Document:

Exhibit
10.25.3

 

NEW EMPLOYEE INDUCEMENT GRANT STOCK OPTION AGREEMENT

 

TO:  Leonard Perham (the “Optionee”):

 

MoSys, Inc., a Delaware corporation (the
“Company”), hereby grants to Optionee an option (“Option”) to purchase a total
of One Hundred Thousand (100,000) shares of Common Stock, $0.01 par value per
share (“Shares”), of the Company, at the price set forth herein.

 

DEFINITIONS FOR
CERTAIN DEFINED TERMS ARE AS FOLLOWS:

 

“Agreement”
means this Stock Option Incentive Grant Agreement.

 

“Board of Directors”
means the Board of Directors of the Company.

 

“Code”
means the Internal Revenue Code of 1986, as amended.

 

“Common Stock”
means the common stock of the Company, par value $.01 per share.

 

“Committee”
means the Compensation Committee of the Board of Directors.

 

“Consultant”
means any independent contractor retained to perform services for the Company
or a Subsidiary.

 

“Continuous Service”
means the absence of any interruption or termination of service as an Employee,
Director or Consultant by the Company, a Parent, or any Subsidiary. Continuous
Service shall not be considered interrupted during any period of (i) any
leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company and any Parent, Subsidiary or
successor of the Company. A leave of absence approved by the Company shall
include sick leave, military leave or any other personal leave approved by an
authorized representative of the Company.

 

“Corporate Transaction”
means:

 

(a)  an
acquisition after the Grant Date by an individual, an entity or a group in one
or more related transactions (excluding the Company or an employee benefit plan
of the Company or a corporation controlled by the Company’s stockholders) of
beneficial ownership of 45 percent or more of the Company’s common stock or
voting securities; or

 

(b) 
consummation of a complete liquidation or dissolution of the Company or a
merger, consolidation, reorganization or sale of all or substantially all of
the Company’s assets (collectively, a “Business Combination”) after the Grant
Date, other than a Business Combination in which (A) the stockholders of
the Company receive beneficial ownership of 50 percent or more of the stock of
the corporation resulting from the Business Combination and (B) at least a
majority of the board of directors of such resulting corporation were incumbent
directors of the Company immediately prior to the consummation of the Business
Combination, and (C) after which no individual, entity or group (excluding
any corporation or other entity resulting from the Business Combination or any
employee benefit plan of such corporation or of the Company) who did not have
beneficial ownership of 45 percent or more of the stock of the

 

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resulting
corporation or other entity immediately before the Business Combination has
beneficial ownership of 45 percent or more of the stock of such resulting
corporation or other entity.

 

For this purpose, “beneficial ownership”
refers to ownership of a security, directly or indirectly, by any person or
entity who through any contract, arrangement, understanding, relationship or
otherwise has or shares (1) voting power, which includes the power to
vote, or to direct the voting of, such security, and/or (2) investment
power, which include the power to dispose, or to direct the disposition of,
such security, and shall be determined in accordance with Rule 13d-3 of
the General Rules and Regulations under the Exchange Act.

 

“Director” means a director of the Company.

 

“Employee” means any person, including officers (whether or not they are
directors), employed by the Company, a Parent or any Subsidiary.

 

“Exchange Act” means Securities Exchange Act of 1934, as amended.

 

“Fair Market Value” of Common Stock as of any date is the closing price for the Common
Stock as reported on the NASDAQ Global Market (or on any other national
securities exchange or other established market on which the Common Stock is
then listed) for that date or, if no closing price is reported for that date,
the closing price on the next preceding date for which a closing price was
reported.

 

“Grant Date” means, with respect to the Option, November 8, 2007.

 

“Non-Employee Director” means a Director of the Company who qualifies as a Non-Employee
Director as such term is defined in Section 240.16b-3(b)(3) of the
General Rules and Regulations promulgated under the Exchange Act.

 

“Parent” means a parent corporation of the Company, whether now or hereafter
existing, as defined by Section 424(e) of the Code.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Stock Price” means the average closing price of a share of the Common Stock on
the NASDAQ Global Market (or on any other national securities exchange or other
established market on which the Common Stock is then listed) during a
consecutive 90-calendar day period within the first two years following the
Grant Date; provided that in the case of a Corporate Transaction such
determination shall be made as of the 90-calendar day period ending on the
third business day immediately preceding the date on which the Corporation
Transaction is consummated.

 

“Subsidiary” means a subsidiary corporation of the Company, whether now or
hereafter existing, as defined in Section 424(f) of the Code.

