EXHIBIT 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "AGREEMENT") is entered into as of October 5,
2001 between Valence Technology, Inc. (previously Ultracell, Inc.), a Delaware
corporation (the "Borrower"), and Xxxx & Xxxx Enterprises, LLC, whose address is
00000 Xxxxxxx Xxxxx, Xxxxxxxxx, XX 00000 ("LENDER").
SECTION 1. LOANS AND NOTE
1.1. LOANS AND ISSUE OF NOTES. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties of the
Borrower set forth herein, Lender hereby agrees to make advances of immediately
available funds to Borrower up to an aggregate principal amount of Twenty
Million Dollars ($20,000,000) from time to time, between the date hereof and
September 30, 2003 as requested by Borrower (the "LOANS" and each a "LOAN"). The
Loans will be evidenced by Borrower's promissory note in the form attached
hereto as EXHIBIT A (the "NOTE"). The Loans shall be made in accordance with the
terms and provisions of this Agreement and shall bear interest and be payable as
set forth herein and in the Note. The Loans shall be secured by a security
interest as set forth in the Security Agreement between Lender and Borrower
attached hereto as EXHIBIT B (the "SECURITY AGREEMENT"). This Agreement, the
Note and the Security Agreement are collectively referred to herein as the "LOAN
DOCUMENTS".
1.2. INTEREST RATE ON LOANS. All Loans shall accrue interest until paid
in full at the interest rate of 8% per annum simple interest or, if less, the
maximum rate allowed by applicable law ("INTEREST RATE"). After the occurrence
of an Event of Default and during the continuation thereof, all outstanding
amounts accrue interest until paid at a per annum rate of 2% over the Interest
Rate (the "DEFAULT RATE"). Interest is computed on a 360-day year for the actual
number of days elapsed.
1.3. MATURITY DATE. All outstanding amounts with respect to the Loans
are due and payable in full, and the term of the Loans shall expire, on
September 30, 2005.
1.4. LENDER EXPENSES. Borrower will pay all audit and inspection fees
and expenses and the reasonable costs and expenses (including reasonable
attorneys' fees, expert witness' and consultants' fees and related expenses) of
preparing, negotiating, administering, defending and enforcing (including
appeals or insolvency proceedings) the Loan Documents (collectively, "LENDER
EXPENSES"), which Lender Expenses will be payable upon demand by Lender. Lender
Expenses also include, without limitation, document fees, filing and recording
fees, collateral search and credit reporting fees, title insurance policy fees
and escrow fees and costs.
1.5. FUNDING OF LOANS. All Loans shall be in a minimum principal amount
of $500,000 and shall not exceed a maximum principal amount of $3,000,000.
Borrower may not request a Loan more frequently than once every week. Lender
shall have at least two business days after Borrower requests a Loan to fund the
same.
1.6 PREPAYMENT OF LOANS. Borrower shall have the right at any time and
from time to time to prepay any Loan, in whole or in part, upon at least three
business days' prior written notice to Lender. The minimum prepayment amount
shall be $1,000,000 and increments of $500,000 in excess thereof.
SECTION 2. CONDITIONS OF LENDING
2.1. CONDITIONS PRECEDENT TO INITIAL LOAN. The obligation of Lender to
make the initial Loan, if any, is subject to the conditions precedent that
Lender shall have received in form and substance satisfactory to Lender all of
the following:
2.1.1. The Schedule of Exceptions, which shall contain only those
scheduled exceptions as are satisfactory to Lender, in its sole discretion;
2.1.2. A certified copy of the resolutions of the Board of Directors
of the Borrower in a form satisfactory to Lender, approving or ratifying
each of the Loan Documents and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to each
of the Loan Documents;
2.1.3. A certificate of the chief executive officer and chief
financial officer of the Borrower, dated as of even date with the Note,
certifying to Lender that the representations and warranties made by the
Borrower in Section 3 herein are true and correct;
2.1.4. The Note duly executed by the Borrower;
2.1.5. The Security Agreement and such UCC-1 financing statements and
other documents required by Lender to perfect its Lien in the collateral
covered thereby, each duly executed by the Borrower;
2.1.6. A warrant, duly executed by the Borrower and in the form of
EXHIBIT C hereto (the "WARRANT") to purchase that number of shares of
Borrower's Common Stock equal to the quotient of $4,500,000 divided by the
average closing price of the Common Stock as reported on the Nasdaq
National Market for the five trading days immediately preceding Borrower's
first public announcement of this Loan transaction.
