LOAN AGREEMENT
This loan agreement ("Agreement") is entered into as of February 24, 1997,
by and between ONTRO, INC. a California corporation (referred to herein as
"Borrower" or the "Company"), and 4D ENTERPRISES, INC., a California
corporation (referred to herein as "Lender"). Borrower and Lender agree as
follows:
1. LOAN. Lender hereby lends to Borrower the sum of Fifty-Five Thousand
Dollars ($55,000.00), (the "Loan").
1.1 NOTE. The Loan shall be evidenced by a convertible promissory
note (the "Note") (a copy of which is attached as Exhibit "A") executed by
Borrower, dated as of the date the Loan is made, providing for (A) the payment
of the principal amount plus interest at the rate of ten percent (10%) per
annum, compounded annually, and computed on the basis of a 365-day year and
actual days elapsed, payable on the earlier to occur of: (i) the fifth business
day after Borrowers completion of the initial public offering of its common
stock; or (ii) two (2) years from the date of this Note ("Maturity Date") at
which time all then unpaid principal and accrued interest shall be due and
payable; or (B) the conversion of some or all amounts due pursuant to the Note
into shares of the Borrower's common stock at the election of the Borrower, as
more particularly described hereinbelow.
1.2 WARRANT. Borrower shall as additional interest grant Lender a
Warrant to purchase ten thousand (10,000) shares of Borrower's common stock for
every Fifty-Five Thousand Dollars ($55,000) loaned to the Borrower by the Lender
pursuant to this Agreement (the "Warrant"). The exercise price of the Warrant
shall be One Dollar ($1.00) per share. The Warrant shall be exercisable by the
Lender at any time during the later to occur of: (i) Twenty-Four (24) months
from the date of the Note; or (ii) Thirty (30) days after the date there is no
longer any amount remaining due from the Borrower to the Lender or the
conversion of this Note pursuant to this Agreement. The Warrant shall be
substantially in the form of Exhibit "B", attached hereto and incorporated
herein. The Borrower shall reserve from its authorized and unissued common
stock the number of shares underlying the Warrant.
2. BORROWER'S NOTE CONVERSION RIGHTS. The Company and Lender agree the
Company shall have the right, in it's sole and absolute discretion, to convert
the amounts due pursuant to this Note into shares of Ontro, Inc. common stock on
or before the fifth business day after the completion of the Company's initial
public offering of its common stock. Upon the Company's election to convert
some or all of this Note, the number of shares of Ontro, Inc. common stock this
Note shall be converted into shall be determined by dividing the total amount of
principal and accrued interest due pursuant to this Note on the date of
conversion by the
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Conversion Price (as hereinafter defined).
2.1 CONVERSION PRICE. The Conversion Price shall be fifty percent
(50%) of the initial public offering price for the Company's common stock per
share. No rights regarding conversion or lack thereof shall inure to Lender or
the Company in the event the Company's initial public offering does not take
place or the Company elects not to convert.
2.2 MANNER OF CONVERSION. The Company may convert this Note,
provided the Company satisfies the following conditions:
2.2.1 Written notice is provided to Lender evidencing the
Company's election to convert the amounts due under this Note, and such notice
is sent via facsimile transmission or written notice on or before the fifth
business day after the Company's completion of its initial public offering.
Such conversion shall be deemed to have been effected immediately prior to the
close of business on the day on which such conversion request shall have been
received. Upon the date conversion is effected the rights of Lender to receive
principal and interest pursuant to this Note shall cease, and Lender shall be
treated for all purposes as the record shareholder of such securities as are to
be issued to Lender in conversion of this Note.
2.2.2 The Company delivers to Lender certificates or other
instruments evidencing ownership by Lender of the number of shares of the
Company's common stock this Note may be converted into as provided in paragraph
(a) hereinabove. No fractional securities will be issued in connection with any
conversion under this Note, but in lieu of such fractional securities, the
Company shall make a cash refund therefor equal in amount to the product of the
applicable fraction multiplied by the Conversion Price.
2.2.3 Upon receipt by Lender of the certificates referenced
in paragraph 2.2.2 hereinabove, this Convertible Promissory Note shall be deemed
cancelled and paid in full. In the event the Company elects to convert only a
portion of the principal and interest due pursuant to the Note, the Company
shall deliver the certificates evidencing the number of shares such amounts were
converted into, along with payment for the balance due.
