Document:

exv10w1

 

Exhibit 10.1

			
	 
	 
	 	Execution Copy

LOAN AGREEMENT

     THIS LOAN AGREEMENT (this “Agreement”) dated the 15th day of September, 2005 (the “Agreement
Date”), is by and between the MICHIGAN ECONOMIC DEVELOPMENT CORPORATION, a Michigan public body
corporate (the “MEDC”), whose address is 300 North Washington Square, Lansing, Michigan 48913 Attn:
Portfolio Manager; and PICOMETRIX, LLC., a Delaware limited liability company (the “Company”),
whose address and principal office is 2925 Boardwalk Drive, Ann Arbor, Michigan 48104. As used in
this Agreement, each of the MEDC and the Company are individually referred to without distinction
as a “Party” and collectively referred to as the “Parties.”

RECITALS

     A. The State of Michigan pursuant to Section 801 of Act Number 11 of the Michigan Public Acts
of 2005 (the “Act”) has appropriated monies for the Life Sciences and Technology Tri-Corridor;

     B. Given that the impetus for this funding appropriation is the desire to build both the
stature of life science, homeland security and advanced automotive manufacturing research and the
level of activity related to life science, homeland security and advanced automotive manufacturing
in the State of Michigan (the “State”), the term Michigan Technology Tri-Corridor (the “Corridor”)
is being used and the appropriation is being used to create the Michigan Technology Tri-Corridor
Fund (the “Fund”);

     C. Consistent with the Act, the mission of the Corridor is to encompass the best of academic
life science, homeland security and advanced automotive manufacturing along with acting as a
catalyst for a robust entrepreneurial private sector of new and established commercial ventures,
thereby enhancing State economic development and the health and well being of the citizens of the
State;

     D. The Act and Executive Order 2003-19 created the Michigan Technology Tri-Corridor Steering
Committee (the “Steering Committee”), which will monitor and assess the Fund portfolio and the mix
of projects within the Corridor to insure that Fund disbursements are consistent with the Act;

     E. The Steering Committee prepared and advertised a Request for Proposals for disbursements
from the Fund;

     F. The Company submitted a Project Application (the “Proposal”) in response to a Request for
Proposals circulated by the Steering Committee;

     G. In the Proposal the Company described how financial support from the Fund could be used by
the Company to engage in life sciences, homeland security and advanced automotive manufacturing
activity within the State toward the accomplishment of life science, homeland security and advanced
automotive manufacturing milestones;

     H. After peer review for scientific and economic merit commissioned by the Steering Committee,
the Proposal was highly rated as meeting the mission of the Corridor;

     I. By Resolution of the Steering Committee, dated June 15, 2005, the Fund offered the Company
an award of One Million Two Hundred Thousand Dollars ($1,200,000);

     J. The MEDC has determined that all of such funds shall be disbursed according to the terms
and conditions hereinafter set forth;

 

 

     K. The Company desires to obtain financial support from the Fund in the form of a loan, to
conduct life sciences research and development activity within the State toward the accomplishment
of certain milestones, upon the terms and conditions hereinafter set forth;

     L. Consistent with the Act and in accordance with the MEDC’s mission of carrying out efficient
and effective economic development programs and policies within the State, the MEDC has agreed to
administer certain disbursements from the Fund; and

     M. The MEDC desires to disburse a Loan to the Company in the amount of One Million Two Hundred
Thousand Dollars ($1,200,000) upon the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the recitals and mutual agreements hereinafter contained,
the Parties agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.1 Defined Terms. As used in this Agreement, the following terms whenever
capitalized, shall have the following respective meanings unless the context or use clearly
indicates another or different meaning or intent, and such definitions shall be applicable to both
the singular and plural forms:

	 	(a)	 	“Act” means Section 801 of Act Number 11 of the Public Acts of 2005, as
amended, that appropriated monies for the State of Michigan Technology Tri-Corridor.
	 
	 	(b)	 	“Agreement” means this Loan Agreement as it may be amended or supplemented in
accordance with its terms, the Loan Documents and the Exhibits to this Agreement.
	 
	 	(c)	 	“Agreement Date” means the date on which this Agreement is executed.
	 
	 	(d)	 	“Board” means the Board of Directors of the Company.
	 
	 	(e)	 	"Budget” means the budget included as Exhibit “F”.
	 
	 	(f)	 	“Bureau” means the Bureau of Commercial Services of the Department of Labor
and Economic Growth.
	 
	 	(g)	 	“Closing Date” means the date on which the first disbursement is made under
this Agreement.
	 
	 	(h)	 	“Company” means Picometrix, LLC, a Delaware limited liability company and a
wholly owned subsidiary of Advanced Photonix, Inc.
	 
	 	(i)	 	“Corridor” means the Michigan Technology Tri-Corridor.
	 
	 	(j)	 	“Events of Default” means those events described in Section 8.1 of this
Agreement, and “Event of Default” shall mean any one of such events.
	 
	 	(k)	 	“Exhibit” means each of the documents or instruments attached to this
Agreement identified as an Exhibit serially lettered, each of which is hereby
incorporated by reference, and as such may be amended.

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	 	(l)	 	“Fund” means the Michigan Technology Tri-Corridor Fund created pursuant to
the Act.
	 
	 	(m)	 	“Indebtedness” means the outstanding principal of, and accrued but unpaid
interest on, the Note.
	 
	 	(n)	 	“Intellectual Property” means all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets, customer lists and know
how.
	 
	 	(o)	 	“Key Milestones” means major achievements of the Company as described in
Exhibit “A”.
	 
	 	(p)	 	“Loan” means the loan made by the MEDC to the Company, under this Agreement.
	 
	 	(q)	 	“Loan Disbursement” means a disbursement on the Loan under this Agreement.
	 
	 	(r)	 	“Loan Disbursement Request” means a written request from the Company for a
Loan Disbursement.
	 
