LOAN AGREEMENT Dated as of January 15, 2010 by and between as Lender and PEPPERBALL TECHNOLOGIES, INC. as Borrower TOTAL CREDIT AMOUNT: $300,000
EXHIBIT
10.1
Dated as
of January 15, 2010
by and
between
X.X.&
X.X. XXXXXXX TRUST, DTD MAY 18, 1988, A CALIFORNIA TRUST
as
Lender
and
as
Borrower
TOTAL
CREDIT AMOUNT: $300,000
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Maturity
Date:
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December
10, 2010
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Formula:
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As
set forth in Agreement
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Interest:
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15%
per annum, fixed
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Warrants:
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$150,000/Warrant
Paid
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Class
of stock:
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Common
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Exercise
price:
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$0.10
per share
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The
information set forth above is subject to the terms and conditions set forth in
the balance of this Agreement. The parties agree as
follows:
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1.
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Closing;
Payments.
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(a) Closing. Upon the
execution of this Loan Agreement Lender shall deliver to Borrower $300,000
(sometimes referred to as “Credit Facility”)
(b) Interest. The Credit Facility shall
be interest-only through February 28, 2010, amortizing thereafter at $12,000 per
month (in addition to the monthly interest payments) for the first month, then
$24,000 per month thereafter through Maturity (See Amortization and Fee Payment
Schedule below).
(c) Warrant. Borrower
is concurrently issuing to Lender a Warrant to Purchase Stock on the terms and
conditions set forth therein (the “Warrant”).
(d) Maturity
Date. All amounts outstanding hereunder are due and
payable on December 10, 2010.
(e) Amortization of
Principal. The amortization of principal associated with this
Credit Facility shall be made as follows:
| Month | Amortization of Principal | ||
| March 31 | $12,000 | ||
| April 30 | 24,000 | ||
| May 31 | 24,000 | ||
| June 30 | 24,000 | ||
| July 31 | 24,000 | ||
| August 31 | 24,000 | ||
| September 30 | 24,000 | ||
| October 31 | 24,000 | ||
| November 30 | 24,000 |
(f) Late Payment. If
any payment of interest or any other amount owing to Lender is not made within
ten (10) days after the due date, Borrower shall pay Lender a late payment fee
equal to the greater of $500 or 10% of the amount of such late
payment. After the occurrence and during the continuance of an Event
of Default (after giving effect to the right to cure, if any, provided in
Section 5), the Exercise Price under the Warrant shall be $0.05. The
terms of this paragraph shall not be construed as Lender’s consent to Borrower’s
failure to pay any amounts in strict accordance with this Agreement, and
Lender’s charging any such fees and/or acceptance of any such payments shall not
restrict Lender’s exercise of any remedies arising out of any such
failure.
2. Security
Interest. As security for all present and future indebtedness,
guarantees, liabilities, and other obligations of Borrower to Lender under this
Agreement, including all fees specified in Section 1 (collectively, the
“Obligations”), Borrower grants Lender a security interest in all of Borrower’s
personal property, whether now owned or hereafter acquired, including without
limitation all of the following: all accounts, cash, patents,
copyrights, trademarks, goodwill, general intangibles, chattel paper, documents,
letters of credit, instruments, deposit accounts, investment property,
inventory, fixtures and equipment, as such terms are defined in Division 9
of the Uniform Commercial Code in effect on the date hereof, and all products,
proceeds and insurance proceeds of the foregoing, but excluding any equipment
subject to existing equipment leases or motor vehicle leases or equipment lines
of credit in place prior to the date hereof and such other equipment or motor
vehicles acquired hereafter under such facilities (collectively, the
“Collateral”). Borrower authorizes Lender to execute such documents
and take such actions as Lender reasonably deems appropriate from time to time
to perfect or continue the security interest granted
hereunder. Borrower shall enter into such deposit account control
agreements, and shall take such other steps as Lender may reasonably request, to
perfect or assure the first priority of the security interest granted
hereunder.