2.3 CONVERTED SHARES SUBJECT TO LOCK UP. The shares of the
Company's common stock issued to Lender in conversion of the Note shall be
subject to a lock-up agreement, wherein the holder of such shares agrees not to
sell, assign or transfer the shares for a specific period. The holder of the
converted shares agrees to sign a Lock-Up Agreement with terms no more
restrictive than the Lock-Up Agreements entered into by shareholders of the
Company who are officers, directors or five percent (5%) shareholders of the
Company.
2.4 RESTRICTED SHARES UPON CONVERSION. The shares of the Company's
common stock issued to Lender in conversion of the Note shall be "restricted
securities" as defined in Sections 5.6 and shall be subject to the limitations
and legend conditons as set forth in Sections 5.7 through 5.10 hereinbelow.
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2.5 The Company will at all times during the period this Note is
convertible, reserve and keep available the number of common shares as shall be
issuable upon the conversion of this Note.
3. CONDITIONS PRECEDENT TO LENDER'S OBLIGATIONS. Lender's obligation to
disburse the Loan is subject to the condition that, on the date of disbursement
("Closing Date"), there shall have been delivered to Lender, in form and
substance satisfactory to Lender and its counsel:
3.1 AUTHORIZATION TO BORROW. A copy of a resolution or resolutions,
in form and substance satisfactory to Lender, passed by the board of directors
of Borrower, authorizing the borrowing provided for in this Agreement, and the
execution, delivery, and performance of this Agreement and the Note or other
instrument or agreement required under this Agreement;
3.2 NOTE. The Note substantially in the form attached hereto as
Exhibit "A", executed by the President of the Borrower.
3.3 AUTHORIZATION OF WARRANT. A copy of a resolution or
resolutions, in form and substance satisfactory to Lender, passed by the board
of directors of Borrower, authorizing the grant of and delivery to the Lender
of the Warrant and reserving the shares of common stock of the Borrower
thereunder.
3.4 WARRANT. The Warrant substantially in the form as attached
hereto as Exhibit "B", executed by a duly authorized officer of the Borrower.
3.5 INCUMBENCY CERTIFICATE. A certificate, signed by the Secretary
or an Assistant Secretary of Borrower and dated the Closing Date, certifying the
incumbency of the person or persons authorized to execute and deliver on behalf
of Borrower this Agreement and the Warrant and the Note or other instrument or
agreement required under this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower represents and
warrants that:
4.1 ORGANIZATION. Borrower is a corporation duly organized and
existing under the laws of the State of California with its principal place of
business at 00000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxxxxx 00000. It has
the power to own its property and to carry on its business as it is now being
conducted. It is duly qualified and authorized to do business and is in good
standing in every state, country, or other jurisdiction in which the nature of
its business and properties makes such qualification necessary;
4.2 SUBSIDIARIES AND AFFILIATES. Borrower does not own or control,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, association, partnership, business, trust or other entity;
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4.3 AUTHORITY. Borrower has full power and authority (corporate and
other) to borrow the sums provided for in this Agreement, to execute and deliver
this Agreement, to issue the Warrant, the Note and any other instrument or
agreement required under this Agreement, and to perform and observe the terms
and provisions of this Agreement and of all such other instruments and
agreements;
4.4 CORPORATE ACTION. All corporate action by Borrower, its
directors or stockholders, necessary for the authorization, execution, delivery,
and performance of this Agreement, issuance of the Warrant, and the Note and
any other instrument or agreement required under this Agreement has been duly
taken;
4.5 INCUMBENCY AND AUTHORITY OF SIGNATOR'S. The officers of
Borrower executing this Agreement, the Warrant, the Note and any other
instrument or agreement required under this Agreement are duly and properly in
office and fully authorized to execute them;
4.6 DUE AND VALID EXECUTION. This Agreement has been duly
authorized, executed, and delivered by Borrower, and is a legal, valid, and
binding agreement of Borrower, enforceable against Borrower in accordance with
its terms and the Warrant and the Note and any other instrument or agreement
required under this Agreement has been so authorized and, when executed and
delivered, will be similarly valid, binding, and enforceable;
4.7 RESERVED SHARES. There are sufficient authorized shares of
common stock available for the conversion of the Note and/or the Warrant to be
exercised and such shares of common stock to be issued in conversion of the Note
and such shares underlying the Warrant have been reserved on the books of the
Borrower.
