Document:

EX-10.15

 Exhibit 10.15 

Page 
 1
 of 15 
 EXECUTIVE EMPLOYMENT 

THIS AGREEMENT (“Agreement”) is made as of [8/23], 2021, by and between, U.S. Lumber Group, LLC, a Delaware limited
liability company (the “Company”), and Chris Gerhard, a resident of Virginia (“Executive”). 
 WHEREAS,
the Company desires to employ Executive in the capacity and on the terms and conditions set forth herein, and Executive desires to be employed by the Company on the terms and conditions set forth herein; 

NOW, THEREFORE, in consideration of the promises herein, and other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and Executive agree as follows: 
 Section 1. Effective Date. The Agreement will take effect
upon the execution of the Agreement (the “Effective Date”). 
 Section 1.01. Employment. Under and subject to
the terms and conditions set forth herein, the Company hereby employs Executive as the Executive Vice President of the Company, and Executive hereby accepts such employment. 

Section 2. Term. The term of employment under this Agreement shall begin on the Effective Date, and, unless sooner
terminated as provided in Sections 6 and 7, shall remain in effect until the fifth (5th) anniversary of the Effective Date (the “Term”). The term of employment shall
be extended for additional consecutive one (1) year terms (“Renewal Terms”) unless either party shall give to the other party written notice not less than ninety (90) days prior to the end of the Term or any Renewal Term
that such party does not wish to extend the term of employment. 
 Section 3. Duties. Executive shall serve as the
Executive Vice President of the Company and in such capacity shall report to the President and Chief Executive Officer of the Company. Executive shall perform such duties as are customary for Executive’s position with companies which are
similar in size, nature and complexity to the Company and shall also perform such additional duties as the President and CEO may assign to him from time to time. Executive shall: 

(a) conduct himself at all times with integrity and in an ethical manner; 

(b) devote substantially all of his working time to the duties of his employment hereunder, and Executive shall apply his full effort, energy
and skill to performance of his duties hereunder; 
 (c) perform his duties hereunder faithfully, loyally, and industriously, subject to the
supervision of the Board; and 
 (d) follow and implement diligently all lawful management policies and decisions of the Board and the
Company that are communicated to him. 

			
	Page 
 2
 of 15	  	

  

 Section 3.02. This Section 3 shall not be construed to prohibit Executive
from: (1) participating in and on corporate, civil or charitable organizations, including boards or committees; (2) delivering lectures or fulfilling speaking engagements; and (3) managing personal investments so long as they do not
materially interfere with his duties to the Company and are not in connection with a Competing Business, as defined in Section 9.02(b) below. 

Section 3.03. Transfer, Demotion, or Material Change in Duties. Executive shall be assigned to and shall perform such duties at
the Company’s headquarters in Duluth, Georgia. Executive and the Company agree and acknowledge that, if Executive’s primary job location is transferred more than 50 miles away from the Company’s current headquarters in Duluth,
Georgia, he is demoted, or if his duties or authority materially change from those set forth in Section 3 above, such transfer, demotion, or material change in duties shall constitute Good Reason, as defined in Section 6.06
below. 
 Section 4. Compensation. In consideration of the services rendered by Executive under this Agreement, the
Company shall pay Executive a base salary of three hundred and fifty thousand dollars ($350,000) per fiscal year (the “Base Salary”). The Base Salary shall be paid in such installments and at such times as the Company pays its other
salaried employees. The Company also shall pay Executive a one-time, signing bonus of five hundred and twenty-eight thousand dollars ($528,000) at the end of the first full month of Executive’s
employment. Executive will also be eligible to participate in the Company’s annual bonus plan that is made available to senior executives of the Company, with an annual target bonus of fifty percent (50%) of Base Salary subject to performance
conditions as may be established by the Board (the “Bonus”). The Base Salary and Bonus will be subject to annual adjustment based on the recommendations of the Board and the approval of such adjustment by the Board. Adjustment of
the Base Salary and Bonus may be adjusted upward, but not downward, and shall be based upon the performance by Executive of his duties hereunder and the financial performance of the Company. The Company shall deduct or cause to be deducted all taxes
and amounts required by law to be withheld from Executive’s compensation and benefits set forth in this Section 4 and in Section 5. To the extent earned, the Bonus will be paid in a cash lump sum by March 15th of the year following the year to which it relates. 
 Section 4.01.
Expenses. The Company shall reimburse Executive for reasonable business expenses incurred by Executive in the performance of his duties under this Agreement, provided Executive incurs and accounts for such expenses in accordance with all the
Company policies and directives as in effect from time to time. Additionally, the Company will reimburse the Executive’s reasonable moving expenses incurred during the move of his residence from Winchester, Virginia to the Atlanta, Georgia
area. 
 Section 5. Benefits and Insurance. Executive shall have the right to participate in the Company’s
retirement and welfare benefit plans on the same basis as other senior executives of the Company and pursuant to the terms of such plans. The Company shall not be required to adopt, amend or continue any insurance plans or fringe benefit plans, and
the Company retains the right to amend or terminate any such plans. 
 Section 5.01. Paid Vacation. Executive shall be entitled
to four (4) weeks of paid vacation per calendar year, plus such additional days paid sick leave in accordance with the Company’s 

			
	Page 
 3
 of 15	  	

  

 sick leave policy. Executive shall take vacation at such times and intervals as shall be appropriate and
consistent with the proper performance of Executive’s duties hereunder. In all other respects, Executive shall be subject to the Company’s vacation and sick leave policies that are in effect during Executive’s employment. 

Section 5.02. Life Insurance. The Company may obtain, in the name and for the benefit of the Company, such life, disability and
other insurance policies on Executive as the Board may from time to time determine to be in the interest of the Company. Executive shall take such medical and physical examinations as are required to obtain such insurance policies, but the Company
shall not utilize information gained as a result of such examinations for any purpose other than for securing key man insurance. The Company also shall provide Executive term life insurance in the amount of two million dollars ($2,000,000) for the
benefit of the Executive’s family. The Company will not be responsible for premium payments upon the Termination Date as defined in Section 7. 

Section 5.03. Car. During the term of this Agreement, the Company shall provide Executive with a car (or a reasonable car
allowance) of similar make and model to the car the Company owns or leases on behalf of the Executive as of the Effective Date for Executive’s use. 

Section 6. Termination. Executive’s employment hereunder may be terminated at the end of the Term
or any Renewal Term as provided in Section 2, or earlier as follows. 
 Section 6.01. Death. Executive’s
employment hereunder shall terminate upon the death of Executive. 
 Section 6.02. Disability. In the event any physical or
mental disability (including without limitation any alcohol or chemical dependency) renders Executive, even with a reasonable accommodation, substantially unable to perform his duties hereunder, and such disability continues for a period of ninety
(90) consecutive days, the Company may terminate Executive’s employment. Any determination of disability shall be made by the Board in consultation with a qualified physician or physicians selected by the Board and Executive. The failure
of Executive to submit to a reasonable examination by such physician or physicians shall act as an estoppel to any objection by Executive to the determination of disability by the Board. In the event that Executive is deemed to be disabled in
accordance with this Section 6.02, the Company shall provide Executive with thirty (30) days’ notice of termination due to disability. 

Section 6.03. By the Company for Cause. The Company may terminate Executive’s employment for Cause (as defined below) at any
time effective upon written notice to Executive. For purposes hereof, the term “Cause” shall mean that the Board has determined that Executive has (a) engaged in conduct amounting to fraud or dishonesty against the Company,
(b) knowingly refused to follow the reasonable directions of the Board, (c) engaged in unethical conduct, (d) knowingly violated the law in the course of performance of the duties of his employment with the Company,
(e) repeatedly been absent from work without a reasonable excuse, (f) been intoxicated with alcohol while on the Company’s premises during regular business hours, (g) used illegal drugs, (h) been convicted of or pled guilty
or nolo contendere to a felony or a crime involving moral turpitude, (i) gross failure of, or willfully neglecting to perform, a duty in performance of his duties as set forth in this Agreement, or (j) committed a material breach or
violation of the 

			
	Page 
 4
 of 15	  	

  

 terms of this Agreement or any other agreement to which Executive and the Company are parties and which
breach constitutes grounds for termination for Cause under this Section 6.03. The Company and Executive agree, however, that, in the case of items (b), (e), (i), and (j) above, the Company may not terminate Executive’s
employment for Cause unless Executive has failed to remedy such failures within thirty (30) days following written notice by the Company to Executive specifically identifying the failures the Company claims of the Executive and the actions
Executive reasonably needs to take to remedy such failures. In the event that the Company determines that the Executive has failed to remedy such failures after the required notice is provided and moves forward with termination under this section,
the Company shall provide Executive at the time of termination a written statement of the ground(s) for the termination, including a full description of all facts and circumstances relied upon for the termination. With respect to items (a), (c),
(d), (f), (g), and (h), the Company shall provide Executive at the time of termination a written statement of the ground(s) for the termination, including a full description of all facts and circumstances relied upon for the termination.
Notwithstanding any provision of this Section 6.03 to the contrary, any resignation by Executive following the occurrence of facts or circumstances that would constitute Cause shall not preclude the Company from treating Executive’s
termination as a termination for Cause. 
 Section 6.04. By the Company without Cause. The Company may terminate
Executive’s employment at any time without Cause effective upon written notice to Executive sixty (60) days prior to the date of termination. 

Section 6.05. By Executive without Good Reason. Executive may terminate this Agreement for any reason upon written notice to the
Company. However, due to the nature of Executive’s position with the Company, Executive must provide the Company one hundred twenty (120) days’ notice of his intent to terminate this Agreement. 

Section 6.06. By Executive with Good Reason. Subject to the cure provisions provided in section 6.06(d), Executive may terminate
his employment under this Agreement for Good Reason (as defined below). For purposes of this Agreement, “Good Reason” will be treated as an involuntary separation from service if Sections 6.06(a)-(d) are satisfied: 

 

	 	(a)	 Executive gives the Company thirty (30) days written notice of termination (“Notice of Good
Reason”); and 

  

	 	(b)	 One or more of the following conditions occur without the consent of Executive: 

 

	 	(i)	 A material diminution in the Executive’s base compensation; 

 

	 	(ii)	 A material diminution in the Executive’s authority, duties, or responsibilities; 

 

	 	(iii)	 [A material diminution in the budget over which the Executive retains authority ]; 

			
	Page 
 5
 of 15	  	

  

	 	(iv)	 A material change in the geographic location at which the Executive must perform the services that increases
the Executive’s home-to-work commuting distance by more than 50 miles; or 

 

	 	(v)	 Any other action or inaction that constitutes a material breach by the Executive of this Agreement.

  

	 	(c)	 Executive provides Notice of Good Reason within sixty (60) days of initial existence of one or more of the
conditions in Section 6.06(b); and 

  

	 	(d)	 Company does not remedy the condition within thirty (30) days. 

Section 6.07. Executive hereby acknowledges and agrees that as of the Effective Date he does not have “Good Reason” under any
prior employment agreement or under this Agreement, and that any “Good Reason” arising under this Agreement may occur only with respect to actions or circumstances occurring after the Effective Date. 

Section 7. Effect of Termination. The following provisions shall apply in the event that Executive’s employment under
this Agreement is terminated. For purposes of this Agreement, the date of termination of employment shall be referred to as the “Termination Date.” 