 

“Termination of Service” means (a) in the case of an Employee, a cessation of the
employee-employer relationship between the Employee and the Company or a Parent
or Subsidiary for any reason, including, but not by way of limitation, a
termination by resignation, discharge, death, disability, or the disaffiliation
of a Parent or Subsidiary, but excluding any such

 

2

 

termination
where there is a simultaneous reemployment by the Company or a Parent or
Subsidiary; (b) in the case of a Consultant, a cessation of the service
relationship between the Consultant and the Company or a Parent or Subsidiary
for any reason, including, but not by way of limitation, a termination by
resignation, discharge, death, disability, or the disaffiliation of a Parent or
Subsidiary, but excluding any such termination where there is a simultaneous
re-engagement of the Consultant by the Company or a Parent or Subsidiary; and (c) in
the case of a Director, a cessation of the Director’s service on the Board of
Directors for any reason, including, for example, but not by way of limitation,
a termination by resignation, removal, death, disability, expiration of the
term of directorship, but excluding any such termination where there is a simultaneous
reemployment by the Company or a Parent or Subsidiary.

 

THE
DETAILS OF YOUR OPTION ARE AS FOLLOWS:

 

1.                                      Nature Of The Option

 

The Option is intended to be a “Nonstatutory
Stock Option” subject to the provisions of Section 1.83-7 of the Treasury Regulations
promulgated under Section 83 of the Code.

 

The Option Price is $5.61 for each Share.

 

2.                                      Vesting And Exercise Of Option

 

(a)  During
the term of this Option, it will vest and become exercisable while the Optionee
remains in Continuous Service (except as otherwise provided in this Section 2)
as to 50,000 Shares if the Stock Price is $13.00 and ratably as to the
remaining 50,000 of the Shares for each one cent increase in the Stock Price up
to $15.00 per share (which equals 250 Shares for each one cent increase).  By way of example, if the Stock Price is
$13.75, the Option would vest and become exercisable with respect to 68,750, or
68.75%, of the Shares.

 

(b)  In the
event of the Optionee’s death, disability or other termination of employment,
the Option shall be exercisable in the manner and to the extent provided below:

 

(i)  Termination of
Status as Employee, Director or Consultant. 
If the Optionee’s Continuous Service shall cease for any reason other
than permanent and total disability or death, the Optionee may, but only within
90 days after the date of Termination of Service, exercise the Option to the
extent that the Optionee was entitled to exercise it at the date of Termination
of Service, subject to the condition that no Option shall be exercised after
the expiration of the Term (as defined in Section 6) of the Option.

 

(ii)  Disability of
the Optionee.  If the Optionee’s
Continuous Service shall cease due to disability, and the Optionee was in
Continuous Service as an Employee, Director or Consultant from the Grant Date
until the date of Termination of Service, the Option may be exercised at any
time within 12 months following the date of Termination of Service, but only to
the extent that the Optionee was entitled to exercise the Option at the time of
Termination of Service, subject to the condition that no option shall be
exercised after the expiration of the Term of the Option.

 

(iii)  Death of the
Optionee.  In the event of the death
of the Optionee during the Term of the Option while the Optionee is an
Employee, Non-Employee

 

3

 

Director or Consultant and in Continuous Service
from the Grant Date until the date of death, the Option may be exercised at any
time within six months following the date of death by the Optionee’s estate or
by a person who acquired the right to exercise the Option by bequest,
inheritance or otherwise as a result of the Optionee’s death, but only to the
extent that the Optionee would have been entitled to exercise the Option at the
date of death, subject to the condition that no option shall be exercised after
the expiration of the Term of the Option.

 

(c)  No
fraction of a Share shall be purchasable or deliverable upon exercise, but in
the event any adjustment of the number of Shares covered by the Option shall
cause such number to include a fraction of a Share, such number of Shares shall
be adjusted to the nearest smaller whole number of Shares.

 

(d)  In
order to exercise any portion of this Option that has vested, the Optionee
shall notify the Company in writing of the election to exercise the Option and
the number of Shares in respect of which the Option is being exercised, by
executing and delivering the Notice of Exercise of Stock Option in the form
attached hereto as Appendix I.  The certificate or certificates representing
Shares as to which this Option has been exercised shall be registered in the
name of the Optionee. Or, the optionee shall notify the Company through his
broker if he chooses to exercises the Option through a brokerage firm.

 

3.                                      Non-Transferability Of Option

 

As approved by the Committee, any vested
portion of the Option may be transferred by the Optionee through a gift or
domestic relations order in settlement of marital property rights to the
following donees or transferees:

 

(a)  any “family
member,” which includes any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law,
including adoptive relations, and any person sharing the employee’s household
(other than a tenant or employee);

 

(b)  a trust
in which “family members” have more than 50% of the beneficial interest;

 

(c)  a
foundation in which “family members” or the employee control the management of
assets; and

 

(d)  any
other entity in which the “family members” (or the employee) own more than 50%
of the voting interests;

 

provided that (x) there
may be no consideration for any such transfer, (y) this Agreement, and any
amendment hereto, must be approved by the Committee, and must expressly provide
for transferability in a manner consistent with this Section 3, and (z) subsequent
transfers of the Option or transferred portion shall be prohibited except
transfers effected in accordance with this Section 3.  Following the transfer, the Option or
transferred portion shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that the
term “Optionee” shall be deemed to
refer to the transferee in lieu of or in addition to the transferor. Any
Termination of Service of the Optionee shall be applied with respect to the
original Optionee, following which the Options shall be exercisable by the transferee
only to the extent and for the periods specified in this Agreement.