4.8 NO VIOLATION. There is no charter, bylaw, or capital stock
provision of Borrower, and no provision of any indenture or agreement, written
or oral, to which Borrower is a party or under which Borrower is obligated, nor
is there any statute, rule, or regulation, or any judgment, decree, or order of
any court or agency binding on Borrower which would be contravened by the
execution and delivery of this Agreement, the Warrant, the Note or any other
instrument or agreement required under this Agreement, or by the performance of
any provision, condition, covenant, or other term of this Agreement, the
Warrant, the Note or any such other instrument or agreement;
4.9 LITIGATION PENDING. There is no litigation, tax claim,
proceeding or dispute pending, or, to the knowledge of Borrower, threatened,
against or affecting Borrower or its property, the adverse determination of
which might affect Borrower's financial condition or operations or impair
Borrower's ability to perform its obligations under this Agreement or under the
Warrant, the Note or any other instrument or agreement required by this
Agreement;
4.10 EVENTS OF DEFAULT. No event has occurred and is continuing or
would result from the making of the Loan which would constitute an Event of
Default as defined herein or which, on the lapse of time or notice or both,
would become such an Event of Default;
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4.11 FINANCIAL STATEMENTS. All financial statements, as well as all
other information, and data furnished by Borrower to Lender are correct, and
accurately and fairly represent the financial condition and results of
operations of Borrower as of that date. Since that date there has been no
material adverse change in Borrower's financial condition or results of
operations sufficient to impact Borrower's ability to repay the Loan in
accordance with the terms of this Agreement. Borrower has no contingent
obligations, liabilities for taxes, or other outstanding financial obligations
which are material in the aggregate, except as disclosed in such statements,
information, and data;
5. REPRESENTATIONS AND WARRANTIES OF LENDER. This Agreement is made with
Lender in reliance upon Lender's representation and warranties to the Company,
which by Lender's execution of this Agreement Lender hereby confirms, that:
5.1 AUTHORIZATION. This Agreement constitutes Lender's valid and
legally binding obligation, enforceable in accordance with its terms.
5.2 INVESTMENT INTENT. The Note and Warrant to be received by
Lender will be acquired for investment for Lender's or his designee's, own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that Lender has no present intention of
selling, granting any participation in, or otherwise distributing the same. By
executing this Agreement, Lender further represents that Lender does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to the Note or the Warrant or any common stock underlying the Warrant.
5.3 DISCLOSURE OF INFORMATION. Lender believes he/she/they have
received all the information he/she/they consider necessary or appropriate for
deciding whether to make the Loan, acquire the Note and the Warrant. Lender
further represents that he/she/they have had an opportunity to ask questions and
receive answers from officers of the Company regarding the Company, its
business and the terms and conditions of the Note and the Warrant.
5.4 CONFIDENTIALITY. Lender hereby represents, warrants and
covenants that he/she/they shall maintain in confidence, and shall not use or
disclose without the prior written consent of the Company, any information
identified as confidential that is furnished to him/her/them by the Company in
connection with this Agreement. This obligation of confidentiality shall not
apply, however, to any information (a) in the public domain through no
unauthorized act or failure to act by Lender, or (b) lawfully disclosed to
Lender by a third party who possessed such information without any obligation of
confidentiality. Lender further covenants that he/she/they shall return to the
Company all tangible materials containing such information upon request by the
Company.
5.5 INVESTMENT EXPERIENCE. Lender is a lender and investor in notes
and securities of companies in the development stage and acknowledges
he/she/they are able to fend for
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themselves, can bear the economic risk and complete loss of his/her/their
investment and has such knowledge and experience in financial or business
matters that he/she/they are capable of evaluating the merits and risks of the
investment in the Note and the Warrant.
5.6 RESTRICTED SECURITIES. Lender understands the Note, the shares
resulting from the conversion of the Note, the Warrant and the shares underlying
the Warrant he/she/they are acquiring are characterized as "restricted
securities" under the federal securities laws in as much 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 not be
resold without registration under the Securities Act of 1933, as amended (the
"Securities Act"), except in certain limited circumstances. In this connection
Lender represents that he/she/they are familiar with Securities and Exchange
Commission ("SEC") Rule 144, as presently in effect, and understand the resale
limitations imposed thereby and by the Securities Act.
5.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, Lender further agrees not to make any
disposition of all or any portion of the Note, the shares resulting from the
conversion of the Note, the Warrant or the shares underlying the Warrant unless
and until:
5.7.1 There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
5.7.2 (i) Lender shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition and (ii) if
reasonably requested by the Company, Lender shall have furnished the Company
with an opinion of counsel, that such disposition will not require registration
of such shares under the Securities Act.