Section 7.01. By Executive Without Good Reason or by the Company for Cause. In the event of the termination of this Agreement by
Executive without Good Reason or by the Company for Cause, the Company shall, within thirty (30) days of Executive’s separation from service, as defined by Code Section 409A, pay Executive any current Base Salary that has been earned
and accrued and any Performance Bonus that has been earned through the Termination Date according to the board-approved bonus plan. The Company shall provide Executive with health insurance through the Termination Date. 

Section 7.02. Death or Disability. In the event of the termination of this Agreement as a result of the death or disability of
Executive, the Company shall, within thirty (30) days of Executive’s the death or disability as defined by Code Section 409A, pay Executive any current Base Salary that has been earned and accrued and any Performance Bonus that has
been earned through the Termination Date according to the board-approved bonus plan. The Company shall provide Executive with health insurance through the Termination Date. 

Section 7.03. By Executive for Good Reason or by the Company Without Cause. In the event of the termination of this Agreement by
Executive for Good Reason or by the Company without Cause, the Company shall pay Executive (i) his then current Base Salary that has been earned and accrued and any Performance Bonus that has been earned through the Termination Date
according to the board-approved bonus plan, and (ii) his then current Base Salary for eighteen (18) months following the Termination Date (the component in Clause (ii) is referred to as the “Termination
Pay”), provided that the Executive timely executes and does not revoke a waiver and release agreement in a form to be provided by the Company. Executive acknowledges and agrees that he must deliver such executed release to the Company
within twenty-one (21) days (or, if greater, the minimum period required by applicable law) after receiving a copy of the release, failing which Executive will forfeit all rights to any portion of the
aforementioned Termination Pay. 

			
	Page 
 6
 of 15	  	

  

 (a) Form of Payment. The Termination Pay under Section 7.03 must be paid
in eighteen (18) monthly installments beginning with the month that follows Executive’s separation from service as defined in Code Section 409A. Termination Pay may not be paid in a one-time
lump sum payment. 
 (b) Health Insurance. In addition to the Termination Pay, the Company shall continue to provide Executive with
health insurance and life insurance as provided in Section 5 above for eighteen (18) months following the Termination Date. Section 7.03(b) does not entitle executive to life insurance provided in Section 5.02.

 Section 7.04. No Other Benefits. Except as specifically provided in this Section 7, Executive shall not be
entitled to any salary, bonus, allowance, severance payment, or other compensation or benefits from the Company upon the termination of his employment under this Agreement regardless of the reason for the termination. 

Section 8. The Company’s Proprietary Information. This Section 8 imposes certain obligations
upon Executive with regard to Inventions in the Field (as defined below) and Company Proprietary Information (as defined below), but this Section does not limit in any way Executive’s obligations or duties arising elsewhere in this Agreement or
under the law with regard to such Inventions in the Field and Company Proprietary Information. 
 Section 8.01. Company Proprietary
Information. For purposes of this Agreement, “Company Proprietary Information” means technical, business, customer, sales, and other information of the Company, whether or not recorded in writing, electronic media, or otherwise,
which derives value from not being generally known to the public or to other persons or entities who can obtain value from its disclosure or use, and includes, without limitation, technical and non-technical
data, compositions, devices, methods, techniques, drawings, inventions, processes, financial data, financial plans, designs, product plans, lists or information concerning actual or potential customers or suppliers, information regarding business
plans and operations, methods and plans of operation, marketing strategies, sales and distribution plans or strategies, cost information, pricing strategies, acquisition and investment plans, and other strategic and tactical plans prepared by the
Company or its employees. Company Proprietary Information includes information which is produced or held by the Company’s affiliates and subsidiaries and which is generated by third parties for the Company and that the Company treats, or is
obligated to maintain, as confidential. Company Proprietary Information shall not include: (a) any record, data, or information which is in the public domain provided the same is not in the public domain as a consequence of unlawful or
unauthorized disclosure by Executive in violation of this Agreement; or (b) record, data or information that has been independently developed through lawful means. 

Section 8.02. Fiduciary Obligations. Executive agrees that Company Proprietary Information and Inventions in the Field are of
critical importance to the Company and agrees that he holds and shall hold all Company Proprietary Information and all Inventions in the Field and information related thereto in a fiduciary capacity for the sole benefit of the Company. 

			
	Page 
 7
 of 15	  	

  

 Section 8.03. Non-Use and Non-Disclosure. Executive shall protect the confidentiality of all Company Proprietary Information at all times, both during and after the Term and any Renewal Terms, for so long as the information or material
remains confidential or a trade secret. Executive shall not during the Term, any Renewal Term, or at any time thereafter, (i) disclose, directly or indirectly, any Company Proprietary Information to any entity or person except (a) authorized
employees of the Company who at the time of such disclosure, in the reasonable judgment of Executive, need to know such Company Proprietary Information for valid business purposes of the Company, (b) such other persons to whom Executive has been
specifically instructed to make disclosure by the Board, (c) to the extent required in the course of Executive’s service to the Company, or (d) as required by law, or (ii) use any Company Proprietary Information, directly or indirectly, for his
own benefit or for the benefit of any person or entity other than the Company. At the termination of his employment, Executive shall deliver to the Company all notes, letters, documents and records (whether contained in written, electronic or any
other media) which may contain Company Proprietary Information which are then in his possession or control. Notwithstanding anything to the contrary in this Agreement or otherwise, as provided for in the Defend Trade Secrets Act of 2016 (18 U.S.C.
§ 1833(b)), Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (a) is made (i) in confidence to a federal, state, or local government official, either
directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made
under seal. Without limiting the foregoing, if Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the trade secret to his or her attorney and use the trade secret information
in the court proceeding, if Executive (a) files any document containing the trade secret under seal, and (b) does not disclose the trade secret, except pursuant to court order. 

Section 8.04. Assignment of Inventions and Copyrights. 

(a) For the purposes of this Agreement, “Inventions in the Field” shall mean any newly created document, recording or
material, discovery, process, design, development, improvement, application, technique, or invention, whether patentable or copyrightable or not, but specifically including anything that is patentable or copyrightable, and whether reduced to
practice or not, conceived or made by Executive individually or jointly with others (whether on or off the Company’s premises or during or after normal working hours) while in the employ of the Company, and which was or is directly or
indirectly related to the business of the Company or its affiliates and subsidiaries, or which resulted or results from any work performed by any employee or agent thereof during the Term or for one (1) year after termination of Executive’s
employment under this Agreement for any reason. 
 (b) Executive agrees at all times promptly to disclose all Inventions in the Field to the
Company, in such form and manner as the Company may reasonably require. Executive further agrees to grant, assign and transfer to the Company or its designee, without any separate remuneration or compensation, his entire right, title and interest in
and to all Inventions in the Field, together with all United States and foreign rights with respect thereto, and at the Company’s expense to execute and deliver all appropriate patent and copyright applications for securing United States and
foreign patents and copyrights on Inventions in the Field and to perform all lawful acts, including giving testimony, and to execute and deliver all such instruments that may 

			
	Page 
 8
 of 15	  	

  

 be necessary or proper to vest all such Inventions in the Field and patents and copyrights with respect
thereto in the Company, and at the Company’s expense, to assist the Company in the prosecution or defense of any interference which may be declared involving any of said patent applications, patents, copyright applications or copyrights. 

(c) Executive acknowledges that Executive’s work on and contributions to documents and other expressions in tangible media (collectively,
“Works”) are within the scope of Executive’s employment and part of Executive’s duties and responsibilities for the Company and its affiliates and subsidiaries, and are, and at all times shall be regarded as, “work
made for hire” as that term is used in the United States Copyright Laws. 
 (d) In the event Executive fails to comply with
Section 8.04(b) above, Executive hereby irrevocably appoints each person who may from time to time serve as CEO, President, Treasurer or Secretary of the Company as his
attorney-in-fact with specific authority to execute, acknowledge, swear to, file and deliver any and all such instruments that may be necessary or proper to vest all
such Inventions in the Field and patents and copyrights in the Company, including without limitation any assignments of his interests in such patents or copyrights. The foregoing powers shall be irrevocable and shall be deemed powers coupled with an
interest in recognition of the fact that each of the parties will be relying upon the power and authority of the Company’s officers to take all actions necessary or appropriate to preserve and to carry out the other provisions of this
Agreement. 
 Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are
expressly allowed by 18 U.S.C. § 1833(b). Accordingly, the parties to this Agreement have the right to disclose in confidence trade secrets to federal, state, and local government officials, or to an attorney, for the sole purpose of reporting
or investigating a suspected violation of law. The parties also have the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure. 

Section 9. Restrictions on Activities of Executive. 

Section 9.01. Acknowledgments. Executive and the Company agree that Executive is being employed hereunder in an important capacity
with the Company and that the Company is engaged in a highly competitive business. Executive and the Company further agree that it is appropriate to place reasonable limits as set forth herein on his ability to compete with the Company to protect
and preserve the legitimate business interests and goodwill of the Company. 
 Section 9.02. Restrictive Covenants. 

 

	 	(a)	 Definitions. 

  

	 	i.	 For purposes of this Agreement only, Restricted Period means a period from the Effective Date until
twenty-four (24) consecutive months after the Executive’s Termination Date. 

  

	 	ii.	 For purposes of this Agreement only, Company Entity means Specialty Building Products, LLC and its
subsidiaries. 

			
	Page 
 9
 of 15	  	

  

	 	iii.	 For purposes of this Agreement only, “Competing Business” means any business that is in
competition with (A) the present products marketed or sold by any Company Entity to its customers and as such products may be improved and/or modified, (B) the present services marketed, sold or provided by any Company Entity to its
customers and as such services may be improved and/or modified or (C) the products and/or services any Company Entity develops, designs, manufactures, markets, produces or supplies in the future to its customers. 

 

	 	iv.	 For purposes of this Agreement only, “Territory” means North America and every other territory
or country where any Company Entity maintains employees, owns property or otherwise conducts business during the Restricted Period. 

(b) Non-Competition; Non-Solicitation of Business
Relations. Executive hereby covenants and agrees that, during Restricted Period, Executive may not, directly or indirectly, whether as principal, agent, owner, employee, equityholder, partner, creditor, member, manager, independent contractor,
consultant or in any other capacity, (i) carry on or engage in any Competing Business in the Territory, (ii) solicit or induce or attempt to solicit or induce any customer, supplier, vendor, licensor, licensee, lessor, lessee or other
business relation of any Company Entity (each a “Business Relation”) to cease or refrain from doing business with, or otherwise modify adversely the business done with, any Company Entity or (iii) in any way knowingly interfere
with the relationship (or prospective relationship) between any Business Relation and any Company Entity. Section 9.02(b) does not prohibit Executive from consulting with, or working on behalf of, any Business Relation or any building
products company that does not meet the definition of a Business as long as Executive complies with the obligations imposed in Section 9.02(d). 

