AMENDMENT NO. 5 TO SECURED PROMISSORY NOTE AND SECURITY AGREEMENT
EXHIBIT 10.1
AMENDMENT NO. 5
TO
SECURED PROMISSORY NOTE
AND SECURITY AGREEMENT
This
AMENDMENT NO. 5 TO
SECURED PROMISSORY NOTE
AND SECURITY AGREEMENT (this
“Amendment”),
effective as of January 1, 2020, is made by and between
Charlie’s Holdings, Inc., a Nevada corporation
(“Holdings”),
Charlie’s Chalk Dust, LLC, a Delaware limited liability
company (“Chalk
Dust”), and ▇▇▇ ▇▇▇▇▇ LLC, a Nevada limited liability
company (“▇▇▇
▇▇▇▇▇”, and together with Holdings and Chalk Dust,
individually and collectively, “Company”), on the one hand, and
Red ▇▇▇▇▇ Holdings, LLC, a Delaware limited liability company
(“Red ▇▇▇▇▇”)
on the other. Company and Red ▇▇▇▇▇ are sometimes collectively
referred to herein as the
“Parties” and each individually as
a “Party”.
RECITALS
WHEREAS, the Parties executed that
certain Secured Promissory Note on April 8, 2020, in favor of Red
▇▇▇▇▇ in the original principal amount of Seven Hundred Fifty
Thousand and 00/100 Dollars ($750,000.00) (the “Note”), a copy of which is
attached hereto as Exhibit
A and by this reference incorporated herein;
WHEREAS, to secure repayment of the
Note, the Company executed and delivered to Red ▇▇▇▇▇ that certain
Security Agreement also dated April 8, 2020 (the
“Security
Agreement”), a copy of which is attached hereto as
Exhibit B and by
this reference incorporated herein and made a part
hereof;
WHEREAS, the Parties amended the Note
and Security Agreement as set forth in that certain Amendment No. 1
to Secured Promissory Note and Security Agreement dated August 27,
2020 (“Amendment No.
1”), a copy of which is attached hereto as
Exhibit C and by
this reference incorporated herein and made a part
hereof;
WHEREAS, the Parties further amended the
Note and Security Agreement as set forth in that certain Amendment
No. 2 to Secured Promissory Note and Security Agreement dated
September 30, 2020 (“Amendment No. 2”), a copy of
which is attached hereto as Exhibit D and by this reference
incorporated herein and made a part hereof;
WHEREAS, the Parties further amended the
Note and Security Agreement as set forth in that certain Amendment
No. 3 to Secured Promissory Note and Security Agreement dated
October 29, 2020 (“Amendment
No. 3”), a copy of which is attached hereto as
Exhibit E and by
this reference incorporated herein and made a part
hereof;
WHEREAS, the Parties further amended the
Note and Security Agreement as set forth in that certain Amendment
No. 4 to Secured Promissory Note and Security Agreement effective
December 1, 2020 (“Amendment
No. 4”), a copy of which is attached hereto as
Exhibit F and by
this reference incorporated herein and made a part
hereof;
WHEREAS, the Note, as amended by
Amendment ▇▇. ▇, ▇▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇▇▇ ▇▇. ▇, and Amendment
No. 4, currently is for the principal amount of One Million Four
Hundred Thousand and 00/100 Dollars ($1,400,000.00), has a
guaranteed minimum interest of One Hundred Twenty-Five Thousand and
00/100 Dollars ($125,000.00), and matures on January 1, 2020 (the
“Maturity
Date”); and
WHEREAS, Company has requested, and Red
▇▇▇▇▇ has agreed, to, among other things, extend the Maturity Date
to February 15, 2021 in exchange for the guaranteed minimum
interest to be increased from One Hundred Twenty-Five Thousand and
00/100 Dollars ($125,000.00) to One Hundred Fifty Thousand and
00/100 Dollars ($150,000.00).
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AGREEMENT
NOW, THEREFORE, in consideration of the
foregoing and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Parties hereto
agree as follows:
1. Amendment to Maturity Date. The
Note, as amended by Amendment No. 4 is hereby amended so that all
references to the Maturity Date in the Note shall, hereafter, mean
February 15, 2021.
2. Increase in Guaranteed Minimum
Interest. The Guaranteed Minimum Interest shall be increased
from One Hundred Twenty-Five Thousand and 00/100 Dollars
($125,000.00) to One Hundred Fifty Thousand and 00/100 Dollars
($150,000.00). All references to in the Note to the defined term
“Guaranteed Minimum Interest” shall hereafter be
interpreted to reflect the amended definition of Guaranteed Minimum
Interest.