5.8 LEGENDS.
5.8.1 It is understood the Note, the certificate representing
the shares resulting from the conversion of the Note, the Warrant, or a
certificate for the Corporation's common stock evidencing the shares underlying
the Warrant ("Certificate") may bear one or more of the following legends:
"These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for
sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the
securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
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5.8.2 Any legend required by the laws of the State of
California or other jurisdiction, including any legend required by the
California Department of Corporations and Sections 417 and 418 of the California
Corporations Code.
5.9 ACCREDITED INVESTOR. Lender is an "accredited investor" as that
term is defined in CFR Section 230. 501(a) (Regulation D), as amended, of the
SEC under the Securities Act.
5.10 REMOVAL OF LEGENDS; FURTHER COVENANTS.
5.10.1 Any legend placed on the Note, the Warrant or a
Certificate pursuant to Section 5.8 hereof shall be removed (i) if the Note, the
Warrant or the shares represented by such Certificates shall have been
effectively registered under the Securities Act or otherwise lawfully sold in a
public transaction, (ii) if the shares may be transferred in compliance with
Rule 144(k) promulgated under the Securities Act, or (iii) if Lender shall have
provided the Company with an opinion of counsel, in form and substance
acceptable to the Company and its counsel and from attorneys reasonably
acceptable to the Company and its counsel, stating that a public sale, transfer
or assignment of the Note, the Warrant or the shares underlying the Warrant may
be made without registration.
5.10.2 Any legend placed on the Note or a Certificate pursuant
to Section 5.8 hereof shall be removed if the Company receives an order of the
appropriate state authority authorizing such removal or if Lender provides the
Company with an opinion of counsel, in form and substance acceptable to the
Company and its counsel and from attorneys reasonably acceptable to the Company
and its counsel, stating that such state legend may be removed.
5.10.3 Lender further covenants that Lender will not transfer
the Note or the Warrant, in violation of the Securities Act, the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), or the rules of the
Commission promulgated thereunder, including Rule 144 under the Securities Act.
Further, Lender agrees that, prior to the closing of the Company's initial
public offering, Lender will not transfer the Note, the Warrant or any shares
underlying the Warrant without the Company's prior consent, even if Lender is
otherwise permitted to transfer them pursuant to this Agreement and all
applicable law.
5.11. CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE NOTE AND
THE WARRANT WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH NOTE AND THE WARRANT OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF NOTE OR THE WARRANT IS EXEMPT FROM QUALIFICATION BY SECTIONS 25100, 25102 OR
25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
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AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
6. BORROWER'S AFFIRMATIVE COVENANTS. Borrower covenants and agrees that
until the full and final payment of all indebtedness incurred under this
Agreement has been made, it will, unless Lender waives compliance in writing:
6.1 USE OF PROCEEDS. Use the proceeds of the Loan in connection
with the further financing of its operations and for general working capital;
6.2 PAYMENT. Repay principal of and interest on the Loan according
to the terms of this Agreement and the terms of the Note evidencing the Loan;
6.3 NOTICE. Promptly give written notice to Lender of:
6.3.1 All litigation affecting Borrower when the amount
claimed is $1,000,000 or more;
6.3.2 Any substantial dispute which may exist between
Borrower and any governmental regulatory body or law enforcement authority;
6.3.3 Any labor controversy resulting in or threatening to
result in a strike against Borrower;
6.3.4 Any proposal by any public authority to acquire
Borrower's assets or business or to engage in activities competitive with
Borrower;
6.3.5 Any Event of Default or any event which, on a lapse of
time or notice or both, would become an Event of Default; and
6.3.6 Any other matter that has resulted or might result in a
material adverse change in Borrower's financial condition or operations;
6.4 DOCUMENTS. Deliver to Lender, in form and detail satisfactory
to Lender, and in the number of copies Lender may reasonably request:
6.4.1 As soon as available but no later than, seventy-five
(75) days after the close of each fiscal year of Borrower, a complete copy of
its audit report, which shall include at least its balance sheet as of the close
of such year, and its income statement, reconciliation of capital accounts, and
statement of cash flows for that year, certified by an independent public
accountant selected by Borrower and satisfactory to Lender. The certificate
shall not be qualified or limited because of restricted or limited examination
by that accountant of any material portion of Borrower's records;