2.1.7. Borrower shall have taken all necessary corporate action to
authorize and reserve for issuance all shares of Common Stock subject to
issuance under the Warrant and to list all such shares with the Nasdaq
National Market.
2.2. CONDITIONS PRECEDENT TO ALL LOANS. The obligations of Lender to
make each Loan (including the initial Loan) shall be subject to the further
conditions precedent that:
2.2.1. On the date of such Loan the following statements shall be true
(and each giving of a request for a Loan and the acceptance by Borrower of
the proceeds of such Loan shall constitute a representation and warranty by
Borrower that on the date of such Loan such statements are true):
(i) The representations and warranties contained in this
Agreement and in the Security Agreement are correct on and as of the
date of such Loan before and after giving effect to such Loan and to
the application of the proceeds therefrom, as though made on and as of
such date; and
(ii) No Event of Default has occurred and no event has occurred
and is continuing, or would result from such Loan or from the
application of the proceeds therefrom, which constitutes an Event of
Default.
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2.2.2. No material adverse change in Borrower's business, as
determined by Lender in its sole discretion, shall have occurred between
the date of the Note and the date of the making of the Loan or between the
date of the making of the immediately preceding Loan and the date of the
making of the Loan.
2.2.3. Lender shall have received such other approvals, opinions or
documents as Lender shall have reasonably requested.
2.3.4. Borrower shall have paid all Lender Expenses that are then due
and payable by Borrower.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Except as set forth in the Schedule of Exceptions attached hereto as
EXHIBIT D and the Borrower SEC Documents, Borrower hereby represents and
warrants the following as of the date hereof:
3.1. ORGANIZATION AND QUALIFICATION. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each Subsidiary is a corporation or other business organization duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which the Subsidiary was incorporated or organized. Borrower and
each Subsidiary is qualified to do business and is in good standing in the
jurisdictions set forth on the Schedule of Exceptions, which are the only
jurisdictions in which qualification is necessary in order for it to own or
lease its property and conduct its business. Borrower and each Subsidiary has
all requisite power and authority to conduct its business and own its property.
3.2. AUTHORIZATION OF TRANSACTION; NO VIOLATION. The borrowing of the
principal amount of the Loans, the issuance of the Note and the Warrant, the
execution, delivery and performance by Borrower of this Agreement, the Note, the
Security Agreement and the Warrant (including, without limitation, the issuance
or reservation for issuance of shares of Borrower's Common Stock upon exercise
of the Warrant) (i) are within the corporate powers of Borrower, (ii) have been
duly authorized by all necessary corporate action of Borrower, its officers,
directors and stockholders, and (iii) will not violate, conflict with, result in
any breach of any of the provisions of, constitute (with or without the passage
of time or giving of notice or both) a default under, or result in the creation
of any Lien upon any Property of Borrower or any Subsidiary under the provisions
of, any law, rule, regulation, judgment, order, decree, instrument, agreement,
charter instrument, bylaw or other instrument to which Borrower or any
Subsidiary is a party or by which the Borrower or any Subsidiary or any Property
of Borrower or any Subsidiary may be bound.
3.3. BINDING OBLIGATION. This Agreement, the Note, the Security
Agreement and the Warrant are valid and legally binding obligations of Borrower,
enforceable in accordance with their terms.
3.4. VALID ISSUANCE OF NOTE, WARRANT AND COMMON STOCK. The Note and the
Warrant have been issued in compliance with all applicable federal and state
securities laws. The shares of Common Stock issuable upon exercise of the
Warrant have been duly and validly reserved for issuance, and upon issuance in
accordance with the terms thereof and Borrower's
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charter instruments, shall be duly and validly issued, fully paid and
nonassessable and not subject to any preemptive or similar rights.
