LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made and entered into to be
effective as of June 28, 2011 (the "Effective Date"), by and between XXXXXX
INTERNATIONAL HOLDINGS, INC., a California corporation ("Lender") and WINTEC
PROTECTIVE SYSTEMS, INC., a Texas corporation ("Borrower").
ARTICLE I
LOAN TO BORROWER
1.1 Loan. Subject to the terms and conditions set forth in this
Agreement, and the other agreements, instruments, and documents executed and
delivered in connection herewith and pursuant hereto, including but not limited
to the Note (as hereafter defined), the Exchange Agreement (as hereafter
defined), the Consulting Agreements (as hereafter defined), the Redemption and
Purchase Agreement (as hereafter defined), the Amended and Restated Bylaws (as
hereafter defined), and the Shareholders' Agreement (as hereafter defined)
(collectively, the "Ancillary Agreements" and together with this Agreement, the
"Loan Documents"), Lender shall extend a loan to Borrower, and Borrower shall
borrow from Lender, the sum of up to One Million Five Hundred Thousand and
No/100 Dollars ($1,500,000.00), in cash (the "Loan").
1.2 Use of Loan Funds. The Loan shall be used solely for the purpose
of expanding the business of Borrower, and other similar purposes, and
not for the funding of any disbursements or distributions to the
shareholders of Borrower.
1.3 Funding of Loan. The Loan shall be funded by the Lender in
a series of advancements, as follows:
(a) Fifty Thousand and No/100 Dollars ($50,000.00) of the Loan
shall be funded upon full execution and delivery of the Loan Documents
(the "Initial Funding").
(b) Four Hundred Fifty Thousand and No/100 Dollars
($450,000.00) of the Loan shall be funded within thirty (30) days of
the Initial Funding.
(c) One Million and No/100 Dollars ($1,000,000.00) of the Loan
shall be funded at such times, and in such amounts, as the Borrower
shall request from Lender in writing.
1.4 Promissory Note. The Loan shall be evidenced by a revolving
promissory note made by Borrower in favor of Lender (together with any renewals,
extensions, and increases thereof, the "Note"), duly executed by Borrower, of
even date herewith, in the original principal amount of the Loan, and in form
and substance acceptable to the Lender, bearing interest at a rate of one
percent (1.00%) per annum. The Note shall be due and payable at such times and
in such amounts as Borrower may determine, in its sole discretion, with the
total outstanding principal balance of the Note, and all accrued but unpaid
interest thereon, due and payable in full on the four (4) year anniversary of
the Effective Date.
ARTICLE II
ANCILLARY AGREEMENTS
2.1 Exchange Agreement. Lender shall contribute three million
(3,000,000) shares of common stock of Lender, $0.0001 par value per share, as a
contribution to the capital of Borrower, in exchange for the issuance by
Borrower to Lender of twenty million four hundred thousand (20,400,000) shares
of common stock of Borrower, $0.001 par value per share, all pursuant to that
certain Contribution and Exchange Agreement executed by and between Borrower and
Lender contemporaneously herewith (the "Exchange Agreement").
2.2 Licensing Agreements. In connection with and as further
consideration for making the Loan to Borrower, Borrower shall grant to Lender:
(a) An exclusive license for the use of Borrower's
anti-corrosion material for small marine craft, pursuant to that
certain License Agreement executed by and between Borrower and Lender
contemporaneously herewith (the "License Agreement"); and
(b) The right of first refusal to exclusively license such
intellectual property of Borrower as Borrower shall, from time to time,
negotiate to license to third parties, pursuant to that certain Right
of First Refusal Agreement executed by and between Borrower and Lender
contemporaneously herewith (the "ROFR Agreement").
2.3 Redemption and Purchase Agreement. After the full repayment of the
Note, and upon prior written notice from Borrower, (a) Borrower shall redeem and
liquidate from Lender twelve million four hundred thousand (12,400,000) shares
of common stock in Borrower then-owned by Lender, and (b) Lender shall grant
Borrower options to purchase three million (3,000,000) shares of common stock of
Lender, $0.0001 par value per share, at a strike price of Ten Cents ($0.10) per
share, all pursuant to that certain Stock Redemption and Purchase Agreement
executed by and between Borrower and Lender contemporaneously herewith (the
"Redemption and Purchase Agreement").