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6.4.2 Such other statement or statements, lists of property
and accounts, budgets, forecasts or reports regarding Borrower as Lender may
reasonably request;
6.5 MAINTENANCE. Maintain and preserve its corporate existence and
all rights, privileges, and franchises now enjoyed, conduct its business in an
orderly, efficient, and customary manner, keep all its properties in good
working order and condition, and from time to time make all needed repairs to,
and renewals or replacements of, its properties so that the efficiency of those
properties shall be fully maintained and preserved;
6.6 OBLIGATIONS. Pay all obligations, including tax claims, at
maturity, unless the obligation to make such payment or payments is in good
faith being disputed or is being contested by appropriate proceedings with due
diligence;
6.7 INSURANCE. Maintain and keep in force in adequate amounts fire
(including use and occupancy), public liability, property damage, and workers'
compensation insurance;
6.8 BOOKS AND RECORDS. Maintain adequate books, accounts, and
records and prepare all financial statements required under this Agreement in
accordance with generally accepted accounting principles and practices
consistently applied, and in compliance with the regulations of any governmental
regulatory body having jurisdiction over them; and permit employees or agents of
Lender at any reasonable time to inspect Borrower's properties, and to examine
or audit Borrower's books, accounts, and records and make copies and memoranda
of them;
6.9 SALES PROCEEDS. Apply the proceeds of sales of its fixed or
capital assets in excess of a cumulative total of $500,000 at Lender's option,
to:
6.9.1 the most remote principal installments of the Loan;
6.9.2 replacement of the assets sold;
6.9.3 a reserve for future purchase of fixed or capital
assets; or
6.9.4 working capital purposes;
7. BORROWER'S NEGATIVE COVENANTS. Borrower covenants and agrees
that until full and final payment of all indebtedness incurred under this
Agreement has been made, it will not, without the prior written consent of
Lender:
7.1 DIVIDENDS. Declare or pay any dividends on any of its shares
except dividends payable in Borrower's capital stock;
7.2 REDEMPTIONS. Purchase, redeem, or otherwise acquire for value,
any of its shares, or create any sinking fund in relation to any of its shares,
except as part of restricted
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compensation or similar awards or issuances to employees or consultants;
7.3 LIQUIDATION OR DISSOLUTION. Liquidate or dissolve, or enter
into any consolidation, merger, pool, joint venture, syndicate, or other
combination, or sell, lease, or dispose of its business or assets as a whole or
such part as in the reasonable opinion of Lender constitutes a substantial
portion of its business or assets;
7.4 FURTHER INDEBTEDNESS. Except as provided in this Agreement,
create or incur any indebtedness for borrowed money which would be senior in
repayment to the Loan, or become liable as a surety, guarantor, accommodation
endorser, or otherwise, for or on the obligation of any other person, firm, or
corporation which would provide a priority of repayment to the Loan; provided,
however, that this section shall not prohibit:
7.4.1 The acquisition of equipment, goods, supplies, or
merchandise on normal credit;
7.4.2 The execution of bonds, undertakings, or contracts in
the usual course of Borrower's business; or
7.4.3 The endorsement of negotiable instruments received in
the usual course of Borrower's business;
7.5 ENCUMBRANCES. Create, assume, or suffer to exist any mortgage,
encumbrance, or other lien (including a lien of attachment, judgment, or
execution), or security interest (including the interest of a conditional seller
of goods), securing a charge or obligation, on or of any of its property, real
or personal, whether now owned or hereafter acquired, except:
7.5.1 Any lien or charge for current tax, assessment, or
other governmental charge, which is not delinquent or remains payable without
any Penalty, or the validity of which is contested in good faith by appropriate
Proceedings on stay of execution of the enforcement of the lien or charge;
7.5.2 Deposits or pledges to secure (i) statutory
obligations, (ii) surety or appeal bonds, (iii) bonds for release of attachment,
stay of execution, or injunction, or (iv) performance of bids, tenders,
contracts (other than for the repayment of borrowed money) or leases, or for
purposes of like general nature in the ordinary course of Borrower's business;
7.5.3 Purchase-money security interests in personal property
acquired after the date of this Agreement when the obligation secured does not
exceed one hundred percent (100%) of the cost of the property purchased;
7.6 ASSET DISPOSITIONS. Dispose of any of its assets except for
full, fair, and reasonable consideration, or enter into any sale and leaseback
agreement covering any of its fixed
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or capital assets, or dispose of its assets as a whole or such part of its
assets except in the regular course of conducting its business.