3.5. GOVERNMENTAL CONSENt. Neither the nature of Borrower nor any
Subsidiary or of the business or Properties of Borrower or any Subsidiary nor
any relationship between Borrower or any Subsidiary and any other Person, nor
any circumstance in connection with the making of the Loans or the offer, issue,
sale, delivery or exercise of the Note or the Warrant, is such as to require a
consent, approval or authorization of, or filing, registration or qualification
with, any governmental authority on the part of Borrower in connection with or
on account of the execution and delivery of this Agreement or the Security
Agreement, the borrowing of the principal amount of the Loans or the offer,
issue, sale, execution, delivery or exercise of the Note and the Warrant.
3.6 OWNERSHIP OF PROPERTY. Borrower owns all of its Property, except for
Permitted Liens to which any such Property is subject. Schedule 3.6 of the
Schedule of Exceptions lists all Permitted Liens having a quantifiable value in
excess of $500,000 and all exclusive licenses granted by Borrower with respect
to any of its patents or other intellectual property rights.
3.7. USE OF PROCEEDS. The proceeds of the Loans shall be used exclusively
in the ordinary course of the Borrower's business. Borrowed funds shall be
considered used in the ordinary course of the Borrower's business only if they
are incurred by the Borrower in connection with the normal, usual or customary
conduct of its business.
3.8. SEC INFORMATION. As of their respective filing dates (except as
thereafter amended) all documents that Borrower has filed with the Securities
and Exchange Commission (the "BORROWER SEC DOCUMENTS") have complied in all
material respects with the applicable requirements of the Act or the Exchange
Act, and none of the Borrower SEC Documents has contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading except to the
extent corrected by a subsequently filed Borrower SEC Document filed prior to
the date hereof.
3.9. LITIGATION. There are no claims, actions, suits or other
proceedings pending, or to the knowledge of Borrower, threatened, at law or in
equity, by or before any Governmental Agency or any arbitrator against Borrower
which could reasonably be expected to have a material adverse effect on the
ability of Borrower to perform its obligations under this Agreement.
3.10. COMPLIANCE WITH LAWS AND AGREEMENTS. Neither Borrower nor any of
its Subsidiaries is in violation of any law, statute, regulation, ordinance,
judgment, order or decree applicable to it which violation could reasonably be
expected to have a material adverse effect on Borrower. Neither Borrower nor any
of its Subsidiaries is in default with respect to any note, mortgage, lease,
agreement to which Borrower or such Subsidiary is a party or by which it is
bound, which default could reasonably be expected to have a material adverse
effect on Borrower.
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3.11. TAXES. Borrower and its Subsidiaries have filed all federal and
other tax returns and reports required to be filed, and have paid all federal
and other taxes, assessments, fees and other governmental charges levied or
imposed upon them or their Property.
3.12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. So long as any amounts
are available for borrowing and until all obligations of Borrower under this
Agreement and under the Note are satisfied in full, the representations and
warranties contained in this Agreement shall have a continuing effect as having
been true when made.
SECTION 4. BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants that until all obligations of Borrower under this
Agreement, the Security Agreement and the Note are satisfied in full, Borrower:
4.1. BORROWER SEC DOCUMENTS. Shall prepare and timely file all reports
and other filings required under applicable U.S. federal securities laws in
accordance with all relevant statutory requirements and the rules and
regulations of the Securities and Exchange Commission.
4.2. NASDAQ STOCK MARKET LISTING. Shall maintain the listing of the
Common Stock on the Nasdaq National Market and shall timely comply with all
applicable listing maintenance and continuity requirements of the Nasdaq Stock
Market. In the event Borrower fails to meet any such requirements, Borrower
shall take and cause to be taken such actions as are necessary and within its
direct or indirect control to maintain the listing of the Common Stock on the
Nasdaq National Market.
4.3. COMPLIANCE WITH LAW. In addition to the covenant contained in
Section 4.1, shall comply in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority,
and shall comply with all provisions of Borrower's certificate of incorporation
and by laws.