 

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Otherwise, this Option may be transferred
only by will or by the law of descent and distribution.  The terms of this Option shall be binding
upon the executors, administrators, heirs and successors of the Optionee.

 

4.                                      Method Of Payment

 

Payment of the exercise price shall be by any
of the following, or a combination thereof, at the election of the Optionee:

 

(a)  cash;

 

(b)  check,
cashier’s check, certified check or wire transfer;

 

(c)  in the
event there exists a public market for the Company’s Common Stock on the date
of exercise, by delivery of a sell order to a broker for the Shares being
purchased and an agreement to pay (or have the broker remit payment for) the
purchase price of the shares being purchased on or before the settlement date
for the sale of such Shares to the broker; or

 

(d)  in the
event there exists a public market for the Company’s Common Stock on the date
of exercise, by surrender of shares of the Company’s Common Stock.  In this case payment shall be made as
follows:

 

(i)  the Optionee shall
deliver to the Secretary of the Company a written notice which shall set forth
the portion of the purchase price the Optionee wishes to pay with Common Stock,
and the number of shares of Common Stock the Optionee intends to surrender upon
the exercise of this Option, which shall be determined by dividing the
aforementioned portion of the purchase price by the closing price per share of
the Common Stock of the Company, as reported on the NASDAQ Global Market (or on
any other national securities exchange or other established market on which the
Common Stock is then listed), on the last business day immediately preceding
the date of exercise of the Option, as determined by the Committee;

 

(ii)  fractional shares
shall be disregarded and the Optionee shall pay in cash an amount equal to such
fraction multiplied by the price determined under subparagraph i above;

 

(iii)  the written
notice shall be accompanied by a duly endorsed blank stock power with respect
to the number of shares of Common Stock set forth in the notice, and the
certificate(s) representing said shares shall be delivered to the Company
at its principal offices within three working days from the date of the notice
of exercise;

 

(iv)  the Optionee
hereby authorizes and directs the Secretary of the Company to transfer so many
of the shares of Common Stock represented by such certificate(s) as are
necessary to pay the purchase price in accordance with the provisions herein;
and

 

(v)  notwithstanding
any other provision herein, the Optionee shall only be permitted to pay the
purchase price with shares of Common Stock owned by him as of the exercise date
in the manner and within the time periods allowed under 17 CFR Section 240.16b-3
promulgated under the Exchange Act, as such regulation

 

5

 

is presently constituted, as it is amended from time
to time, and as it is interpreted now or hereafter by the Securities and
Exchange Commission.

 

(vi)  the Optionee may
elect to pay the exercise price by authorizing a third party to sell Shares
subject to the Option and remit to the Company a sufficient portion of the sale
proceeds to pay the entire exercise price and any tax withholding resulting
from such exercise.

 

5.                                      Adjustments Upon Changes In Capitalization

 

(a)  Recapitalization.  Subject to any required action by the
stockholders of the Company, the number of Shares covered by the Option and the
per share exercise price of the Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, combination,
reclassification, the payment of a stock dividend on the Common Stock or any
other increase or decrease in the number of such shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be
deemed to have been effected without receipt of consideration. Such adjustment
shall be made by the Board of Directors, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an Option.

 

(b)  Corporate
Transaction.  In the event of a
proposed Corporate Transaction, the Board of Directors shall notify the
Optionee at least 10 calendar days prior to such proposed Corporate
Transaction.  To the extent it has not
been previously exercised, the Option will terminate immediately prior to the
consummation of such proposed Corporate Transaction (but subsequent to the full
vesting acceleration provided in Section 2(a)), unless the Option is
assumed or an equivalent option is substituted by the successor corporation or
a parent or subsidiary of such successor corporation. For the purposes of this
subsection, the Option shall be considered assumed if, following the Corporate
Transaction, the Option confers the right to purchase, for each Share subject
to the Option immediately prior to the Corporate Transaction, the consideration
(whether stock, cash, or other securities or property) received in the
Corporate Transaction by holders of Common Stock for each Share subject to the
Option held on the effective date of the Corporate Transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the Corporate Transaction was not solely common
stock of the successor corporation or its parent or subsidiary, the Board of
Directors may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Option for each Share
subject to the Option to be solely common stock of the successor corporation or
its parent or subsidiary equal in fair market value to the per share
consideration received by the Company’s holders of Common Stock in the
Corporate Transaction.

 

6.                                      Term Of Option

 

This Option may not be exercised more than
seven years from the date of grant of this Option (the “Term”), as set forth
below, and may be exercised during such term only in accordance with  the terms of this Option.

 

6

 

7.                                      Not Employment Contract

 

Nothing in this Agreement shall confer upon
the Optionee any right to continue in the employ or other service with the
Company or any Parent or Subsidiary or shall interfere with or restrict in any
way the rights of the Company (or any Parent or Subsidiary), which are hereby
expressly reserved, to discharge the Optionee at any time for any reason
whatsoever, with or without cause, subject to the provisions of applicable law.  This is not an employment contract.