(c) Non-Solicitation of Company Employees; No Hire. Executive hereby covenants and
agrees that, during the Restricted Period, Executive may not, directly or indirectly, (i) recruit, solicit, contact or approach for employment, hiring or engagement (whether as an employee, consultant, agent, independent contractor or
otherwise), or encourage to leave his or her employment, consulting or independent contractor relationship with any Company Entity, or (ii) employ, hire or engage as an employee, consultant, agent, independent contractor or otherwise, any
person who is employed or otherwise engaged by any Company Entity as of immediately prior to the Effective Date (each such Person, a “Company Employee”); provided, that, (A) with respect to clause (i) in this
Section 9.02(c), generalized advertisements of employment not focused specifically on or directed in any way at any Company Employee shall not be deemed to constitute a breach, and (B) clause (ii) of this
Section 9.02(c), shall not preclude the Executive from soliciting, hiring or engaging any employee or independent contractor from and after the nine (9) month anniversary of the termination by any Company Entity of such employee or
independent contractor. 
 (d) Confidentiality. Executive hereby covenants and agrees that Executive must keep confidential and not,
directly or indirectly, divulge to any unauthorized person or use or otherwise appropriate for their own benefit, any confidential or proprietary information or documents of or relating to any Company Entity, including, without limitation, the
following: all Intellectual Property Rights of any Company Entity; confidential records, computer software programs or any portions or logic comprising said programs; terms of Contracts; pricing information, customer or supplier lists, marketing
information or sales techniques; and planning and financial information of any Company Entity (hereinafter referred to as the “Confidential Information”). In the event 

			
	Page 
 10
 of 15	  	

  

 that the Executive is requested or required (by oral question or request for information or documents in any
Action) to disclose any Confidential Information, Executive shall notify the Company promptly of the request or requirement so the Company, as applicable, may seek an appropriate protective order or waive compliance with the provisions of this
Section 9.02(d). If, in the absence of a protective order or the receipt of a waiver hereunder, Executive believes in good faith that Executive is compelled by Law to disclose any such Confidential Information, the Executive may disclose
such Confidential Information to the extent required by Law; provided, however, that Executive shall use Executive’s commercially reasonable efforts to obtain an order or other assurance that confidential treatment will be accorded to such
portion of such Confidential Information required to be disclosed as the Company shall reasonably request. Executive hereby acknowledges and agrees that the prohibitions against disclosure of Confidential Information recited herein are in addition
to, and not in lieu of, any rights or remedies that Executive or the Company may have available pursuant to the Laws of any jurisdiction or at common law to prevent the disclosure of trade secrets or proprietary information, and the enforcement by
Company of its rights and remedies pursuant to this Agreement shall not be construed as a waiver of any other rights or available remedies that it may possess in law or equity absent this Agreement. 

(e) Permitted Disclosures. Notwithstanding the foregoing, Executive may be permitted to disclose Confidential Information to any
Company Entity and representatives to the extent reasonably necessary in order for Executive to perform his obligations and exercise the his rights and remedies under this Agreement, provided that (i) Executive advises any such recipient of the
obligations set forth in Section 9.02(d) and takes such other reasonable actions as shall be necessary or desirable in order to ensure that any such recipient complies with such obligations and (ii) Executive remains responsible to
the Company for any breach by any such recipient of the obligations set forth in Section 9.02(d). 
 Section 9.03.
Blue-Pencil. If any provision or part of this Section 9 is unenforceable because of its duration or its geographic coverage, or because it is too expansive in any other respect, the parties hereto agree to modify this
Section 9, and that the court making such determination shall have the power to interpret and modify this Section 9, to reduce the duration, the geographic coverage, or such other provision and to delete specific words or
phrases herefrom (“blue-penciling”), so that this Section 9 shall extend over the longest time, the largest geographic area and in any other respect as contemplated by this Agreement, as is enforceable under applicable
law and, in its reduced or blue-penciled form, such provision shall then be enforceable and shall be enforced. The parties intend the above restrictions to be completely severable and independent, and any invalidity or unenforceability of any one or
more of such restrictions shall not render invalid or unenforceable any one or more of the other restrictions. 
 Section 9.04.
EXECUTIVE REPRESENTS AND WARRANTS THAT THE KNOWLEDGE, SKILLS AND ABILITIES HE POSSESSES AT THE TIME OF COMMENCEMENT OF HIS EMPLOYMENT HEREUNDER ARE SUFFICIENT TO PERMIT HIM, IN THE EVENT OF TERMINATION OF HIS EMPLOYMENT HEREUNDER, TO EARN A
LIVELIHOOD SATISFACTORY TO HIMSELF WITHOUT VIOLATING ANY PROVISION OF SECTION 8 OR 9 HEREOF, FOR EXAMPLE, BY USING SUCH KNOWLEDGE, SKILLS AND ABILITIES, OR SOME OF THEM, IN THE SERVICE OF A NON-COMPETITOR. 

			
	Page 
 11
 of 15	  	

  

 Section 10. Section 409A Compliance. 

(a) The intent of the parties is that payments and benefits under this Agreement comply with Internal Revenue Code Section 409A and the
regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted and performed to be in compliance with Code
Section 409A, including but not limited to exemptions for short-term deferrals, separation pay arrangements, reimbursements, and in-kind distributions, and this Agreement must be administered, interpreted
and construed in a manner that does not result in the imposition of additional taxes, penalties or interest under Code Section 409A. The Company and Employee agree to negotiate in good faith to make amendments to the Agreement, as the parties
mutually agree are necessary or desirable to avoid the imposition of taxes, penalties or interest under Code Section 409A. Neither the Company nor Employee will have the right to accelerate or defer the delivery of any such payments or benefits
except to the extent specifically permitted or required by Code Section 409A. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the
maximum extent reasonably possible, maintain the original intent and economic benefit to Executive and the Company of the applicable provision without violating the provisions of Code Section 409A. In no event whatsoever shall the Company be
liable for any additional tax, interest or penalty that may be imposed on Executive by or damages for failing to comply with the Code. 

(b) For purposes of Code Section 409A, Executive is a “service provider” as defined in Code Section 409A. 

(c) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment
of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement,
references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” Notwithstanding anything to the contrary in this Agreement, if Executive is deemed on the date of
termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered deferred compensation under Code
Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of
such “separation from service” of Executive, and (B) the date of Executive’s death, to the extent required under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed
pursuant to this Section 10(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Executive in a lump sum, and any remaining payments and
benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. 
 (d) To
the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (A) all expenses or other
reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive, (B) any right to reimbursement or
in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) no such reimbursement, expenses eligible for reimbursement, or in-kind
benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year. 

			
	Page 
 12
 of 15	  	

  

 (e) For purposes of Code Section 409A, Executive’s right to receive any installment
payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment
within the specified period shall be within the sole discretion of the Company. 
 (f) Notwithstanding any other provision of this Agreement
to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code
Section 409A. 
 Section 11. Remedies. It is specifically understood and agreed that any breach of the
provisions of Section 8 or 9 of this Agreement is likely to result in irreparable injury to the Company and that the remedy at law alone will be an inadequate remedy for such breach, and that in addition to any other remedy it may
have, the Company shall be entitled to enforce the specific performance of this Agreement by Executive and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without the necessity of posting a bond or proving
actual damages. 
 Section 12. Severable Provisions. The provisions of this Agreement are severable and the
invalidity of any one or more provisions shall not affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of this Agreement or the application thereof is unenforceable in
whole or in part because of the duration or scope thereof, the parties hereto agree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable,
and that the Agreement in its reduced form shall be valid and enforceable to the full extent permitted by law. 

Section 13. Notices. All notices hereunder shall be in writing and shall be deemed to have been duly given on
the date of personal delivery; or on the date of electronic confirmation of receipt, if sent by facsimile transmission or electronic mail; or three (3) days after deposit in the United States mail, if mailed by certified or registered mail,
return receipt requested (postage prepaid); or one (1) day after deposit with a reputable overnight courier for overnight delivery (delivery charges prepaid), as follows: 

 

			
	 If to the Company:
	  	U.S. Lumber Group, LLC
		  	2160 Satellite Blvd. Suite 450
		  	Duluth, GA 30097
		  	Attention: Jeff McLendon
		
	 If to Executive:
	  	 At the address (or to the facsimile number)

shown in the books and records of the Company.

			
	Page 
 13
 of 15	  	

  

 Section 14. Arbitration. Except as stated herein, any controversy or claim
arising out of or relating to the foregoing Agreement or the breach thereof shall be settled by binding arbitration in accordance with the most recent Employment Dispute Resolution Rules of the American Arbitration Association (“AAA”), and
judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The AAA’s Optional Rules for Emergency Measures of Protection shall apply to this Agreement and may be utilized in any proceeding
hereunder. Unless otherwise directed by the Arbitrator pursuant to law, the Company shall pay the fees of the Arbitrator and any arbitration filing fees, except for any legal proceeding that Executive initiates under this provision, in which case
the Executive is responsible for that amount of the filing fee that is equal to the amount Executive would be responsible for paying if pursued in a court of law. 

Section 15. Miscellaneous. 

Section 15.01. Entire Agreement, Modification. This Agreement constitutes the entire agreement between the parties hereto
withregard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement may not be amended, revised or waived, except by a writing signed by the parties. 

Section 15.02. Assignment and Transfer. This Agreement shall not be terminated by the merger or consolidation of the Company with
any corporation or other entity or by the transfer of all or substantially all of the assets of the Company to any other corporation, firm or entity. The provisions of this Agreement shall be binding on and shall inure to the benefit of any
successor in interest to the Company. If the Company transfers all or substantially all of its assets to any other corporation, firm or entity, the Company shall have the right to assign this Agreement to that corporation, firm or entity. Neither
this Agreement nor any of the rights, duties or obligations of Executive shall be assignable by Executive, nor shall any of the payments required or permitted to be made to Executive by this Agreement be encumbered, transferred or in any way
anticipated, except as required by applicable laws or permitted by this Agreement. 
 Section 15.03. Captions. Captions herein
have been inserted solely for convenience of reference and in no way define, limit or describe the scope or substance of any provision of this Agreement. 

Section 15.04. No Conflicting Agreements. Executive represents and warrants to the Company that (a) there are no
restrictions, agreements, or understandings whatsoever to which Executive is a party which would prevent or make unlawful Executive’s execution of this Agreement or Executive’s employment hereunder, (b) the execution of this Agreement
and Executive’s employment hereunder shall not constitute a breach or violation of any law, contract, agreement or understanding, oral or written, to which Executive is a party or by which Executive is bound, (c) Executive is free and able
to execute this Agreement and to enter into employment with the Company, (d) to Executive’s knowledge, he has not violated nor is he in violation of any law, regulation, rule, order, stipulation or the like relevant to the Company’s
business, and (e) this Agreement is Executive’s valid and binding obligation, enforceable in accordance with its terms. The Company represents that this Agreement is its valid and binding obligation, enforceable in accordance with its
terms. 

			
	Page 
 14
 of 15	  	

  

 Section 15.05. Attorneys’ Fees. Except as ordered otherwise by a court,
arbitrator, or other tribunal, in the event that any suit or action is instituted arising out of or relating to this Agreement or the employment relationship between the parties, each party shall be responsible for his or its own fees, costs and
expenses of such suit or action, including without limitation, reasonable fees and expenses of attorneys and accountants, and including without limitation all reasonable fees, costs and expenses of appeals. 

Section 15.06. Governing Law. The execution, interpretation and performance of this Agreement, and any disputes with respect to
the transactions contemplated by this Agreement, shall be governed by the internal laws and judicial decisions of the State of Georgia, without regard to principles of conflicts of laws. 

Section 15.07. Waiver of Breach. Except as provided herein, failure of either party to insist, in one or more instances, on
performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or any
other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver and specifically referencing this Agreement. 

