Calim Private Equity, LLC
P.O. Box 2720
Aspen, Colorado 81612
December 2, 2002
Chapeau, Inc.
00 Xxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
Re: Loan from Calim Private Equity, LLC to Chapeau, Inc.
Gentlemen:
By letter loan agreement dated August 14, 2002 (the
"Agreement"), Calim Private Equity, LLC ("Calim") agreed to make
a loan (the "Loan") to Chapeau, Inc. (the "Company"), in an
amount up to $500,000 (the "Initial Credit Amount"). The Initial
Credit Amount has been advanced in full, and the Company has
requested that Calim advance an additional $300,000 to the
Company for further development of the Company's technology.
Calim or its assigns (the "Lender") is willing to advance an
additional amount in respect of the Loan in an amount up to
$300,000 (the "Second Credit Amount"), subject to and on the
following terms and conditions.
1. Capitalized Terms. Unless otherwise defined or the
context otherwise requires, capitalized terms used in this letter
(this "Amendment") shall have the meanings assigned them in the
Agreement.
2. Loan of Second Credit Amount. The Loan of the Second
Credit Amount shall, except as otherwise expressly provided
herein, be governed by the terms and provisions of the Agreement.
In addition, the Loan of the Second Credit Amount shall be
represented by an allonge (the "Allonge") to the Note in the form
attached as Exhibit 2 to this Agreement.
3. Drawings. Drawings by the Company under the Allonge
shall be made by the Company in accordance with the provisions of
Section 2 of the Agreement.
4. Security. The Loan of the Second Credit Amount shall
be secured by and entitled to the security of the Security
Agreement.
5. Conversion. The Loan of the Second Credit Amount shall
entitled the Lender to convert into up to $300,000 principal
amount of convertible bonds of the Company on terms identical to
those provided in Section 5 of the Agreement.
Chapeau, Inc.
December 2, 2002
Page 2
6. Stock Options. In consideration for making the Loan of
the Second Credit Amount, upon the execution of this Amendment,
the Company shall issue to or at the direction of the Lender
stock options to purchase up to an additional 300,000 shares of
the common stock of the Company (the "Second Options"),
substantially in the form of the form of Option Agreement
attached to the Agreement.
7. Representations and Warranties. The Company represents
and warrants to the Lender as follows:
(a) The representations and warranties of the Company
contained in the Agreement are true and correct on the date of
this Amendment as if made on the date hereof and with respect to
the transactions contemplated hereby, except to the extent
described in Exhibit 7(a) to this Amendment.
(b) Except as described in the Company's Quarterly Report
on Form 10-QSB as filed with the United States Securities and
Exchange Commission on November 19, 2002, no Event of Default or
event which, with the passage of time or the provision of notice
or both, would constitute an Event of Default, has occurred and
is continuing.
(c) The Company has the corporate power, authority and
legal right to make, deliver and perform each of the Agreement,
this Amendment, the Allonge, the Second Options and each other
document and instrument executed and delivered in connection
herewith and therewith (collectively, the "Second Transaction
Documents") and to borrow hereunder and has taken all necessary
corporate action to authorize the Loan and other transactions
contemplated hereby on the terms and conditions of this Amendment
and to authorize the execution, delivery and performance of this
Amendment and each of the other Second Transaction Documents. No
consent of any other person (including security holders and
creditors of the Company), and no authorization of, notice to, or
other act by or in respect of any governmental authority, is
required in connection with the Loan or with the execution,
delivery, performance, validity or enforceability of this
Amendment or any other Second Transaction Document. This
Amendment and each other Second Transaction Document have been
duly executed and delivered on behalf of the Company and each
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally.
8. Force and Effect. As hereby amended, each of the
Transaction Documents remains in full force and effect.
Chapeau, Inc.
December 2, 2002
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of December 2,
2002.
CHAPEAU, INC.