4.4. TAXES AND OTHER LIABILITIES. Shall pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, including federal and
state income taxes, except such as Borrower may in good faith contest or as to
which a bona fide dispute may arise; provided that provision is made to the
satisfaction of Lender for eventual payment thereof in the event that it is
found that the same is an obligation of Borrower.
4.5. LITIGATION. Shall promptly give notice in writing to Lender of any
litigation pending or threatened by or against Borrower with a potential
liability in excess of $100,000.
4.6. NOTICE TO LENDER. Shall promptly give notice in writing to Lender
of (i) the occurrence of any Event of Default, or (ii) any change in name,
identity or corporate structure of Borrower, regardless of whether such event is
a breach of this Agreement or any of the other Loan Documents.
4.7. LEGAL EXISTENCE AND GOOD STANDING. Shall, and shall cause each of
its Subsidiaries to, maintain its legal existence and its qualification and good
standing in all jurisdictions in which the failure to maintain such existence
and qualification or good standing could reasonably be expected to have a
material adverse effect on Borrower.
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4.8 MAINTENANCE OF PROPERTY; INSPECTION OF PROPERTY.
4.8.1. Shall, and shall cause each of its Subsidiaries to,
maintain all of its Property necessary and useful in the conduct of its
business, in good operating condition and repair, ordinary wear and tear
excepted.
4.8.2. Shall permit representatives and independent contractors
of Lender to visit and inspect any of its Properties, to examine its corporate,
financial and operating records, and make copies thereof or abstracts therefrom
and to discuss its affairs, finances and accounts with its directors, officers
and independent public accountants, at such reasonable times during normal
business hours and as soon as may be reasonably desired.
4.9 INSURANCE. Shall maintain, and shall cause each of its Subsidiaries
to maintain, with financially sound and reputable insurers, insurance against
loss or damage by fire with extended coverage, public liability and third party
property damage.
SECTION 5. BORROWER'S NEGATIVE COVENANTS
Borrower further covenants that until payment in full of the Note and
all other amounts due hereunder, Borrower will not without the prior written
consent of Lender:
5.1. GUARANTEES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments in the ordinary
course of business) or accommodation endorser or otherwise for the debts or
obligations of any other person or entity.
5.2. LOANS OR ADVANCES. Make or permit to exist any loans or advances
to, or investments in, any person or entity, except:
(a) any of the foregoing existing as of the date hereof and described on
Schedule 5.2 of the Schedule of Exceptions;
(b) advances in the nature of accounts receivable, general intangible or
notes receivable arising from the licensing of software, from the sale of goods
or services or otherwise in the ordinary course of business;
(c) advances to employees of Borrower and its Subsidiaries in reasonable
amounts approved by the board of directors of Borrower.
(d) investments in cash and highly liquid investments with a maturity of
90 days or less at the date of purchase;
(e) investments by Borrower in its existing wholly-owned Subsidiaries in
the ordinary course of business;
(f) investments by existing wholly-owned Subsidiaries of Borrower in
Borrower or any other wholly-owned Subsidiary of Borrower in the ordinary course
of business;
(g) securities received in connection with the satisfaction or
enforcement of indebtedness or claims due or owing to Borrower or any of its
Subsidiaries or as security of any such indebtedness or claim;
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(h) prepayments by Borrower or its Subsidiaries in the ordinary course
of business; and
(i) other loans, advances or investments in an aggregate amount not to
exceed $1,000,000 outstanding at any time.
5.3. DISTRIBUTIONS. Declare or pay any dividends or any other
distributions on account of any shares of any class of capital stock of
Borrower, either in cash or any other property, to any stockholder or equity
interest holder of or in Borrower or any Subsidiary, nor redeem, retire,
repurchase or otherwise acquire any shares of capital stock of Borrower.
5.4. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower's or any
Subsidiary's assets now owned or hereafter acquired, except:
(a) the lien created under the Security Agreement;
(b) liens existing as of the date hereof and described on Schedule 3.6
of the Schedule of Exceptions;
(c) other Permitted Liens.
