Attached files
file | filename |
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EX-10.2 - Vuzix Corp | v206807_ex10-2.htm |
EX-10.1 - Vuzix Corp | v206807_ex10-1.htm |
EX-10.3 - Vuzix Corp | v206807_ex10-3.htm |
EX-10.4 - Vuzix Corp | v206807_ex10-4.htm |
EX-99.1 - Vuzix Corp | v206807_ex99-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
report (Date of earliest event reported) - December 23, 2010
VUZIX
CORPORATION
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
(State or
Other Jurisdiction of Incorporation)
000-53846
|
04-3392453
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
75
Town Centre Drive, Rochester, New York 14623
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(585)
359-5900
(Registrant’s
Telephone Number, Including Area Code)
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[
] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[
] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
INFORMATION
TO BE INCLUDED IN THE REPORT
SECTION
1 REGISTRANT’S BUSINESS AND OPERATIONS
ITEM
1.01. Entry into a Material Definitive Agreement.
A. Convertible
Loan.
On
December 23, 2010, Vuzix Corporation ("Vuzix ") entered into a Convertible Loan
and Security Agreement dated as of December 23, 2010 ("Loan Agreement") with LC
Capital Master Fund Ltd. (the "Lender") pursuant to which the Lender loaned
$4,000,000 to Vuzix (the “Loan”). The Loan is evidenced by a
Convertible Promissory Note dated December 23, 2010. The Loan bears
interest at an annual rate of 12% per annum, payable
semi-annually. The principal of the Loan is payable in 24 monthly
installments beginning on January 23, 2012 and is payable in full on December
23, 2014. The Loan is initially convertible into up to 40,140,492
shares of the $.001 par value common stock (“Common Stock”) of Vuzix at a
conversion price of $0.09965 per share. Vuzix also issued to the
Lender its Warrant to purchase up to 40,000,000 shares of Common Stock at an
exercise price of $0.09965 per share (the “Warrant”). The Warrant
expires on December 23, 2014. The maximum number of shares of Common
Stock that the Lender can acquire upon conversion of the Note and exercise of
the Warrant is 46,517,695. All share numbers in the preceding
paragraph are subject to adjustment as set forth below.
The Loan
is secured by a security interest in all of the assets of Vuzix.
Vuzix
received $4,000,000, less estimated transaction expenses of $160,000, as the
proceeds of the Loan and the issuance of the Warrant to the
Lender. Vuzix can receive up to an additional $3,986,000 over
the next three years upon exercise of the Warrant by the Lender.
The Loan
Agreement, the Note and the Warrant are more fully described below.
The
Lender has certain registration rights, and Vuzix has certain registration
obligations, as set forth in the Loan Agreement and as further described
below.
Convertible Loan and
Security Agreement
Loan
Under the
Loan Agreement, the Lender loaned to Vuzix, and Vuzix borrowed from the Lender,
$4,000,000.
Loan
Terms
Interest
Rate and Payment
The Loan
bears interest at a rate of 12% per annum. Interest is payable
semi-annually.
Repayment
of Principal
Principal
of the Loan is payable in 24 equal monthly installments of $141,666 each, with
the first payment due on January 23, 2012. A final payment of
$600,000 is due on December 23, 2014. Principal may be prepaid at any
time, but the maximum amount that may be prepaid is an amount such that the
unpaid principal balance of the Loan is the lesser of (a) $600,000 or (b) an
amount such that the maximum number of shares that can be or have been acquired
by the Lender upon conversion of the Loan and exercise of the Warrant is not
less than 46, 517,695, adjusted as described below.
Conversion
The
Lender may convert the principal and interest of the Loan into shares of Common
Stock at any time and from time to time at the rate of $0.09965 per share of
Common Stock. The maximum number of shares into which the Loan can be
converted at any time is 46,517,695 less the aggregate number of shares into
which the Loan has previously been converted and for which the Warrant has
previously been exercised. The Loan Agreement contains certain other
limitations on number of shares into which the Lender’s may convert the Loan at
any time.
Reservation
of Shares
Vuzix
must at all times reserve a number of shares of Common Stock sufficient to cover
the maximum number of shares of Common Stock issuable upon conversion of the
Loan.