8. EVENTS OF DEFAULT. Regardless of the terms of any note issued under
this Agreement, the occurrence of any of the events set out below ("Events of
Default") shall at the option of Lender, make all interest and principal
remaining on the Loan immediately due and payable, without notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor,
or other notices or demands of any kind, except as specified in this Agreement:
8.1 Payments Borrower shall fail to pay, within 10 days after the
date when due, any installment of interest or principal in accordance with the
terms of this Agreement or of the Note evidencing the Loan;
8.2 Representations and Warranties. Any representation or warranty
by Borrower in this Agreement or in any agreement, instrument, or certificate
executed under this Agreement or in connection with any transaction contemplated
by this Agreement shall prove to have been false or misleading in any material
respect when made;
8.3 LIENS. An involuntary lien or liens in the aggregate sum of
$500,000 or more, of any kind, shall attach to the assets or property of
Borrower, except for taxes due but not in default, or for taxes that are being
contested; provided, however, that no lien shall be considered for the purpose
of this section if:
8.3.1 Such lien is removed without expenditure of funds by
Borrower other than the costs of appropriate proceedings; or
8.3.2 Borrower, in the reasonable opinion of its counsel,
has the right to and is diligently proceeding to have such lien removed without
unreasonable expenditure of funds by Borrower other than the costs of
appropriate proceedings, and such opinion of counsel is furnished to Lender
within ten days after written request for it;
8.4 JUDGMENTS. A judgment or judgments shall be entered against
Borrower in the aggregate amount of $500,000 or more on a claim or claims not
covered by insurance; provided, however, that no judgment shall be considered
for the purpose of this section if:
8.4.1 Such judgment is vacated without unreasonable
expenditure of funds by Borrower other than the costs of appropriate
proceedings; or
8.4.2 Borrower, in the opinion of its counsel, has the right
to and is diligently proceeding to have such judgment vacated without
unreasonable expenditure of funds by Borrower other than the costs of
appropriate proceedings, and such opinion of counsel is furnished to Lender
within ten days after written request for it;
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8.5 BANKRUPTCY. Borrower shall file any petition or action for
relief under any Bankruptcy, arrangement, reorganization, insolvency, or
moratorium law, or any other law or laws for the relief of or relating to
debtors, or shall, with respect to any involuntary petition or action for relief
under such law or laws, consent or fail to timely object to the relief requested
in such petition;
8.6 INVOLUNTARY BANKRUPTCY. An involuntary petition shall be filed
under any bankruptcy statute against Borrower, or a receiver, trustee,
custodian, or similar officer of the court shall be appointed to take possession
of all or any substantial part of Borrower's properties, unless such petition or
appointment is dismissed or withdrawn or ceases to be in effect within 90 days
from the date of the filing or appointment;
8.7 OTHER DEFAULT. Any material default shall occur under any other
agreement pertaining to the borrowing of money or the advance of credit to which
Borrower may be a party as borrower, if that default gives to the holder of the
obligation concerned the right to accelerate the indebtedness;
8.8 BREACH. Borrower shall breach or default under any term,
condition, provision, representation, or warranty in this Agreement if that
breach or default shall continue for ten days after its occurrence, or, if
Lender has received notice of the breach or default within that ten-day period,
after notice of the breach or default to Borrower from Lender, whichever is
later.
9. MISCELLANEOUS.
9.1 NOTICES. Any communications between the parties or notices
provided for in this Agreement may be given by mailing them, first class,
postage prepaid:
to Lender at:
4D Enterprises, Inc.
00000 Xx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Xxx Xxxxx
and to Borrower at:
Ontro, Inc.
00000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxx, Xx. 00000
Attn: Xxxxx X. Xxxxxxx
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with a copy to:
Xxxxxx Xxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, XX. 92037-1483
Attn: Xxxxx X. Xxxxxx
or to such other address as either party may indicate to the other in writing
after the date of this Agreement.
9.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties and their respective successors and assigns;
provided, however, that Borrower shall not assign this Agreement or any of the
rights, duties, or obligations of Borrower under this Agreement without the
prior written consent of Lender.
