to Bank.

 

“Facility Amount” is Three Million One Hundred Twenty-Five Thousand Dollars ($3,125,000).

 

2.5           Exhibit B (Compliance Certificate).  Exhibit B to the Loan Agreement is hereby replaced with Exhibit B attached hereto.

 

2.6           Exhibit D (Borrowing Base Certificate).  Exhibit D to the Loan Agreement is hereby replaced with Exhibit D attached hereto.

 

3.           Limitation of Amendments.

 

3.1           The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

 

3.2           This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

 

  

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4.           Representations and Warranties.  To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

 

4.1           Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

 

4.2           Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

 

4.3           The organizational documents of Borrower most recently delivered to Bank remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

 

4.4           The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

 

4.5           The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

 

4.6           The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on either Borrower, except as already has been obtained or made; and

 

4.7           This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

 

5.           Integration.  This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents.

 

  

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6.           Counterparts.  This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

 

7.           Effectiveness.  This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, and (b) Borrower’s payment of a loan fee (including Ex-Im Bank fees) in an amount equal to Eight Thousand Dollars ($8,000).

 

[Signature page follows.]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

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In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

 

	BANK	 	BORROWER	 
	 	 	 	 	 	 
	Silicon Valley Bank	 	Aehr Test Systems	 
	 	 	 	 	 	 
	By:	
/s/ Mei Chui

	 	By:	
/s/ Gary L. Larson

	 
	Name:	

Mei Chui

	 	Name:	
Gary L. Larson

	 
	Title:	
Relationship Mgr

	 	Title:	
VP,CFO

	 

 

 

 

 

 

 

[Signature Page to Second Amendment to Loan and Security Agreement]

  

 

  

 

EXHIBIT B

SPECIALTY FINANCE DIVISION

Compliance Certificate

I, an authorized officer of AEHR TEST SYSTEMS (“Borrower”) certify under the Loan and Security Agreement (as amended, the “Agreement”) between Borrower and Silicon Valley Bank (“Bank”) as follows for the period ending _____________________________ (all capitalized terms used herein shall have the meaning set forth in this Agreement):

 

Borrower represents and warrants for each Financed Receivable:

 

Each Financed Receivable is an Eligible Account;

 

Borrower is the owner with legal right to sell, transfer, assign and encumber such Financed Receivable;

 

The correct amount is on the Invoice Transmittal and is not disputed;

 

Payment is not contingent on any obligation or contract and Borrower has fulfilled all its obligations as of the Invoice Transmittal date;

 

Each Financed Receivable is based on an actual sale and delivery of goods and/or services rendered, is due to Borrower,  is not past due or in default, has not been previously sold, assigned, transferred, or pledged and is free of any liens, security interests and encumbrances other than Permitted Liens;

 

There are no defenses, offsets, counterclaims or agreements for which the Account Debtor may claim any deduction or discount;

 

Borrower reasonably believes no Account Debtor is insolvent or subject to any Insolvency Proceedings;

 

Borrower has not filed or had filed against it Insolvency Proceedings and does not anticipate any filing;

 

Bank has the right to endorse and/ or require Borrower to endorse all payments received on Financed Receivables and all proceeds of Collateral.

 

No representation, warranty or other statement of Borrower in any certificate or written statement given to Bank contains any untrue statement of a material fact or omits to state a material fact necessary to make the statement contained in the certificates or statement not misleading.

 

Additionally, Borrower represents and warrants as follows:

 

Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to cause a Material Adverse Change.  The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower’s organizational documents, nor constitute an event of default under any material agreement by which Borrower is bound.  Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change.

 

  

  

  

 

Borrower has good title to the Collateral, free of Liens except Permitted Liens.  All inventory is in all material respects of good and marketable quality, free from material defects.

 

Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended.  Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005.  Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors).  Borrower has complied in all material respects with the Federal Fair Labor Standards Act.  Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change.  None of Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally.  Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP.  Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted except where the failure to obtain or make such consents, declarations, notices or filings would not reasonably be expected to cause a Material Adverse Change.