Adjustments
The
number of shares or other property into which the Loan can be converted is
subject to adjustment to reflect such matters as stock dividends or other
distributions on equity securities in shares of Common Stock; subdivisions or
combinations of the Common Stock; distributions made on shares of Common Stock;
and the effect of mergers, consolidations, recapitalizations, reclassifications
or other similar events.
Covenants
The Loan
Agreement contains certain covenants, including covenants to maintain
unrestricted cash in an amount of $500,000 or unused operating lines of an
equivalent amount, to meet certain EBITDA targets for each of its calendar
quarters while the Loan is outstanding and to permit the Lender to nominate two
persons to Vuzix’s Board of Directors
Security
Vuzix has
granted the Lender a security interest in substantially all of its property as
security for the Loan. The Lender has agreed to subordinate its
security interest in accounts receivable and inventory to a security interest
granted by a lender who provides Vuzix with a working capital line of credit of
not less than $1,000,000 or more than $2,000,000
Vuzix and
the Lender entered into a separate Intellectual Property Security Agreement that
supplemented the provisions of the Loan Agreement and granted the Lender a
security interest in all of Vuzix’s right, title and interest in its
intellectual property.
Line
of Credit Covenant
If Vuzix
does not obtain a working capital line of credit on terms satisfactory to the
Lender of not less than $1,000,000 nor more than $2,000,000 by March 23, 2011,
then Vuzix is obligated to pay the Lender a restructuring fee of $200,000, which
will be represented by a promissory note payable on December 23,
2014. If Vuzix does not obtain such a working capital line of
credit by June 23, 2011, then it is obligated to pay the Lender an additional
restructuring fee of $400,000, which will be represented by a promissory note
payable on December 23, 2014. Both restructuring fee promissory notes
will be convertible into shares of Common Stock on the same terms as are
applicable to conversion of the Loan, except that such notes will be convertible
in to shares of Common Stock at a conversion price equal to the greater of (i)
the U.S. Dollar equivalent of CDN$0.10 per share and (ii) the Market Price (as
defined in the Loan Agreement), on the date of issuance of such promissory
notes.
Warrant
Shares
Subject to Warrant
Pursuant
to the Loan Agreement, the Company issued to the Lender its Warrant entitling
the warrant holder to purchase up to 40,000,000 shares of Common Stock an
exercise price of $0.09965 per share, subject to adjustment as provided
therein. However, the maximum number of shares for which the Warrant
can be exercised at any time is 46,517,695 less the aggregate number of shares
into which the Loan has previously been converted and for which the Warrant has
previously been exercised. The Warrant may be exercised until
December 23, 2014.
Cashless
Exercise
Subject
to the rules of the TSX-Venture Exchange, in lieu of exercising the Warrant, the
Lender may convert the Warrant into whole shares of Common Stock. The
number of shares into which the Warrant may be converted is determined by
dividing the excess of the fair market value of the Common Stock over the
exercise price of the Warrant then in effect by the fair market value of the
Common Stock. The fair market value of the Common Stock is determined
as set forth in the Warrant.
Registration
Rights
The
Lender has the right to cause Vuzix to register the share of Common Stock
issuable upon exercise of the Warrant in one (1) demand registration and one (1)
or more piggy-back registrations, subject to underwrites’ cutbacks
and the rights of prior holders of piggy-back registration rights.
The terms
of the Loan, the conversion price of the loan into shares of Common Stock, the
terms of the Warrant and the other transactions contemplated by the Loan
Agreement and the Warrant were determined through arm's-length negotiations
between Vuzix and the Lender.
The Loan
Agreement, the form of Note, the Intellectual Property Security Agreement and
the form of Warrant have been included as exhibits 10.1, 10.2, 10. 3
and 10.4, respectively, in this Current Report on Form 8-K. Please review these
documents for additional information regarding the terms of these
agreements.
SECTION
2 – FINANCIAL INFORMATION
ITEM
2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
(a)
|
(1) On
December 23, 2010, Vuzix entered into the Loan Agreement with the
Lender.
|
(2) Pursuant
to the Loan Agreement, the Lender loaned $4,000,000 to Vuzix (the
“Loan”). The Loan is evidenced by a Convertible Promissory Note dated
December 23, 2010. The Loan bears interest at an annual rate of 12%
per annum, payable semi-annually. The principal of the Loan is
payable in 24 monthly installments beginning on January 23, 2012 and is payable
in full on December 23, 2014. Repayment of the Loan can be
accelerated upon the occurrence of an Event of Default, as described in the Loan
Agreement. Events of Default include (but are not limited to)
payment defaults, defaults in the observance of covenants contained in the Loan
Agreement or in other agreements between Vuzix and the Lender, insolvency and
certain judgments being entered against Vuzix.