Section 15.08. Remedies Cumulative. All rights and remedies conferred upon the parties hereto by this Agreement or by law, in
equity or otherwise, shall be cumulative of each other. 
 Section 15.09. Independent Advice from Counsel. Each of the parties
has received independent legal advice from legal counsel of his or its choice with respect to the advisability of entering into this Agreement and its terms, or has voluntarily and knowingly declined to seek legal counsel. The terms of this
Agreement are the result of negotiations between the parties, and the provisions of this Agreement shall be interpreted and construed in accordance with their fair meanings, and not for or against either party, regardless of which party may have
drafted this Agreement or any specific provision. 
 Section 15.10. Termination of Existing Employment Agreements. All
employment agreements or offer letters to which Executive is a party, whether oral or written, are hereby terminated and superseded in whole by this Agreement. 

Section 15.11. Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one (1) instrument. 
 (signature page follows) 

			
	Page 
 15
 of 15	  	

  

 IN WITNESS WHEREOF, the parties hereto have duly executed or caused the execution of this
Agreement as a sealed instrument as of the day and year first above written. 
  

			
	COMPANY:
	
	U.S. Lumber Group, LLC
		
	By:	 	 /s/ Jeffery D. McLendon

	Name:	 	Jeffery D. McLendon
	Title:	 	President and CEO
	
	EXECUTIVE:
	
	 /s/ Chris Gerhard

	Chris Gerhardex_321148.htm

 

Exhibit 10.1

 

LOAN AND SECURITY AGREEMENT

 

This LOAN AND SECURITY AGREEMENT (this “Agreement”) is entered into as of December 29, 2021, by and between Nantahala Capital Management, LLC and certain funds and separate accounts managed by it (collectively, “Nantahala”), as lenders, and the other lenders set forth on the signature pages hereto (together with Nantahala, the “Lenders”), and ImageWare Systems, Inc. (“Borrower”).

 

RECITALS

 

This Agreement sets forth the terms on which Lenders will provide to Borrower a secured term loan credit facility in an aggregate amount of up to $2,500,000 and Borrower will repay the amounts owing to Lenders on the terms and conditions contained herein.

 

AGREEMENT

 

The parties agree as follows:

 

1.    DEFINITIONS AND CONSTRUCTION.

 

1.1    Definitions. As used in this Agreement, all capitalized terms shall have the definitions set forth on Exhibit A. Any term used in the Code and not defined herein shall have the meaning given to the term in the Code.

 

1.2    Accounting Terms. Any accounting term not specifically defined on Exhibit A shall be construed in accordance with GAAP and all calculations shall be made in accordance with GAAP. The term “financial statements” shall include the accompanying notes and schedules.

 

2.    LOAN AND TERMS OF PAYMENT.

 

2.1    Initial Loan. Subject to the terms and conditions of this Agreement, each Lender having a Commitment hereby agrees to make an initial term loan to Borrower in a single borrowing on the Closing Date (with respect to such Lender, the “Initial Loan”) in an aggregate principal amount set forth on such Lender’s Signature Page which, together with all Lenders hereto, will be in the aggregate principal amount of $600,000. Each Lender’s Commitment shall be (A) reduced on a dollar-for-dollar basis by the aggregate principal amount of any Initial Loan made by such Lender and (B) terminated in full upon the Maturity Date.

 

2.2    Borrowing Procedures; Initial Loans.

 

(a)    With respect to Initial Loans, in order to request a borrowing of Initial Loans, the Borrower shall deliver to Lender (or designee thereof) a funding notice in form and substance reasonably satisfactory to Lender (the “Initial Funding Notice”), no later than 12:00pm, New York City time, two (2) Business Days (or such shorter time as the Lenders may agree in their sole and absolute discretion) prior to the Closing Date. The Initial Funding Notice shall specify the following information: (i) the date of such borrowing (which shall be a Business Day); (ii) the number and location of the account to which funds are to be disbursed; and (iii) the amount of such borrowing.

 

2.3    Repayment. Amounts borrowed pursuant to this Section 2 may be repaid at any time prior to the Maturity Date subject to any penalty or premium set forth herein, including as provided in Section 2.5. All amounts borrowed under this Section 2, together with all accrued but unpaid interest and fees thereon, shall be paid in full in cash no later than the Maturity Date. Any such amounts that are repaid or prepaid by Borrower prior to the Maturity Date may not be reborrowed.

 

 

 

 

2.4    Interest Rates, Payments, and Calculations.

 

(a)    Interest Rate. From the Closing Date and up to and including the date that is the six-month anniversary of the Closing Date, the outstanding principal balance of the Loan, shall bear interest at a fixed rate per annum equal to twelve percent (12%) (“Initial Interest Rate”); provided that, if the Loans are not fully repaid within six (6) months following the Closing Date (such date, the “Interest Trigger Date”), then the outstanding principal balance of the Loans shall bear interest at a fixed rate per annum equal to seventeen percent (17%) (“Trigger Rate”).

 

(b)    Default Rate. Immediately and automatically upon the occurrence and during the continuance of an Event of Default, all outstanding principal (including any interest capitalized thereon) of the Loans and all other Obligations shall accrue and bear interest at the Default Rate.

 

(c)    Payments. Interest hereunder shall be payable by capitalizing and compounding and adding such accrued and unpaid interest to the then outstanding principal amount of the Loan on each Interest Payment Date, and from and after such time such interest shall be treated as a Loan for all purposes hereunder.

 

(d)    Computation. All interest chargeable under the Loan Documents shall be computed on the basis of a three hundred sixty-five (365) day year for the actual number of days elapsed.

 

2.5    Prepayments.

 

(a)    Voluntary Prepayments. The Borrower may from time to time following the Closing Date voluntarily prepay the Loans, in whole or in part, at a price equal to 105% of the principal amount thereof (including any interest capitalized thereon), upon notice delivered to the Lenders no later than 12:00 p.m., New York City time, three (3) Business Days prior thereto (or such shorter period as is otherwise agreed to by the Required Lenders), which notice shall specify the date and amount of such prepayment. 

 

(b)    Mandatory Prepayments.

 

(i)    Debt Issuances. Upon the receipt by the Borrower (or any designee thereof) of the Net Cash Proceeds of any Debt Issuance consummated on or after the Closing Date, the Borrower shall, substantially concurrently with the realization or receipt by the Borrower of such Net Cash Proceeds (but in any event within three (3) Business Days thereof), prepay the Loans as hereafter provided in an aggregate amount equal to the lesser of (A) the outstanding principal balance of the Loan (including any interest capitalized thereon), and (B) 100% of such Net Cash Proceeds.

 

(ii)     Dispositions. Upon the receipt by the Borrower of the Net Cash Proceeds of any Disposition consummated on or after the Closing Date, the Borrower shall, substantially concurrently with the realization or receipt by the Borrower of such Net Cash Proceeds (but in any event within three (3) Business Days), prepay the Loans in an aggregate amount equal to the lesser of (A) the outstanding principal balance of the Loan (including any interest capitalized thereon), and (B) 100% of the Net Cash Proceeds of such Disposition.

 

(c)    Equity Issuances. Upon any Equity Issuance after the Closing Date, Borrower shall prepay the Loans in an aggregate amount equal to the lesser of (A) the outstanding principal balance of the Loan (including any interest capitalized thereon), and (B) 100% of such Net Cash Proceeds.

 

(d)    Change of Control. Upon Change of Control, Borrower shall prepay the Loans in an aggregate amount equal to the lesser of (A) 105% of the outstanding principal balance of the Loan (including any interest capitalized thereon), and (B) 105% of the Net Cash Proceeds received in connection therewith.

 

 

 

 

2.6    Delayed Draw Loans.

 

(a)    Request for Additional Draws.

 

(i)    Subject to the terms and conditions of this Section 2.6(a), following the Closing Date, the Borrower may, in accordance with Section 2.6(a)(ii), request that the Lenders, or any Eligible Purchaser, as applicable, extend certain term loans, in one or more borrowings (with respect to such Lender, a “Delayed Draw Loan”) in an aggregate principal amount not to exceed $1,900,000 (the “Maximum Draw Amount”).

 

(ii)     In order to request a borrowing of Delayed Draw Loans, the Borrower shall deliver to the Lenders a funding request in form and substance reasonable to Lender (each a “DDL Funding Request”), no later than 12:00pm, New York City time, ten (10) Business Days, prior to the proposed date of such borrowing; provided however, that each request for a borrowing of Delayed Draw Loans shall require prior written Consent of the Lenders. Each DDL Funding Request shall specify the following information: (i) the date of such proposed borrowing (which shall be a Business Day); (ii) the number and location of the account to which funds are to be disbursed; and (iii) the amount of such borrowing. For the avoidance of doubt, each DDL Funding request shall be for an amount that is no less $262,500 and no more than $525,000.

 

(b)    Additional Lenders. If, following the Closing Date, the Borrower delivers a DDL Funding Request to the Lenders in accordance with Section 2.6(a), then the Lenders shall, within ten (10) Business Days, deliver to Borrower a written notice of rejection to such DDL Funding Request (any such notice, a “Rejection Notice”); provided that, if the Lenders do not deliver such Rejection Notice within such ten day period, then the Lenders shall be deemed to have accepted the terms of the applicable DDL Funding Request; provided further, to the extent the Lenders so deliver to the Borrower a Rejection Notice, Borrower shall have the right to seek alternative financing sources reasonably satisfactory to the Required Lenders) (any such Persons, “Eligible Purchasers”) which shall become Lenders pursuant to a joinder agreement in form and substance reasonably satisfactory to the Lenders (each such Eligible Purchaser executing and delivering such joinder agreement and becoming a Lender, an “Additional Lender”); provided that, to the extent that such Additional Lender is Consented to by the Required Lenders, such Consent shall not be unreasonably withheld or delayed.

 

(c)    Conditions to Effectiveness of Delayed Draw Loan. As a condition precedent to Borrower’s right to request each Delayed Draw Loan, each of the conditions precedent set forth in Section 3.1 shall be satisfied and or waived and no Default or Event of Default shall have occurred and be continuing or would otherwise result therefrom.

 

(d)    Interest. The Interest Rates, payments and calculations set forth in Section 2.4 shall apply to each Delayed Draw Loan; provided that the Interest Rate on each Delayed Draw Loan shall accrue on and from the Delayed Draw Loan Effective Date.

 

(e)    Other Delayed Draw Loan Terms. Each Delayed Draw Loan shall rank pari passu in right of payment in respect of Collateral and with the Obligations in respect of the Loans. In addition, Delayed Draw Loans shall have the same terms as the Initial Loans (and may participate in prepayments of the Loans on a pro rata or less than pro rata basis) or such other terms as are reasonably acceptable to the Lenders.

 

2.7    Term. This Agreement shall become effective on the Closing Date and, subject to Section 13.8, shall continue in full force and effect for so long as any Obligations remain outstanding. Notwithstanding the foregoing, Borrower shall have the right to terminate this Agreement at any time (including without limitation, upon the occurrence of a Change of Control) so long as Borrower pays in full all outstanding Obligations as of such date of termination.

 

 

 

 

2.8    CONDITIONS OF LOANS.

 

2.9    Conditions Precedent to Initial Loans. The obligation of any Lender to make any Loan hereunder is subject to the fulfillment (or waiver by Required Lenders) of all of the following conditions:

 

(a)    receipt by Lenders of an executed Funding Request in the form of Exhibit C attached hereto;

 

(b)    resolutions of the Board of Directors (or other governing body) of Borrower and certified by a Responsible Officer of Borrower which authorize the execution, delivery, and performance by Borrower of this Agreement and the other Loan Documents to which Borrower is or is to be a party;

 

(c)    the Organizational Documents for Borrower certified as of a date reasonably acceptable to the Lenders by the appropriate official(s) of the jurisdiction of organization of Borrower;

 

(d)    a favorable opinion of Disclosure Law Group, a Professional Corporation, counsel to the Borrower, in form and substance reasonably satisfactory to the Required Lenders and their legal counsel and covering such matters incident to the transactions contemplated hereby and the other Loan Documents as the Required Lenders may reasonably require, addressed to each Lender.