5.5. CONDUCT OF BUSINESS. Change the nature of the business heretofore
conducted by Borrower in the usual, regular and ordinary course.
SECTION 6. DEFAULT
6.1. EVENTS OF DEFAULT. The following events are "EVENTS OF DEFAULT"
under the Loan Documents:
6.1.1. Default shall be made by Borrower in the payment of principal of
or any interest on the Note when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment or by acceleration or
otherwise;
6.1.2. Default shall be made in the due performance or observance of-any
other covenant, agreement or provision herein or in any of the other Loan
Documents to be performed or observed by Borrower, or a material breach shall
exist in any representation or warranty herein contained or in any of the other
Loan Documents, and such default or breach shall have continued uncured for a
period of 30 days after written notice thereof to Borrower from Lender;
6.1.3. Borrower shall be involved in financial difficulties as evidenced
by:
(a) an admission in writing by Borrower of its inability to pay its
debts generally as they become due;
(b) Borrower filing a petition in bankruptcy or for reorganization or
for the adoption of an arrangement under the Bankruptcy Code (as now or in the
future amended) or an admission seeking the relief therein provided;
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(c) Borrower making a general assignment for the benefit of its
creditors;
(d) Borrower consenting to the appointment of a receiver or trustee for
all or a substantial part of the property of Borrower or approving as filed in
good faith a petition filed against Borrower under said Bankruptcy Code (in both
cases without the consent of Borrower), which order shall not have been vacated
or set aside or otherwise terminated within 60 days from the date of entry or
shall have been unstayed for a period of 60 days;
(e) the assumption of custody or sequestration by a court of competent
jurisdiction of all or substantially all the Property of Borrower, which custody
or sequestration shall not have been terminated within 90 days from its
assumption or shall have been unsuspended for a period of 60 days; or
(f) an attachment being made on any substantial part of the property or
assets of Borrower which shall not be discharged within 60 days from the making
thereof.
6.1.4. Default made by Borrower in (i) any other note, agreement or
other instrument evidencing any other indebtedness for borrowed money between
Borrower and Lender, or (ii) any agreement between Borrower and a third party
giving the third party the right to accelerate any indebtedness for borrowed
money exceeding $100,000 in principal amount.
6.1.5. A money judgment(s) in the aggregate during the term of this
Agreement of at least $100,000 is rendered against Borrower and is unsatisfied
and unstayed for 10 days.
6.1.6. Borrower terminates or suspends its business, or there is filed
by or against Borrower any petition seeking the liquidation or dissolution of
Borrower or the commencement of any other procedure to liquidate or dissolve
Borrower, or there occurs any event, condition or circumstances which causes the
liquidation or dissolution of Borrower.
6.1.7. Borrower or any person acting for Borrower makes any material
misrepresentation or material misstatement now or in the future in any warranty
or representation in this Agreement or in any writing delivered to Lender to
induce Lender to enter this Agreement or any of the Loan Documents.
6.1.8. The closing of (i) a merger, consolidation, reorganization,
transaction or series of transactions which results in the stockholders of
Borrower as constituted immediately prior to such event holding less than a
majority of the voting power of Borrower or the surviving entity in such
transaction(s); or (ii) a sale, transfer or other disposition of substantially
all of the assets of Borrower (each a "CHANGE OF CONTROL").
6.2. REMEDIES UPON DEFAULT.
6.2.1. Upon the occurrence and during the continuation of any of the
above Events of Default, Lender may, by notice to Borrower, terminate its
commitment to make any further Loans and declare the unpaid principal and all
accrued interest on the Loans and the Note, and all other amounts payable under
the Loan Documents, to be immediately due and payable, whereupon all such
principal, interest and other amounts shall be forthwith due and payable,
without presentment, demand, protest or further notice of any kind; and provided
that, in the case of occurrence of an Event of Default under 6.1.3 or 6.1.6,
Borrower's commitment to make any further Loans shall be
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automatically terminated and all such principal, interest and other amounts
shall be automatically due and payable, without presentment, demand, protest or
further notice of any kind.