	 	(s)	 	“Loan Documents” means this Agreement, the Note and the Security Agreement.
	 
	 	(t)	 	“Maximum Amount” means of One Million Two Hundred Thousand Dollars
($1,200,000).
	 
	 	(u)	 	“MEDC” means the Michigan Economic Development Corporation, a Michigan public
body corporate.
	 
	 	(v)	 	“Milestone Certificate” means the certificate issued by the Company whereby
the Company certifies the completion of certain Key Milestones in the form of Exhibit
“B”.
	 
	 	(w)	 	“Milestone Report” means the report submitted by the Company to demonstrate
completion of one or more sets of Key Milestones.
	 
	 	(x)	 	“Note” means the Promissory Note (Line of Credit) of the Company evidencing
the Loan in the form attached hereto as Exhibit “D”.
	 
	 	(y)	 	“Portfolio Manager” means that individual person designated by the MEDC to
administer this Agreement and to make and monitor the disbursements hereunder.
	 
	 	(z)	 	“Proceeds” means funds paid by the MEDC to the Company pursuant to this
Agreement.
	 
	 	(aa)	 	“Progress Report” means the semi-annual report submitted each April and
October describing the current status of milestones. The Progress Report includes the
Metrics and Statistics section.
	 
	 	(bb)	 	“Proposal” means the Project Application for funding submitted by the
Company, and attached hereto as Exhibit “G”.

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	 	(cc)	 	“State” means the State of Michigan.
	 
	 	(dd)	 	“Steering Committee” means the Michigan Technology Tri-Corridor Steering
Committee created pursuant to the Act.
	 
	 	(ee)	 	“Trigger Event” means, as of the time determined, when the Company ceases to
have substantially all of its employees (exclusive of sales staff) or operations
located within the State.

     Section 1.2 Construction of Certain Terms. Unless the context of this Agreement
otherwise requires, (i) words of any gender include each other gender; (ii) words using the
singular or plural number also include the plural or singular number, respectively; (iii) the terms
“hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; and
(iv) the terms “Article,” or “Section,” shall refer to the specified Article, or Section, of this
Agreement.

ARTICLE II

LOAN

     Section 2.1 Loan Commitment. Pursuant to the terms and conditions of this Agreement,
the MEDC agrees to make a Loan to the Company in the amount of up to the Maximum Amount in such
installments and at such times as the Company may specify in accordance with Section 2.2 hereof.
The MEDC’s obligation to disburse any portion of the Loan shall automatically be suspended upon the
occurrence, and during the continuance, of an Event of Default.

     Section 2.2 Loan Disbursement Procedure. The Company, at its discretion, may request
a disbursement (a “Loan Disbursement”) of a portion of the Loan no more frequently than once a
month by delivering to the MEDC a completed Loan Disbursement Request, substantially in the form as
Exhibit “C” (the “Loan Disbursement Request”) and a Milestone Report. The MEDC shall within thirty
(30) calendar days of its receipt of the Loan Disbursement Request make the Loan Disbursement
(either by check or wire transfer as selected by the MEDC) directly to the Company, upon
satisfaction of the following conditions:

	 	(i)	 	the initial Loan Disbursement Request must be accompanied by an (A) executed
original of the Note, and (B) an opinion of legal counsel to the Company,
substantially in the form attached as Exhibit “E”; and must not exceed Six Hundred
Thousand Dollars ($600,000);
	 
	 	(ii)	 	the second Loan Disbursement does not, upon achievement of the first set of
Key Milestones, exceed One Hundred Sixty Eight Thousand Dollars ($168,000);
	 
	 	(iii)	 	the third Loan Disbursement does not, upon achievement of the second set of
Key Milestones, exceed One Hundred Sixty Eight Thousand Dollars ($168,000);
	 
	 	(iv)	 	the fourth Loan Disbursement does not, upon achievement of the third set of
Key Milestones, exceed One Hundred Sixty Eight Thousand Dollars ($168,000);
	 
	 	(v)	 	provided the Company has achieved all of the Key Milestones and submitted its
Final Report, the final Loan Disbursement, together with all other Loan Disbursements
to the Company, does not exceed the Maximum Amount;
	 
	 	(vi)	 	there is no outstanding Event of Default as of the date of the Disbursement
Request; or

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	 	(vii)	 	with respect to the final Loan Disbursement, receipt and approval by the
Portfolio Manager of the Company’s Final Report demonstrating achievement of
milestones that the Portfolio Manager determines to be in material compliance with
Exhibits F (Budget), A (Key Milestones), and G (Proposal), or amendments thereof.

     Section 2.3 Application of Loan Payments. The Company shall make all payments,
whether repayments of principal or payments of interest, by check or wire transfer as directed by
the MEDC. The MEDC shall apply all payments received from the Company first to any late fees, then
to accrued interest and then to principal.

     Section 2.4 Loan Prepayments. The Company shall have the right to prepay accrued
interest and principal in whole or in part at any time without payment of any prepayment fee or
penalty. Prepayments are to be applied first to accrued interest and then to principal.

     Section 2.5 Acceleration. Upon the occurrence of a Trigger Event or if an Event of
Default remains uncured beyond the period allowed in Section 8.1, the MEDC may at its sole option
and discretion declare the entire unpaid balance of principal and accrued interest immediately due
and owing. The MEDC shall give the Company written notice of this declaration of acceleration by
sending a statement to the Company stating the declaration and setting out the amount owed as of
the date of the notice; provided, however, that in the event of any acceleration by reason of the
occurrence of a Trigger Event, the amount due shall be equal to the sum of the Indebtedness and a
premium equal to seven percent (7%) of the then-outstanding principal balance of the Loan.
Notwithstanding the foregoing, but provided that the MEDC shall have disbursed the Maximum Amount
in respect of satisfaction of all of the Key Milestones, the MEDC may not accelerate the
Indebtedness by reason of the occurrence of a Trigger Event during the eighteen (18) month period
commencing with the last such disbursement, but may do so at any time during the sixty (60) days
following the expiration of such period with respect to a Trigger Event occurring during such
period. In any event, Interest shall continue to accrue at the rate set out herein until the
Company pays the entire balance (and such premium, if applicable), together with all accrued
interest, in full.