 

8.                                      Income Tax Withholding

 

(a) 
Whenever Shares are issued or to be issued pursuant to the Option, the Company
shall have the right to require the recipient to remit to the Company an amount
sufficient to satisfy federal, state, local or other withholding tax
requirements if, when, and to the extent required by law (whether so required
to secure for the Company an otherwise available tax deduction or otherwise)
prior to the delivery of any certificate or certificates for such shares. The obligations
of the Company under this Agreement shall be conditional on satisfaction of all
such withholding obligations and the Company shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Optionee. However, in such cases the Optionee may elect,
subject to the approval of the Board of Directors, to satisfy an applicable
withholding requirement, in whole or in part, by having the Company withhold
shares to satisfy their tax obligations. The Optionee may only elect to have
shares withheld having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be imposed on
the transaction. All elections shall be irrevocable, made in writing, signed by
the Optionee, and shall be subject to any restrictions or limitations that the
Board of Directors deems appropriate.

 

In the event of any
determination that the Company has failed to withhold a sum sufficient to pay
all withholding taxes due in connection with the exercise of this Option, the
Optionee agrees to pay the Company the amount of such deficiency in cash within
five days after receiving a written demand from the Company to do so, whether
or not Optionee is an employee of the Company at that time.

 

(b)  At such
time as the Optionee is required to pay to the Company an amount with respect
to tax withholding obligations as set forth in Section 8(a), the Optionee
may elect prior to the date the amount of such withholding tax is determined to
make such payment, or such increased payment as the Optionee elects to make up
to the maximum federal, state and local marginal tax rates (including any
related FICA obligation) applicable to the Optionee and the particular
transaction in accordance with the provisions of Section 8(a).

 

(c)  Any
adverse consequences incurred by an Optionee with respect to the use of shares
of Common Stock to pay any part of the Option Price or of any tax in connection
with the exercise of an Option shall be the sole responsibility of the
Optionee.

 

9.                                      Conditions Upon Issuance of Shares.

 

Shares shall not be issued with respect to
the Option unless the exercise of the Option and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
or public trading market upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance. As a condition to the exercise of the Option, the

 

7

 

Company may
require the Optionee to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.

 

10.                               Notices and Other Communications.

 

Any notice, demand, request or other
communication hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered, certified or overnight mail, postage prepaid, or telecopied
with a confirmation copy by regular, certified or overnight mail, addressed or
telecopied, as the case may be, (i) if to the Optionee, at his residence
address last filed with the Company and (ii) if to the Company, at its
principal place of business, addressed to the attention of its Chief Executive
Officer or Secretary, or to such other address or telecopier number or
electronic mail address, as the case may be, as the addressee may have
designated by notice to the addressor. All such notices, requests, demands and
other communications shall be deemed to have been received: (i) in the
case of personal delivery, on the date of such delivery; (ii) in the case
of mailing, when received by the addressee; (iii) in the case of facsimile
transmission, when confirmed by facsimile machine report; and (iv) in the
case of electronic mail, when directed to an electronic mail address at which
the receiving party has consented to receive notice, provided, that such
consent is deemed revoked if the sender is unable to deliver by electronic
transmission two consecutive notices and such inability becomes known to the
secretary or assistant secretary of the Company or to the transfer agent, or other
person responsible for giving notice.

 

Dated as of
the 28th day of November 2007.

 

 

	
   

  	
  MOSYS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mehdi
  Bathaee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Chief
  Operating Officer

  

 

8

 

ACKNOWLEDGEMENT
BY OPTIONEE

 

The Optionee acknowledges receipt of copies
of the Agreement  and represents
that he is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions of the Agreement.  The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board of
Directors upon any questions arising under the Agreement.

 

	
   

  	
  /s/ Leonard
  Perham

  
	
   

  	
  Optionee

  
	
   

  	
   

  
	
  Date: December 4, 2007

  	
   

  

 

[CONSENT OF
SPOUSE/DOMESTIC PARTNER

 

I, ___________________________,
spouse/domestic partner of the Optionee who executed the foregoing Agreement,
hereby agree that my spouse’s/domestic partner’s interest in the shares of
Common Stock subject to said Agreement shall be irrevocably bound by the
Agreement’s terms.  I further agree that
my community property interest in such shares, if any, shall similarly be bound
by said Agreement and that such consent is binding upon my executors,
administrators, heirs and assigns.  I
agree to execute and deliver such documents as may be necessary to carry out
the intent of said Agreement and this consent.

 

	
   

  	
  ]

  
	
   

  	
  Spouse/Domestic Partner

  

 

9

 

APPENDIX I

 

MOSYS, INC.

 

NOTICE OF EXERCISE OF STOCK OPTION

 

I _____________________________________ (print legibly) hereby elect to
exercise the following stock options(s) granted to me by MOSYS, INC. (the
“Company”).  All shares being purchased
are fully vested and exercisable pursuant to Section 3 of the listed
Option Agreement.