By: /s/ Xxx X. Xxxxxxxx
Authorized Officer
CALIM PRIVATE EQUITY, LLC
By: /s/ Xxxxxxx X. X. Xxxxxx
Managing Director
EXHIBIT 2
Form of Allonge
ALLONGE TO PROMISSORY NOTE
Aspen, Colorado
December 2, 2002
PURSUANT TO an Amendment to a letter agreement dated
December 2, 2002 (the "Amendment"), Chapeau, Inc., a Utah
corporation (the "Company") has adopted this Allonge to reflect
the increase in the principal amount borrowed or to be borrowed
by the Company under, as well as the name of the holder of, the
promissory note (the "Note") attached hereto. This Allonge and
the attached Note constitute collectively one and a singular
instrument, and one shall not be negotiated, transferred or
conveyed without the other; and the Lender (as defined in the
Amendment) shall not effect any transfer or replacement of the
Note without attachment of this Allonge. Unless otherwise
defined or the context otherwise requires, capitalized terms
used in this Allonge shall have the meanings assigned them in
the Agreement and the Amendment.
1. Definition of Payee. The Payee, as defined in the
Note, is by assignment (i) with respect to $500,000 principal
amount, Calim Venture Partners II, LLC, a Delaware limited
liability company ("CVPII"), and (ii) with respect to $300,000
principal amount, MFPI Partners, LLC, a Delaware limited
liability company ("MFPI"). CVPII and MFPI shall share pari
passu in proportion to the respective principal amounts
indicated above in the Note and the rights, titles and interests
of Calim and the Lender in and to the Agreement, the Security
Agreement, the other Transaction Documents and the Second
Transaction Documents.
2. Aggregate Principal Amount. The aggregate principal
amount of the Note is hereby increased from $500,000 to
$800,000; and each place in the Note where the figure $500,000
appears, such shall hereafter be $800,000.
IN WITNESS OF THE ABOVE, the Company has caused this
Allonge to be executed as of the date shown above.
CHAPEAU, INC.
By: /s/ Xxx X. Xxxxxxxx .
Authorized Officer
EXHIBIT 7(a)
Exceptions
The Company has received a collection notice dated September
11, 2002 regarding a past due account with Silver State Forklift
SVC in the approximate amount of $4,569.
STOCK OPTION AGREEMENT
by and between
CHAPEAU, INC.
and
MFPI PARTNERS, LLC
Dated as of December 2, 2002
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and
entered into as of February 13, 2003 by and between CHAPEAU,
INC., a Utah corporation (the "Company"), and MFPI Partners, LLC,
a Delaware limited liability company (the "Optionee").
RECITALS
WHEREAS, the Optionee (as assignee of Calim Private Equity,
LLC) and the Company are parties to an amended Letter Loan
Agreement dated as of the date hereof (the "Amendment"), pursuant
to which the Optionee has agreed to make the Company a loan on
the terms and conditions described therein; and
WHEREAS, as a condition of its agreement to enter into the
Loan Agreement the Optionee has required the Company to issue to
it stock options on the basis specified herein; and
WHEREAS, the Company and the Optionee each desire to agree
upon the following terms and conditions for the grant to the
Optionee of an option to acquire an amount of the Company's
Common Stock, par value US $0.001 each (the "Common Stock"),
NOW, THEREFORE, in consideration of the foregoing and the
mutual terms and provisions contained herein, the parties hereto
agree as follows:
1. Definitions.
Unless otherwise defined or the context otherwise requires,
capitalized terms used in this Agreement shall have the meanings
assigned them in the Amendment and the therein defined Loan
Agreement.
2. Grant of Option.
The Company hereby grants to the Optionee, on the terms and
conditions hereinafter provided, (the "Option") to purchase up to
300,000 shares (each a "Share") of Common Stock (the "Option
Stock"), subject to adjustment pursuant to Section 13 below.
3. Purchase Price.
The purchase price for the Option Stock is US $0.10 per
Share, subject to adjustment pursuant to Section 13 below (the
"Exercise Price"), which the Board of Directors of the Company
(the "Board") has determined is a fair price for the Option Stock
on the date hereof, taking into account all circumstances,
including without limitation the Optionee's agreement to make the
Loan on the conditions specified in the Loan Agreement.
