XML 81 R21.htm IDEA: XBRL DOCUMENT v2.4.0.8
SUBSEQUENT EVENTS
12 Months Ended
Dec. 31, 2013
SUBSEQUENT EVENTS [Abstract]  
SUBSEQUENT EVENTS

NOTE 15 - SUBSEQUENT EVENTS

 

On February 13, 2014, the Company's subsidiary, DSS Technology Management, entered into an a series of agreements with certain investors pursuant to which the Company contracted to receive a series of advances up to $4,500,000 from the investors in exchange for promissory notes, fixed return interests and contingent interests collateralized by certain of the Company's intellectual property. On February 13, 2014, the Company received the first advance of $2,000,000 in exchange for a promissory note in the amount of $1,791,000, fixed return equity interests in the amount of $199,000, and contingent equity interests in the amount of $10,000.

 

Upon the Company achieving the First Milestone as defined in the Agreement, the Company will issue and sell to the Investors a promissory note in the amount of $900,000 (the "First Milestone Note") and fixed return equity interests in the amount of $100,000 (the "First Milestone Fixed Return Interests"), and in turn will receive $1,000,000 (collectively, the "First Milestone Advance"). Upon the Company achieving the Second Milestone as defined in the Agreement, the Company will issue and sell to the Investors a promissory note in the amount of $1,350,000 (the "Second Milestone Note") and fixed return equity interests in the amount of $150,000 (the "Second Milestone Fixed Return Interests"), and in turn will receive $1,500,000 (collectively, the "Second Milestone Advance").

 

The Initial Advance Note, the First Milestone Note, and the Second Milestone Note (collectively, the "Notes") shall bear interest at a rate per annum equal to the Applicable Federal Rate on the unpaid principal amount thereof. The Notes will also be subject to a Make Whole Amount calculation (as defined in the Agreement), which will result in an effective annual interest rate of approximately 4.23% for the term thereof, assuming no prepayments. At the Company's option, it may pay accrued interest when due on the Notes, or elect to capitalize the accrued interest, adding it to the principal thereof. The maturity date of all the Notes shall be the date four years after issuance of the Initial Advance Notes.

 

The Company will apply any proceeds it receives in connection with the monetization of certain Patents (as defined in the Agreement) to the payment of the Notes, the Fixed Return Interests, and the Contingent Interests, in the following order (the "Payment Waterfall"): (i) 100% of the first $5,000,000 of Gross Receipts (as defined in the Agreement) shall be paid to the purchasers of the Notes, until they have received payment in full thereunder (including any Make Whole Amount), then to the Fixed Return Interest purchasers until they have received their Fixed Return (as defined in the Agreement), and then to the Contingent Interest purchasers until they have received their 2(x) Return (as defined in the Agreement); then (ii) 100% of the next $3,300,000 of Gross Receipts may be retained by the Company or paid to the Company's counsel; then (iii) the Applicable Percentage (as defined in the Agreement) of any Gross Receipts following the application of the first $8,300,000 shall be paid to the Notes purchasers until they have received payment in full thereunder, then to the Fixed Return Interests purchasers until they have received their Fixed Return, and then to the Contingent Interests purchasers until they have received their 2(x) Return; then (iv) after full payment of the Notes and Fixed Interests have been made, the Company shall pay the Contingent Interest purchasers 12% of the Gross Receipts and the Company shall be entitled to 88% of the Gross Receipts.

 

Pursuant to the Agreement, the Company granted, to the Collateral Agent for the benefit of the investors, a non-exclusive, royalty-free, license (including the right to grant sublicenses subject to certain restrictions as further described in the Agreement and Patent License) with respect to the Patents (as defined in the Agreement), which shall be governed by the Patent License. The Agreement contains certain Events of Default which include: (i) the Company failing to make payments pursuant to the Agreement when due; (ii) on or before the second anniversary of the Effective Date, Investors fail to have received payments from the Company equal to the aggregate amount of Advances made (1x Return); (iii) on or before the fourth anniversary of the Effective Date, Investors fail to have received payments from the Company equal to two times the aggregate amount of Advances made (2x Return); (iv) the Company violates a material covenant or covenants contained in the Agreement, and thereafter fails to cure such breach for a period of 30 days following the earlier of the Company learning of such failure or its receipt of notice of such failure; (v) the Company makes a representation or warranty that is materially false when made; (vi) any default or event of default with respect to any indebtedness in excess of $500,000 of Company shall occur and be continuing; (vii) a Change of Control of Company occurs (as defined in the Agreement); (viii) any material provision of the Agreement, or any related ancillary agreements, ceases to be valid and binding on or enforceable against the Company in accordance with its terms; (ix) any judgment against the Company which exceeds $500,000, or that grants injunctive relief resulting in a Material Adverse Effect (as defined in the Agreement), that remains unsatisfied for a period of 30 days from entry thereof; (x) the Company files a voluntary petition for bankruptcy, or has an involuntary bankruptcy proceeding filed against it that is not responded to or dismissed within 60 days, or seeks other debtor relief under applicable law other than bankruptcy law, or is declared bankrupt, or makes an assignment for the benefit of its creditors, or consents to the appointment of a receiver or other custodian for all or a substantial portion of its property.