EXHIBIT
LOAN AGREEMENT
This Loan Agreement (this "Agreement"), dated as of October 13, 2001,
is entered into between Xxxxxx Xxxxx ("Lender"), and EXTEN INDUSTRIES, INC.
("Borrower") as of the date first set forth above. The above information is
subject to all of the terms and conditions of this Agreement. The parties agree
as follows:
1. Loan and Payments. The Lender is making loans (collectively,
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the "Loan") to Borrower in the amount of Fifty Thousand ($50,000) Dollars. The
Loan may be prepaid at any time without penalty.
(a) Interest. Borrower shall pay interest on the Loan and
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other monetary Obligations at a fixed rate equal to twelve percent (12 %) per
annum. Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed. Interest shall be payable monthly within seven
(7) business days of the last day of the previous month.
(b). Voluntary Conversion. Each Lender may convert the pro
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rata portion of the outstanding principal balance of the Loan, together with all
accrued but unpaid interest, owing to such Lender, and no less than such amount,
into Borrower's Common Stock, at the option of such Lender, on the terms and
conditions set forth herein. The stock will be delivered within ten (10)
business days of the conversion date and the shares will have no restrictions
relative to their sale and disposition.
(e) Penalties. Should any interest payment be late,
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certain penalties shall become effective. The conversion price of the shares of
common stock shall decline by $.01 for each week, or fraction thereof, that
interest payment is not received.
If Lender elects to exercise his right to convert then such
Lender must give written notice of his intention to convert not less than ten
(10) business days prior to the date of such intended conversion. Lender must
concurrently execute a standard form of Stock Purchase Agreement and other
agreements as are necessary to document the issuance of the Common Stock. The
Borrower shall issue and deliver to such Lender, within the same ten (10)
business days, a certificate or certificates for the number of Common Stock to
which the Lender is entitled and a check or cash with respect to any fractional
interest in any share of Common Stock. Upon receipt of the shares, Lender, by
execution hereof, agrees to deliver to the Borrower the executed original of
this Agreement, marked "cancelled," within ten (10) days of such conversion,
In the event that a Lender exercises the conversion right
described herein, he shall receive Borrower's Common Stock at a price per share
equal to $.07, if converted during the term of this Agreement. No fractional
shares will be issued upon such conversion; in lieu of any fractional share to
which a Lender would otherwise be entitled, the Borrower will pay the cash value
of such fractional share to the Lender.
If the Borrower declares or pays a dividend on its common
stock payable in common stock, or other securities, or subdivides the
outstanding common stock into a greater amount of common stock, then upon
conversion of the Loan pursuant hereto, for each share of Common Stock acquired,
the Lender shall receive, without cost to the Lender, the total number of Common
Stock to which the Lender would have been entitled had the Lender owned the
Common Stock of record as of the date the dividend or subdivision occurred. Upon
any reclassification, exchange, substitution, or other event that results in a
change of the number of the securities issuable upon conversion hereof, the
Lender shall be entitled to receive, upon conversion hereof, the number of
securities that the Lender would have received for the Common Stock if the Loan
had been converted immediately before such reclassification, exchange,
substitution, or other event. The Borrower shall not, by amendment of its
Certificate of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Borrower.
(e) Warrants. Borrower is concurrently issuing to each
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Lender a Warrant to Purchase Stock on the terms and conditions set forth therein
(the "Warrant").
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(d) Maturity Date; Extension. All amounts outstanding
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hereunder are due and payable on October 1, 2002 (the "Original Maturity Date').
However, provided that an Event of Default does not exist or is not continuing,
Borrower may extend the Original Maturity Date for one (1) ninety (90) day
period (the "Extended Maturity Date") by providing the Lead Lender (as defined
in Schedule I hereto), at least thirty (30) days prior to the Original Maturity
Date, with written notice that Borrower wishes to extend the Original Maturity
Date. Extensions of the Extended Maturity Date, if any, may be provided in the
sole discretion of the individual Lender.
2. Representations and Warranties. Borrower represents to Lender
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as follows (which shall be deemed continuing throughout the term of this
Agreement).
(a) Authorization. Borrower is and will continue to be,
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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 any failure
to do so would have a Material Adverse Effect; the execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby have been duty and validly authorized by all necessary corporate action,
and do not violate Borrower's articles or certificate of incorporation, or
by-laws, or any law or any material agreement or instrument which is binding
upon Borrower or its property.
(b) Title to Shares; Permitted Liens. After consummation
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of the acquisition of the Shares, Borrower will own the Shares, free of liens,
claims and interests of any kind.
