Document:

ex10-6.htm

Exhibit 10.6

 

Amendment to Junior Secured Convertible Promissory Notes

 

This Amendment to Junior Secured Convertible Promissory Notes (this “Amendment”) is made and entered into as of December 27, 2016, by and between Determine, Inc., a Delaware corporation (the “Company”), and Lloyd I. Miller, III (the “Lenders’ Agent” and, together with the Company, the “Parties”). Capitalized terms used in this Amendment but not otherwise defined herein shall have the meanings ascribed to them in the Existing Notes (as defined below).

 

Recitals

 

A.     The Parties previously entered into the (i) Junior Secured Convertible Note Purchase Agreement, dated as of March 11, 2015, pursuant to which the Company sold to certain Lenders Junior Secured Convertible Promissory Notes in the aggregate principal amount of $3 million, which promissory notes were amended by the Second Purchase Agreement (as defined in this Recital A) (the “March 2015 Notes”) and (ii) Junior Secured Convertible Note Purchase Agreement, dated as of December 16, 2016 (the “Second Purchase Agreement”), pursuant to which the Company sold to certain Lenders Junior Secured Convertible Promissory Notes in the aggregate principal amount of $2.5 million (the “December 2015 Notes” and, collectively with the March 2015 Notes, the “Existing Notes”).

 

B.     Certain of the Lenders have agreed to make certain additional loans to the Company pursuant to a Junior Secured Convertible Note Purchase Agreement, dated as of December 27, 2016, by and among the Company and such Lenders.

 

C.     In order to induce such Lenders to make such additional loans to the Company, the Company and the Lenders’ Agent desire to amend the Existing Notes, as more fully set forth below.

 

D.     Pursuant to Section 11 of the Existing Notes, any provision of the Existing Notes may be amended, waived or modified with the written consent of the Company and the Lenders’ Agent, which such amendment, waiver or modification shall be binding upon the Company and all Lenders.

 

Agreement

 

NOW, THEREFORE, in consideration of the mutual promises set forth herein, and for other consideration, the receipt and adequacy of which is hereby acknowledged, the Parties agree as follows:

 

	 	
1.
	
Amendment to December 2015 Notes. 

 

(a)     Section 1(b) of each December 2015 Note is hereby amended to add the following paragraph at the end of Section 1(b):

 

“Notwithstanding the foregoing, beginning with the first quarterly interest payment due on December 31, 2016, and continuing until the Maturity Date, the PIK Right described above shall be of no further force and effect and shall be superseded by the following provisions: Provided the Company is not then in default pursuant to this Note or any other Loan Document, upon each quarterly interest payment date on and after December 31, 2016, the Company may elect to pay the accrued interest due on such date by capitalizing, compounding and adding to the unpaid Principal Amount the amount of interest accrued such quarter (“PIK Interest”); provided, however, that any such PIK Interest shall be deemed to have accrued at the rate of ten percent (10%) per annum simple interest (computed on the basis of actual days elapsed and a fiscal year of 364 days). Amounts representing PIK Interest shall be treated as Principal Amount for all purposes under this Note and the Loan Documents and shall bear interest in accordance with this Section 1. The obligation of the Company to pay all such PIK Interest so added shall be automatically evidenced by this Note. The PIK Interest election shall be made by the Company by written notice to Lender on or prior to the date such interest payment is due.”

 

 

 

 

(b)     Section 6(a) of each of the December 2015 Notes is hereby amended and restated in its entirety to read as follows:

 