3. Representations and
Warranties. Borrower represents to Lender as follows (which
shall be deemed continuing throughout the term of this Agreement):
(a) Authorization. Borrower
is and will continue to be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and Borrower
is and will continue to be qualified and licensed to do business in all
jurisdictions in which it is required to do so; the execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby have been duly and validly authorized by all necessary corporate action,
and do not violate Borrower’s Certificate of Incorporation or by-laws, or any
law or any material agreement or instrument which is binding upon Borrower or
its property. Except as disclosed on Exhibit A, Borrower has no
wholly owned or partially owned subsidiaries and is not a partner or joint
venturer in any partnership or joint venture.
(b) State of Incorporation; Places of
Business; Locations of Collateral. Borrower is a corporation
incorporated and in good standing under the laws of the State of
Colorado. The address set forth in this Agreement under Borrower’s
signature is Borrower’s chief executive office.
(c) Title to Collateral; Permitted
Liens. Borrower is now, and will at all times in the future
be, the sole owner of all the Collateral, except for items of Equipment that are
leased by Borrower. The Collateral now is and will remain free and
clear of any and all liens, security interests, encumbrances and adverse claims,
except for (i) purchase money security interests in specific items of
Equipment; (ii) leases of specific items of Equipment; (iii) liens for
taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings, provided
the same have no priority over any of Lender’s security interests; and
(iv) liens of materialmen, mechanics, warehousemen, carriers, or other
similar liens arising in the ordinary course of business and securing
obligations that are not delinquent.
(d) Tax Returns and
Payments. Borrower has timely filed, and will timely file, all
tax returns and reports required by applicable law, and Borrower has timely
paid, and will timely pay, all applicable taxes, assessments, deposits and
contributions now or in the future owed by Borrower.
(e) Compliance with
Law. Borrower has complied, and will comply, in all material
respects, with all provisions of all applicable laws and
regulations.
(f) Information. All
information provided to Lender by or on behalf of Borrower on or prior to the
date of this Agreement is true and correct in all material respects, and no
representation or other statement made by Borrower to Lender contains any untrue
statement of a material fact or omits to state a material fact necessary to make
any statements made to Lender not misleading at the time made.
(g) Litigation. Except
as disclosed on Exhibit
A, there is no claim or litigation pending or (to best of Borrower’s
knowledge) threatened against Borrower. Borrower will promptly inform
Lender in writing of any claim or litigation in the future which, either
separately or in the aggregate, involve a claim in excess of
$200,000.
(h) Subsidiaries. Except
as disclosed on Exhibit
A, Borrower has no wholly-owned or partially owned subsidiaries and Exhibit A sets forth all
Advances by Borrower to, and all investments by Borrower in, any person, entity,
corporation partnership or joint venture.
(i) Deposit and Investment
Accounts. Borrower maintains only the operating, savings,
deposit, securities and investment accounts listed on Exhibit A.
4. Covenants.
(a) Insurance. Borrower
will maintain insurance on the Collateral and Borrower’s business, in amounts
and of a type that are customary to businesses similar to Borrower’s, and Lender
will be named in a loss payable endorsement in favor of Lender, in form
reasonably acceptable to Lender.
(b) Negative
Covenants. Without Lender’s prior written consent, Borrower
shall not do any of the following: (i) permit or suffer an
acquisition of all or substantially all of Borrower’s assets other than an
acquisition, the terms of which provide for immediate payment of all amounts
outstanding under this Agreement; (ii) acquire any assets outside the
ordinary course of business; (iii) sell, lease, encumber, license or
transfer any Collateral except for sales in the ordinary course of business (in
which case Lender retains its security interest in the proceeds of such
disposition); (iv) pay or declare any dividends on Borrower’s stock;
(v) redeem, purchase or otherwise acquire, any of Borrower’s stock;
(vi) make any investments in, or Advances or advances to, any person,
including without limitation any investments in, or downstreaming of funds to,
any subsidiary or affiliate of Borrower, except in the ordinary course of
business as conducted on the date hereof; or (vii) incur any indebtedness
outside the ordinary course of business, other than debt of up to $1,000,000
subordinated on terms reasonably acceptable to Lender, or make any payment on
any of Borrower’s indebtedness that is subordinate to the Obligations, other
than regularly scheduled interest payments for so long as an Event of Default is
not continuing.
(c) Board
Materials. Borrower shall give Lender copies of all notices,
minutes, consents and other materials that Borrower provides to its directors in
connection with such meetings at the same time and in the same manner as it
gives to its directors.