ARTICLE III

REPRESENTATIONS AND COVENANTS OF THE COMPANY

     Section 3.1 Organization. The Company is duly organized and is validly existing in
good standing under the laws of the State of Delaware and has the limited liability company power
and authority to enter into and perform its obligations under this Agreement. The Company is not
presently authorized to conduct business as a foreign limited liability company in any jurisdiction
other than the State of Michigan. Exhibit “H” includes a certificate of good standing from the
State of Michigan dated within sixty (60) calendar days of the Closing Date, together with copies
of the Company’s Certificate of Formation (including all amendments, restatements and supplements).
On the Agreement Date the Company has its principal office and substantially all of its operations
and employees located within the State. The sole member of the Company is Advanced Photonix, Inc.,
a Delaware corporation.

     Section 3.2 Limited Liability Company Authority. The execution, delivery and
performance by the Company of this Agreement has been duly authorized and approved by all necessary
and proper limited liability company action on the part of the Company and will not violate any
provision of law or of the Company’s Certificate of Formation or operating agreement, or result in
the breach of or constitute a default or require any consent under, or result in the creation of
any lien, charge, restriction, claim or encumbrance upon, any property or assets of the

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Company
pursuant to any indenture or other agreement or instrument to which the Company is a party or by
which the Company or its property may be bound or affected, other than has or will be obtained or
as specifically provided herein, and this Agreement is valid, binding, and enforceable in
accordance with its terms, except as limited by applicable bankruptcy, insolvency, moratorium,
reorganization or other laws or affecting the enforcement of creditors’ rights generally or by
general principles of equity.

     Section 3.3 Consent. Except as has been disclosed in writing to the MEDC or already
obtained, no consent or approval is necessary from any governmental or other authority, except the
MEDC, as a condition to the execution and delivery of this Agreement by the Company or the
performance of any of its obligations hereunder.

     Section 3.4 Full Disclosure. Neither this Agreement, the Proposal, nor any written
statements or certificates furnished by the Company to the Steering Committee or the MEDC in
connection with the making of the award and Agreement contain any untrue statement or material
fact, or omit a fact necessary to make the statements contained therein or herein misleading.
There is no fact that the Company has not disclosed to the Steering Committee or the MEDC in
writing, which materially adversely affects or, to the best of the Company’s knowledge, is likely
to materially adversely affect the properties, business, or condition (financial or otherwise) of
the Company or the ability of the Company to perform this Agreement.

     Section 3.5 Litigation. Except as has been disclosed in writing to the MEDC, to the
knowledge of the Company or its officers, there are no suits or proceedings, pending or, to the
knowledge of the Company, threatened, before any governmental commission, board, bureau, or other
administrative agency or tribunal, which, if resolved against the Company, would have a material
adverse effect on the financial condition or business of the Company.

     Section 3.6 Compliance with Laws. To its knowledge, the Company is not and will not
during the term of this Agreement be in violation of any laws, ordinances, regulations, rules,
orders, judgments, decrees or other requirements imposed by any governmental authority to which it
is subject, including those related to research misconduct and research integrity, and will not
fail to obtain any licenses, permits or other governmental authorizations necessary to the
ownership of its properties or to the conduct of its business, which violation or failure to obtain
might materially and adversely affect its business, profits, properties or condition (financial or
otherwise).

     Section 3.7 Suits or Other Proceedings. Upon the Company obtaining knowledge of any
material litigation, dispute or proceeding being instituted or threatened against the Company or
any attachment, levy, execution or other process being instituted against any property or assets of
the Company, the Company will promptly notify the MEDC in writing of such litigation, dispute,
levy, execution or other process.

     Section 3.8 No Brokers or Finders. No individual person, firm or entity has a right,
interest or claim against the Company for any commission or other compensation as a finder or
broker in connection with the transactions contemplated by this Agreement.

     Section 3.9 Use of Proceeds. The Company shall use the Proceeds as described in the
Budget. The Company agrees that all Proceeds shown in the Budget are to be spent as generally
specified, except that re-budgeting between general categories of up to ten percent (10%) of the
total budget amount is permissible without the necessity of prior approval by the
Portfolio Manager. Any other changes to the budget must be pre-approved in writing by the
Portfolio Manager. Any Proceeds used to pay employees or contractors not contemplated by the
Proposal who perform services outside the State must be pre-approved by the Portfolio Manager,
which approval shall not be unreasonably withheld or delayed. The Company shall maintain an
overall financial management system to ensure effective control over and accountability for all
funds received hereunder, as well as records that allow for the comparison of actual expenditures

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outlays with budgeted amounts, supported in each case by source documentation (including without
limitation, time sheets and third party invoices) for all expenditures of Proceeds greater than
$100 that is sufficiently detailed so as to allow for the verification of such expenditure and
comparison with Budget line items.

     Section 3.10 Property. The Company will maintain its property and assets in customary
repair, order and condition.

     Section 3.11 Proprietary Information of Third Parties. No third party has claimed or,
to the Company’s knowledge, has reason to claim that any individual person, firm or entity employed
by or affiliated with the Company has: (a) violated an employment, non-competition or
non-disclosure agreement; (b) disclosed or utilized any trade secret or proprietary information or
documentation of the third party; or (c) interfered in the employment relationship between the
third party and any of its present or future employees. The Company has not received a request for
information from a third party that suggests this type of claim may be contemplated. To the
Company’s knowledge, after reasonable inquiry, no individual person, firm or entity employed by or
affiliated with the Company has or intends to: (i) employ any trade secret, information or
documentation proprietary to any former employer; or (ii) violate any confidential relationship
with a third party in connection with the development, manufacture or sale of any of the Company’s
products, proposed products, services or proposed services. The Company is not aware of any aspect
in the conduct of its business or the performance of this Agreement that will constitute a breach
or default under any agreement entered into by any individual person, firm or entity employed by or
affiliated with the Company.