“(a) Subject to applicable NASDAQ listing rule limitations (including, if applicable, approval by the Company’s stockholders), at any time following the date of this Note and up to the Maturity Date, the then outstanding Obligations under this Note (or any portion thereof) may be converted into fully paid and nonassessable shares of Company Common Stock, $0.0001 par value per share (the “Conversion Shares”), at the sole election of Lender upon written notice to the Company (the “Conversion Notice”), which Conversion Notice shall state the proposed effective date of such conversion (which date shall be no fewer than ten (10) business days following the date of delivery of the Conversion Notice) (the “Conversion Date”). The Obligations hereunder shall convert at a conversion price equal to $3.00 per share, subject to adjustment for any stock dividend, stock split, combination or other similar recapitalization event with respect to the Company’s Common Stock (each a “Recapitalization Event”); provided, however, that if prior to the Maturity Date the Company offers and sells its Common Stock (or other securities that are convertible into or exercisable for shares of Common Stock) in a private placement primarily intended to raise capital at a price per share of Common Stock of $2.50 or less (subject to adjustment for any Recapitalization Event), then the conversion price of the Obligations under this Note shall be reduced to such Common Stock offer price plus $0.50 per share (the applicable conversion price with respect to a conversion under this Section 6(a) hereinafter is referred to as the “Conversion Price”).”

 

(c)     A new Section 19 is hereby added to each December 2015 Note, as follows:

 

“19.     Change of Control. In the event of a Change of Control occurring prior to the repayment or conversion of the Obligations under this Note pursuant to its terms, this Note, including all Obligations hereunder, shall be, at the option of Lender, either (i) repaid in cash as of the closing of such Change of Control or, (ii) subject to applicable NASDAQ listing rule limitations (including, if applicable, approval by the Company’s stockholders), converted into Conversion Shares at the then-current Conversion Price, to be issued to Lender immediately prior to the closing of such Change of Control. The Company shall provide at least 20 business days’ notice to Lender of the closing of a Change of Control.”

 

“‘Change of Control’ means (i) a direct or indirect merger or consolidation of the Company into or with another entity after which the stockholders of the Company immediately prior to such transaction do not own, immediately following the consummation of the transaction by virtue of their shares in the Company or securities received in exchange for such shares in connection with the transaction, a majority of the voting power of the surviving entity in proportions substantially similar to those that existed immediately prior to such transaction, (ii) the direct or indirect sale, transfer or issuance by the Company, or the sale or transfer by stockholders of the Company, in a transaction or series of related transactions, to a person or “group” within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended and Rule 13D thereunder, in either case, as a result of which more than 50% of the voting power of the Company is beneficially owned by such person or group , and (iii) the direct or indirect sale, transfer or other disposition (but not including a transfer or disposition by pledge or mortgage to a bona fide lender) of all or substantially all of the assets or intellectual property of the Company. Notwithstanding the foregoing, the following shall not be deemed a Change of Control: a merger effected exclusively for the purpose of changing the domicile of the Company.”

 

 

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2.
	
Amendment to March 2015 Notes. 

 

(a)     Section 1(b) of each March 2015 Note is hereby amended to add the following paragraph at the end of Section 1(b):

 

“Notwithstanding the foregoing, beginning with the first quarterly interest payment due on December 11, 2016, and continuing until the Maturity Date, the PIK Right described above shall be of no further force and effect and shall be superseded by the following provisions: Provided the Company is not then in default pursuant to this Note or any other Loan Document, upon each quarterly interest payment date on and after December 11, 2016, the Company may elect to pay the accrued interest due on such date by capitalizing, compounding and adding to the unpaid Principal Amount the amount of interest accrued such quarter (“PIK Interest”); provided, however, that any such PIK Interest shall be deemed to have accrued at the rate of ten percent (10%) per annum simple interest (computed on the basis of actual days elapsed and a fiscal year of 364 days). Amounts representing PIK Interest shall be treated as Principal Amount for all purposes under this Note and the Loan Documents and shall bear interest in accordance with this Section 1. The obligation of the Company to pay all such PIK Interest so added shall be automatically evidenced by this Note. The PIK Interest election shall be made by the Company by written notice to Lender on or prior to the date such interest payment is due.”