6.2.2. Upon the occurrence and during the continuation of any of the
above Events of Default, Lender shall have, in addition to all other rights and
remedies provided herein or by applicable law, all of the rights and remedies of
a secured party under the Uniform Commercial Code of the State of California,
including, but not limited to, the right to take possession of the Collateral,
and for that purpose Lender may, and Borrower hereby authorizes Lender to, enter
upon any premises on which Collateral may be located or situated and remove the
same therefrom or without removal render the same unusable and may use or
dispose of the Collateral on such premises without any liability for rent,
storage, utilities or other sums, and upon request Borrower shall, to the extent
practicable, assemble and make the Collateral available to Lender at a place to
be designated by Lender, which is reasonably convenient to Borrower and Lender.
Borrower agrees that, to the extent notice of sale shall be required by law, at
least five days' notice to Borrower of the time and place of any public sale or
the time after which any private sale or any other intended disposition is to be
made shall constitute reasonable notification of such sale or disposition.
Lender shall also have the right to apply for and have a receiver appointed by a
court of competent jurisdiction in any action taken by Lender to enforce its
rights and remedies hereunder, to manage, protect and preserve the Collateral or
continue the operation of the business of Borrower, and Lender shall be entitled
to collect all revenues and profits thereof and apply the same to the payment of
all expenses and other charges of such receivership, including the compensation
of the receiver, and to the payment of the Note until a sale or other
disposition of such Collateral shall be finally made and consummated. In the
event of any disposition or collection of or any other realization upon all or
any part of the Collateral, Lender shall apply the proceeds of such disposition,
collection or other realization as follows:
(a) First, to the payment of the reasonable costs and expenses of Lender
in exercising or enforcing its rights hereunder, including, but not limited to,
reasonable costs and expenses incurred in retaking, holding and/or preparing the
Collateral for sale, lease or other disposition, and to the payment of all
Lender Expenses;
(b) Second, to the payment of the Note and all other Obligations (as
that term is defined in the Security Agreement); and
(c) Third, the surplus, if any, shall be paid to Borrower or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 7. MISCELLANEOUS
7.1. RESTRICTIVE LEGEND. The Note and each certificate for shares issued
upon exercise of the Warrant shall bear a legend on its face substantially in
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR EXEMPTION THEREFROM UNDER SUCH
ACT;
provided, however, that no such legend shall be required, and the holder thereof
shall be entitled to receive from Borrower, without expense, a new certificate
of like tenor not bearing
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such legend, when the shares evidenced thereby have been effectively registered
under the Act, or when, in the opinion of such holder's counsel, such legend is
not required in order to insure compliance with the registration provisions of
the Act.
7.2. AMENDMENT. No amendment or waiver of any provision of this
Agreement or the other Loan Documents, nor consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
7.3. NOTICES. All notices, requests, demands and other communications
under this Agreement or the other Loan Documents shall be in writing and shall
be deemed to have been duly given on the date of delivery, if delivered
personally or by telegram or telecopy to the party to whom notice is to be
given, or on the third business day after mailing if mailed by first class mail,
registered or certified, postage prepaid and properly addressed as follows:
If to the Borrower: Valence Technology, Inc..
0000 Xxxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile: 512/527-2910
Attn: Chief Financial Officer
If to the Lender: Xxxx & Xxxx Enterprises, LLC
00000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxx
Either party may change its address for purposes of this section by
giving the other party written notice of the new address in the manner set forth
above.
7.4. NO WAIVER; REMEDIES. No failure on the part of the Lender to
exercise, and no delay on the part of Lender in exercising, any right hereunder
or under the other Loan Documents shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder or under the other Loan
Documents preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
7.5. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles consistently applied, except as otherwise stated herein.