2.4 Amended and Restated Bylaws. Borrower shall, with the advice and
consent of Lender, amend and restate Borrower's corporate Bylaws, to provide for
certain restrictions on voting and the disposition of shares of common stock of
Borrower, and to increase the number of Directors of Borrower's Board of
Directors, pursuant to those certain Amended and Restated Bylaws of the
Borrower, authorized and approved by Borrower's shareholders and Board of
Directors contemporaneously herewith (the "Amended and Restated Bylaws").
2.5 Shareholders' Agreement. The shareholders of Borrower, including
but not limited to Lender, shall execute and enter into that certain
Shareholders' Agreement, restricting the transfer of the shares of common stock
of Borrower held by Lender (the "Shareholders' Agreement").
ARTICLE III
CLOSING
3.1 Closing. The closing of the Loan contemplated hereby, and the
funding of the Initial Funding, shall occur upon the full execution of this
Agreement.
3.1 Closing Documents. Prior to or contemporaneously with the
execution and delivery of this Agreement:
(a) Borrower shall deliver or cause to be delivered to the
Lender a duly executed Note, a duly executed Exchange Agreement, duly
executed Consulting Agreements, a duly executed Redemption and Purchase
Agreement, duly authorized Amended and Restated Bylaws, a duly executed
Shareholders' Agreement, and a written consent action of the
shareholders and Board of Directors of Borrower, authorizing this
Agreement and the Loan Documents, among other things; and
(b) Lender shall deliver the Initial Funding to Borrower, a
duly executed Exchange Agreement, duly executed Consulting Agreements,
a duly executed Redemption and Purchase Agreement, and a duly executed
Shareholders' Agreement.
ARTICLE IV
COVENANTS OF BORROWER
4.1 Affirmative Covenants. Until the Note and all other obligations and
liabilities of the Borrower under this Agreement and the other Loan Documents
are fully paid and satisfied, Borrower agrees and covenants that it will, unless
the Lender otherwise consents in writing:
(a) Conduct its operations in the ordinary course of business
consistent with past practices, and use reasonable efforts to preserve
intact its current business organizations, preserve their relationships
with customers, suppliers and others having business dealings with
them, and preserve the goodwill of the Borrower;
(b) Apply the Loan proceeds strictly in compliance with
Section 1.2 hereof;
(c) Promptly notify the Lender, in writing, about any event
which, in Borrower's reasonably opinion, constitutes or will, by giving
notice or with the passage of time or both, constitute an Event of
Default (as hereafter defined).
(d) Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in all other instruments and
agreements between the Borrower and the Lender, including, without
limitation, the other Loan Documents;
(e) Maintain adequate liability insurance at all times; and
(f) Execute and deliver, or cause to be executed and
delivered, and any all other agreements, instruments, or documents
which the Lender may reasonably request in order to give effect to the
transactions contemplated under this Agreement and the other Loan
Documents.
4.2 Negative Covenants. Until the Note and all other obligations and
liabilities of the Borrower under this Agreement and the other Loan Documents
are fully paid and satisfied, Borrower agrees and covenants that it will NOT,
unless the Lender otherwise consents in writing:
(a) Use the Loan funds for any purpose in contravention of
Section 1.2;
(b) Assign or attempt to assign the Note, this Agreement,
or any of the Ancillary Agreements;
(c) Fail to pay when due any part of the principal of, or
interest on, the Note or any other indebtedness or obligation from
time to time owing by the Borrower to the Lender;
(d) Fail to perform any term or condition or covenant of this
Agreement or any other agreement between the Borrower and the Lender
(including, without limitation, any of the Ancillary Agreements);
(e) Declare insolvency or bankruptcy, or make an assignment
for the benefit of creditors, or consent to the appointment of a
trustee or receiver of other officer of a court or other tribunal with
respect to Borrower or the property of Borrower;
(f) Fail to discharge a trustee, receiver, or other officer of
the court if such officer is appointed for Borrower without Borrower's
consent, within thirty (30) days of such appointment;
(g) Fail to discharge, bond, or dismiss any entry of any
judgment against the Borrower or the issuance or entry of any
attachment or other lien against any of the property of the Borrower
for an amount in excess of Ten Thousand and No/100 Dollars
($10,000.00), within thirty (30) days of such entry or issuance;
(h) Default under any loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay the Loan or perform
its obligations under this Agreement or any of the Ancillary
Agreements;
(i) Amend its organizational and governing corporate
documents, except as specifically contemplated herein;
(j) (i) Declare, set aside or pay any distribution (whether in
cash, shares or property, or any combination thereof) to its