     Section 3.12 Trade Secret Protection. To the Company’s knowledge, all technical
information developed by and belonging to the Company that has not been patented has been kept
confidential. All employees and consultants of the Company having access to the confidential or
proprietary information of the Company have signed a non-disclosure agreement for the benefit of
the Company. The Company has taken all reasonable security measures to protect the secrecy,
confidentiality and value of the Company’s trade secrets. To the Company’s knowledge, the trade
secrets have not been disclosed by the Company or by any shareholder, officer or employee in any
forum, such as a conference or seminar, or in any professional journal, trade publication or any
other publication or non-confidential writing. The trade secrets have not been disclosed in a
presentation to a prospective joint venture or manufacturing partner or investor without an
appropriate confidentiality agreement. Any of the employees of the Company and any other
individual person, firm or entity who, either alone or in concert with others, developed, invented,
discovered, derived, programmed, or designed these secrets or who have knowledge of or access to
information relating to them, have been put on notice thereof and have entered into appropriate
nondisclosure agreements. To the knowledge of the Company, no individual person, firm or entity
other than the Company’s officers, employees and consultants under obligations of confidentiality
has possession or knowledge of the Company’s trade secrets, excepting the United States government
by reason of contracts between the Company and the United States Government. Notwithstanding the
foregoing, the Company has and will continue to disclose trade secrets and other proprietary
information to potential institutional investors and to other potential investors from whom or
which the Company is unable to secure an obligation of confidentiality.

     Section 3.13 Intellectual Property Rights. The Company owns or possesses adequate
licenses or other rights to use all Intellectual Property necessary or desirable to the conduct of
its business as currently conducted and as contemplated by the Proposal. No claim is pending or,
to the Company’s knowledge is threatened, in connection with the Company’s use of any
Intellectual Property. The Company has no actual knowledge of the basis for a claim against the
Company’s use of its Intellectual Property. The Company has not received notice that it is in
default of any license agreement to which the Company is a licensee.

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ARTICLE IV

REPRESENTATIONS AND COVENANTS OF THE MEDC

     The MEDC represents and warrants to the Company that:

     Section 4.1 Organization. The MEDC is a public body corporate formed under an
Interlocal agreement pursuant to the Urban Cooperation Act of 1967, as amended, primarily to
promote economic development in the State. The MEDC has the corporate power and authority to enter
into and perform its obligations under this Agreement.

     Section 4.2 Consent. Except as had been disclosed in writing to the Company, no
consent or approval is necessary from any governmental authority as a condition to the execution
and delivery of this Agreement by the MEDC or the performance of any of its obligations hereunder.

     Section 4.3 Sophistication. The MEDC has sufficient knowledge and experience in
financial and business matters that it is capable of evaluating the merits and risks of making the
Loan. The MEDC is financially able to bear the risk of total loss thereof.

     Section 4.4 Information. The MEDC has had an opportunity to discuss the Company’s
business, management and financial affairs with the Company’s management. The MEDC has asked for
and received all information it needs to evaluate the transactions contemplated by this Agreement,
subject to the accuracy of the representations and warranties of the Company contained in this
Agreement.

ARTICLE V

INSURANCE AND INDEMNIFICATION

     Section 5.1 Insurance. The Company, during the term of this Agreement, will acquire
and maintain insurance from responsible companies in such amounts and against such risks as are
ordinarily carried by similar businesses, including but not limited to public liability insurance,
workers’ compensation insurance or a program of self-insurance complying with the requirements of
State law. The Company shall provide evidence of such insurance to the MEDC at its request.

     Section 5.2 Indemnification and Hold Harmless. Except for disbursement of the
Proceeds as required in this Agreement, the MEDC, its corporate board, its Executive Committee, the
Steering Committee and their respective participants, officers, agents and employees (collectively,
the “Indemnified Persons”) shall not be liable to the Company for any reason.

     The Company shall indemnify and hold the MEDC or other Indemnified Person harmless against any
and all claims asserted by or on behalf of any individual person, firm or entity, (other than an
Indemnified Person), arising or resulting from, or in any way connected with this Agreement and any
and all related documents executed and delivered in connection therewith or any act or failure to
act by the Company under the Agreement, including all liabilities, costs and expenses, including
reasonable counsel fees, incurred in any action or proceeding brought by reason of any such claim.
In the event that any action or proceeding is brought against the MEDC or other Indemnified Person
by reason of any such claim, such action or proceeding shall be defended by MEDC counsel or by counsel chosen by the Company, as the MEDC shall determine
and indicate by notice to the Company within fifteen (15) days of the MEDC’s receipt of notice of
the filing of any such claim. In the event such defense is by MEDC counsel, the Company shall
indemnify the MEDC for reasonable costs of its counsel allocated to such defense and charged to the
MEDC, subject to delivery by the MEDC to the Company of detailed invoices

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for such costs. If the MEDC fails to timely give such notice, the Company shall assume the defense of such claim at its
sole cost and expense.

     The Company shall have no obligation to indemnify an Indemnified Person under this Section 5.2
if a court with competent jurisdiction finds that the liability in question was caused by the
willful misconduct or gross negligence of the MEDC or other Indemnified Person, unless the court
finds that despite the adjudication or liability, the MEDC or other Indemnified Person is fairly
and reasonably entitled to indemnity for the expenses the court considers proper. The MEDC and the
Company agree to act cooperatively in the defense of any action brought against the MEDC or another
Indemnified Person, the Company, or the MEDC or other Indemnified Person and the Company jointly to
the greatest extent possible.

