Vuzix Announces Agreements for $4.2 Million in Debt Restructuring

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ROCHESTER, N.Y.— Vuzix Corporation (TSX-V: VZX, OTC:BB) a leading supplier of video eyewear and smart glasses products in the consumer, commercial and entertainment markets, reported that it has entered into definitive agreements with the holders of outstanding secured promissory notes to convert all their debt subject to the closing of the company's proposed public stock offering.

Per these agreements, the various holders have agreed to convert their outstanding secured promissory notes, in the total principal amounts of $2,374,692 (as of Dec. 31, 2012), together with accrued interest (equal to $411,572 as of Dec. 31, 2012) into shares of the company's common stock, subject to the closing of the company's proposed public stock offering, at a conversion price equal to the public offering price (or in the case of one lender, at its option, the conversion price provided in its notes). That same lender also agreed, subject to the closing of Vuzix’ proposed public stock offering, to exchange its outstanding warrants to purchase 533,333 shares of the company's common stock into the greater of (a) 200,000 shares of the Company's common stock, or (b) the Black Scholes value of the warrants as of the date of the pricing of the Company's proposed public stock offering based upon the per share offering price.

Vuzix also entered into deferred compensation deferral and conversion option agreements with its president and CEO, Paul Travers and its CFO, Grant Russell, that are subject to and effective upon the closing of the Company's proposed public stock offering. Under these agreements, unpaid salary owed to them, in the aggregate amount of $1,452,735 (including $442,638 in accrued interest, as of Dec. 31, 2012), will be convertible into shares of the company's common stock, at their option, at a conversion price equal to the offering price of the company's proposed public stock offering, subject to approval of the TSX Venture Exchange. In addition, any remaining unconverted amounts will be due and payable beginning April 1, 2014 in equal monthly payments over a maximum of 12 months.

The closing of all these transactions is subject to approval of the TSX Venture Exchange and satisfaction of customary closing conditions, as well as the closing of the company's proposed public stock offering by June 30, 2013.

Travers said that, "This debt restructuring, where up to a $4,238,998 in liabilities will be converted to equity, will dramatically improve our balance sheet and should help make Vuzix more attractive to our current and new investors. Further, it shows the continuing support and belief of our senior creditors and management of the exciting future potential for Vuzix."