3. Waiver of Default. Red ▇▇▇▇▇
hereby waives those rights granted to it under Section 5(b) of the
Note, including, without limitation, the acceleration and
accumulation of interest at the Default Rate, for any Event of
Default arising from, or related to, the Company’s failure to
pay dividends on its Series A Convertible Preferred Stock, par
value $0.001 (“Series A
Preferred”), and the Company’s receipt of that
certain notice of default dated August 13, 2020 from certain
holders of the Series A Preferred.
4. Amendment to Security
Agreement. The Security Agreement is hereby amended so that
any reference to the “Note” in the Security Agreement
shall mean the Note as amended by this Amendment.
5. Event of Conflict. The
provisions of the Note, as modified in this Amendment, Amendment
▇▇. ▇, ▇▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇▇▇ ▇▇. ▇, and Amendment No. 4, shall
remain in full force and effect in accordance with their terms and
are hereby ratified and confirmed. In the event of any conflict
between the terms and conditions of this Amendment and the terms
and conditions set forth in the Note, Amendment ▇▇. ▇, ▇▇▇▇▇▇▇▇▇
▇▇. ▇, ▇▇▇▇▇▇▇▇▇ ▇▇. ▇, and/or Amendment No. 4, the terms and
conditions set forth herein shall control. This Amendment shall be
governed by and construed in accordance with the laws of the State
of California.
6. Counterparts; Electronic
Execution. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed
counterpart of this Amendment by telefacsimile or other electronic
method of transmission (including without limitation a PDF
attachment) shall be equally as effective as delivery of an
original executed counterpart of this Amendment.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, this Amendment was duly executed on the date first
written above.
|
“COMPANY”
CHARLIE’S
HOLDINGS, INC.,
a
Nevada corporation
|
“RED
▇▇▇▇▇”
RED
▇▇▇▇▇ HOLDINGS, LLC
a
Delaware limited liability company
|
|
|
By:
/s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇
Chief
Executive Officer
|
By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
General
Partner
|
|
|
CHARLIE’S
CHALK DUST, LLC
a
Delaware limited liability company
|
|
|
|
By:
/s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
|
|
|
|
▇▇▇
▇▇▇▇▇ LLC
a
Nevada limited liability company
|
|
|
|
By:
/s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
|
|
|
|
|
|
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EXHIBIT A
Secured
Promissory Note
[Continued
on Next Page]
-4-
SECURED PROMISSORY NOTE
|
$750,000.00
|
April
8, 2020
|
THIS
SECURED PROMISSORY NOTE (this "Note") is a duly authorized and
validly issued joint and several promissory note of Charlie's
Holdings, Inc., a Nevada corporation ("Holdings"), Charlie's Chalk
Dust, LLC, a Delaware limited liability company ("Chalk Dust"), and ▇▇▇ ▇▇▇▇▇
LLC, a Nevada limited liability company ("▇▇▇ ▇▇▇▇▇" and together with
Holdings and Chalk Dust, individually and collectively, the
“Company”), each of which
have a principal place of business located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇.
FOR
VALUE RECEIVED, the Company hereby promises to pay to the order of
Red ▇▇▇▇▇ Holdings, LLC, a Delaware limited liability company
("Red ▇▇▇▇▇"), or
its successors and assigns (together with Red ▇▇▇▇▇, the
“Holder”), the principal
sum of Seven Hundred Fifty Thousand Dollars ($750,000.00) (the
“Principal
Amount”), together with interest thereon and other
amounts payable hereunder at the times and on the dates set forth
herein and in any event no later than the Maturity
Date.
Capitalized terms
used herein without definition have the meanings set forth on
Exhibit A hereto, which is incorporated herein by this reference as
though set forth herein in full. This Note is subject to the
following additional provisions:
Section 1. Advance of Funds: Conditions to
Advance.
(a) On or substantially concurrently with
the Effective Date, the Holder shall advance to the Company by wire
of immediately available funds the Principal Amount less any amounts that may be
deducted therefrom by agreement between the Holder and the Company
or otherwise pursuant to the terms of this Note. The entire
Principal Amount shall be deemed to have been advanced on the
Effective Date.