 

(e)    payment of all reasonable and documented fees, charges and disbursements of Stroock & Stroock & Lavan LLP, primary outside counsel to Lenders to the extent invoiced prior to or on the Closing Date.

 

(f)    the representations and warranties contained in Section 5 shall be true and correct in all material respects on and as of the Closing Date and through and including the Funding Date as though made at and as of each such date, and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such Loan (provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of such date). The making of each Loan shall be deemed to be a representation and warranty by Borrower on the date of such Loan as to the accuracy of the facts referred to in this Section 3.1.

 

2.10    Conditions for All Loans. In addition to the conditions precedent stated elsewhere herein, no Lender shall be obligated to make any Advance unless:

 

(a)    Representations and Warranties. The representations and warranties made in Section 5 of this Agreement are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations or warranties that already are qualified or modified as to “materiality”, “Material Adverse Effect” or words of similar language in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification) at and as of the time the Delayed Draw Loan is to be made, and the request for a Delayed Draw Loan shall constitute the representation and warranty by Borrower that such representations and warranties are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations or warranties that already are qualified or modified as to “materiality”, “Material Adverse Effect” or words of similar language in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification) at such time.

 

 

 

 

(b)    No Default. On the date of, and upon receipt of, the applicable Delayed Draw Loan, no Event of Default, and no event which, with the lapse of time or notice or both, could reasonably be expected to become an Event of Default, shall have occurred and be continuing.

 

(c)    Funding Request. The Lenders have received a Funding Request, as well as such other documents, certificates, or agreements as the Lenders may reasonably request.

 

(d)    Additional Information. Such documents and certifications as the Lenders may reasonably require to evidence Borrower (A) is duly organized or formed, and (B) is validly existing, in good standing and qualified to engage in business in its state of organization or formation and each other jurisdiction where its ownership, lease or operation of properties or the conduct of its business otherwise requires such qualification or license, except, in each such case referred to in this clause (B), to the extent failure to be so qualified in any such jurisdiction could not reasonably be expected to have a Material Adverse Effect.

 

(e)    Perfection. (a) Searches of Uniform Commercial Code filings in the jurisdiction of formation of Borrower or where a filing would need to be made in order to perfect the Lenders security interest in the Collateral, and (b) copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens.

 

Each Funding Request hereunder shall be deemed to be a representation and warranty by Borrower to the Lenders that the conditions specified in this Section 3, as applicable, have been satisfied (or waived) on and as of the applicable borrowing date.

 

2.11    Original Issue Discount. All Loans to be advanced by the Lenders shall be made to the Borrower at an original issue discount of 5.00% of the amount of each Loan, which original issue discount shall not be credited ‎against the interest payable pursuant to Section 2.4 but shall constitute ‎additional interest capitalized to the principal amount of such Loan. Such additional interest represents an annual interest rate for ‎the purposes of applicable Law on the Loans in an amount equal to the original issue discount divided by the ‎number of days from the Closing Date, in the case of the Initial Loan, and from the applicable date of funding, in the case of any Delayed Draw Loan, to the Maturity Date, multiplied by 365 ‎‎(“Original Issue Discount”).

 

3.    CREATION OF SECURITY INTEREST.

 

3.1    Grant of Security Interest. Borrower grants and pledges to Lenders a continuing first priority security interest in the Collateral to secure the prompt repayment of any and all Obligations and to secure the prompt performance by Borrower of each the covenants and duties under this Agreement and the other Loan Documents. Except as set forth in the Schedule of Exceptions, such security interest constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a valid, first priority security interest in later-acquired Collateral. Notwithstanding any termination of this Agreement, Lenders’ Lien on the Collateral shall remain in effect for so long as any Obligations are outstanding.

 

 

 

 

3.2    Perfection of Security Interest. Borrower authorizes Lenders to file at any time financing statements, continuation statements, and amendments thereto that (i) either specifically describe the Collateral or describe the Collateral as all assets of Borrower as described herein, and (ii) contain any other information required by the Code for the sufficiency of filing office acceptance of any financing statement, continuation statement, or amendment, including whether Borrower is an organization, the type of organization and any organizational identification number issued to Borrower, if applicable. Any such financing statements may be filed by Lenders at any time in any jurisdiction. Borrower shall from time to time endorse and deliver to Lenders, at the request of Required Lenders, all other documents that Required Lenders may reasonably request, in form and substance satisfactory to Required Lenders, to perfect and continue perfection of Lenders’ security interests in all or any portion of the Collateral and in order to fully consummate all of the transactions contemplated under the Loan Documents. Borrower shall have the right to possess the Collateral, except where expressly otherwise provided in this Agreement or the other Loan Documents or where Required Lenders choose to perfect its security interest by possession in addition to the filing of a financing statement. Where Collateral is in possession of a third party bailee, Borrower shall take such steps as Required Lenders request for Lenders to (i) obtain an acknowledgment, in form and substance satisfactory to Required Lenders, of the bailee that the bailee holds such Collateral for the benefit of Lenders, and (ii) obtain “control” of any Collateral consisting of investment property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such items and the term “control” are defined in Revised Article 9 of the Code) by causing the securities intermediary or depositary institution or issuing bank to execute a control agreement in form and substance satisfactory to Lenders. Borrower will not create any chattel paper without placing a legend on the chattel paper acceptable to Lenders indicating that Lenders have a security interest in such chattel paper. Borrower, with the Consent of the Lenders, from time to time may deposit with Lenders specific cash collateral to secure specific Obligations; Borrower authorizes Lenders to hold such specific balances in pledge and to decline to honor any drafts thereon or any request by Borrower or any other Person to pay or otherwise transfer any part of such balances for so long as the specific Obligations are outstanding.

 

3.3    Release of Security Interest. Upon the payment in full in cash of all outstanding Obligations by Borrower, the Lenders shall release their Lien on and security interest in any remaining Collateral; provided, that if any payment, or any part thereof, of the Obligations, is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement Consented to and entered into by any of the Lenders) to be repaid to a trustee, receiver or any other Person for the Borrower or any substantial part of its property, the Collateral or otherwise, this Loan Agreement, all rights hereunder and the Liens created hereby shall, without any action of any party, continue to be effective, or be reinstated in full force and effect, until such payments have been made.

 

4.    REPRESENTATIONS AND WARRANTIES.

 

Borrower represents and warrants as follows:

 

4.1    Due Organization and Qualification. Borrower is an entity duly existing under the laws of the jurisdiction in which it is organized and qualified and licensed to do business in any state in which the conduct of its business or its ownership of property requires that it be so qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Effect.

 

4.2    Due Authorization; No Conflict. The execution, delivery, and performance of the Loan Documents are within Borrower’s powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower’s organizational documents, nor will they constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement by which it is bound, except to the extent such default would not reasonably be expected to cause a Material Adverse Effect.

 

 

 

 

4.3    Collateral. Borrower has all necessary rights in, or the power to transfer, the Collateral, and its title to the Collateral is free and clear of Liens, adverse claims, and restrictions on transfer or pledge except for Permitted Liens. Any real property and facilities held under lease by the Borrower are held by it under valid, subsisting and enforceable leases with such exceptions as are not material, or adverse to, and do not materially interfere with, the use made and proposed to be made of such property and buildings by the Borrower and its Subsidiaries.

 

4.4    Saleable Value of Assets. The fair saleable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities, and Borrower is not left with unreasonably small capital after the transactions contemplated by this Agreement.

 

4.5    Compliance with Laws and Documents. Borrower is not, nor will the execution, delivery, and performance of and compliance with the terms of the Loan Documents cause Borrower to be, in violation of any Laws or in default (nor has any event occurred which, with the giving of notice or lapse of time or both, could constitute such a default) under any contract in any respect which could have a Material Adverse Effect. During the past five (5) years, there have been no proceedings, claims, or (to the best of Borrower’s knowledge) investigations against or involving the Borrower by any Governmental Authority under or pursuant to any environmental, occupational safety and health, antitrust, unfair competition, securities, or other Laws which could have a Material Adverse Effect (the “Governmental Proceedings”).

 

4.6    Litigation. The Borrower is not involved in, nor is Borrower aware of the threat of, any Litigation which could have a Material Adverse Effect, and there are no outstanding or unpaid judgments against the Borrower.

 

4.7    Enforceability of Loan Documents. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been duly executed and delivered by the Borrower. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid, and binding obligation of the Borrower enforceable it in accordance with its terms therein and herein, subject to Debtor Relief Laws and except that the availability of equitable remedies may be limited.

 

4.8    Use of Proceeds. All proceeds of the Loans shall be used for working capital and general corporate purposes, including the payment of all reasonable and documented accrued and unpaid costs, fees (including reasonable attorney’s fees of the Lenders) and expenses incurred in connection with the transactions contemplated herein; provided that, the proceeds of any Delayed Draw Loan may be used for, in addition to working capital and general corporate purposes, the payment of the Purchase Price in connection with any Exchange transaction pursuant to Section 10. The proceeds of the Loans are not and will not be used directly or indirectly for the purpose of purchasing or carrying, or for the purpose of extending credit to others for the purpose of purchasing or carrying, any “margin stock” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System.

 

4.9    Regulatory Acts. Borrower is not an “investment company” or “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, nor is subject to regulation under any other Law (other than Regulation X of the Board of Governors of the Federal Reserve System) which regulates the incurring by Borrower of debt.

 

4.10    General. There is no significant material fact, event circumstance or condition relating to the financial condition and business of Borrower or the Collateral, which would reasonably result in a Material Adverse Effect, which has not been disclosed in writing to Lenders and all writings heretofore or hereafter exhibited, made, or delivered to Agents by or on behalf of -Borrower is and will be genuine and in all respects what they purport and appear to be.

 

 

 

 

4.11    Liens. The Borrower has good and indefeasible title to all of its real properties constituting Collateral and good and marketable title to all of its other properties and assets constituting Collateral, in each case free and clear of any Liens except the Permitted Liens. The Borrower has full power and authority to grant to the Lenders the Liens in the Collateral pursuant hereto and the other Loan Documents. When financing statements and the Mortgages have been filed in the appropriate offices against the Borrower with respect to any Collateral, Collateral Agent, for the benefit of the Secured Parties, will have a fully perfected first priority Lien in that portion of the Collateral in which a Lien may be perfected by filing, subject only to any Permitted Liens.

 

4.12    Material Contract. Except as could not reasonably be expected to have a Material Adverse Effect, each Material Contract (a) is in full force and effect and is binding upon and enforceable against the Borrower that is a party thereto and, to the knowledge of the Borrower, all other parties thereto in accordance with its terms; and (b) is not in default due to the action of the Borrower.

 

4.13    Pledged Securities.

 

(a)    Schedule 5.13(a) sets forth, as of the Closing Date, a complete and accurate list of the ownership of the issued and outstanding Equity Interests held by the Borrower and all Pledged Securities owned by it have been duly authorized, validly issued, are fully paid and non-assessable.