(3) The
Loan is initially convertible into up to 40,140,492 shares of the $.001 par
value common stock (“Common Stock”) of Vuzix at a conversion price of $0.09965
per share. Pursuant to the Loan Agreement, Vuzix issued to the Lender
its Warrant to purchase up to 40,000,000 shares of Common Stock at an exercise
price of $0.09965 per share.
Reference
is made to Item 1.01A of this report on Form 8-K and to the Loan
Agreement for a complete statement of the terms of the Loan and to the Warrant
for its terms.
SECTION
3 - SECURITES AND TRADING MARKETS
ITEM
3.02. Unregistered Sales of Equity Securities
(a) Pursuant
to the Loan Agreement, on December 23, 2010, Vuzix issued to the Lender its
promissory note in the principal amount of $4,000,000, convertible into shares
of Common Stock at an initial conversion price of $0.09965 per share, subject to
limitation and adjustment as provided therein. Also pursuant to the
Loan Agreement, Vuzix issued to the Lender its Warrant to purchase up to
40,000,000 shares of Common Stock at an initial exercise price of $0.09965 per
share, subject to limitation and adjustment as provided therein.
(b) All
of the securities specified in the preceding subparagraph (a) were sold for
cash. The amount payable to Vuzix for such securities was $4,000,000. There were
no commissions paid or payable with respect to such sales. Kaufman
Bros. LLC was paid a financial advisory fee of $50,000 and received warrants to
purchase 1,000,000 shares of Common Stock on the same terms and conditions as
the Warrants.
(c) Exemption
from registration of the securities specified in the preceding subparagraph (a)
is claimed under Section 4(2) of the Securities Act of 1933, as amended (the
“Act”). Vuzix reasonably believes that the Investor has knowledge and
experience in finance and business matters sufficient to evaluate the risks and
merits of the investment and does not intend to resell or distribute the
securities to the public.
(d) The
Loan is convertible until December 23, 2010. The Warrant is
exercisable until December 23, 2014. The initial conversion price of
the Loan and the initial exercise price of the Warrant are each $0.09965,
subject to adjustment as provided in the Loan Agreement and the Warrant,
respectively.
ITEM 3.03 Material Modification to
Rights of Security Holders.
The Loan
Agreement requires that Vuzix maintain at all times a
balance of unrestricted cash and cash equivalents (not including any cash held
in any collateral account), together with undrawn availability under its working
capital line, of at least $500,000, measured on a monthly basis on the last day
of each month.
SECTION
9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM
9.01. Exhibits
Following
is the Index of Exhibits furnished in accordance with Item 601 of Regulation
S-K, filed as part of this Current Report on Form 8-K or incorporated by
reference herewith:
10.1
|
Convertible
Loan and Security Agreement, dated as of December 23, 2010, by and between
Vuzix and the Lender.
|
10.2
|
Intellectual
Property Security Agreement dated as of December 23, 2010, by
and between Vuzix and the Lender.
|
10.3
|
Warrant
to Purchase Stock dated December 23, 2010, issued by Vuzix to the
Lender.
|
10.4
|
Convertible
Promissory Note issued by Vuzix to the
Lender.
|
99.1
|
Press
release issued by Vuzix on December 23,
2010.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
VUZIX
CORPORATION
|
|||
Date: December
30, 2010
|
By:
|
/s/ Paul Travers | |
Name: Paul
Travers
|
|||
Title: President
|
|||
EXHIBIT
INDEX
Exhibit
Number Description
10.1
|
Convertible
Loan and Security Agreement, dated as of December 23, 2010, by and between
Vuzix and the Lender.
|
10.2
|
Intellectual
Property Security Agreement dated as of December 23, 2010, by
and between Vuzix and the Lender.
|
10.3
|
Warrant
to Purchase Stock dated December 23, 2010, issued by Vuzix to the
Lender.
|
10.4
|
Convertible
Promissory Note issued by Vuzix to the
Lender.
|
99.1
|
Press
release issued by Vuzix on December 23,
2010.
|