(b) Prior to the Holder having the
obligation of making the foregoing advance, the following shall
have occurred to the satisfaction of the Holder in its sole
discretion (such date being the "Effective Date"): (i) this Note
shall have been duly executed and delivered by the Company to the
Holder; (ii) the Security Agreement shall have been duly executed
and delivered by the Company to the Holder; and (iii) if requested
by the Holder, the Company shall have delivered to the Holder true
and correct copies of the Company’s organizational documents,
resolutions approving the transactions contemplated hereby and
under the other Transaction Documents, and current good standing
certificates from each jurisdiction requested by the
Holder.
Section 2. Payment of Principal and Interest;
Security.
(a) Payment of Principal. The
Principal Amount shall be due and payable in full by the Company to
the Holder on the Maturity Date or, if earlier, upon acceleration
of this Note in accordance with the terms hereof. Any amount of
principal repaid hereunder may not be reborrowed.
(b) Payment of Interest. From the
Effective Date until paid in full, interest on the aggregate
outstanding Principal Amount shall be equal to at least $75,000
(the "Guaranteed Minimum
Interest"), which amount shall be the minimum amount due and
owing regardless of the duration of the loan evidenced by this
Note. The Guaranteed Minimum Interest shall accrue and be fully
earned upon the advance by Holder of the loan evidenced by this
Note on or substantially concurrently with the Effective Date. The
Guaranteed Minimum Interest and any additional accrued interest
shall be due and payable by the Company to the Holder on the
Maturity Date or, if earlier, upon acceleration of this Note in
accordance with the terms hereof. Upon and after the occurrence of
an Event of Default (as defined below), then, in addition to the
Guaranteed Minimum Interest, the principal and unpaid interest and
unpaid other amounts under this Note shall, at the election of the
Holder in its sole and absolute discretion, bear interest at the
lesser of a rate equal to 20% per annum or the Maximum Rate (as
defined below) (the "Default Rate"). Such interest
shall accrue daily commencing on occurrence of such Event of
Default until payment in full of the Principal Amount, together
with all accrued and unpaid interest and other amounts which may
become due hereunder, has been made.
-5-
(c) Prepayment. The Company may
prepay all or any portion of the Principal Amount, together with
the Guaranteed Minimum Interest.
(d) Payments. Notwithstanding
anything to the contrary contained herein or in any other
Transaction Document, all payments made by the Company shall be
applied to principal, interest, fees and other charges due the
Holder hereunder in such order of priority as the Holder shall
elect.
(e) Security. The obligations of
the Company under this Note are secured by the collateral
identified in the Security Agreement.
(f) Use of Proceeds. The proceeds
of this Note shall be used by the Company for working capital and
for general corporate purposes. Notwithstanding the foregoing, the
proceeds of this Note shall not in any event be used to make or pay
any dividend or distribution or to redeem any equity of the Company
or securities convertible, exercisable or exchangeable into equity
of the Company, to settle any outstanding litigation or to make any
payment or prepayment on any existing indebtedness for borrowed
money.
Section 3. Representations and Warranties.
The Company hereby represents and warrants to the Holder as
follows:
(a) The Company has been duly formed, is
validly existing and is in good standing under the laws of its
jurisdiction of formation, is in good standing or duly qualified as
a foreign corporation in all jurisdictions where the conduct of its
business so requires and where the failure to so qualify could
reasonably be expected to have a Material Adverse Effect, and has
all requisite power and authority to execute, deliver and perform
its obligations under this Note and all other Transaction Documents
to which it is a party. Each of this Note and all other Transaction
Documents have been duly authorized, executed and delivered by the
Company and constitute its legal, valid and binding obligation,
enforceable against it in accordance with the terms hereof and
thereof except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, or other laws of
general application relating to or affecting the enforcement of
creditors’ rights generally. The execution, delivery and
performance by the Company of this Note and all other Transaction
Documents to which it is a party, and the incurrence by it of
obligations hereunder and thereunder, do not (i) contravene or
conflict with the Company’s certificate of formation,
operating agreement or similar governing documents or any law
applicable to the Company or other instrument binding on or
otherwise affecting the Company, or (ii) give rise to any lien,
security interest or other charge or encumbrance (other than in
favor of the Holder) upon any of the Company’s properties. No
consent or approval of or notice to or filing with any governmental
authority or other third party is or will be required on the part
of the Company as a condition to the validity or enforceability of
this Note or the other Transaction Documents, other than such
consents which have been obtained and are in full force and effect,
true and complete copies of which have been previously provided to
the Holder.