5. Events of
Default. Prior to Full Repayment, any one or more of the
following shall constitute an Event of Default under this
Agreement:
(a) Borrower
shall fail to pay any principal of or interest on any Advances or any other
monetary Obligations within ten (10) days of when due; or
(b) Borrower
shall fail to comply with any other provision of this Agreement, which failure
is not cured within ten (10) days after the sooner of (i) the date that Borrower
has knowledge of
that failure or (ii) Borrower’s receipt of notice from Lender; or
(c) Any
warranty, representation, statement, report or certificate made or delivered to
Lender by Borrower or on Borrower’s behalf shall be untrue or misleading in a
material respect as of the date given or made, or shall become untrue or
misleading in a material respect after the date hereof which cannot be corrected
after notice to the satisfaction of Lender, acting reasonably; or
(d) A default
or event of default shall occur under any agreement to which Borrower is a party
or by which it is bound (i) resulting in a right by the other party or parties,
whether or not exercised, to accelerate the maturity of any indebtedness or (ii)
that could have a Material Adverse Effect, as defined below; or
(e) Dissolution,
termination of existence of Borrower; the occurrence of a Dissolution Event; or
appointment of a receiver, trustee or custodian, for all or any material part of
the property of, assignment for the benefit of creditors by, or the commencement
of any proceeding by or against Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect (except that, in the
case of a proceeding commenced against Borrower, Borrower shall have sixty
(60) days after the date such proceeding was commenced to have it
dismissed, provided Lender shall have no obligation to make any Advances during
such period); or
(f) The
occurrence of a “Material Adverse Effect”, which shall mean (i) a material
adverse change in the business, prospects, operations, results of operations,
assets, liabilities or financial or other condition of Borrower, (ii) the
impairment of Borrower’s ability to perform its Obligations or of Lender’s
ability to enforce the Obligations or realize upon the Collateral, or
(iii) a material adverse change in the value of the
Collateral.
6. Remedies.
(a) Remedies. Upon the
occurrence and during the continuance of any Event of Default (after giving
effect to the right to cure, if any, provided in Section 5), Lender, at its
option, may do any one or more of the following: (a) Accelerate
and declare the Obligations to be immediately due, payable, and performable;
(b) Take possession of any or all of the Collateral wherever it may be
found, and for that purpose Borrower hereby authorizes Lender to enter
Borrower’s premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge by Borrower for so long as Lender reasonably deems it necessary
in order to complete the enforcement of its rights under this Agreement or any
other agreement; provided, however, that should Lender seek to take possession
of any of the Collateral by Court process, Borrower hereby
waives: (i) any bond and any surety or security relating
thereto; (ii) any demand for possession prior to the commencement of any
suit or action to recover possession thereof; and (iii) any requirement
that Lender retain possession of, and not dispose of, any such Collateral until
after trial or final judgment; (c) Require Borrower to assemble any or all
of the Collateral and make it available to Lender at places designated by
Lender; (d) Complete the processing of any Collateral prior to a
disposition thereof and, for such purpose and for the purpose of removal, Lender
shall have the right to use Borrower’s premises, equipment and all other
property without charge by Borrower; (e) Collect and dispose of and realize
upon any investment property, including withdrawal of any and all funds from any
deposit or securities accounts; (f) Dispose of any of the Collateral, at
one or more public or private sales, in lots or in bulk, for cash, exchange or
other property, or on credit, and to adjourn any such sale from time to time
without notice other than oral announcement at the time scheduled for sale; and
(g) Demand payment of, and collect any accounts, general intangibles or
other Collateral and, in connection therewith, Borrower irrevocably authorizes
Lender to endorse or sign Borrower’s name on all collections, receipts,
instruments and other documents, and, in Lender’s good faith business judgment,
to grant extensions of time to pay, compromise claims and settle accounts,
general intangibles and the like for less than face value; Borrower grants
Lender a license, exercisable from and after an Event of Default has occurred,
to use and copy any trademarks, service marks and other intellectual property in
which Borrower has an interest to effect any of the foregoing
remedies. All reasonable attorneys’ fees, expenses, costs,
liabilities and obligations incurred by Lender with respect to the foregoing
shall be added to and become part of the Obligations, and shall be due on
demand.