 

(b)     A new Section 19 is hereby added to each March 2015 Note, as follows::

 

“19.     Change of Control. In the event of a Change of Control occurring prior to the repayment or conversion of the Obligations under this Note pursuant to its terms, this Note, including all Obligations hereunder, shall be, at the option of Lender, either (i) repaid in cash as of the closing of such Change of Control or, (ii) subject to applicable NASDAQ listing rule limitations (including, if applicable, approval by the Company’s stockholders), converted into Conversion Shares at the then-current Conversion Price, to be issued to Lender immediately prior to the closing of such Change of Control. The Company shall provide at least 20 business days’ notice to Lender of the closing of a Change of Control.”

 

“‘Change of Control’ means (i) a direct or indirect merger or consolidation of the Company into or with another entity after which the stockholders of the Company immediately prior to such transaction do not own, immediately following the consummation of the transaction by virtue of their shares in the Company or securities received in exchange for such shares in connection with the transaction, a majority of the voting power of the surviving entity in proportions substantially similar to those that existed immediately prior to such transaction, (ii) the direct or indirect sale, transfer or issuance by the Company, or the sale or transfer by stockholders of the Company, in a transaction or series of related transactions, to a person or “group” within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended and Rule 13D thereunder, in either case, as a result of which more than 50% of the voting power of the Company is beneficially owned by such person or group , and (iii) the direct or indirect sale, transfer or other disposition (but not including a transfer or disposition by pledge or mortgage to a bona fide lender) of all or substantially all of the assets or intellectual property of the Company. Notwithstanding the foregoing, the following shall not be deemed a Change of Control: a merger effected exclusively for the purpose of changing the domicile of the Company.”

 

 

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3.     Continuing Effect. Except as expressly amended hereby, all terms and conditions of the Existing Notes shall remain in full force and effect and shall apply to this Amendment; provided, however, that the Lenders’ Agent acknowledges and agrees that this Amendment will have effect with respect to the interest payments due on December 11, 2016 and December 31, 2016 under the March 2015 Notes and December 2015 Notes, respectively, even if the effective date of this Amendment is after one or both such interest payment due dates.

 

4.     Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflict of laws. 

 

5.     Counterparts; Facsimile. This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

 

[Signature Pages Follow]

 

 

4

 

 

IN WITNESS WHEREOF, the undersigned parties have executed this Amendment to Junior Secured Convertible Promissory Notes as the date first set forth above.

 

 

	
 
	
COMPANY:
	
 

	
 
	
 
	
 
	
 

	 	 	 	 
	 	DETERMINE, INC.	 
	 	 	 	 
	 	By:	/s/ John K. Nolan	 
	
 
	
Name:
	
John K. Nolan
	
 

	 	Title:	Chief Financial Officer	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	LENDERS’ AGENT:	 
	 	 	 	 
	 	 	 	 
	 	LLOYD I. MILLER, III	 
	 	 	 	 
	 	 	 	 
	 	/s/ Lloyd I. Miller, III	 
	 	Signatureex10-7.htm

Exhibit 10.7

 

THIRD AMENDMENT TO 2015 GUARANTY FEE AGREEMENT AND

SECOND AMENDMENT TO 2016 GUARANTY FEE AGREEMENT

 

This Third Amendment to 2015 Guaranty Fee Agreement and Second Amendment to 2016 Guaranty Fee Agreement (this “Amendment”), dated as of December 27, 2016 (the “Amendment Date”), is entered into by and among each of Determine, Inc., a Delaware corporation (the “Company”), Lloyd I. Miller, III (“Mr. Miller”), MILFAM II L.P. (“MILFAM”) and Alimco Financial Corporation (formerly known as Alliance Semiconductor Corporation) (“ALFC” and, together with Mr. Miller and MILFAM, the “Guarantors”). Capitalized terms used but not otherwise defined herein shall have the meaning assigned to them in the Fee Agreements (as defined below).

 

The Company, Mr. Miller and MILFAM are parties to the Guaranty Fee Agreement, effective as of March 11, 2015, as amended by Amendment to Guaranty Fee Agreement, effective as of February 3, 2016, and as amended by Second Amendment to 2015 Guaranty Fee Agreement and Amendment to 2016 Guaranty Fee Agreement, dated as of April 22, 2016 (as amended, the “2015 Fee Agreement”), pursuant to which the Company agreed to pay certain fees to Mr. Miller and MILFAM in exchange for the debt Guaranties provided by Mr. Miller and MILFAM contemplated thereunder.