(b) The Company is in compliance in all
material respects with all laws and regulatory requirements to
which it or its properties are subject. There is no litigation
pending or, to the knowledge of the Company, threatened against the
Company. The Company’s principal place of business is at the
address set forth at the beginning of this Note. The Company has
paid all federal, foreign, state and local taxes required to be
paid by it on or prior to the date they were due. All documents,
instruments and other written material heretofore or hereafter
furnished to the Holder pursuant to the terms of any Transaction
Document contain no misstatements of a material fact and do not
fail to disclose any material fact and the Company has not failed
to disclose to the Holder any material information.
(c) All
financial statements of the Company delivered to Holder, if any,
fairly present in all material respects the financial position of
the Company as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end
audit adjustments. None of such financial reports, as of their
date, 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 therein, in the light of the
circumstances under which they were made, not
misleading.
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Section 4. Covenants. As long as any
portion of this Note remains outstanding, the Company agrees as
follows:
(a) the
Company shall not enter into, create, incur, assume or suffer to
exist any Lien on or with respect to any of its assets now owned or
hereafter acquired or any interest therein or any income or profits
therefrom;
(b) the
Company shall not amend its constitutional documents, including
without limitation, its certificate of formation, operating
agreement or similar governing documents, in any manner that
adversely affects any rights of the Holder;
(c) the
Company shall not enter into, create, incur, assume or suffer to
exist any Indebtedness, other than Indebtedness existing on the
date hereof in the amount in effect on the date hereof that has
been previously disclosed to Holder in writing;
(d) the
Company shall comply with its obligations under this Note and the
other Transaction Documents;
(e) the
Company shall comply with all applicable laws and duly observe and
conform in all material respects to all valid requirements of
governmental authorities relating to the conduct of its business or
to its properties or assets;
(f) the
Company shall not engage in any transactions with any officer,
director, employee, stockholder or any affiliate of the Company,
including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee,
stockholder or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, stockholder, trustee or
partner, other than any transactions in which the terms of such
transaction are, in all material respects, no less favorable to the
Company than would likely apply if such transaction was negotiated
on an arms’ length basis between unrelated
parties;
(g) the
Company shall not declare or pay any dividends or make any
distributions to any holder(s) of equity interests or other equity
security of the Company, or purchase or otherwise acquire for
value, directly or indirectly, any equity interests or other equity
security of the Company; except that Holdings may pay the one-time
dividend equal to the eight percent (8%) Dividend Amount (as
defined in the Series A Certificate) as contemplated by Section 3
of the Series A Certificate so long as (a) Holdings shall have used
its best efforts to satisfy the Equity Conditions (as defined in
the Series A Certificate), (b) if the Equity Conditions have been
satisfied, such dividend payment shall be paid in shares of common
stock of Holdings and (c) in the event that Holdings has failed to
satisfy the Equity Conditions and such dividend is required the be
paid in cash, the aggregate amount of all such cash distributions
shall not exceed $1,650,000.
(h) the
Company shall not (i) merge or consolidate with any other Person
(regardless of which Person is the surviving entity); (ii) sell or
dispose of any of its assets other than immaterial dispositions in
the ordinary course of business and for fair equivalent value or
(iii) in any way or manner alter its organizational structure or
effect a change of entity;
(i) the
Company shall promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits,
property or business of the Company; provided, however, that any
such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on
its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments,
charges or levies forthwith upon the commencement of proceedings to
foreclose any Lien which may have attached as security
therefor;
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(j) the
Company shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights
to use property owned or possessed by it and reasonably deemed to
be necessary to the conduct of its business;
(k) the
Company shall keep its properties in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time
make all necessary and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company shall at all
times comply with each provision of all leases to which it is a
party or under which it occupies property;
(l) the
Company shall not make any payment on any indebtedness owed to
officers, directors or affiliates except with the prior written
consent of the Holder;
(m) the
Company shall maintain with financially sound and reputable
insurance companies not affiliates of the Company, insurance with
respect to its properties and business against loss or damage of
the kinds customarily insured against by Persons engaged in the
same or similar business, of such types and in such amounts as are
customarily carried under similar circumstances by such other
Persons and providing for not less than 30 days’ prior notice
to the Holder of termination, lapse or cancellation of such
insurance;
(n) If,
notwithstanding any prohibitions in this Note on the incurrence of
Indebtedness, (i) any Indebtedness shall be incurred by any Company
or any of its subsidiaries or (ii) any equity interests shall be
issued by any Company or any of its subsidiaries, then, in each
case, unless Holder otherwise provides its prior written consent,
Company shall immediately prepay the obligations owing with respect
to this Note in an amount equal to the net cash proceeds received
from such incurrence or issuance.