 

(b)    None of the Pledged Securities has been issued or transferred in violation of the securities registration, securities disclosure or similar Laws of any jurisdiction to which such issuance or transfer may be subject, (ii) there are existing no options, warrants, calls or commitments of any character whatsoever relating to such Pledged Securities or which obligate the issuer of any Pledged Securities to issue additional Equity Interests, and (iii) no consent, approval, authorization, or other action by, and no giving of notice, filing with, any Governmental Authority or any other Person is required for the pledge by the Borrower of such Pledged Securities pursuant to this Agreement or for the exercise by Collateral Agent of remedies in respect of the Pledged Securities, except as may be required in connection with such disposition by Laws affecting the offering and sale of securities generally.

 

5.    AFFIRMATIVE COVENANTS.

 

Borrower covenants that, until payment in full in cash of all outstanding Obligations, and for so long as Lenders may have any commitment to make Loans hereunder, Borrower shall do all of the following:

 

5.1    Good Standing and Government Compliance. Borrower shall maintain its organizational existence and good standing in the state in which it is organized unless otherwise permitted under this Agreement, shall maintain qualification and good standing in each other jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Effect. Borrower shall comply with all statutes, laws, ordinances and government rules and regulations to which it is subject, and shall maintain in force all licenses, approvals and agreements, the loss of which or failure to comply with which would reasonably be expected to have a Material Adverse Effect.

 

5.2    Maintenance of Entity Existence. Borrower will, (a) (i) preserve and maintain its existence and (ii) maintain all of its leases, licenses, permits, franchises, qualifications, and rights that are necessary or desirable in the ordinary conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; (b) conduct its business in an orderly and efficient manner in accordance with good business practices; (c) keep or cause to be kept all of their respective assets which are useful and necessary in their respective businesses in good repair, working order and condition (ordinary wear and tear excepted), and will make or cause to be made all necessary repairs, renewals and replacements as may be reasonably required and (d) carry on and conduct its business in substantially the same fields as such business is now and has heretofore been carried on.

 

 

 

 

5.3    Minimum Cash. From and after the Closing Date, Borrower shall maintain a minimum amount of unrestricted cash and cash equivalents equal to no less than $205,000 (the “Minimum Cash Threshold”).

 

5.4    Books and Records. Borrower will maintain proper books of record and account in which full, true, and correct entries in conformity with GAAP, or other method of accounting reasonably acceptable Lenders (at the direction of the Required Lenders), shall be made of all dealings and transactions in relation to its business and activities consistent with prior practice.

 

5.5    Compliance with Laws; Agreements. Borrower will (a) comply with the requirements of all applicable material Laws, except where (i) contested in good faith and by proper proceedings, or (ii) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect and (b) comply in all material respects with all agreements, contracts, and instruments binding on it or affecting its respective properties or business, except where the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect. Without limiting the foregoing, Borrower is in compliance with all applicable Anti-Money Laundering Laws and regulations and is in compliance with the Patriot Act and all Anti-Terrorism Laws, Sanctions and Anti-Corruption Laws.

 

5.6    Notice of Default; Material Adverse Effect. Upon any of the officers or directors of the Borrower becoming aware of any of the events or occurrences in clauses (i) through (iii) below, Borrower will promptly notify Lenders of (i) any breach of any of the covenants contained herein, (ii) any change in circumstance that would reasonably result in a Material Adverse Effect with respect to the Borrower or the Collateral, or (iii) the filing of any claim, action, suit or proceeding before any Governmental Authority against the Borrower or any of their respective Subsidiaries in which an adverse decision could have a Material Adverse Effect upon the Borrower and advise Agents from time to time of the status thereof.

 

5.7    Taxes. Borrower shall make due and timely payment or deposit of all material federal, state, and local taxes, assessments, or contributions required of it by law, including, but not limited to, those laws concerning income taxes; provided that Borrower need not make any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved against (to the extent required by GAAP) by Borrower.

 

5.8    Further Assurances. At any time and from time to time following the Closing Date Borrower shall execute and/or deliver such further instruments and take such further action as may necessary or advisable be requested by Lenders to effect the purposes of this Agreement, including, for the avoidance of doubt, furnishing such additional information regarding the business, financial or otherwise, of the Borrower as Lenders may from time to time request.

 

5.9    Costs and Expenses. Borrower shall pay (a) all reasonable and documented out-of-pocket expenses incurred by the Lenders (including the reasonable fees, and disbursements of one (1) primary outside counsel for Lenders) in connection with the preparation, negotiation, delivery and administration of this Agreement and preparation, negotiation, execution and administration of the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (b) all reasonable out of pocket expenses incurred by any Lender in connection with the enforcement or protection of its rights (i) in connection with this Agreement and the other Loan Documents, including its rights under this Section 6.4, or (ii) in connection with Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

 

 

 

 

5.10    Post-Closing Matters. Notwithstanding the terms hereof, the Borrower will execute and deliver the documents, take the actions and complete the tasks, in each case within the applicable time limits, as the Required Lenders may reasonably request.

 

6.    NEGATIVE COVENANTS.

 

Borrower covenants and agrees that so long as any Obligations (other than contingent indemnity obligations) remain outstanding, Borrower will not do any of the following without Required Lenders’ prior Consent, which shall not be delayed or unreasonably withheld:

 

6.1    Dispositions. Borrower will not directly or indirectly, sell, lease, assign, transfer, or otherwise dispose of any of its assets, whether now owned or hereafter acquired, except Dispositions, for fair value, of worn-out and obsolete equipment not necessary to the conduct of its business and the sale or discount, in each case without recourse and in the ordinary course of business, of accounts receivable or notes receivable arising in the ordinary course of business.

 

6.2    Mergers or Acquisitions; Organization Documents. Borrower will not, directly or indirectly, (a) consummate a merger or consolidation, (b) purchase or otherwise acquire all or substantially all of the assets of any other Person or any part of the shares or other evidence of beneficial ownership of any Person, (c) form or acquire a new Subsidiary or transfer assets to any Subsidiary, (d) amend, restate, modify, supplement, terminate or replace any Organizational Documents without the prior Consent of the Required Lenders or (e) wind-up, dissolve, or liquidate.

 

6.3    Encumbrances. Create, incur, assume or allow any Lien to be granted, or purport to be granted, on any of its property or assign or otherwise convey any right to receive income (cash or noncash), except for Permitted Liens, or covenant to any other Person that Borrower in the future will refrain from creating, incurring, assuming or allowing any Lien with respect to any of Borrower’s property other than Permitted Liens. Further, Borrower will not sign, or authorize the preparation and filing of any financing statement naming it as debtor covering all or any portion of the Collateral, except as permitted by the Loan Documents.

 

6.4    Distributions. Except as currently required by the Company’s Organizational Documents (as in effect on the date hereof), pay any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of any Person or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Equity Interest, or on account of any return of capital to any Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment.

 

6.5    Incurrence of Indebtedness. Incur, acquire, assume, become liable for, or otherwise make any commitment to incur, acquire, assume or otherwise become liable for any Indebtedness, other than Permitted Debt.

 

6.6    Investments. Borrower will not directly or indirectly, make any advance, loan, extension of credit, any capital contribution to or investment in, or purchase, any stock, bonds, notes, debentures, or other securities of, any Person, except Permitted Investments.

 

6.7    Transactions with Affiliates and Insiders. Borrower will not enter into, renew or extend any transaction or arrangement, including the purchase, sale, lease, transfer or exchange of property or assets (tangible or intangible) or the rendering of any service, with or to any Affiliate of Borrower or any of its Subsidiaries (all such transactions with any such Affiliates, collectively the “Related Party Transactions”), unless, after giving effect thereto, all Related Party Transactions of a similar type are on terms, taken as a whole, that are not materially less favorable (as determined in good faith at any such time of determination by the Borrower) to the Borrower than those that could be obtained in a comparable arm’s-length transaction with a Person that is not an Affiliate of the Borrower, in each case without the prior Consent of the Required Lenders (which consent shall not be delayed or unreasonably withheld).

 

 

 

 

6.8    Limitation on Issuance of Equity. Borrower will not, directly or indirectly, at any time issue, sell, assign, or otherwise dispose of (a) any of its Equity Interests, (b) any securities exchangeable for or convertible into or carrying any rights to acquire any of its Equity Interests, or (c) any option, warrant (or other right to acquire any of its Equity Interests), except in each case, where contemplated by any instrument existing and disclosed to the Lenders on the Closing Date.

 

6.9    Subsidiaries. Create, form, acquire, assume or otherwise invest and/or hold any equity interest, or make any commitment to create, form, acquire, assume or otherwise invest in and/or hold any equity interest of, any Person without the prior Consent of the Required Lenders (which shall not be unreasonably withheld).

 

7.    EVENTS OF DEFAULT.

 

Any one or more of the following events shall constitute an event of default (each an “Event of Default”) by Borrower under this Agreement:

 

7.1    Payment Default. If Borrower fails to pay any (i) principal when due, or (ii) any of the other Obligations within three (3) Business Days from when due;

 

7.2    Covenant Default.

 

(a)    If Borrower fails to perform any obligation under Section 6 or violates any of the covenants contained in Section 7 of this Agreement; provided, however, that if in the event of a breach of an obligation under Section 6, if such breach is capable of being cured, such breach shall only become an Event of Default if such breach continues for five (5) Business Days following the occurrence thereof; or

 

(b)    If Borrower fails or neglects to perform or observe any other term, provision, condition, covenant contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower and Lenders and as to any default under such other term, provision, condition or covenant that can be cured, has failed to cure such default within five (5) Business Days after Borrower receives notice thereof or any officer of Borrower becomes aware thereof; provided, however, that if the default cannot by its nature be cured within the five (5) Business Day period or cannot after diligent attempts by Borrower be cured within such five (5) Business Day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable period (which shall not in any case exceed ten (10) Business Days) to attempt to cure such default, so long as Borrower continues to diligently attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default;

 

7.3    Material Adverse Effect. If there occurs any circumstance or circumstances that could reasonably be expected to have a Material Adverse Effect;

 

7.4    Defective Perfection. If, at any time, Lenders’ security interest in the Collateral is not prior to all other security interests or Liens;

 

7.5    Attachment. If any material portion of Borrower’s or its Subsidiaries assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within fifteen (15) Business Days, or if Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any material portion of Borrower’s assets, or if a notice of lien, levy, or assessment is filed of record with respect to any of Borrower’s assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, and the same is not paid within fifteen (15) Business Days after Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by Borrower (provided that no Loans will be made during such cure period);

 

 

 

 

7.6    Insolvency. If Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced against Borrower and is not dismissed or stayed within thirty (30) Business Days (provided that no Loans will be made prior to the dismissal of such Insolvency Proceeding);

 

7.7    Other Agreements. If there is a default by Borrower or other failure by Borrower to perform under any agreement to which Borrower is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness; or

 

7.8    Misrepresentations. If any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth herein or in any certificate delivered to Lenders by any Responsible Officer pursuant to this Agreement or to induce Lenders to enter into this Agreement or any other Loan Document.

 

7.9    Change in Control. Any Change in Control shall occur.

 

7.10    Loan Documents. Any provision of any of the Loan Documents ceases to be in full force and effect, or be enforceable any Lender, as applicable, in accordance with their terms; or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or Borrower denies that it has any or further liability or obligation under any provision of any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document.