     Any Indemnified Person making a claim under this Section 5.2 shall give the Company notice
thereof within fifteen (15) days following the Indemnified Person’s receipt of the complaint or
other pleading giving rise to such claim, which notice shall specify the nature, scope and amount
of any such claim and be accompanied by such complaint or other pleading. The failure of such
Indemnified Person to deliver such notice within such fifteen (15) day period shall, if materially
prejudicial to the Company’s ability to defend such action, relieve the Company of its obligation
of indemnity hereunder as to such claim. In the event that the MEDC shall use its own counsel to
defend against any claim giving rise to the Company’s obligation of indemnity under this Section
5.2, the Company shall nonetheless, at its sole cost and expense, have the right to participate in
such defense to the extent practical. If the MEDC assumes defense of any such claim, the Company
shall not have any obligation of indemnity hereunder with respect to any settlement of such claim
made without the Company’s consent, which consent shall not be unreasonably withheld. If the
Company assumes the defense of any such claim, the Company shall not settle any such claim that
involves anything other than the payment of money by the Company without the consent of the MEDC or
any other Indemnified Person, which consent shall not be unreasonably withheld or delayed.

     Performance of the activities contemplated under this Agreement is within the sole control of
the Company and its employees, agents and contractors, and an Indemnified Person shall have no
liability in tort or otherwise for any loss or damage caused by or related to the actions, products
and processes of the Company, its employees, agents or contractors.

     The Company shall also indemnify the MEDC and any other Indemnified Persons from and against
all costs and expenses, including reasonable counsel fees, lawfully incurred in enforcing any
obligation of the Company under this Agreement.

     This Section 5.2 shall survive the termination of this Agreement.

ARTICLE VI

CONDITIONS TO THE OBLIGATIONS OF MEDC

     The MEDC’s obligations under this Agreement are contingent upon the Company satisfying the
MEDC that the following conditions have been met, on or before the Closing Date.

     Section 6.1 Opinion of Company’s Counsel. The MEDC shall have received an opinion
from counsel for the Company, dated the Closing Date, in substantially the form of the letter
attached as Exhibit “E”.

     Section 6.2 Satisfactory Due Diligence. The MEDC shall have completed its due
diligence of the Company and be reasonably satisfied with the outcome.

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ARTICLE VII

GENERAL TERMS AND CONDITIONS

     Section 7.1 Key Milestones. The Company agrees to the Sets of Key Milestones set
forth as Exhibit “A”.

     Section 7.2 Key Milestones Reached. The Portfolio Manager (as defined herein) shall
determine reasonable and substantial compliance with the Key Milestones reached based on; (i) the
Milestone Certificate, which shall be submitted by the Company in substantially the form of Exhibit
“B”; and (ii) the Milestone Report. The Portfolio Manager shall, within thirty (30) calendar days
of receipt of the Milestone Certificate and the Milestone Report, do one or more of the following:
request to review or inspect Company records related to a Milestone Certificate and Milestone
Report pursuant to Section 7.3; approve the Milestone Certificate and Milestone Report; request
further clarifying information or, determine that the Key Milestones have not been accomplished and
reject the Loan Disbursement Request, provided that any rejection shall be done in good faith and
not for an arbitrary or capricious reason. Absent any such affirmative action by the MEDC, the
Milestone Certificate and the Milestone Report shall be deemed accepted by the MEDC.

     Section 7.3 Access to Records and Inspection Rights. To enable the MEDC to monitor
and ensure compliance with the terms of this Agreement, the Company shall permit the MEDC to
inspect the books and records, including financial records and all other information and data
relevant to the terms of this Agreement and the expenditure of the Proceeds, but not more than once
per calendar quarter except upon the occurrence of an Event of Default or the MEDC’s reasonable
belief that an Event of Default has occurred. The Company shall permit the Portfolio Manager or
any employee or agent of the MEDC to visit, upon reasonable prior notice and during normal business
hours, the Company offices and any other location where books and records of the Company are
normally kept, to inspect the books and records, including financial records, of the Company
related to this Agreement (including information and data deemed by the Company as Confidential
Information, as defined in Section 7.6 hereof). At such visits, the Company shall permit the
Portfolio Manager or any employee or agent of the MEDC to make copies thereof or extracts therefrom
of information not deemed by the Company as Confidential Information and to discuss the affairs,
finances and accounts of the Company related to this Agreement with its officers, employees or
agents who are primarily responsible for expenditure of the Proceeds as often as the MEDC may
reasonably require. Notwithstanding anything to the contrary in this Article VII, any information
and data that the Company reasonably determines is Confidential Information shall be reviewed by
the MEDC at the offices of the Company (in lieu of the Company delivering such information or data
to the MEDC) during normal business hours and the MEDC shall not have the right to remove,
photocopy, photograph or otherwise record in any way any part of such books and records without the
prior written consent of the Company.

     Section 7.4 Information and Reports. The Company shall provide to the MEDC
semi-annual summary progress reports (the “Progress Reports”) on each, April 1 and October 1, for
the six (6) month period ending a full month prior to the due date in a form acceptable to the
Portfolio Manager except that the Portfolio Manager hereby waives the requirement for the October
2005 Progress Report. Each Progress Report shall contain a concise description of activities
supported by the Proceeds, the Company’s accomplishments, the Company’s performance against the Key
Milestones, information on the use of the Proceeds, Metrics and Statistics section, and any
additional information or data requested by the Portfolio Manager reasonably related to the
business, affairs and financial condition of the Company, provided that such additional information
or data does not constitute Confidential Information the review of which shall be conducted
pursuant to Sections 7.3 and 7.6 hereof. The Progress Report shall be substantially in the form of Exhibit “J” (Progress Report Form). The Milestone Reports shall
contain adequate documentation to demonstrate that a set of Key Milestones has been met. The
Milestone Report shall contain a table of contents and state the Key Milestone (or part thereof)