3. Events of Default. Any one or more of the following shall
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constitute an Event of Default under this Agreement:
(a) Borrower shall fail to pay any principal of or
interest on the Loan or any other monetary Obligations within ten (10) days
after the date 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 such failure occurs; or
(e) Any warranty, representation, statement, report or
certificate made or delivered to Lender by Borrower or on Borrower's behalf,
taken together, shall be untrue or misleading in a material respect as of the
date given or made; or
(d) There shall be a change in the record or beneficial
ownership of an aggregate of more than 51% of the outstanding shares of stock of
Borrower, or
(e) Dissolution, termination of existence, or insolvency
of Borrower; or Borrower fails to meet its debts as they mature; 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 60 days
after the date such proceeding was commenced to have it dismissed); or 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'
ability to enforce the Obligations or realize upon the Shares, or (iii) a
material adverse change in the value of the Shares.
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4. Remedies.
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(a) Remedies. Upon the occurrence and during the
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continuance of any Event of Default, Lender, at his option, may do any one or
more of the following, without notice except for such notices as are required by
law: (a) Accelerate and declare the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (b) Take possession of
any or all of the Shares; (e) Sell or otherwise dispose of the Shares, 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. Borrower
recognizes that Lender may be unable to make a public sale of any or all of the
investment property, by reasons of prohibitions contained in applicable
securities laws or otherwise, and expressly agrees that a private sale to a
restricted group of purchasers for investment and not with a view to any
distribution thereof shall be considered a commercially reasonable sale. 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.
5. Waivers. The failure of Lender at any time or times to require
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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 the Lender and delivered to
Borrower. 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.
6. Costs; Indemnity. Borrower shall reimburse Lender for all of
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the following ("Costs"): all reasonable attorneys' fees and all filing,
recording, search, title insurance, appraisal, audit, and other reasonable costs
incurred by Lender, pursuant to, in connection with, or relating to this
Agreement or its enforcement (whether or not any lawsuit is filed), including,
but not limited to, any reasonable attorneys' fees and costs Lender incur
relating to preparation and negotiation of this Agreement and the documents
relating to this Agreement. Lender shall provide an itemized statement of Costs
to Borrower, if so requested by Borrower. If either Lender or Borrower files any
lawsuit against the other predicated 'on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
cost, including (but not limited to) reasonable attorneys' fees incurred in
connection therewith. Borrower shall indemnity Lender for any losses, claims,
actions, causes of action, penalties, and reasonable costs and expenses
(including reasonable attorneys' fees), which Lender may sustain or incur based
upon or arising out of this Agreement, any of the Obligations, any other
relationship or agreement between Lender and Borrower, or any other matter
relating to Borrower or the Obligations, except any such amounts sustained or
incurred as the result of the gross negligence or willful misconduct of Under or
any of their directors, officers, employees, agents, attorneys, or any other
person affiliated with or representing Lender. The indemnity agreement set forth
in this Section shall survive any termination of this Agreement and shall
continue in full force and effect.
7. Notices. All notices under this Agreement shall be in writing
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and shall be deemed to have been given (a) upon receipt, when delivered by hand
or by electronic facsimile transmission, or (b) upon actual delivery by
overnight courier, or (e) three days after mailing by regular first-class mail
or certified mail return receipt requested, addressed to each party at the
addresses indicated on Schedule I hereto.
8. Governing Law, Jurisdiction; Venue. This Agreement and all
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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 (i) agrees that all actions and
proceedings relating directly or indirectly to this Agreement shall, at Lender'
option, be litigated in courts located within California, and that the exclusive
venue therefore shall be San Diego County; (ii) consents to the jurisdiction and
venue of any such court and consents to service of process in any such action or
proceeding by personal delivery or any other method permitted by law; and (iii)
waives any and all rights Borrower may have to object to the jurisdiction of any
such court, or to transfer or change the venue of any such action or proceeding.
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9. Mutual Waiver of Jury Trial. BORROWER AND LENDER EACH HEREBY
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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 LENDERS OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH LENDERS OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
10. General. Should any provision of this Agreement be held by any
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court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect. 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. Any 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,
without notice to, or consent of, Borrower. Borrower may not assign any rights
under or interest in this Agreement without the Lead 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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"Borrower"
EXTEN INDUSTRIES, INC.
By: /S/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
Title: President
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Address for notices:
000 X. 0xx Xxx #000
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Fax: (000) 000 0000
"Lender"
Name: Xxxxxx Xxxxx
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Signed ________________________
Address for notices:
00000 Xxxxxxx Xxxx Xx. #00X
Xxxxx Xxxxx, XX 00000-0000
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