 

8.    LENDERS’ RIGHTS AND REMEDIES.

 

8.1    Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Required Lenders may, at their election, without notice to Borrower or any other Lender of their election and without demand, do any one or more of the following, all of which are hereby authorized by Borrower:

 

(a)    Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable (provided that upon the occurrence of an Event of Default described in Section 8.6 (insolvency), all Obligations shall become immediately due and payable without any action by the Lenders);

 

(b)    Cease advancing money or extending credit to or for the benefit of Borrower under this Agreement or under any other agreement between Borrower and Lenders;

 

(c)    Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Required Lenders reasonably consider advisable;

 

(d)    Make such payments and do such acts as Required Lenders consider necessary or reasonable to protect their security interest in the Collateral. Borrower agrees to assemble the Collateral if Required Lenders so require, and to make the Collateral available to Lenders as Required Lenders may designate. Borrower authorizes Lenders to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Required Lenders’ determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of Borrower’s owned premises, Borrower hereby grants Lenders a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of Lenders’ rights or remedies provided herein, at law, in equity, or otherwise;

 

(e)    Set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Lenders, and (ii) Indebtedness at any time owing to or for the credit or the account of Borrower held by Lenders;

 

 

 

 

(f)    Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Lenders are hereby granted a license or other right, solely pursuant to the provisions of this Section 9.1, to use, without charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Lenders’ exercise of their rights under this Section 9.1, Borrower’s rights under all licenses and all franchise agreements shall inure to Lenders’ benefit;

 

(g)    Dispose of the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrower’s premises) as Required Lenders determine is commercially reasonable, and apply any proceeds to the Obligations in whatever manner or order Required Lenders deem appropriate. Lenders may sell the Collateral without giving any warranties as to the Collateral. Lenders may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If Lenders sell any of the Collateral upon credit, Borrower will be credited only with payments actually made by the purchaser, received by Lenders, and applied to the indebtedness of the purchaser. If the purchaser fails to pay for the Collateral, Lenders may resell the Collateral and Borrower shall be credited with the proceeds of the sale;

 

(h)    Lenders may credit bid and purchase at any public or private sale;

 

(i)    Apply for the appointment of a receiver, trustee, liquidator or conservator of the Collateral, without notice and without regard to the adequacy of the security for the Obligations and without regard to the solvency of Borrower, any guarantor or any other Person liable for any of the Obligations;

 

(j)    Exercise any other rights of a secured creditor under applicable law; and

 

(k)    Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower.

 

Lenders may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.

 

8.2    [Reserved].

 

8.3    Accounts Collection. At any time after the occurrence and during the continuation of an Event of Default, to the extent constituting Collateral, Lenders may, upon prior written notice to Borrower, notify any Person owing funds to Borrower of Lenders’ security interest in such funds. Borrower shall collect all such amounts owing to Borrower for Lenders, receive in trust all payments as Lenders’ trustee, and immediately deliver such funds to Lenders in their original form as received from such Person, with proper endorsements for deposit.

 

8.4    Lender Expenses. If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Lenders may after ten (10) Business Days’ notice to Borrower make payment of the same or any part thereof. Any amounts so paid or deposited by Lenders shall constitute Lender Expenses, shall be immediately due and payable, and shall bear interest at the then applicable rate hereinabove provided, and shall be secured by the Collateral. Any payments made by Lenders shall not constitute an agreement by Lenders to make similar payments in the future or a waiver by Lenders of any Event of Default under this Agreement.

 

 

 

 

8.5    Lenders’ Liability for Collateral. Lenders shall have no obligation to maintain, preserve, clean up or otherwise prepare the Collateral for sale. All risk of loss, damage or destruction of the Collateral shall be borne by Borrower.

 

8.6    No Obligation to Pursue Others. Lenders have no obligation to attempt to satisfy the Obligations by collecting them from any other person liable for them and Lenders may release, modify or waive any collateral provided by any other Person to secure any of the Obligations, all without affecting Lenders’ rights against Borrower. Borrower waives any right it may have to require Lenders to pursue any other Person for any of the Obligations.

 

8.7    Remedies Cumulative. Lenders’ rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. Lenders shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Lenders of one right or remedy shall be deemed an election, and no waiver by Lenders of any Event of Default on Borrower’s part shall be deemed a continuing waiver. No delay by Lenders shall constitute a waiver, election, or acquiescence by it. No waiver by Lenders shall be effective unless made in a written document signed on behalf of Lenders and then shall be effective only in the specific instance and for the specific purpose for which it was given. Borrower expressly agrees that this Section 9.7 may only be waived or modified with the express Consent of the Required Lenders and will not be deemed waived or modified by Lenders by course of performance, conduct, estoppel or otherwise.

 

8.8    Demand; Protest. Except as otherwise provided in this Agreement, Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment and any other notices relating to the Obligations.

 

9.    Exchange of Debt.

 

9.1    Exchange. Borrower hereby acknowledges and agrees that, subject to the last sentence of this Section 10.1, at any time on or after the Closing Date, each Lender shall have the right, but not the obligation, to exchange each such Lender’s pro rata portion (the “Exchange”) (including all principal and interest thereon) of shares of the Borrower’s Series D Preferred Stock held by the Lenders (such preferred stock, the (“Exchange Shares”), for a mutually agreed upon portion of any subsequent Delayed Draw Loan (such amount, the “Purchase Price”), by providing written notice of the Exchange to the Borrower (the “Exchange Notice”) indicating the date on which the Exchange shall occur (the “Exchange Date”) which date shall be no less than 5 Business Days after delivery of the Exchange Notice, and the Purchase Price of such Exchange Shares; provided, that, at any time of determination, the aggregate Purchase Price for all Exchange Shares which are Exchanged pursuant to this Section 10.1 shall not exceed the then outstanding aggregate principal amount (including any interest capitalized thereon) of the Loans made by Lenders.. The Exchange shall be subject to terms and conditions to be negotiated in good faith between the Borrower and the applicable Lender and Lender’s reasonable satisfaction with such terms and conditions.

 

9.2    Additional Conditions to Exchange.  It shall be a condition precedent to the Lender consummating the Exchange that (a) that no Material Adverse Event shall have occurred or would result therefrom and (b) a favorable opinion of Disclosure Law Group, a Professional Corporation, counsel to the Borrower, in form and substance reasonably satisfactory to the Lender (or Lenders) consummating the Exchange.  Any Exchange Notice delivered by the Lender pursuant to Section 10.1 shall become automatically null and void without any further action by any party if a Material Adverse Event shall occur between the delivery of such Exchange Notice and on or prior to the Exchange Date.

 

 

 

 

9.3    Maximum Draw Amount. In connection with any Exchange, the Lenders hereby agree that, as of the applicable Exchange Date, the Maximum Draw Amount shall be increased on a dollar-for dollar basis equal to the Purchase Price paid by Borrower, as set forth in any applicable Exchange Notice.

 

9.4    Other Holders of Series D Preferred Stock. Subject to the requirements set forth in Section 10.1 above, upon delivery by the Lenders of an Exchange Notice to the Borrower pursuant to Section 10.1, the Borrower shall offer to all holders of Series D Preferred Stock (other than the Lenders, the “Holders”) the opportunity, but not the obligation, to exchange each such Holder’s pro rata portion of shares of the Borrower’s Series D Preferred Stock held by such Holders for participation in any subsequent Delayed Draw Term Loan, upon substantially similar terms as those provided in the applicable Exchange Notice by the Lenders.

 

10.    NOTICES.

 

Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, or by email to Borrower or to Lender, as the case may be, at its addresses set forth below:

 

	
			If to Borrower:

				
			ImageWare Systems Inc.

			13500 Evening Creek Drive N.

			Suite 550

			San Diego, California 92127

			Email: jmorris@iwsinc.com

			Attn: Chief Financial Officer

			Disclosure Law Group, a Professional Corporation

			655 West Broadway, Suite 870

			San Diego, CA 92101

			Telephone: (619) 272-7062

			Facsimile: (619) 330-2101

			Email: drumsey@disclosurelawgroup.com

			Attention: Daniel W. Rumsey, Managing Director

			
	 	 
	
			If to Lender:

				
			If to any Lenders, to the address set forth under such Lender’s name on the Signature Page hereto executed by such Lender.

			with a copy (which does not constitute notice) to:

			Stroock & Stroock & Lavan LLP

			180 Maiden Lane

			New York, New York

			Attention: Brett Lawrence

			Email: blawrence@stroock.com

			

 

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.

 

 

 

 

11.    CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE.

 

This Agreement and the other Loan Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the Law of the State of New York. Borrower irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or tort or otherwise, against Lenders in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in a forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the exclusive jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable Law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Nothing in this Agreement or in any other Loan Document shall affect any right that Lenders may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against Borrower or its properties in the courts of any jurisdiction. Borrower irrevocably and unconditionally waives, to the fullest extent permitted by applicable Law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 10. Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by applicable Law.

 

EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

12.    GENERAL PROVISIONS.

 

12.1    Successors and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties and shall bind all persons who become bound as a debtor to this Agreement; provided, however, that neither this Agreement nor any rights hereunder may be assigned by Borrower without Required Lenders’ prior Consent. Each Lender shall have the right without the consent of or notice to Borrower to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, such Lenders’ obligations, rights and benefits hereunder.

 

 

 

 

12.2    Indemnification. Borrower shall defend, indemnify and hold harmless Lenders and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement and/or the Loan Documents; and (b) all reasonable losses or Lender Expenses in any way suffered, incurred, or paid by Lenders, its officers, employees and agents as a result of or in any way arising out of, following, or consequential to transactions between Lenders and Borrower whether under this Agreement, or otherwise (including without limitation reasonable attorneys’ fees and expenses), except for losses caused by Lenders’ gross negligence or willful misconduct.

 

12.3    Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement.

 

12.4    Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

 

12.5    Correction of Loan Documents. With Borrower's prior written consent, Lenders may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties.

 

12.6    Amendments in Writing, Integration. All amendments, modifications or waivers to or terminations of this Agreement or the other Loan Documents must be in writing signed by the Borrower and the Required Lenders, provided, however that not such amendment, modification or waiver shall:

 

(a)    modify this Section 13.6 without the Consent of all Lenders;

 

(b)    increase the aggregate amount of the Loans required to be made by a Lender pursuant to its Commitment or extend the Maturity Date for any Loans made (or participated in) by a Lender without the Consent of each such Lender;

 

(c)    reduce the principal amount of or rate of interest on or premium payable with respect to the Loans or extend the date on which interest, fees or premiums are payable in respect of the Loans, in each case, without the Consent of the Required Lenders; or

 

(d)    except as otherwise expressly provided in a Loan Document, release the Borrower from its Obligations under the Loan Documents or release all or substantially all of the Collateral, in each case without the Consent of all Lenders.

 

All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement and the other Loan Documents, if any, are merged into this Agreement and the Loan Documents.

 

12.7    Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of a copy of this Agreement or any other document contemplated hereby bearing an original or electronic signature by facsimile transmission (whether directly from one facsimile device to another by means of a dial-up connection or whether mediated by the worldwide web), by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original or electronic signature.

 

 

 

 

12.8    Survival. All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations remain outstanding or Lender has any obligation to make any Loan to Borrower. The obligations of Borrower to indemnify Lenders with respect to the expenses, damages, losses, costs and liabilities described in Section 13.2 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Lenders have run.