 

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

 

	
Reporting Covenant

	
Required

	
Complies

	  	  	  
	
Quarterly financial statements with Compliance Certificate

	
Quarterly within 30 days (40 days for Borrower’s second fiscal quarter)

	
Yes   No

	
Monthly financial statements with Compliance Certificate

	
Monthly within 30 days

	
Yes   No

	
Fiscal year end financials + CC

	
Within 5 days of being publicly available but no later than 55 days FYE

	
Yes   No

	
Annual financial statement (CPA Audited) + CC

	
FYE within 180 days

	
Yes   No

	
10-Q, 10-K and 8-K

	
Within 5 days after filing with SEC

	
Yes   No

	
A/R & A/P Agings, Deferred Revenue report

	
Monthly within 30 days

	
Yes   No

	
Quarterly Invoices/Purchase Orders

	
As soon as available

	
Yes   No

	
Annual Financial Projections

	
Within 30 days after Board Approval

	
  Yes   No

	
Pricing Reduction

	
Applies

	  	  	  
	
Net Cash > $1,000,000

	
Prime – 0.50%

	
Yes   No

	
Net Cash ≤ $1,000,000

	
Prime + 0.75%

	
Yes   No

	
Net Cash > $0.00

	
No CHF

	
Yes   No

	
Net Cash ≤ $0.00

	
CHF = 0.20%

	
Yes   No

Pricing Reduction

 

	Trigger	 	Required	 	Actual	 	Eligible for Reduction	 
	 	 	 	 	 	 	 	 
	Net Cash	 	$0.00/$1,000,000 	 	$__________ 	 	Yes   No	 

 

 

 

[Continued next page.]

 

  

  

  

 

All other representations and warranties in this Agreement are true and correct in all material respects on this date, and Borrower represents that there is no existing Event of Default.

Sincerely,

 

AEHR TEST SYSTEMS

________________________

Signature

________________________

Title

________________________

Date

 

  

  

  

 

EXHIBIT D

BORROWING BASE CERTIFICATE

Borrower: Aehr Test Systems

Lender:  Silicon Valley Bank

Commitment Amount:  $2,500,000

 

	
ACCOUNTS RECEIVABLE

	  
	
1.   Accounts Receivable (invoiced) Book Value as of ____________________

	

$_______________

	
2.   Additions (Please explain on next page)

	
$_______________

	
3.   Less:  Intercompany / Employee / Non-Trade Accounts

	
$_______________

	
4.   NET TRADE ACCOUNTS RECEIVABLE

	
$_______________

	  	  
	
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

	  
	
5.   90 Days Past Invoice Date

	
$_______________

	
6.   Balance of 50% over 90 Day Accounts (Cross-Age or Current Affected)

	
$_______________

	
7.   Foreign Account Debtor Accounts

	
$_______________

	
8.   Foreign Invoiced and/or Collected Accounts

	
$_______________

	
9.   Contra / Customer Deposit Accounts

	
$_______________

	
10. U.S. Government Accounts

	
$_______________

	
11. Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts

	
$_______________

	
12. Accounts with Memo or Pre-Billings

	
$_______________

	
13. Contract Accounts; Accounts with Progress / Milestone Billings

	
$_______________

	
14. Accounts for Retainage Billings

	
$_______________

	
15. Trust / Bonded Accounts

	
$_______________

	
16. Bill and Hold Accounts

	
$_______________

	
17. Unbilled Accounts

	
$_______________

	
18. Non-Trade Accounts (If not already deducted above)

	
$_______________

	
19. Accounts with Extended Term Invoices (Net 90+)

	
$_______________

	
20. Chargebacks Accounts / Debit Memos

	
$_______________

	
21. Product Returns/Exchanges

	
$_______________

	
22. Disputed Accounts; Insolvent Account Debtor Accounts

	
$_______________

	
23. Deferred Revenue / Other (Please explain on next page)

	
$_______________

	
24. [Reserved]

	 
	
25. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

	
$_______________

	  	  
	
26. Eligible Accounts (#4 minus #25)

	
$_______________

	
27. ELIGIBLE AMOUNT OF ACCOUNTS (80% of #26)

	
$_______________

	  	  
	
BALANCES

	  
	
28. Maximum Loan Amount

	
$2,500,000

	
29. Outstanding Exim Advances and Exim Inventory Advances

	
$_______________

	
30. Unused Loan Amount (#28 minus #29)

	
$_______________

	
31. Total Funds Available (Lesser of #27 or #30)

	
$_______________

	
32. Present balance owing on Line of Credit

	
$_______________

	
33. RESERVE POSITION (#31 minus #32)

	
$_______________

[Continued on following page.]

 

  

  

  

 

Explanatory comments from previous page:

 

 

The undersigned represents and warrants that this is true, complete and correct, and that the information in this Borrowing Base Certificate complies with the representations and warranties in the Loan and Security Agreement between the undersigned and Silicon Valley Bank.

 

	
COMMENTS:

 

 

By: ___________________________

Authorized Signer

Date:                                                             

	
BANK USE ONLY

Received by: _____________________

authorized signer

Date:   __________________________

Verified: ________________________

authorized signer

Date: ___________________________

Compliance Status:                Yes           No

 

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