 

The Company and ALFC are parties to the Guaranty Fee Agreement, dated as of February 3, 2016, as amended by Second Amendment to 2015 Guaranty Fee Agreement and Amendment to 2016 Guaranty Fee Agreement, dated as of April 22, 2016 (as amended, the “2016 Fee Agreement” and, together with the 2015 Fee Agreement, the “Fee Agreements”) pursuant to which the Company agreed to pay certain fees to ALFC in exchange for the debt Guaranty provided by ALFC contemplated thereunder.

 

Certain of the Guarantors have agreed to guarantee additional borrowed amounts under the credit facility provided to the Company by Western Alliance Bank, as successor in interest to Bridge Bank, National Association, and in connection with such additional guaranty, the Company and the Guarantors desire to amend the Fee Agreements and pay certain accrued fees thereunder with shares of Company stock, as more fully set forth in this Amendment.

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants contained herein, the Company and the Guarantors hereby agree as follows:

 

1.     Amendment of 2015 Fee Agreement Monthly Fee. Section 1(b) of the 2015 Fee Agreement is hereby further amended to include the following paragraph at the end of Section 1(b): 

 

“Notwithstanding the foregoing, effective on January 1, 2017, for the remaining term of this Agreement, the Monthly Fee shall equal (i) 10% of the Guaranteed Amount divided by (ii) 12. The aggregate amount of the unpaid Monthly Fees shall be payable in cash on the Payment Date. The Monthly Fees shall accrue, without interest, on the first business day of each month during the term of this Agreement.”

 

2.     Amendment of 2016 Fee Agreement Monthly Fee. Section 1(b)(iii) of the 2016 Fee Agreement is hereby amended and restated in its entirety to read as follows: 

 

“(iii)     Notwithstanding the foregoing, effective on January 1, 2017, for the remaining term of this Agreement, the Monthly Fee shall equal (i) 10% of the Guaranteed Amount divided by (ii) 12. The aggregate amount of the unpaid Monthly Fees shall be payable in cash on the Payment Date. The applicable Monthly Fees shall accrue, without interest, on the first business day of each month during the term of this Agreement.”

 

 

1

 

 

3.     Payment Shares. 

 

a.     Payment of Certain Accrued Fees. The Company and the Guarantors agree that, effective upon the Amendment Date, $524,000 (the “Payment Amount”) of the Monthly Fees previously accrued under the Fee Agreements, as amended hereby, is hereby paid and satisfied in full by the issuance to the Guarantors of 277,248 fully paid and nonassessable shares of Company common stock, $0.0001 par value per share (the “Payment Shares”). The Payment Shares shall be issued to the Guarantors in such amounts as set forth on Exhibit A to this Amendment. As soon as reasonably practicable following the Amendment Date, the Company shall cause its transfer agent to deliver certificates to the Guarantors, registered in such name or names as the Guarantors may designate, representing the Payment Shares. The Guarantors hereby waive any notice period under the Fee Agreements in connection with the payment of the Payment Amount with the Payment Shares.

 

b.     Representations and Warranties of the Guarantors. Each Guarantor hereby represents and warrants to the Company that:

 

i.     Organization and Existence. Such Guarantor, if such Guarantor is an entity, is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority, and if such Guarantor is a natural person, all requisite power and authority, to invest in the Payment Shares pursuant to this Amendment.