-10-

 

that is to be reviewed. Furthermore, the Milestone Report shall include the contract
number/letter, page number, paragraph number, and sentence number, if needed, where the milestone
can be verified and include copies of receipts, other supporting documentation, and all relevant
attachments. If the Milestone Report coincides with the semi-annual Report, and upon agreement of
the Portfolio Manager at least one week prior to the due date, the Portfolio Manager may waive the
semi-annual Report, less the Metrics and Statistics section, and accept the Milestone Report to
fulfill the semi-annual Report requirement. There will be frequent contact between the MEDC and
the Company, including a minimum of two site visits made approximately at the one year and two year
anniversary of the Agreement Date and pursuant to at least ten (10) business days advance notice.
Within six (6) months following the completion of the (last) Set of Key Milestones, the Company
shall provide the MEDC with a Final Progress Report (the Final Progress Report). The final
Progress Report shall be an all-encompassing report and shall include a description of the
milestones achieved during the award period, budget, metrics, statistics, intellectual property and
commercialization status, any supporting documentation and any other information or data requested
by the Portfolio Manager to assess compliance with Exhibits F (Budget), A (Key Milestones) and G
(Proposal). All Progress Reports shall be retained by the MEDC and shall be in a form as
determined in advance by the Portfolio Manager. The Company shall include reprints of publications
published based upon developments funded by the Proceeds in the semi-annual Progress Reports and
the Final Progress Report. The Company shall provide to the MEDC immediate notice of any material
change to activities funded with the Proceeds, including, but not limited to, changes to key
personnel. The Company agrees that all material changes to milestones and the Budget (other than
as provided in section 3.9 above, Exhibit A and Exhibit G) must be pre-approved in writing by the
Portfolio Manager, which approval shall not be unreasonably withheld or delayed.

     Section 7.5 Annual Financial Statements. The Company shall provide to the MEDC copies
of the financial statements for its parent, Advanced Photonix, Inc., as audited by an independent
certified public accountant and filed with the Securities and Exchange Commission, within one
hundred and fifty (150) calendar days after the end of the Company’s fiscal year.

     Section 7.6 Confidentiality. In connection with the transactions contemplated by this
Agreement, the MEDC or its representatives may obtain, or have access to, confidential and/or
proprietary information or data concerning the business, operations, assets and liabilities of the
Company, including, without limitation, the Company’s Intellectual Property (collectively, the
“Confidential Information”). The MEDC agrees that it and its representatives will use the
Confidential Information solely for the purpose of consummating the transactions contemplated by
this Agreement, and that the Confidential Information will be kept strictly confidential and that
neither the MEDC nor any of its representatives will disclose any of the Confidential Information
in any manner whatsoever; provided, however, that the MEDC may disclose Confidential Information
(a) to such of its representatives who need such information or data for the sole purpose of
consummating the transactions contemplated by this Agreement, (b) to the extent required by
applicable law (including, without limitation, the Michigan Freedom of Information Act, as
amended), (c) if, prior to the Agreement Date, such information or data was generally publicly
available, (d) if after the Agreement Date, such information or data becomes publicly available
without fault of or action on the part of the MEDC or its representatives, and (e) in all other
cases, to the extent that the Company gives its prior written consent to such disclosure.
Notwithstanding the foregoing, the MEDC shall give the Company not less than three (3) days’ prior
written notice of any disclosure permitted by this Section 7.6 to allow the Company and its parent
corporation to comply with Regulation FD, as promulgated under the Securities Act of 1933, as
amended. This Section 7.6 shall survive termination of this Agreement.

     Section 7.7 Portfolio Manager. The MEDC shall designate a Portfolio Manager to
administer this Agreement and to monitor the disbursements hereunder. The Portfolio Manager may be
changed at the discretion of the MEDC.

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     Section 7.8 Publicity. The Company will not use the name of the MEDC, nor any
officer, agent or employee of the MEDC in any publicity, advertising or news release concerning
this Agreement without the prior written approval of the Portfolio Manager or an authorized
representative of the MEDC, which approval shall not be unreasonably withheld or delayed. The
Parties agree to prepare and issue at least one news release announcing this Agreement within
thirty (30) calendar days after the Agreement Date, which news release(s) shall be subject to the
prior approval of the Parties and the expense of which shall be borne by the MEDC. The MEDC shall
give the Company not less than three (3) days’ prior written notice of any dissemination of any
such press release to allow the Company and its parent corporation to comply with Regulation FD, as
promulgated under the Securities Act of 1933, as amended.

     Section 7.9 Intangible Rights. The Company, will make all filings and applications
and take any other steps which, in the opinion of the Company’s counsel and subject to the consent
of the Board, are necessary to protect the Company’s interests in the intangible rights that the
Board determines are necessary or appropriate for the conduct of its business, including licenses,
permits, franchises, concessions, and Intellectual Property. The Company will register its
ownership of every patent that it owns by assignment with the United States Patent and Trademark
Office. The Company will require all employees and consultants involved in product development to
execute an assignment to the Company of the rights to all technology, inventions, computer
programs, written materials or other matters developed in the course of employment or consultation
with the Company.

     Section 7.10 Compliance with Governing Documents. The Company shall comply with all
obligations under its Certificate of Formation and operating agreement.

     Section 7.11 Discharge of Obligations. Unless contested in good faith by appropriate
proceedings without risk of encumbrance of any Company asset, the Company shall promptly pay and
discharge all taxes, assessments, and governmental charges lawfully levied or imposed upon it (in
each case before they become delinquent and before penalties accrue), pay when due all lawful
claims for labor, materials, supplies, and rents, and pay all other debts and liabilities that if
unpaid would by law result in a writ of attachment, garnishment, execution, tax lien, or similar
writ upon any of the property of the Company.

     Section 7.12 Enforcement of Rights. To the extent necessary to protect its
intellectual property and without incurring extraordinary expense, the Company will enforce its
rights under all confidentiality and non-competition agreements it has entered into.