(b) Application of
Proceeds. All proceeds realized as the result of any sale or
other disposition of the Collateral shall be applied by Lender first to the
reasonable costs, expenses, liabilities, obligations and attorneys’ fees
incurred by Lender in the exercise of its rights under this Agreement, second to
any fees and Obligations other than interest and principal, third to the
interest due upon any of the Obligations, and fourth to the principal of the
Obligations, in such order as Lender shall determine in its sole
discretion. Any surplus shall be paid to Borrower or other persons
legally entitled thereto; Borrower shall remain liable to Lender for any
deficiency.
(c) Remedies
Cumulative. In addition to the rights and remedies set forth
in this Agreement, Lender shall have all the other rights and remedies accorded
a secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Lender and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial
exercise by Lender of one or more of its rights or remedies shall not be deemed
an election, nor bar Lender from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Lender to exercise
any rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been fully paid and performed.
(d) Power of
Attorney. After the occurrence and during the continuance of
an Event of Default (after giving effect to the right to cure, if any, provided
in Section 5), Borrower irrevocably appoints Lender (and any of Lender’s
designated employees or agents) as Borrower’s true and lawful attorney in fact
to: endorse Borrower’s name on any checks or other forms of payment;
make, settle and adjust all claims under and decisions with respect to
Borrower’s policies of insurance; settle and adjust disputes and claims
respecting accounts, general intangibles and other Collateral; execute and
deliver all notices, instruments and agreements in connection with the
perfection of the security interest granted in this Agreement; sell, lease or
otherwise dispose of all or any part of the Collateral; and take any other
action or sign any other documents required to be taken or signed by Borrower,
or reasonably necessary to enforce Lender’s rights or remedies or otherwise
carry out the purposes of this Agreement. The appointment of Lender
as Borrower’s attorney in fact, and each of Lender’s rights and powers, being
coupled with an interest, are irrevocable until all Obligations owing to Lender
have been paid and performed in full.
(e) Loan Default. Upon
the occurrence of an Event of Default under the loan agreement, Lender may
acquire an additional 50,000 warrant shares of Borrower at $0.05 per share for
the first 30 day period the Default remains uncured and an additional 75,000
warrant shares of Borrower at $0.05 per share for each subsequent 30 day period
the Default remains uncured. Additionally, in the event of a default,
the interest rate will increase to 18% until the default is cured, and a default
fee of $6,000 will be charged per month up to a cumulative total of 25% of any
amounts due.
7. Triggering
Event. Prior to Full Repayment (defined below), the occurrence
of any one or more of the following shall constitute a “Triggering
Event”: (i) the sale, lease, license, exchange or similar
transaction involving all or substantially all of the assets of Borrower in one
or more transactions, (ii) the closing of a recapitalization,
reorganization, merger, consolidation or other transaction or transactions of
Borrower, (iii) any action (voluntary or involuntary) to liquidate,
dissolve and/or wind down the business of Borrower, (iv) the sale of any
division or business unit of Borrower in one or more transactions in which the
gross proceeds are at least $500,000 (or to the extent Borrower receives
consideration other than cash, any such transaction in which Borrower is deemed
to have received value in the form of cash, marketable securities, assets or
other consideration or any combination thereof of at least $500,000) and (v) the
incurrence of any debt other than debt of up to $1,000,000 subordinated on terms
reasonably acceptable to Lender.