 

ii.    Authorization. The execution, delivery and performance by such Guarantor of this Amendment has been duly authorized and will constitute the valid and legally binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

 

iii.   Purchase Entirely for Own Account. The Payment Shares to be received by such Guarantor hereunder will be acquired for such Guarantor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act 1933, as amended (the “1933 Act”), and such Guarantor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act, without prejudice, however, to such Guarantor’s right at all times to sell or otherwise dispose of all or any part of such Payment Shares in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by such Guarantor to hold the Payment Shares for any period of time. Neither such Guarantor nor any affiliate of such Guarantor is a broker-dealer registered with the SEC under the Securities Exchange Act of 1934, as amended, or an entity engaged in a business that would require it to be so registered.

 

iv.   Investment Experience. Such Guarantor acknowledges that it can bear the economic risk and complete loss of its investment in the Payment Shares and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby.

 

v.    Restricted Securities. Such Guarantor understands that the Payment Shares are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances.

 

 

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vi.   Legends. It is understood that certificates evidencing the Payment Shares may bear the following or any similar legend:

 

“The securities represented hereby have not been registered with the Securities and Exchange Commission or the securities commission of any state in reliance upon an exemption from registration under the Securities Act of 1933, as amended, and, accordingly, may not be transferred unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144, or (iii) the Company has received an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under the Securities Act of 1933, as amended.”

 

If required by the authorities of any state in connection with the issuance of sale of the Payment Shares, the legend required by such state authority.

 

vii.  Accredited Investor. Such Guarantor is an accredited investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

4.     Miscellaneous.

 

a.     Effect on Fee Agreements. Except as amended hereby, the 2015 Fee Agreement and the 2016 Fee Agreement shall remain in full force and effect. For the avoidance of doubt, all previously accrued Monthly Fees and other amounts in excess of the Payment Amount continue to be outstanding and payable by the Company pursuant to the Fee Agreements.

 

b.     Further Instruments. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Amendment and to effect the issuance of the Payment Shares.

 

c.     Notice. All notices and communications required or permitted hereunder shall be given as set forth in the Fee Agreements.

 

d.     Successors and Assigns. This Amendment, and the obligations and rights of the parties hereunder, shall be binding upon and inure to the benefit of the parties’ respective heirs, personal representatives, successors and assigns.

 

e.     Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York (without regard to the principles of conflicts of laws of any jurisdiction).

 

f.     Entire Agreement. This Amendment, along with the Fee Agreements (as amended hereby), shall constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled. 

 

g.     Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which together shall be deemed to constitute one instrument. 

 

[Remainder of Page Intentionally Left Blank]

 

 

3

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment to 2015 Guaranty Fee Agreement and Second Amendment to 2016 Guaranty Fee Agreement as of the date first written above.

 

	
 
	
“Company”
	
 

	
 
	
 
	
 
	
 

	
 
	
DETERMINE, INC.
	
 

	 	 	 	 
	 	 	 	 
	 	By:	/s/ John K. Nolan	 
	 	 	John K. Nolan	 
	 	 	Chief Financial Officer	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	“Guarantors”	 
	 	 	 	 
	 	LLOYD I. MILLER, III	 
	 	 	 	 
	 	 	 	 
	 	/s/ Lloyd I. Miller, III	 
	 	Signature	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	MILFAM II L.P.	 
	 	 	 	 
	 	By:	MILFAM LLC	 
	 	Its:	General Partner	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Lloyd I. Miller, III	 
	 	Name:	Lloyd I. Miller, III	 
	 	Title:	Manager	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	ALIMCO FINANCIAL CORPORATION,	 
	 	formerly known as Alliance Semiconductor Corporation	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Alan B. Howe	 
	 	Name:	Alan B. Howe	 
	 	Title:	CEO	 

 

 

 

 

 

 

EXHIBIT A

 

PAYMENT SHARES ALLOCATION

 

	
Guarantor
	
Number of Payment Shares
	
Amount of Accrued Monthly Fees Satisfied by Issuance of Payment Shares

	
Lloyd I. Miller, III
	
73,471
	
$138,859.49

	
MILFAM II L.P.
	
73,471
	
$138,859.49

	
Alimco Financial Corporation
	
130,306
	
$246,281.02

	
Totals:
	
277,248.00
	
$524,000.00

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