(o) the
Company shall deliver to the Holder or provide access to the
Holder, (i) promptly upon the Holder’s request, such books,
records, financial statements, tax returns, investment statements,
lists of property and accounts, budgets, forecasts or reports as to
the Company as the Holder may request; and (ii) immediately upon
knowledge of the same, notice of the occurrence of any Event of
Default.
Section 5. Events of Default.
(a)
“Event of
Default” means, wherever used herein, any of the
following events (whatever the reason for such event and whether
such event shall be voluntary or involuntary or effected by
operation of law or pursuant to any judgment, decree or order of
any court, or any order, rule or regulation of any administrative
or governmental body):
i. any
default in the payment of (A) the principal amount of this Note or
(B) interest or other amounts owing to the Holder on this Note, as
and when the same shall become due and payable (whether on the
Maturity Date or by acceleration or otherwise);
ii. the
Company shall fail to observe or perform any other covenant or
agreement contained in this Note or any other Transaction
Document;
iii. a
default or event of default shall occur under any of the
Transaction Documents, or the failure or invalidity of any of the
Transaction Documents;
iv. any
representation or warranty made in this Note, any other Transaction
Documents, any written statement pursuant hereto or thereto or any
other report, financial statement or certificate made or delivered
to the Holder shall be untrue or incorrect in any respect as of the
date when made or deemed made;
-8-
v. the
Company shall be subject to a Bankruptcy Event;
vi. the
Company shall default on any other obligations under any promissory
note, mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which
there may be issued, or by which there may be secured or evidenced,
any indebtedness for borrowed money or money due under any long
term leasing or factoring arrangement, whether such indebtedness
now exists or shall hereafter be created;
vii.
any monetary judgment, writ or similar final process in excess of
$100,000 shall be entered or filed against the Company or its
property or other assets, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period
of 10 calendar days; or
viii. a
Material Adverse Effect occurs.
(b)
Remedies Upon Event of
Default. If any Event of Default occurs, the entire unpaid
principal amount of this Note plus all accrued interest and other
amounts owing under this Note through the date of acceleration,
shall become, at the Holder’s election in its sole and
absolute discretion, immediately due and payable upon written
notice to the Company, except that, with respect to a default under
Section 5(a)(v) above, no such notice shall be required and such
acceleration shall be automatic and immediate. In connection with
such acceleration described herein, the Holder need not provide,
and the Company hereby waives, any presentment, demand or protest
of any kind, and the Holder may immediately and without expiration
of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable
law and the Transaction Documents. Such acceleration may be
rescinded and annulled by the Holder at any time prior to payment
hereunder and the Holder shall have all rights as the holder of the
Note until such time, if any, as the Holder receives full payment
pursuant to this Section 5(b). No such rescission or annulment
shall affect any subsequent Event of Default or impair any right
consequent thereon.
Section 6. Miscellaneous.
(a)
Notices. Any and
all notices or other communications or deliveries to be provided by
the Holder to the Company hereunder shall be delivered to the
address of the Company set forth in the first paragraph of this
Note. Notices to the Holder shall be delivered to its address at
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ or such other address
as may be designated by the Holder from time to time.
(b)
Absolute
Obligation. No provision of this Note shall alter or impair
the obligation of the Company, which is absolute and unconditional,
to pay the principal of, and accrued interest, as applicable, on
this Note at the time, place, and rate, and in the coin or
currency, herein prescribed. This Note is a direct, unconditional
and secured debt obligation of the Company. All payments to be made
by the Company hereunder and under the other Transaction Documents
shall be made, in lawful money of the United States of America, and
without condition or deduction for any counterclaim, defense,
recoupment or setoff.
(c)
Lost or Mutilated
Note. If this Note shall be mutilated, lost, stolen or
destroyed, then the Company shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated Note, or
in lieu of or in substitution for a lost, stolen or destroyed Note,
a new Note for the principal amount of this Note so mutilated,
lost, stolen or destroyed.