If a
Triggering Event (or any part or element thereof) shall occur before all amounts
owing Lender under this Agreement have been indefeasibly paid in full (“Full
Repayment”), upon the occurrence, and as part of the consummation, of such
Triggering Event, Lender shall be entitled to one hundred percent (100%) of the
proceeds of the sale of assets in an orderly liquidation of Borrower’s
assets until such time as all amounts owing to Lender have been
repaid in full (including, without limitation, all accrued interest due thereon,
fees and other costs payable to Lender). If the consideration payable
to Borrower in connection with such transaction(s) is other than cash in an
amount sufficient to satisfy the Full Repayment, Lender shall be entitled to
receive, in addition to such cash (or, upon mutual agreement, unrestricted,
publicly tradable marketable securities, provided such securities are traded on
a major public exchange and in regular daily volume sufficient to allow the
immediate liquidated thereof without negatively impacting the value of such
securities), the cash proceeds received by Borrower upon the sale of such
non-cash consideration until Full Repayment. If Lender elects to
receive such unrestricted, publicly tradable marketable securities, Lender shall
credit the then outstanding balance hereunder with the fair market value of such
securities (based upon the average closing price per share for the five (5)
trading day period immediately preceding the date Lender receives such
unrestricted marketable securities). If Borrower receives non-cash
consideration in connection with such transaction, Borrower shall sell, as soon
as reasonably practical, such non-cash consideration in a commercially
reasonable manner in order to maximize the proceeds of such sale.
8. Waivers. The
failure of Lender at any time or times to require Borrower to strictly comply
with any of the provisions of this Agreement or any other present or future
agreement between Borrower and Lender shall not waive or diminish any right of
Lender later to demand and receive strict compliance therewith. Any
waiver of any default shall not waive or affect any other default, whether prior
or subsequent, and whether or not similar. None of the provisions of
this Agreement or any other agreement shall be deemed to have been waived except
by a specific written waiver signed by an authorized officer of
Lender. Borrower waives demand, protest, notice of protest and notice
of default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
general intangible, document or guaranty at any time held by Lender on which
Borrower is or may in any way be liable, and notice of any action taken by
Lender, unless expressly required by this Agreement.
9. Governing Law; Jurisdiction;
Venue. This Agreement and all acts and transactions hereunder
and all rights and obligations of Lender and Borrower shall be governed by the
internal laws (and not the conflict of laws rules) of the State of
California. As a material part of the consideration to Lender to
enter into this Agreement, Borrower agrees that all actions and proceedings
relating directly or indirectly to this Agreement shall be litigated in courts
located within California, and that the exclusive venue therefor shall be San
Diego County.
10. MUTUAL
WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVE THE RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY
WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR
AGREEMENT BETWEEN LENDER AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF
LENDER OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, IN ALL OF THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. IF THIS JURY
WAIVER IS FOR ANY REASON UNENFORCEABLE, THE PARTIES AGREE TO RESOLVE ALL CLAIMS,
CAUSES AND DISPUTES THROUGH FINAL AND BINDING ARBITRATION TO BE HELD IN SAN
DIEGO COUNTY IN ACCORDANCE WITH THEN-CURRENT COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION. JUDGMENT UPON ANY AWARD RESULTING
FROM ARBITRATION MAY BE ENTERED INTO AND ENFORCED BY ANY STATE OR FEDERAL COURT
HAVING JURISDICTION THEREOF.
11. General. This
Agreement and such other written agreements, documents and instruments as may be
executed in connection herewith are the final, entire and complete agreement
between Borrower and Lender and supersede all prior and contemporaneous
negotiations and oral representations and agreements, all of which are merged
and integrated in this Agreement. There are no oral understandings,
representations or agreements between the parties which are not set forth in
this Agreement or in other written agreements signed by the parties in
connection herewith. The terms and provisions of this Agreement may
not be waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Lender. Lender may assign all or any part of
its interest in this Agreement and the Obligations to any person or entity, or
grant a participation in, or security interest in, any interest in this
Agreement, with notice to, but without consent of, Borrower. Borrower
may not assign any rights under or interest in this Agreement without Lender’s
prior written consent. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one agreement.
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X.X.&
X.X. XXXXXXX TRUST, DTD MAY 18, 1988, A CALIFORNIA TRUST
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By: /s/ Xxxxx X.
Xxxxxxx
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By: /s/ Xxxxxxxx Xxxxx
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Title: Trustee
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Title: Asst.
Secretary
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Address
for notices:
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Address
for notices:
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X.X.&
X.X. Xxxxxxx Trust, dtd May 18, 1988, a California Trust
X.X.
Xxx 0000
Xxxxxx
Xxxxx Xx, XX 00000
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0000
Xxxxx Xxxxx Xx., Xxxxx 000
Xxx
Xxxxx, XX 00000
Attn: Xxxx
X. Xxxxxx, Chief Executive Officer
Fax: 000-000-0000
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