 

1. ____________ Shares at $
____________ per share (Grant date): ____________ )

2. ____________ Shares at $
____________ per share (Grant date): ____________ )

3. ____________ Shares at $
____________ per share (Grant date): ____________ )

4. ____________ Shares at $
____________ per share (Grant date): ____________ )

 

Cash  exercise in the amount of $
____________________

Shares should be issued to me as follows:

                Name: ________________________________________________

 

 

If you choose to include your spouse, you must designate below how you
wish your shares to be registered by checking the appropriate box.  If we receive no designation, the shares will
be designated as Joint Tenants.

 

                                                ________ Joint Tenants                                                                                                                                                                                                            ________ Community Property

                                                ________ Tenants in Common                                                                                                                                                                          ________ Tenancy by Entirety

 

 

Verification by__________________________________________Stock
Administration

 

Certificate to be delivered to (complete item 1 or 2 below)

1.               Employee ________                                                         Home Address:    __________________________________________________________

                                                                                                                                                                                                                                                                                                __________________________________________________________

2.               (Insert Name of Second Broker) 
________________________________________________

                                                Acct
#:  ________________________________________________

                Contact
Name & Number: ________________________________________________

 

 

Signature:
________________________________________ Date:
________________________________________

Social
Security No.: ___________________________________________

[For Company Use
Only]

 

As of the date set forth
above, the above named person has the vested right to exercise the number of
shares set forth above.

Date: ____________________________                                                            ____________________________________________

 

Amount due Company: $ ____________

 

	
   

  	
  MoSys, Inc.

  
	
   

  	
  755 N. Mathilda Avenue

  
	
   

  	
  Sunnyvale, California 94085

  
	
   

  	
  (408) 731-1800

  
	
   

  	
  Attn: Stock AdministrationEXHIBIT 10.1

 

AMENDED AND RESTATED LOAN
AGREEMENT

 

Wachovia Bank, National
Association

177 Meeting Street, Suite 450

Charleston, South Carolina
29401

(Hereinafter referred to as
the “Bank”)

 

Force Protection, Inc.

9801 Highway 78

Ladson, South Carolina 29458

 

Force Protection
Technologies, Inc.

9801 Highway 78

Ladson, South Carolina 29456

 

Force Protection Industries, Inc.

9801 Highway 78

Ladson, South Carolina 29456

 

(Individually and
collectively, “Borrower”)

 

This Amended and Restated
Loan Agreement (“Agreement”) is entered into May 6, 2008, by and between
Bank and Borrower and amends and restates that certain loan agreement of
Borrower and Bank dated July 20, 2007.

 

This Agreement applies to
the loan or loans {individually and collectively, the “Loan”) evidenced by one
or more promissory notes dated April 30, 2008 or other notes subject
hereto, as modified from time to time (whether one or more, the “Note”), the
standby letters of credit issued hereunder (each, a “Letter of Credit” and
collectively, the “Letters of Credit”) and all Loan Documents. The terms “Loan
Documents” and “Obligations,” as used in this Agreement, are defined in the
Note.

 

Relying upon the covenants,
agreements, representations and warranties contained in this Agreement, Bank is
willing to extend credit to Borrower upon the terms and subject to the
conditions set forth herein, and Bank and Borrower agree as follows:

 

LETTERS OF CREDIT. Upon the
request of Borrower, Bank shall issue standby Letters of Credit, provided, the
aggregate amount available to be drawn under ail standby Letters of Credit plus
the aggregate amount of unreimbursed drawings under all standby Letters of
Credit at any one time does not exceed $2,000,000.00, and further provided, no
standby Letter of Credit shall expire more than 365 days after the date it is
issued. Notwithstanding anything to the contrary contained herein, the
aggregate outstanding principal balance of Advances (as defined in the line of
credit Promissory Note in the amount of $30,000,000.00, dated April 30,
2008) plus the aggregate amount available to be drawn under all Letters of
Credit plus the aggregate amount of unreimbursed drawings under ail Letters of
Credit at any one time shall not exceed $30,000,000.00. The Letters of Credit
are to be used by Borrower solely for trade credit 

 

 

enhancement. Bank’s
obligation to issue Letters of Credit shall terminate if Borrower is in default
(however denominated) under the Note or the other Loan Documents, or in any
case, if not sooner terminated, on October 15, 2008.

 

LETTER OF CREDIT FEES. Borrower shall
pay to Bank, at such times as Bank shall require, Bank’s standard fees In
connection with Letters of Credit, as in effect from time to time, and with
respect to standby Letters of Credit, an additional fee equal to 1.00% per
annum on the face amount of each standby Letter of Credit, payable annually, in
advance, for so tong as such Letter of Credit is outstanding.