 

12.9    Confidentiality. In handling any confidential information, Lenders and all employees and agents of Lenders shall exercise the same degree of care that Lenders exercise with respect to its own proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement except that disclosure of such information may be made (i) to the subsidiaries or Affiliates of Lenders in connection with their present or prospective business relations with Borrower, (ii) to prospective transferees or purchasers of any interest in the Loans, (iii) as required by law, regulations, rule or order, subpoena, judicial order or similar order, (iv) as may be required in connection with the examination, audit or similar investigation of a Lender, (v) to Lenders’ accountants, auditors and regulators, and (vi) as Lenders may determine in connection with the enforcement of any remedies hereunder. Confidential information hereunder shall not include information that either: (a) is in the public domain or in the knowledge or possession of a Lender when disclosed to such Lender, or becomes part of the public domain after disclosure to such Lender through no fault of such Lender; or (b) is disclosed to a Lender by a third party, provided such Lender does not have actual knowledge that such third party is prohibited from disclosing such information.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

 

	
			BORROWER:

			
	 
	
			IMAGEWARE SYSTEMS, INC.

			
	 
	
			By: /s/ Kristin Taylor

			
	
			Name: Kristin Taylor

			
	
			Title: Chief Executive Officer

			

 

 

	
			LENDER:

			 

			_______________________________________

			(Print or Type Name of Purchaser)

			 

			 

			 

			By: ____________________________________

			Name:         

			Title:

			ADDRESS:   _____________________________

			 _____________________________

			 _____________________________                                         

			Telephone:____________________________                          

			Facsimile: ____________________________                           

			E-Mail: ______________________________                           

			Attention: ____________________________

			                          

			LOAN AMOUNT: ______________________

			
	 
	 
	 
	 

 

 

 

 

EXHIBIT A

 

DEFINITIONS

 

“Additional Lender” has the meaning assigned to such term in Section 2.5(b).

 

“Affiliate” means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors, and partners.

 

“Anti-Corruption Laws” means all Laws of any jurisdiction applicable to the Borrower, any other Loan Party or any of their Subsidiaries from time to time concerning or relating to bribery or corruption, including without limitation the Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd-1, et seq.

 

“Anti-Money Laundering Laws” means all Laws of any jurisdiction applicable to the Borrower, any other Loan Party or any of their Subsidiaries from time to time concerning or relating to money laundering, including, without limitation, the Bank Secrecy Act and the Patriot Act.

 

“Anti-Terrorism Laws” means all Laws of any jurisdiction applicable to the Borrower, any other Loan Party or any of their Subsidiaries from time to time concerning or relating to terrorism or money laundering, including, without limitation, Title III of the Patriot Act, the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 C.F.R. Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto.

 

“Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. §§ 101-1532, as now in effect or hereafter amended, and the rules and regulations promulgated thereunder.

 

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks in the State of New York are authorized or required to close.

 

“Change of Control” means the occurrence of any of the following events, without Lender's prior Consent:

(a)    a sale, conveyance or disposition of all or substantially all of the assets of the Borrower and any direct and/or indirect Subsidiaries of the Borrower, taken as a whole (including by or through the sale, conveyance or other disposition of the capital stock of, or reorganization, merger, share exchange, consolidation or other business combination involving, any direct and/or indirect subsidiary or Subsidiaries of the Borrower, if substantially all of the assets of the Borrower and any direct and/or indirect Subsidiaries of the Borrower, taken as a whole, are held by such Subsidiary or Subsidiaries);

 

(b)    a reorganization, merger, share exchange, consolidation or other business combination of the Borrower with or into any other entity in which transaction the Persons who hold more than fifty percent (50%) of the total voting power of the Equity Interests of the Borrower (or, if the Borrower is not the acquiring, resulting or surviving entity in such transaction, such acquiring, resulting or surviving entity) immediately after such transaction are not Persons who, immediately prior to such transaction, held more than fifty percent (50%) of the total voting power of the Equity Interests of the Company;

 

(c)    an acquisition (in one transaction or a series of related transactions) of Equity Interests of the Borrower representing in the aggregate more than fifty percent (50%) of the total voting power of the Equity Interests of the Borrower (after giving effect to such acquisition) by any Person or “group” (as such term is used in Section 13(d)(3) of the Exchange Act) of Persons.

 

 

 

 

(d)    the initiation, filing or implementation of a voluntary Insolvency Proceeding with respect to the Borrower (or any material Subsidiary of the Borrower); or

 

(e)    any liquidation, dissolution, winding up of the affairs of the Borrower.

 

“Closing Date” means the date of this Agreement.

 

“Code” or “UCC” means the New York Uniform Commercial Code as amended or supplemented from time to time.

 

“Collateral” means all property described on Exhibit B attached hereto.

 

“Commitment” means, with respect to each Lender, the amount set forth opposite such Lender’s name on Schedule A hereto.

 

“Consent” means the prior written consent of the Required Lenders and/or Lenders, as context may require, which may be granted or withheld in their sole discretion.

 

“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.

 

“Debt Issuance” means the issuance by the Borrower of any Indebtedness.

 

“Debtor Relief Law” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

“Default Rate” means a per annum rate equal to (i) 4.00% plus (ii) the Interest Rate then in effect.

 

“Delayed Draw Loan” shall have the meaning set forth in Section 2.6(a)(i).

 

“Disposition” or “Dispose” means the sale, assignment, transfer, license, lease (as lessor), or other disposition of any property by the Company or any Subsidiary (or the granting of any option or other right to do any of the foregoing, except for those specified exceptions to an Equity Issuance).

 

 

 

 

“Eligible Purchaser” means (i) a Lender, (ii) an Affiliate of a Lender, and (iii) any other Person (other than a natural person) approved by the Borrower.

 

“Equity Interests” with respect to any Person, means all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

"Equity Issuance" means the the Company's issuance, sale, assignment, or other Disposition of (a) any of its Equity Interests, (b) any securities exchangeable for or convertible into or carrying any rights to acquire any of its Equity Interests, or (c) any option, warrant (or other right to acquire any of its Equity Interests), except in each case, where contemplated by any instrument existing and disclosed to the Lenders on the Closing Date, including, without limitation, under the ImageWare Systems, Inc. 2020 Omnibus Equity Incentive Plan.

 

“Event of Default” has the meaning assigned to such term in Section 8.

 

“Exchange” has the meaning set forth in Section 10.1.

 

“Exchange Notice” has the meaning set forth in Section 10.1.

 

“Exchange Shares” has the meaning set forth in Section 10.1.

 

“Funding Date” means, (i) in respect of the Initial Loan, the Closing Date and (ii) in respect of any Delayed Draw Loan, the date of borrowing indicated in the applicable DDL Funding Request.

 

“Funding Request” means the Initial Funding Request and each DDL Funding Request, as applicable.

 

“GAAP” means generally accepted accounting principles, consistently applied, as in effect from time to time.

 

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments (c) all capital lease obligations and (d) all Contingent Obligations, if any.

 

“Initial Interest Rate” shall have the meaning set forth in Section 2.5(a).

 

“Initial Loan” shall have the meaning set forth in Section 2.1.

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

 

“Interest Payment Date” means the first calendar day of each month following the Closing Date.

 

“Interest Rate” means the Initial Interest Rate and the Trigger Rate, as applicable.

 

 

 

 

“Lender Expenses” means all reasonable costs or expenses (including reasonable attorneys’ fees and expenses, whether generated in-house or by outside counsel) incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents; reasonable Collateral audit fees; and Lenders’ reasonable attorneys’ fees and expenses (whether generated in-house or by outside counsel) incurred in amending, enforcing or defending the Loan Documents (including fees and expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought.

 

“Lien” means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.

 

“Loan” means, for any Lender, each Initial Loan and Delayed Draw Loan, as applicable and “Loans” means collectively all such Initial Loans and Delayed Draw Loans.

 

“Loan Documents” means, collectively, this Agreement, any note or notes executed by Borrower, and any other document, instrument or agreement entered into in connection with this Agreement, all as amended or extended from time to time.

 

“Material Adverse Effect” means (i) a material impairment in the perfection or priority of Lenders’ Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.

 

“Maturity Date” means the 12 month anniversary of the Closing Date.

 

“Maximum Draw Amount” has the meaning set forth in Section 2.6, as may be increased pursuant to Section 10.

 

“Net Cash Proceeds” means, with respect to any Disposition, the cash proceeds (including cash proceeds subsequently received (as and when received) in respect of non-cash consideration initially received and including all insurance settlements (it being understood and agreed that any such receipts of insurance settlements shall exclude proceeds of business interruption insurance) and condemnation awards from any single event or series of related events) net of the sum, without duplication, of (i) transaction expenses (including reasonable broker's fees or commissions, legal fees, accounting fees, investment banking fees and other professional fees, transfer and similar taxes and the Borrower's good faith estimate of income taxes paid or payable in connection with the receipt of such cash proceeds), (ii) amounts set aside as a reserve, in accordance with GAAP, including pursuant to any escrow arrangement, against any liabilities under any indemnification obligations or other contingent liabilities and retained liabilities (such as pension and other employment benefit liabilities and liabilities associated with environmental matters) associated with such Disposition (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds), (iii) Taxes paid or reasonably estimated to be payable as a result thereof, and (iv) the principal amount, premium or penalty, if any, interest and other amounts on any indebtedness for borrowed money which is secured by the asset sold in such Disposition and is required to be repaid with such proceeds (other than any such indebtedness assumed by the purchaser of such asset).

 

“Obligations” means all debt, principal, interest, Lender Expenses and other amounts owed to Lender by Borrower pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower to others that Lender may have obtained by assignment or otherwise.

 

 

 

 

“Organizational Documents” means (a) in the case of a corporation, its articles or certificate of incorporation and bylaws, (b) in the case of a general partnership, its partnership agreement, (c) in the case of a limited partnership, its certificate of limited partnership and partnership agreement, (d) in the case of a limited liability company, its articles of organization and operating agreement or regulations, and (e) in the case of any other entity, its organizational and governance documents and agreements.

 

“Original Issue Discount” or “OID” has the meaning set forth in Section 3.4.

 

“Parties” means the Borrower and the Lenders and any Additional Lenders that may be joined to this Agreement from time to time.

 

“Periodic Payments” means all installments or similar recurring payments that Borrower may now or hereafter become obligated to pay to Lender pursuant to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrower and Lender.

 

“Permitted Debt” means the following:

 

	 	
			(a)

				
			Any Indebtedness existing on the Closing Date;

			

 

	 	
			(b)

				
			Indebtedness arising under this Agreement or the other Loan Documents; and

			

 

	 	
			(c)

				
			Indebtedness to which the Required Lenders have Consented.

			

 

“Permitted Liens” means the following:

 

	 	
			(a)

				
			Any Liens existing on the Closing Date;

			

 

	 	
			(b)

				
			Liens arising under this Agreement or the other Loan Documents; and

			

 

	 	
			(c)

				
			Liens to which the Required Lenders have Consented.

			

 

“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.

 

“Purchase Price” has the meaning set forth in Section 10.1.

 

“Related Party Transaction” has the meaning set forth in Section 7.7.

 

“Required Lenders” means Lenders holding at least fifty percent (50%) of the aggregate principal amount of loans outstanding at any time.

 

“Responsible Officer” means each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and the Controller of Borrower.

 

“Schedule of Exceptions” means the schedule of exceptions attached hereto and approved by Lenders, if any.

 

“Subsidiary” means any corporation, partnership or limited liability company or joint venture in which (i) any general partnership interest or (ii) more than fifty percent (50%) of the stock, limited liability company interest or joint venture of which by the terms thereof ordinary voting power to elect the Board of Directors, managers or trustees of the entity, at the time as of which any determination is being made, is owned by Borrower, either directly or through an Affiliate.

 

“Trigger Rate” has the meaning set forth in Section 2.5(a).

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00338-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00338-of-00352.parquet"}]]