4. Option Term.
The Option shall be exercisable at any time during the
period commencing on the date of this Agreement and ending on the
day immediately preceding the fifth anniversary date of this
Agreement (the "Option Period"). Following the end of the Option
Period, the Option will terminate without further act or deed,
subject to earlier termination as provided in this Agreement.
5. Transferability.
(a) This Agreement, and any rights hereunder, may not be
assigned or transferred by the Optionee except as provided herein
and in accordance with and subject to the provisions of the
United States Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "1933 Act"). Any
purported assignment or transfer made other than in accordance
with this Section 5 shall be null and void and of no force and
effect.
(b) An assignment or transfer of this Agreement, and any
rights hereunder (each a "Transfer") may be made only upon
receipt by the Company of (i) notice of the proposed Transfer and
(ii) if reasonably requested by the Company, an opinion of
counsel reasonably satisfactory to the Company that (A) the
transferee is a person to whom this Agreement may be Transferred
without registration under the Act and (B) such Transfer will not
violate any applicable law or governmental rule or regulation,
including without limitation the Act and any other applicable
federal or state securities law.
(c) Any Transfer permitted hereunder shall be made by
surrender of this Agreement to the Company at its principal
office with an assignment form duly executed and funds sufficient
to pay any applicable transfer tax. In such event the Company
shall, without charge, execute and deliver a new Agreement in the
name of the transferee named in such assignment in the amount so
Transferred, and this Agreement shall be promptly canceled;
provided that in the event that the Optionee shall Transfer this
Agreement and the Option in part, a new Agreement evidencing the
portion of the Option remaining and not so Transferred shall be
issued in the name of the Optionee.
6. Exercise of Option.
(a) The Option shall be exercisable, in whole or in part,
by surrender of this Agreement to the Company at its principal
office, together with written notice, delivered in person or by
certified mail to the Secretary of the Company, which shall:
(i) state the election to exercise the Option, the
number of Shares in respect of which it is being exercised
and the address and tax identification number of the
Optionee; and
(ii) be signed by the Optionee, or if the Option is
being exercised by any person or persons other than the
Optionee in compliance with Section 5 above, be signed by
the permitted transferee.
(b) The Optionee shall, together with the notice required
by (a) above, tender, in cash or by certified or bank cashier's
check, payment in full to the Company at its office of the amount
of the Exercise Price for the number of Shares with respect to
which the Option is then being exercised.
(c) The Company shall cause Shares to be delivered to or at
the direction of the Optionee as soon as practicable following
payment by the Optionee.
(d) In the event that the Optionee shall exercise the
Option in part, a new Agreement evidencing the portion of the
Option remaining and not so exercised shall be issued in the name
of the Optionee.
7. Optionee's Rights as Shareholder.
The Optionee shall have no rights as a shareholder with
respect to any Option Stock until the date of the exercise of the
Option and the delivery of the Shares.
8. Acquisition for Own Account.
The Optionee hereby represents and warrants to the Company
that the Option Stock to be issued and delivered to the Optionee
pursuant to this Agreement shall be acquired by the Optionee for
investment for the Optionee's own account and not with a view to,
or for, sale or other distribution thereof, and that the Optionee
has no present intention to sell or otherwise distribute any
Option Stock to be issued or delivered to the Optionee pursuant
to this Agreement, except in a manner which will not violate the
provisions of any applicable federal or state securities laws,
rules or regulations.
9. Benefits of Agreement.
This Agreement shall inure to the benefit of and be binding
upon each successor of the Company. All obligations imposed upon
the Optionee and all rights granted to or for the benefit of the
Company under this Agreement shall be binding upon the Optionee's
successors and permitted assigns.