shareholders, or make any other actual, constructive or deemed
distribution to any of its shareholders, or otherwise make any payments
to its shareholders in their capacity as such if Borrower is delinquent
in any payments of the Note; or (ii) redeem, repurchase or otherwise
acquire, directly or indirectly, any of its shares of common stock,
except as specifically contemplated herein, if Borrower is delinquent
in any payments of the Note;
(k) Incur or assume any indebtedness or mortgage or pledge any
of its material assets, tangible or intangible, or create or suffer to
exist any lien thereupon, except ordinary course of business
transactions, unless: (i) and Event of Default does not exist, and (ii)
Lender is unwilling or unable to fund advances requested by or due to
Borrower pursuant to the Note or this Agreement;
(l) Sell, lease, license or otherwise grant to any entity or
individual any rights in any material assets or properties of the
Borrower, including but not limited to Borrower's intellectual
property, without Lender's prior written consent; or
(m) Take or agree in writing or otherwise to take any action
which would make any of the representations or warranties of the
Borrower contained in this Agreement untrue, incomplete or incorrect in
any material respect.
4.3 Events of Default. A violation of this Agreement, including but not
limited to a violation of the affirmative covenants contained in Section 4.1
hereof, the negative covenants contained in Section 4.2 hereof, or the
representations and warranties of Borrower contained in Section 5.2 hereof,
shall constitute an "Event of Default", upon which the entire unpaid principal
balance of the Note, together with all accrued by unpaid interest thereon, and
all other indebtedness then owing by the Borrower to the Lender shall, at the
option of the Lender, become immediately due and payable if the notice
provisions, if any, set forth in the Note are complied with.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations of Lender. Lender hereby represents and warrants
the following to Borrower:
(a) Lender is a corporation duly organized, validly existing,
and in good standing under the laws of the State of California.
(b) Lender has full right, power, legal capacity and authority
to execute, deliver and perform this Agreement and all Ancillary
Agreements and to consummate the transactions contemplated herein and
thereby, including the full right, power, legal capacity and authority
to enter into the Loan and the Ancillary Agreements. This Agreement has
been duly executed and delivered by Lender and constitutes, and all
documents and instruments referred to herein or contemplated hereby
when duly executed and delivered by Lender will constitute, legal,
valid and binding obligations of Lender enforceable in accordance with
their respective terms and conditions, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a
proceeding at law or in equity).
(c) No approval, consent or other order or action of or filing
with any court, administrative agency, governmental authority or other
third party is required for the execution, delivery or performance by
Lender of this Agreement or the Ancillary Agreements.
(d) The execution and delivery of this Agreement and the
Ancillary Agreements, and the consummation of the transactions
contemplated hereby and thereby and the performance by Lender of its
respective obligations hereunder and thereunder, will not constitute a
violation of, conflict with or result in a default under (i) any
mortgage, indenture, charter or bylaw provision, contract, agreement,
commitment or other instrument of any kind to which Lender is a party
or by which Lender or any of its respective assets may be bound or
affected, or (ii) any law, rule or regulation applicable to Lender or
any court injunction, order or decree, or any valid and enforceable
order of any governmental agency having jurisdiction over Lender.
(e) Lender is in compliance with, and has conducted and does
conduct its business and operations in compliance with all applicable
Federal, state, and local laws, rules and regulations affecting Lender.
(f) Lender has adequate unrestricted earned surplus and
capital surplus to deliver and fund the Loan pursuant to this
Agreement.
5.2 Representations of Borrower. Borrower hereby represents and
warrants the following to Lender:
(a) Borrower is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Texas.
(b) Borrower has full right, power, legal capacity and
authority to execute, deliver and perform this Agreement and all
Ancillary Agreements and to consummate the transactions contemplated
herein and thereby, including the full right, power, legal capacity and
authority to enter into the Loan and the Ancillary Agreements. This
Agreement has been duly executed and delivered by Borrower and
constitutes, and all documents and instruments referred to herein or
contemplated hereby when duly executed and delivered by Borrower will
constitute, legal, valid and binding obligations of Borrower
enforceable in accordance with their respective terms and conditions,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity (whether applied in a proceeding at law or in equity).