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(d)
Governing Law. All
questions concerning the construction, validity, enforcement and
interpretation of this Note or any other Transaction Document shall
be governed by and construed and enforced in accordance with the
internal laws of the State of California, without regard to the
principles of conflict of laws thereof. The Company hereby agrees
that it will commence any and all legal proceedings under, with
respect to or related to any of the Transaction Documents (whether
brought against a party hereto or its respective affiliates,
directors, officers, members, employees or agents) only in the
state and federal courts sitting in the County of Orange, State of
California (the “California Courts”). The
Company hereby irrevocably submits to the nonexclusive jurisdiction
of the California Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such California Court, or that such California
Court is an improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such
party at the address in effect for notices to it under this Note
and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in
any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS NOTE, THE OTHER TRANSACTION DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. If either party shall
commence an action or proceeding to enforce any provisions of this
Note, then the prevailing party in such action or proceeding shall
be reimbursed by the other party for its reasonable
attorneys’ fees and other reasonable costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding. Nothing in this Note or any other
Transaction Document shall affect any right that the Holder may
otherwise have to bring any action or proceeding relating to this
Note or any other Transaction Document against the Company or its
properties in the courts of any jurisdiction.
(e)
Costs and Expenses.
The Company agrees to pay all costs and expenses, including the
fees and expenses of any attorneys, accountants and other experts
retained by the Holder, which are expended or incurred by the
Holder in connection with (i) the preparation, negotiation,
modification and/or enforcement of this Note or any other
Transaction Document, or the collection of any sums due hereunder
or thereunder, whether or not suit is commenced; (ii) any actions
for declaratory relief in any way related to this Note or any other
Transaction Document; (iii) the protection or preservation of any
rights of the Holder under this Note or any other Transaction
Document; (iv) any actions taken by the Holder in negotiating any
amendment, waiver, consent or release of or under this Note or any
other Transaction Document; (v) any actions taken in reviewing the
Holder’s financial affairs if an Event of Default has
occurred or the Holder has determined in good faith that an Event
of Default may likely occur; (vi) the Holder’s participation
in any refinancing, restructuring, bankruptcy or insolvency
proceeding involving the Company; (vii) verifying, maintaining, or
perfecting any security interest or other lien granted to the
Holder in any collateral; (viii) any effort by the Holder to
protect, assemble, complete, collect, sell, liquidate or otherwise
dispose of any collateral, including in connection with any action
or proceeding; or (ix) any refinancing or restructuring of this
Note, including, without limitation, any restructuring in the
nature of a “work out” or in any insolvency or
bankruptcy proceeding. All sums due to the Holder pursuant to this
clause (f) shall be due and payable immediately on demand and shall
bear interest at the same rate as then applicable to the Principal
Amount.
(f)
Waiver. Any waiver
by the Holder of a breach of any provision of this Note or any
other Transaction Document shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach
of any other provision of this Note or any other Transaction
Document. The failure of the Holder to insist upon strict adherence
to any term of this Note or any other Transaction Document on one
or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to
that term or any other term of this Note or such Transaction
Document, as applicable. Any waiver by the Holder must be in
writing.
-10-
(g)
Severability. If
any provision of this Note or any other Transaction Document is
invalid, illegal or unenforceable, the balance of this Note or
other Transaction Document, as applicable, shall remain in effect,
and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and
circumstances.
(h)
Next Business Day.
Whenever any payment or other obligation hereunder shall be due on
a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
(i)
Headings. The
headings contained herein are for convenience only, do not
constitute a part of this Note and shall not be deemed to limit or
affect any of the provisions hereof.
(j)
Usury.
i. To
the extent it may lawfully do so, the Company hereby agrees not to
insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any claim, action or
proceeding that may be brought by the Holder in order to enforce
any right or remedy under any Transaction Document; provided that,
notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the
total liability of the Company under the Transaction Documents for
payments in the nature of interest shall not exceed the maximum
lawful rate authorized under applicable law (taking into account
any usury exception or exemption available to the Holder, the
“Maximum
Rate”), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of
them, when aggregated with any other sums in the nature of interest
that the Company may be obligated to pay under the Transaction
Documents exceed such Maximum Rate. It is agreed that if the
maximum contract rate of interest allowed by law and applicable to
the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the
new maximum contract rate of interest allowed by law will be the
Maximum Rate applicable to the Transaction Documents from the
effective date forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in
excess of the Maximum Rate is paid by the Company to the Holder
with respect to indebtedness evidenced by the Transaction
Documents, such excess shall be applied by the Holder to the unpaid
principal balance of any such indebtedness or be refunded to the
Company, the manner of handling such excess to be at the
Holder’s election.
ii.