10. Company's Obligations.
The Company shall (i) at all times during the term of the
Option maintain or otherwise reserve and keep available, or cause
the Company to so reserve and keep available, such number of
Shares as will be sufficient to satisfy the requirements of this
Agreement; (ii) pay all original issue and transfer taxes with
respect to the issue and transfer to the Optionee of Option Stock
pursuant to the Option and all other fees and expenses
necessarily incurred by the Company in connection therewith; and
(iii) from time to time use its best efforts to comply with all
laws and regulations which, in the opinion of counsel for the
Company, shall be applicable thereto.
11. Extension and Renewal of Options.
The Board may extend or renew the Option beyond the Option
Period as specified in this Agreement, or accept the surrender of
the Option (to the extent not theretofore exercised).
12. No Obligation to Exercise Options.
The granting of the Option shall impose no obligation upon
the Optionee to exercise the Option.
13. Adjustments to Shares. (a) If outstanding shares of
Common Stock shall be subdivided into a greater number of shares
or a dividend in Common Stock shall be paid in respect of Common
Stock, the Exercise Price in effect immediately prior to such
subdivision or at the record date of such dividend shall
simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be
proportionately reduced. If outstanding shares of Common Stock
shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be
made in the Exercise Price, the number of shares of Common Stock
purchasable upon the exercise of the Option shall be changed to
the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of the Option
immediately prior to such adjustment, multiplied by the Exercise
Price in effect immediately prior to such adjustment, by (ii) the
Exercise Price in effect immediately after such adjustment. (b)
When any adjustment is required to be made in the number of
shares of Common Stock purchasable hereunder or the Exercise
Price pursuant to this Section 13, the Company shall promptly
provide the Optionee with a certificate setting forth (i) a brief
statement of the facts requiring such adjustment; (ii) the
Exercise Price after such adjustment; and (iii) the kind and
amount of stock or other securities or property into which the
Option shall be exercisable after such adjustment.
(c) The Company shall not, by amendment of its Articles 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 or provisions of
this Agreement, but shall at all times in good faith assist in
carrying out all the provisions of this Section 13 and in taking
all such actions as may be necessary or appropriate to protect
the Optionee's rights under this Section 13 against impairment.
14. Loss, Theft, Destruction or Mutilation. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Agreement and, in the
case of less, theft or destruction, of indemnity or security
reasonably satisfactory to it, and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon
surrender and cancellation of this Agreement if mutilated, the
Company will make and deliver a new Agreement identical in tenor
and date in lieu of this Agreement. 15. Construction.
This Agreement shall be construed in accordance with, and
shall be governed by, the laws of the State of Delaware, except
to the extent that the laws of the State of Utah might govern the
corporate affairs of the Company.
16. Waiver.
No waiver by any party hereto of any breach of any covenant,
condition or agreement hereof on the part of the parties hereto
to be kept and performed shall be considered to constitute a
waiver of any other covenant, condition or provision, or of any
subsequent breach thereof.
17. Severability.
In the event any court of competent jurisdiction shall
declare any portion of this Agreement to be invalid, the
remainder of this Agreement shall not be invalidated thereby, but
shall remain in full force and effect.
18. Notices.
Unless otherwise provided in this Agreement, no notice,
consent, approval waiver or other communication which may be or
is required or permitted to be given under this Agreement shall
be effective unless given in accordance with Section 16 of the
Loan Agreement, with the name "MFPI Partners, LLC" substituted
for that of "Calim Private Equity, LLC" therein.
19. Gender and Number.
Whenever the context thereof requires, references in this
Agreement to the singular number shall include the plural and
vice versa, and words denoting gender shall be construed to
include the masculine, feminine and neuter.
20. Amendment.
All subsequent changes and modifications to this Agreement,
to be valid, shall be by written instrument executed by the
Company and the Optionee, except as otherwise specifically set
forth herein.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Company and the Optionee have caused
this Agreement to be executed as of the day and year first above
written.
CHAPEAU, INC.
By: /s/ Xxx X. Xxxxxxxx
Authorized Officer
MFPI PARTNERS, LLC
By: /s/ Xxxxxxx X. X. Xxxxxx
Managing Director