     Section 7.13 Termination of Funding. In the event that the State Legislature or the
State government fails to provide or terminates the funding necessary for the MEDC to fund the
Proceeds, the MEDC may terminate this Agreement by providing notice to the Company not less than
thirty (30) calendar days prior to the date of cancellation; provided, however, that in the event
the action of the State Legislature or State government results in an immediate absence or
termination of funding, this Agreement may be terminated effective immediately upon delivery of
notice to the Company. In the event of termination of funding the MEDC has no further obligation
to pay for expenditures incurred by the Company beyond the date of termination of this Agreement
and the Company’s indemnification obligation under Section 5.2 hereof shall be limited to the
Proceeds disbursed as of the time of such termination.

     Section 7.14 Termination of Agreement. Other than as set forth in Sections 7.13 and
8.2 hereof, this Agreement shall terminate upon payment in full of the Note, whether by payment at
maturity or prepayment.

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ARTICLE VIII

DEFAULT

     Section 8.1 Events of Default. The occurrence of any one or more of the following
events or conditions shall constitute an “Event of Default” under this Agreement, unless a written
wavier of the Event of Default is signed by the MEDC: (a) any representation made by the Company
shall prove incorrect at the time that such representation was made in any material respect,
including, but not limited to, any information provided under Section 7.4, the requirements of
Section 3.6 and the original proposal (Exhibit G); (b) any material breach by the Company of any
covenant made by, or obligation of, the Company under this Agreement (including, without
limitation, the Company’s obligations under Sections 2.5, 3.9, 7.3 and 7.4), which breach is not
cured to the reasonable satisfaction of the MEDC within thirty (30) days after receipt of notice
thereof; provided, however, if such breach cannot be cured within such thirty (30) day period, it
shall not constitute an Event of Default hereunder so long as the MEDC reasonably determines that
the Company is diligently pursuing a cure thereof; (c) any failure by the Company to pay any
installment of principal or interest when due hereunder and such failure shall continue and shall
not be cured for a period of ten (10) calendar days after the due date of such payment; (d) the
Company’s failure generally to pay debts as they mature, or the appointment of a receiver or
custodian over a material portion of the Company’s assets, which receiver or custodian is not
discharged within sixty (60) calendar days of such appointment; (e) any voluntary bankruptcy or
insolvency proceedings are commenced by the Company; (f) any involuntary bankruptcy or insolvency
proceedings are commenced against the Company, which proceedings are not set aside within sixty
(60) calendar days from the date of institution thereof; (g) any writ of attachment, garnishment,
execution, tax lien, or similar writ is issued against the property of the Company which is not
either (i) removed within sixty (60) calendar days, or (ii) bonded over by the Company while being
contested in good faith by appropriate proceedings; (h) the Company’s failure to timely meet one of
the Key Milestones set out in Exhibit “A”; (i) the occurrence of the Trigger Event; or (j) the
Company ceases substantially all of its operations.

     Section 8.2 Available Remedies. Upon the occurrence of any one or more of the Events
of Default, the MEDC may terminate this Agreement and retains the right to demand return of any
Proceeds paid as a result of the violation of this Agreement giving rise to such Event of Default.
The termination of this Agreement is not intended to be the sole and exclusive remedy in case any
Event of Default shall occur and each remedy shall be cumulative and in addition to every other
provision or remedy given herein or now or hereafter existing at law, in equity, by statute or
otherwise. The Company will pay all costs and expenses, including, without limitation, reasonable
attorneys fees and expenses incurred by the MEDC in collecting any sums due the MEDC under this
Agreement, in enforcing any of its rights hereunder due to failure of the Company to comply with
its obligations under this Agreement, or in exercising any remedies available to the MEDC as result
of the occurrence of one or more Events of Default.

     Section 8.3 Reimbursement. If this Agreement is terminated as described in Section
8.2 hereof, the MEDC shall have no further obligation to make any further payment of the Proceeds
to the Company. The Company shall reimburse the MEDC for disbursements of the Proceeds determined
to have been expended for purposes other than as set forth in Section 3.9 hereof and for the
Proceeds which were previously disbursed but not yet expended by the Company and which are not
subject to an irrevocable or non-cancelable legal commitment of the Company for expenditure of
funds contemplated by the Budget or otherwise approved by the MEDC.

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ARTICLE IX

MISCELLANEOUS

     Section 9.1 Notices. Any notice, approval, request, authorization, direction or other
communication under this Agreement shall be given in writing and shall be deemed to have been
delivered and given for all purposes (i) on the delivery date if delivered by confirmed facsimile;
(ii) on the delivery date if delivered personally to the Party to whom the same is directed; (iii)
one (1) business day after deposit with a commercial overnight carrier, with written verification
of receipt; or (iv) three (3) business days after the mailing date, whether or not actually
received, if sent by United States mail, return receipt requested, postage and charges prepaid, or
any other means of rapid mail delivery for which a receipt is available. The notice address for
the Parties shall be the address as set forth in the introductory paragraph of this Agreement, with
the other relevant notice information, including the recipient for notice and, as applicable, such
recipient’s fax number or e-mail address, to be as reasonably identified by the notifying Party.
The MEDC and the Company may by notice given hereunder designate any further or different addresses
to which subsequent notices shall be sent.

     Section 9.2 Entire Agreement. This Agreement, together with the Exhibits hereto, sets
forth the entire agreement and understanding of the Parties with respect to the subject matter
hereof, and supersedes all prior agreements, understandings and communications, whether written or
oral, with respect to the subject matter hereof.

     Section 9.3 Counterparts and Copies. This Agreement may be executed in any number of
counterparts, each of which, when executed shall be deemed an original, and all of which together,
shall constitute one and the same agreement. Copies (whether photostatic, facsimile or otherwise)
of this Agreement may be made and relied upon to the same extent as though such copy was an
original.

     Section 9.4 Severability. If any clause, provision or section of this Agreement shall
be held illegal or invalid by any court, to the extent permitted by the court order, decree or
judgment the invalidity of such clause, provision or section shall not affect any of the remaining
clauses, provisions or sections hereof and this Agreement shall be construed and enforced as if
such illegal or invalid clause, provision or section had not been contained herein.