 

REPRESENTATIONS. Borrower
represents that from the date of this Agreement and until final payment in full
of the Obligations: Accurate Information. All information now and hereafter
furnished to Bank is and will be true, correct and complete in all material
respects. Any such information relating to Borrower’s financial condition will
accurately reflect Borrower’s financial condition as of the date(s) thereof,
(including all contingent liabilities of every type), and Borrower further
represents that its financial condition has not changed materially or adversely
since the dates) of such documents. Authorization;
Non-Contravention. The execution, delivery and performance by
Borrower and any guarantor, as applicable, of this Agreement and other Loan
Documents to which it is a party are within its power, have been duly
authorized as may be required and, if necessary, by making appropriate filings
with any governmental agency or unit and are the legal, binding, valid and
enforceable obligations of Borrower and any guarantors; and do not (i) contravene,
or constitute (with or without the giving of notice or lapse of time or both) a
violation of any provision of applicable law, a violation of the organizational
documents of Borrower or any guarantor, or a default under any agreement,
judgment, injunction, order, decree or other instrument binding upon or affecting
Borrower or any guarantor, (ii) result in the creation or imposition of
any lien (other than the lien(s) created by the Loan Documents) on any of
Borrower’s or any guarantor’s assets,- or (iii) give cause for the
acceleration of any obligations of Borrower or any guarantor to any other
creditor. Asset Ownership. Borrower has good and
marketable title to all of the properties and assets reflected on the balance
sheets and financial statements supplied Bank by Borrower, and all such
properties and assets are free and clear of mortgages, security deeds, pledges,
liens, charges, and all other encumbrances, except as otherwise disclosed to
Bank by Borrower in writing and approved by Bank (“Permitted Liens”). To
Borrower’s knowledge, no default has occurred under any Permitted Liens and no
claims or interests adverse to Borrower’s present rights in its properties and
assets have arisen. Discharge of Liens and
Taxes. Borrower has duly filed, paid and/or discharged all taxes or
other claims that may become a lien on any of its property or assets, except to
the extent that such items are being appropriately contested in good faith and
an adequate reserve for the payment thereof is being maintained. Sufficiency of Capital. Borrower is not, and after
consummation of this Agreement and after giving effect to all indebtedness
incurred and liens created by Borrower in connection with the Note and any
other Loan Documents, will not be, insolvent within the meaning of 11 U.S.C. §
101, as in effect from time to time. Compliance with Laws.
Borrower and any subsidiary and affiliate of Borrower and any guarantor are in
compliance in all material respects with all federal, state and local laws, rules and
regulations applicable to its properties, operations, business, and finances,
including, without limitation, any federal or state laws relating to liquor
(including 18 U.S.C. § 3617, et seq.) or narcotics (including 21 U.S.C. § 801,
et seq.) and/or any commercial crimes; all applicable federal, state and local
taws and regulations intended to protect the environment, and the 

 

 

Employee Retirement income
Security Act of 1974, as amended (“ERISA’’), if applicable. None of Borrower,
or any subsidiary or affiliate of Borrower or any guarantor is a Sanctioned
Person or has any of its assets in a Sanctioned Country or does business in or
with, or derives any of its operating income from investments in or
transactions with, Sanctioned Persons or Sanctioned Countries in violation of
economic sanctions administered by OFAC. The proceeds from the Loan will not be
used to fund any operations in, finance any investments or activities in, or
make any payments to, a Sanctioned Person or a Sanctioned Country. “OFAC” means
the U.S. Department of the Treasury’s Office of Foreign Assets Control. “Sanctioned
Country” means a country subject to a sanctions program identified on the list
maintained by OFAC and available at
http://www.treas.gov/offices/enforcement/ofac/sdnandexshtml, or as otherwise
published from time to time. “Sanctioned Person” means (i) a person named
on the list of Specially Designated Nationals or Blocked Persons maintained by
OFAC available at
http://www.treas.gov/offices/enforcement/ofac/programs/index.shtml, or as
otherwise published from time to time, or (ii) (A) an agency of the
government of a Sanctioned Country, (B) an organization controlled by a
Sanctioned Country, or (C) a person resident in a Sanctioned Country to
the extent subject to a sanctions program administered by OFAC. Organization
and Authority. Each corporation, partnership or limited liability company
Borrower and/or guarantor, as applicable, is duly created, validly existing and
in good standing under the laws of the state of its organization, and has all
powers, governmental licenses, authorizations, consents and approvals required
to operate its business as now conducted. Each corporation, partnership or
limited liability company Borrower and/or guarantor, as applicable, is duly
qualified, licensed and in good standing in each jurisdiction where qualification
or licensing is required by the nature of its business or the character and
location of its property, business or customers, and in which the failure to so
qualify or be licensed, as the case may be, in the aggregate, could have a
material adverse effect on the business, financial position, results of
operations, properties or prospects of Borrower or any such guarantor. No Litigation. There are no pending material suits, claims
or demands against Borrower or any guarantor that have not been disclosed to
Bank by Borrower in writing. To the best of Borrower’s knowledge, there are no
threatened material suits, claims or demands against Borrower or any guarantor
that have not been disclosed to Bank by Borrower in writing. ERISA. Each
employee pension benefit plan, as defined In ERISA, maintained by Borrower
meets, as of the date hereof, the minimum funding standards of ERISA and all
applicable regulations thereto and requirements thereof, and of the internal
Revenue Code of 1986, as amended. No Prohibited Transaction” or “Reportable.
Event” (as both terms are defined by ERISA) has occurred with respect to any
such plan. Indemnity. Borrower will indemnify Bank and its affiliates from and
against any losses, liabilities, claims, damages, penalties or fines imposed
upon, asserted or assessed against or incurred by Bank arising out of the
inaccuracy or breach of any of the representations contained in this Agreement
or any other Loan Documents.