Without limiting the generality of; the foregoing, it is the intent
of Holder and Company that the loan evidenced by this Note comply
with the usury exemption set forth in California Corporations Code
§ 25118(b). In accordance with such Section, Company hereby
represents and warrants to Holder the following:
|
(1)
|
Holder
and Company, or any of their respective officers, directors,
members, managers or other controlling persons, have a preexisting
personal or business relationship.
|
|
(2)
|
Holder
and Company, by reason of their own business and financial
experience or that of their professional advisers, have the
capacity to protect their own interests in connection with the
transaction.
|
-11-
(k)
Indemnification.
The Company will indemnify and hold the Holder harmless from any
loss, liability, damages, judgments, and costs of any kind
(“Liabilities”) relating to
or arising directly or indirectly out of (i) this Note or any other
Transaction Document, (ii) any credit extended or committed by the
Holder to the Company hereunder, and (iii) any litigation or
proceeding related to or arising out of this Note, any such
Transaction, Document, or any such credit; provided, however that
the Company shall have no obligation to indemnify the Holder for
any Liabilities that have arisen as a result of the Holder’s
gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction.. This
indemnity includes but is not limited to attorneys’ fees and
expenses. This indemnity extends to the Holder, its affiliates,
partners, directors, officers, employees, agents, successors,
attorneys, and assigns. This indemnity will survive repayment of
the Company’s obligations to the Holder. All sums due to the
Holder hereunder shall be due and payable immediately without
demand and shall bear interest at the same rate as then applicable
to the Principal Amount.
(l)
Joint and Several
Liability. Each of Holdings, Chalk Dust and ▇▇▇ ▇▇▇▇▇
acknowledge that each of the undersigned are parties to this note
as the "Company" as joint and several co-borrowers hereunder. Any
references in this Note to the "Company" shall refer to any of
Holdings, Chalk Dust or ▇▇▇ ▇▇▇▇▇, or both such Persons as the
context may require. Each of Holdings, Chalk Dust and ▇▇▇ ▇▇▇▇▇
accept joint and several liability for the payment and performance
of all of the obligations of the Company hereunder, and each of
such obligations constitute the absolute and unconditional full
recourse obligations of each such Person enforceable against each
such Person to the full extent of its properties and assets. Each
of Holdings, Chalk Dust and ▇▇▇ ▇▇▇▇▇ hereby waive, to the fullest
extent permitted by law, any and all defenses or benefits that may
be derived from or afforded by applicable law limiting the
liability of or exonerating guarantors or sureties (including
co-borrowers to the extent applicable), including , including but
not limited to any rights and defenses that are or may become
available to any such Person by reason of Sections 2787 to 2855,
inclusive, 2899 and 3433 of the California Civil Code.
(m)
Successors and Assigns;
Assignments and Participations. This Note shall be binding
upon and inure to the benefit of the Company and the Holder and
their respective successors and assigns, except that the Company
may not assign or transfer any of its rights or obligations under
this Note or any other Transaction Document without the express
written consent of the Holder.
(n)
Counterparts; Electronic
Execution. This Note may be executed in any number of
counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall
constitute but one and the same Note. Delivery of an executed
counterpart of this Note by telefacsimile or other electronic
method of transmission (including without limitation a PDF
attachment) shall be equally as effective as delivery of an
original executed counterpart of this Note. The foregoing shall
apply to each other Transaction Document mutatis mutandis.
-12-
IN
WITNESS WHEREOF, the Company has caused this Note to be duly
executed by its duly authorized officer as of the date first above
indicated.
|
|
"Company"
CHARLIE'S HOLDINGS,
INC.,
a
Nevada corporation
By:
▇▇▇▇▇▇▇ ▇▇▇▇▇
Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇
Title:
Chief Executive Officer
CHARLIE'S CHALK
DUST, LLC,
a
Delaware limited liability company
By:
▇▇▇▇▇▇▇ ▇▇▇▇▇
Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇
Title:
Chief Executive Office
▇▇▇
▇▇▇▇▇ LLC,
a
Nevada limited liability company
By:
▇▇▇▇▇▇▇ ▇▇▇▇▇
Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇
Title:
Chief Executive Officer
|
AGREED
AND ACKNOWLEDGED:
RED
▇▇▇▇▇ HOLDINGS, LLC,
a
Delaware limited liability company
|
By:
▇▇▇▇▇ ▇▇▇▇▇
|
|
Name:
▇▇▇▇▇ ▇▇▇▇▇
|
|
Title:
General Partner
|
-13-
EXHIBIT A
(Certain Defined Terms)
“Bankruptcy
Event” means any of the
following events: (a) the Company commences a case or other
proceeding under any Debtor Relief Laws; (b) there is
commenced against the Company any case or proceeding under Debtor
Relief Laws that is not dismissed within 30 calendar days after
commencement; (c) the Company is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such
case or proceeding is entered; (d) the Company suffers any
appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 30
calendar days after such appointment; (e) the Company makes a
general assignment for the benefit of creditors; (f) the
Company calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or
(g) the Company, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the
foregoing or takes any corporate or other action for the purpose of
effecting any of the foregoing.