(c) No approval, consent or other order or action of or filing
with any court, administrative agency, governmental authority or other
third party is required for the execution, delivery or performance by
Borrower of this Agreement or the Ancillary Agreements.
(d) Borrower has full legal and beneficial title to all of its
assets and intellectual property free and clear of all liens, pledges,
mortgages, security interests, conditional sales contracts and
encumbrances.
(e) The execution and delivery of this Agreement and the
Ancillary Agreements, and the consummation of the transactions
contemplated hereby and thereby and the performance by Borrower of its
respective obligations hereunder and thereunder, will not constitute a
violation of, conflict with or result in a default under (i) any
mortgage, indenture, charter or bylaw provision, contract, agreement,
commitment or other instrument of any kind to which Borrower is a party
or by which Borrower or any of its respective assets may be bound or
affected, or (ii) any law, rule or regulation applicable to Borrower or
any court injunction, order or decree, or any valid and enforceable
order of any governmental agency having jurisdiction over Borrower.
(f) Borrower is in compliance with, and has conducted and does
conduct its business and operations in compliance with all applicable
Federal, state, and local laws, rules and regulations affecting
Borrower.
(g) Borrower acknowledges and agrees that the Loan is not
transferable and may not be assigned, in whole or in part, to any
other party.
ARTICLE VI
MISCELLANEOUS
6.1 Tax. Lender shall have no obligation for the payment or withholding
of any Federal, state, or other taxes applicable to the extension of credit
described herein. Borrower shall be solely responsible for the reporting of all
income and payment of all taxes in the event that the Loan is deemed to be
income to Borrower. Borrower shall indemnify and hold Lender harmless for any
expense or costs incurred by Lender from Borrower's failure to comply with the
provisions of this section.
6.2 Waiver and Agreement. Neither the failure nor any delay on the part
of the Lender to exercise any right, power, or privilege herein or under any of
the other Loan Documents shall operate as a waiver thereof, nor shall any single
or partial exercise of such right, power, or privilege preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. No waiver of any provision in this Agreement or in any of the other
Loan Documents, and no departure by the Borrower therefrom, shall be effective
unless the same shall be in writing and signed by the Lender, and then shall be
effective only in the specific instance and for the purpose for which given and
to the extent specified in such writing. No modification or amendment to this
Agreement or to any of the other Loan Documents shall be valid or effective
unless the same is signed by the party against whom it is sought to be enforced.
6.3 Nature and Survival of Representations, Warranties and Agreements.
All representations, warranties and covenants of Lender and Borrower contained
in this Agreement, and all statements contained in this Agreement or in any
instrument delivered by or on behalf of Lender and Borrower pursuant hereto,
shall be deemed representations, warranties, covenants and agreements by the
person or entity making or delivering such statement or instrument, and all such
representations, warranties, covenants, and agreements shall survive the closing
and the consummation of the transaction contemplated herein.
6.4 Miscellaneous Provisions.
(a) The captions, section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
(b) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
(c) The parties agree to execute and deliver any additional
agreements or documents and to take such other actions as may be
reasonably necessary or appropriate to effectuate the intent of this
Agreement and to comply with the pertinent provisions of state and
Federal law.
(d) This Agreement shall be binding on, inure to the benefit
of and be enforceable by Lender and Borrower and their respective
heirs, personal representatives, successors and assigns.
(e) This Agreement shall, at all times, be considered a
contract made under the laws of the State of Texas, for all purposes,
and shall be governed by and construed in accordance with the laws of
Texas. Jurisdiction for all disputes relating, in any way, to this
Agreement, shall lie exclusively in the courts of Xxxxxx County, Texas.
(f) This Agreement, together with the Ancillary Agreements,
constitutes the entire agreement of the parties hereto and supersedes
all prior understandings with respect to the subject matter hereof.
(g) This Agreement may only be modified, altered or amended
in a writing executed by a duly authorized representative of each
party.
IN WITNESS WHEREOF, this Agreement has been executed and shall take
effect as of the Effective Date.
LENDER: BORROWER:
XXXXXX INTERNATIONAL WINTEC PROTECTIVE SYSTEMS, INC.,
HOLDINGS, INC., a California a Texas corporation
corporation
By: ______________________________
By: ________________________________ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxx Chief Executive Officer
President