 

AFFIRMATIVE COVENANTS.
Borrower agrees that from the date hereof and until final payment in full of
the Obligations, unless Bank shall otherwise consent in writing, Borrower will:
Access to Books and Records. Allow Bank, or its agents, during normal business
hours, access to the books, records and such other documents of Borrower as
Bank shall reasonably require, and allow Bank, at Borrower’s expense, to
inspect, audit and examine the same and to make extracts therefrom and to make
copies thereof. Business Continuity. Conduct its business in substantially the
same manner and locations as such business is now and has previously been
conducted. Certificate of Full Compliance From Officer. Deliver to Bank, with
the financial 

 

 

statements required herein,
a certification by Borrower’s chief financial officer, or its equivalent, that
Borrower is in full compliance with the Loan Documents. Compliance with Other
Agreements. Comply with all terms and conditions contained in this Agreement,
and any other Loan Documents, and swap agreements, if applicable, as defined in
11 U.S.C. § 101, as in effect from time to time. Estoppel Certificate. Furnish,
within 15 days after request by Bank, a written statement duly acknowledged of
the amount due under the Loan and identifying each outstanding Letter of
Credit, if any, and whether offsets or defenses exist against the Obligations.
Insurance. Maintain adequate insurance coverage with respect to its properties
and business against loss or damage of the kinds and in the amounts customarily
insured against by companies of established reputation engaged in the same or
similar businesses including, without limitation, commercial general liability
insurance, workers compensation insurance, and business interruption insurance;
all acquired in such amounts and from such companies as Bank may reasonably
require. Maintain Properties. Maintain, preserve and keep its property in good
repair, working order and condition (normal wear and tear excepted), making all
replacements, additions and improvements thereto necessary for the proper
conduct of its business, unless prohibited by the Loan Documents, Notice of
Default and Other Notices. (a) Notice of Default. Furnish to Bank
immediately upon becoming aware of the existence of any condition or event
which constitutes a Default (as defined in the Loan Documents) or any event
which, upon the giving of notice or lapse of time or both, may become a
Default, written notice specifying the nature and period of existence thereof
and the action which Borrower is taking or proposes to take with respect
thereto. (b) Other Notices. Promptly notify Bank in writing of (i) any
material adverse change in its financial condition or its business; (ii) any
default under any material agreement, contract or other instrument to which it
is a party or by which any of its properties are bound, or any acceleration of
the maturity of any indebtedness owing by Borrower; (iii) any material
adverse claim against or affecting Borrower or any part of its properties; (iv) the
commencement of, and any material determination in, any litigation with any
third party or any proceeding before any governmental agency or unit affecting
Borrower; and (v) at least 30 days prior thereto, any change in Borrower’s
name or address as shown above, and/or any change in Borrower’s structure.
Other Financial Information. Deliver promptly such other information regarding
the operation, business affairs, and financial condition of Borrower which Bank
may reasonably request. Payment of Debts. Pay and discharge when due, and
before subject to penalty or further charge, and otherwise satisfy before
maturity or delinquency, all obligations, debts, taxes, and liabilities of
whatever nature or amount, except those which Borrower in good faith disputes.
Reports and Proxies. Deliver to Bane promptly, a copy of all financial
statements, reports, notices, and proxy statements, sent by Borrower to
stockholders, and all regular or periodic reports required to be filed by
Borrower with any governmental agency or authority. All such regular and
periodic reports which remain unfiled on the date hereof shall be filed on or
before September 30, 2008 in a manner and Iona acceptable to the
applicable governmental agency or authority.

 

NEGATIVE COVENANTS, Borrower
agrees that from the date hereof and until final payment in full of the
Obligations, unless Bank shall otherwise consent in writing, Borrower will not
Change in Fiscal Year. Change its fiscal year. Encumbrances. Create, assume, or
permit to exist any mortgage, security deed, deed of trust, pledge, lien,
charge or other encumbrance on any of its assets, whether now owned or
hereafter acquired, other than: (i) security interests required by the
Loan Documents; (ii) liens for taxes contested in good faith; or (iii) Permitted
Liens. Investments. Purchase any stock, securities, or evidence of indebtedness
of any other person or 

 

 

entity except investments in
direct obligations of the United States Government and certificates of deposit
of United States commercial banks having a tier 1 capital ratio of not less
than 6% and then in an amount not exceeding 10% of the issuing bank’s
unimpaired capital and surplus. Default on Other Contracts or Obligations.
Default on any material contract with or obligation when due to a third party
or default In the performance of any material obligation to a third party
incurred for money borrowed. Government Intervention.  Permit the assertion or making of any
seizure, vesting or intervention by or under authority of any governmental
entity, as a result of which the management of Borrower or any guarantor is
displaced of its authority in the conduct of its respective business or such
business is curtailed or materially impaired. Judgment Entered. Permit the
entry of any material monetary judgment or the assessment against, the filing
of any tax lien against, or the issuance of any writ of garnishment or
attachment against any material property of or debts due. Prepayment of Other
Debt. Retire any long-term debt entered into prior to the date of this
Agreement at a date in advance of its legal obligation to do so. Retire or
Repurchase Capital Stock, Retire or otherwise acquire any of its capital stock.