7.6. BINDING EFFECT; GOVERNING LAW. This Agreement and the other Loan
Documents shall be binding upon and inure to the benefit of Borrower and Lender
and their respective successors and assigns, except that Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of Lender. This Agreement and the other Loan Documents
shall be governed by, and construed in accordance
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with, the internal laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
7.7. JURISDICTION AND VENUE. BORROWER HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS INITIATED BY BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN THE
CALIFORNIA SUPERIOR COURT OR THE UNITED STATES DISTRICT COURT LOCATED IN THE
CITY OF SAN JOSE, CALIFORNIA. BORROWER HEREBY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN
ANY OF SUCH COURTS, AND AGREES THAT SERVICE OF SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO
BORROWER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO THIS
AGREEMENT. BORROWER WAIVES ANY CLAIM THAT SAN JOSE, CALIFORNIA IS AN
INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE. SHOULD BORROWER
AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT,
PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER
THE MAILING THEREOF, BORROWER SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR
JUDGMENT MAY BE ENTERED BY LENDER AGAINST BORROWER AS DEMANDED OR PRAYED FOR IN
SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR
BORROWER SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT, BY LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER PERMITTED FORUM OR
THE TAKING BY LENDER OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND BORROWER HEREBY WAIVES THE RIGHT, IF ANY, TO COLLATERALLY
ATTACK ANY SUCH JUDGMENT OR ACTION.
7.8. WAIVER OF RIGHT TO JURY TRIAL. LENDER AND BORROWER ACKNOWLEDGE AND
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREIN AND
THEREIN WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND THEREFORE, THE
PARTIES AGREE THAT ANY COURT PROCEEDING ARISING OUT OF ANY SUCH CONTROVERSY WILL
BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
7.9. INVESTMENT REPRESENTATION. Lender represents and warrants to
Borrower that it is acquiring the Note and Warrant for its own account for
investment and not with a view to, or for a sale in connection with, any
distribution thereof.
7.10. SUBORDINATION TO BANK DEBT. In the event that Borrower shall seek
conventional bank financing secured by accounts receivable and/or inventory or
equipment lease or acquisition financing and the lender or lessor in such
financing shall request Lender to subordinate its position with respect to
payment by Borrower to that of such lender or lessor, Lender's consent shall not
be withheld unreasonably.
7.11. ASSIGNMENT. Borrower shall not assign its rights or delegate any
of its duties under any of the Loan Documents without Lender's prior written
consent. Lender may freely assign its rights and obligations under the Loan
Documents.
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SECTION 8. DEFINITIONS
As used in this Agreement and the other Loan Documents, the following
terms have the respective meanings set forth below or in the indicated part of
this Agreement:
8.1 "COLLATERAL" has the meaning ascribed in the Security Agreement.
8.2. "COMMON STOCK" shall mean the common stock $0.001 par value per
share of Valence Technology, Inc.
8.3. "LIEN" shall mean any mortgage, deed of trust, security interest,
pledge, charge, encumbrance, claim, easement, right of way, covenant, condition,
restriction, reservation, title exception, lease intended for security purposes
or lease which constitutes debt. For purposes of this Agreement, the Borrower
shall be deemed to be the owner of any Property which it has leased under a
lease which constitutes debt or which it has acquired or holds subject to a
conditional sale agreement, lease or other arrangement pursuant to which title
to the property has been retained by or vested in another Person for security
purposes.
8.4. "PERMITTED LIENS" has the meaning ascribed in the Security
Agreement.
8.5. "PROPERTY" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, and whether tangible or intangible.
"PROPERTIES" shall mean all Property held by an entity or any other person.
8.6. "ACT" shall mean the Securities Act of 1933, as amended from time
to time.
8.7. "SUBSIDIARY" shall mean a corporation of which the Borrower owns,
directly or indirectly, 50% or more of the ordinary voting power for the
election of directors.
* * *
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SIGNATURE PAGE OF LOAN AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.
BORROWER: LENDER:
VALENCE TECHNOLOGY, INC. XXXX & XXXX ENTERPRISES, LLC
a Delaware corporation
By: /S/ XXXXXXX X. XXXXXXXX By: /S/ XXXX X. XXXX
---------------------------- -----------------------------
Its: CEO AND PRESIDENT Its: MEMBER
---------------------------- -----------------------------
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