9.3 DELAY AND WAIVERS. No delay or omission to exercise any right,
power, or remedy accruing to Lender on any breach or default of Borrower under
this Agreement shall impair any such right, power, or remedy of Lender, nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence in such breach or default, or waiver of or acquiescence in any
similar breach or default occurring later; nor shall any waiver of any single
breach or default be considered a waiver of any other prior or subsequent breach
or default. Any waiver, permit, consent, or approval of any kind by Lender of
any breach or default under this Agreement, or any waiver by Lender of any
provision or condition of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in that writing. All
remedies, either under this Agreement or by law or otherwise afforded to Lender,
shall be cumulative and not alternative.
9.4 ATTORNEYS FEES. In the event of any legal action or suit in
relation to this Agreement or any note or other instrument or agreement required
under this Agreement, or in the event that Lender incurs any legal expense in
protecting its rights under this Agreement or under any security agreement in
any legal proceeding, Borrower, in addition to all other sums which Borrower may
be called on to pay, will pay to Lender the amount of such legal expense and
will, if Lender prevails in such action, pay to Lender a reasonable sum for its
attorney's fees and all other costs and expenses.
9.5 SEVERABILITY. In the event any sentence or paragraph of this
Agreement is declared void by a court of competent jurisdiction, said sentence
or paragraph shall be deemed severed from the remainder of this Agreement, and
the balance of this Agreement shall remain in effect.
9.6. TITLES, CAPTIONS AND PARAGRAPH HEADINGS. Paragraph and
subparagraph titles and captions contained in this Agreement are inserted only
as a matter of convenience for reference. Such titles, captions, and paragraph
headings in no way define, limit, extend or describe the scope of this Agreement
or the intent of any provisions hereof.
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9.7 NUMBER AND GENDER. Whenever a singular number is used in this
Agreement or where required by context, the same shall include plural.
Masculine gender shall include feminine and neuter genders and the word "person"
shall include corporation, firm, partnership, or other forms of association.
9.8. ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement between all parties herein and supersedes all prior Agreements and
understandings, oral or written, between the parties hereto with respect to the
subject matter hereof, and shall not be modified or amended except in writing,
executed by all parties herein.
9.9. COUNTERPARTS. This Agreement may be executed in several
counterparts, and as so executed shall constitute an Agreement, binding to all
parties herein.
9.10 NON-WAIVER. No delay or omission on the part of any party
herein in exercising any rights or remedies herein shall operate as a waiver of
such rights or remedies. No waiver of any default shall constitute a waiver of
any other default, whether of the same or any other covenant or condition. No
waiver, benefit, privilege or service voluntarily given or performed by any
party herein shall give the other parties any contractual right by custom,
estoppel or otherwise. Any waiver by any party herein must be executed in
writing, expressly specifying the subject and extent of the waiver.
9.11 GOVERNING LAW AND VENUE. This Agreement and all amendments
thereto shall be governed, construed, and enforced in accordance with the laws
of the State of California, and venue for any legal action arising out of this
Agreement shall be in San Diego County, California.
9.12 LEGAL REPRESENTATION. The law firm of Xxxxxx Xxxxxxx LLP has
prepared this Agreement solely on behalf of the Borrower based on instructions
received. The Lender has been advised to seek and obtain separate legal
counsel with respect to the preparation and execution of this Agreement, and
he/she has had an opportunity to do so, has access to qualified independent
counsel and has sought and obtained such advice and counsel to the extent
desired.
9.13 CONSTRUCTION. This Agreement has been negotiated between the
parties and their advisors, and shall not be construed against the party
preparing it, but shall be construed as if all parties jointly prepared this
Agreement and any uncertainty and ambiguity shall not be interpreted against any
one party.
9.14 NO OTHER INDUCEMENT. The making, execution and delivery of this
Agreement by the parties hereto has been induced by no representations,
statements, warranties or agreements other than those expressed herein.
9.15 DISPUTES. In the event of an inconsistency arising between the
terms of the Note or the Warrant and this Loan Agreement, the terms of the Loan
Agreement shall control.
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IN WITNESS WHEREOF, the parties to this Agreement have executed this loan
Agreement by their duly authorized officers effective as of the day and year
first above written.
BORROWER:
ONTRO, INC.
a California corporation
By:
--------------------------------------
Xxxxx X. Xxxxxxxx, Secretary
LENDER:
4D ENTERPRISES, INC.
a California corporation
By:
--------------------------------------
Xxx Xxxxx, President
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EXHIBIT A
NOTE
EXHIBIT B
WARRANT