 

ANNUAL FINANCIAL STATEMENTS.
Borrower shall deliver to Bank for fiscal year ended December 31, 2007,
unqualified, audited financial statements no later than August 31, 2008
reflecting its operations during such fiscal year, including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flows, with supporting schedules; all on a consolidated and consolidating basis
with respect to Borrower and its subsidiaries, affiliates and parent or holding
company, as applicable, and in reasonable detail, prepared in conformity with
generally accepted accounting principles, applied on a basis consistent with
that of the preceding year. All such statements shall be examined by the
independent certified public accountant firm of Grant Thornton. The opinion of
such independent certified public accountant shall not be acceptable to Bank if
qualified due to any limitations in scope imposed by Borrower or any other
person or entity. Any other qualification of the opinion by the accountant
shall render the acceptability of the financial statements subject to Bank’s
approval.

 

PERIODIC FINANCIAL
STATEMENTS. Commencing with the second quarter of 2008, the Borrower shall
deliver to Bank, within 60 days after the end of each fiscal quarter, unaudited
management-prepared quarterly financial statements including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flows, with supporting schedules; all on a consolidated and consolidating basis
with respect to Borrower and its subsidiaries, affiliates and parent or holding
company, as applicable, all in reasonable detail and prepared in conformity
with generally accepted accounting principles, applied on a basis consistent
with that of the preceding year, provided however, the financial statements for
the first quarter of 2008 shall be due on or before August 31, 2008. Such
statements shall be certified as to their correctness by a principal financial
officer of Borrower and in each case, if audited statements are required,
subject to audit and year-end adjustments.

 

CASH FLOW PROJECTIONS.
Borrower shall deliver to Bank updated cash flow projections in a form
acceptable to Bank as soon as available, but in any event no later than August 31,
2008.

 

FINANCIAL COVENANTS.
Borrower agrees to the following provisions from the date hereof until final
payment in full of the Obligations, unless Bank shall otherwise consent in
writing, using the financial information for Borrower, its subsidiaries,
affiliates and its holding or parent 

 

 

company, as applicable:
Deposit Relationship. Borrower shall maintain a non-interest bearing demand
deposit and all of its other depository and treasury services with Bank.

 

CONDITIONS PRECEDENT. The
obligations of Bank to make the loan and any advances and to issue any Letters
of Credit pursuant to this Agreement are subject to the following conditions
precedent Letter of Credit Documents. Receipt by Bank of all documents required
by Bank in connection with Letters of Credit, including without limitation,
applications therefor, all in form satisfactory to Bank. Additional Documents.
Receipt by Bank of such additional supporting documents as Bank or its counsel
may reasonably request.

 

ASSIGNMENT OF CLAIMS UNDER
CONTRACTS WITH THE UNITED STATES GOVERNMENT AND ITS AGENCIES. The Borrower
hereby agrees that, upon request of the Bank, it will assign its claims under
contracts with the United States government and any of its departments,
agencies, divisions, and other instrumentalities. The Borrower agrees to take
any and all actions required to assign any claims it has under such contracts,
including, but not limited to, any actions necessary to comply with the
Assignment of Claims Act of 1940, (31 U.S.C. 3727, 41 U.S.C. 15) and the rules and
regulations promulgated thereunder.

 

IN WITNESS WHEREOF, Borrower
and Bank, on the day and year first written above, have caused this Agreement
to be duly executed under seat.

 

	
   

  	
   

  	
  Force
  Protection, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
        /s/
  Michael Moody

  	
  (SEAL)

  
	
   

  	
   

  	
  Michael Moody, its Chief
  Executive Officer

  

 

	
   

  	
   

  	
  Force Protection
  Technologies, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
        /s/
  Michael Moody

  	
  (SEAL)

  
	
   

  	
   

  	
  Michael Moody, its Chief
  Executive Officer

  

 

	
   

  	
   

  	
  Force Protection
  Industries, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
        /s/
  Michael Moody

  	
  (SEAL)

  
	
   

  	
   

  	
  Michael Moody, its Chief
  Executive Officer

  

 

	
   

  	
   

  	
  Wachovia Bank, National
  Association

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
           /s/
  Guy M. Meares, III

  	
  (SEAL)

  
	
   

  	
   

  	
  Guy M. Meares, III,
  Senior Vice President

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