     Section 9.5 Captions. The captions or headings in this Agreement are for convenience
only and in no way define, limit or describe the scope or intent of any provisions or sections of
this Agreement.

     Section 9.6 Governing Law. This Agreement and the Loan Documents shall be deemed to
be a contract made under the laws of the State, and for all purposes shall be governed by, and
construed in accordance with, the laws of the State (excluding choice of law rules of such
jurisdiction).

     Section 9.7 Jurisdiction. In connection with any dispute between the parties under
this Agreement, the Company hereby irrevocably submits to jurisdiction of the court of the State of
Michigan in Ingham County or, if such court does not have jurisdiction, the United States District
Court for the Eastern District of Michigan. The Company hereby waives and agrees not to assert, by
way of motion as a defense or otherwise in any such action any claim (a) that it is not subject to
the jurisdiction of such courts, (b) that the action is brought in an inconvenient forum, (c) that
it is immune from any legal process with respect to itself or is property, (d) that the venue of
the suit, action or other proceeding is improper, or (e) that this Agreement or the subject matter
hereof may not be enforced in or by such courts.

     Section 9.8 Relationship between Parties. The relationship between the parties is
only as described in this Agreement. The Company and its officers, agents and employees shall

-14-

 

not describe or represent themselves as agents of the MEDC to any individual person, firm or
entity for any purpose.

     Section 9.9 Successors and Assigns. Neither Party may assign its rights or
obligations under this Agreement without the prior written consent of the other Party. The terms
and conditions of this Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns.

     Section 9.10 Waiver. A failure or delay in exercising any right in respect of this
Agreement will not be presumed to operate as a waiver unless otherwise stated in this Agreement,
and a single or partial exercise of any right will not be presumed to preclude any subsequent or
further exercise of that right or the exercise of any other right.

     Section 9.11 Amendment. This Agreement may not be modified or amended except pursuant
to a written instrument signed by the Parties.

(This space intentionally left blank)

-15-

 

     The Parties have executed this Agreement as of the above written date.

Michigan Economic Development Corporation

	 	 	 	 	 
	By

	 	 	 	 
	 	 	  /s/   James C. Epolito	 	 
	 

	 	  James C. Epolito	 	 
	 

	 	  Its President and CEO	 	 

Picometrix, LLC

By Advanced Photonix, Inc.

Its Sole Member

	 	 	 	 	 
	By

	 	 	 	 
	 	 	  /s/   Richard D. Kurtz	 	 
	 

	 	  Richard D. Kurtz	 	 
	 

	 	  Its Chief Executive Officer	 	 

-16-exv10w4a

 

Exhibit 10.4(A)

AMENDMENT TO ASSET PURCHASE AGREEMENT DATED 27/11/03

Dated: 7 January 2004

BETWEEN:

	1.	 	Point Match USA Inc. company organized and existing under the laws of the State of
Delaware, having its principal place of business at 1333 Broadway, Suite 918 New York, NY 10018,
United States (“Seller”), and
	 
	2.	 	MatchNet Plc., a company organized and existing under the laws of England, having its
principal place of business at 8383 Willshire Blvd. Beverly Hills 90211, LA, CA, United States
(“Purchaser”).
	 
	 	 	Together, Seller and Purchaser are “Parties” and each is a “Party.”

WHEREAS

	A.	 	The Parties have entered into an Asset Purchase Agreement dated 27 November 2003 (The
“APA”); and
	 
	B.	 	The Parties wish to amend the APA with respect to certain matters as set forth below.

NOW THEREFORE, the Parties hereby agree as follows:

	1.	 	The Amendments
	 
	 	 	The parties agree that the APA will be amended as follows:

	 	1.1.	 	Section 1.3 will be amended and will be read as follows: “Closing Date” means the 16th
January, 2004.
	 
	 	1.2.	 	Section 7.7 to the APA will be cancelled and deleted.
	 
	 	1.3.	 	Section 12.9 to the APA will be cancelled and deleted.
	 
	 	1.4.	 	Section 2 to the APA will be amended as follows: The second sentence saying: “In Addition,
the Seller shall have the option to assign the Assigned Agreements to the Purchaser” will be
omitted.
	 
	 	1.5.	 	Section 6.5 to the APA will be cancelled and instead it will be written as follows:
	 
	 	 	 	“The Purchaser will pay the Seller, on the closing, the sum of 4.700USD as participation in the
Seller’s lease payments under the Assigned Agreement. It is hereby clarified that the Assigned
Agreement will not be assigned to the Purchaser”.
	 
	 	1.6.	 	Section 6 will be amended by replacing the figure “12:00” with the figure “09:00”.

	2.	 	Completion of Due Diligence Examination
	 
	 	 	The Purchaser hereby confirms that taking into account the changes made to the APA under this
Amendment, the due diligence examination conducted pursuant to section 9 of the APA was completed
to its satisfaction.
	 
	3.	 	Validity of the APA

	 	3.1	 	All other stipulations of the APA will remain valid and in full force and effect.
	 
	 	3.2	 	In case of contradiction between the stipulations of this Addendum and the APA the stipulation
of this Amendment will prevail.

	4.	 	Miscellaneous

	 	4.1	 	This Amendment is made in accordance with the terms and provisions of Section 21 to the APA.
	 
	 	4.2	 	Sections 21 — 29 to the APA will apply to this Amendment mutatis mutandis.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date hereof.

	 	 	 	 	 	 	 	 	 	 	 
	Point Match USA Inc.	 	 	 	Matchnet PLC	 	 
	By:

	 	 	 	 	 	By:
	 	/s/ Joe Shapira	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name: Nadav Palti and Zion Madmon	 	 	 	Name: Joe Shapira	 	 
	Title: Chairman, CEO	 	 	 	Title: Chairman, CEO

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