“Business
Day” means any day other
than a Saturday, Sunday or other day on which commercial banks are
authorized to close under the laws of, or are in fact closed in,
Orange County, California.
“Debtor Relief
Laws” means the
Bankruptcy Code of the United States, and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief laws of the United States
or other applicable jurisdictions from time to time in effect and
affecting the rights of creditors generally.
“Indebtedness”
means (a) all obligations for borrowed money; (b) all
obligations evidenced by bonds, debentures, notes, or other similar
instruments and all reimbursement or other obligations in respect
of letters of credit, bankers acceptances, current swap agreements,
interest rate hedging agreements, interest rate swaps, or other
financial products; (c) all capital lease obligations;
(d) all obligations or liabilities secured by a lien or
encumbrance on any asset of the Company, irrespective of whether
such obligation or liability is assumed; (e) all obligations
for the deferred purchase price of assets; (f) all synthetic
leases; and (g) any obligation guaranteeing or intended to
guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted or sold with recourse) any of the foregoing
obligations of any other person; provided, however, Indebtedness
shall not include (x) usual and customary trade debt incurred
in the ordinary course of business and (y) endorsements for
collection or deposit in the ordinary course of
business.
“Lien”
means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest or preferential
arrangement in the nature of a security interest of any kind or
nature whatsoever (including any conditional sale or other title
retention agreement, any easement, right of way or other
encumbrance on title to real property, and any financing lease
having substantially the same economic effect as any of the
foregoing).
"Liquidity
Event" means any of the
following, in each case with respect to either Company (or both) or
any of their respective subsidiaries and/or affiliates: (a) the
raising of any additional capital by any Company, whether in the
form of debt, equity or otherwise, in which Company receives
aggregate net cash proceeds therefrom of at least $1,000,000,
including, without limitation, the anticipated investment, whether
in the form of equity, debt or otherwise, by United Capital
Partners LLC and/or any of its affiliates, (b) any merger or
consolidation in which any Company is a constituent party, or (c)
the sale, transfer, pledge or other disposition of any equity
interests of any Company and/or any of their respective
subsidiaries and/or affiliates, or (d) the sale, lease, transfer,
exclusive license or other disposition, in a single transaction or
series of related transactions, by the Company or any subsidiary or
affiliate of the Company of all or substantially all the assets of
the Company and its subsidiaries and/or
affiliates.
“Material Adverse
Effect” means (a) a
material adverse change in, or a material adverse effect upon, the
operations, business, properties, liabilities (actual or
contingent), condition (financial or otherwise) or prospects of the
Company; (b) a material impairment of the rights and remedies of
the Holder under any Transaction Document or of the ability of
Company to perform its obligations under any Transaction Document;
(c) a material adverse effect upon the legality, validity, binding
effect or enforceability against the Company of any Transaction
Document; or (d) the issuance by any third party lender to the
Company of a notice of default on Indebtedness.
"Maturity
Date" means the earlier to
occur of (a) a Liquidity Event or (b) October 1,
2020.
“Note”
means this Secured Promissory Note, as amended, restated,
supplemented, extended or otherwise modified from time to
time.
“Person”
means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint
stock company, limited liability company, governmental authority or
other entity of any kind.
“Security
Agreement” means the
Security Agreement of even date herewith made by Company in favor
of the Holder, as amended, restated, supplemented, extended or
otherwise modified from time to time.
"Series A
Certificate" means that certain
Certificate of Designations, Preferences and Rights of the Series A
Convertible Preferred Stock of True Drinks Holdings, Inc. (now
known as Charlie's Holdings, Inc.) as in effect as of the date of
this Agreement.
“Transaction
Documents” means this
Note, the Security Agreement, each guaranty entered into in
connection herewith, if any, and each other instrument, document or
agreement now or hereafter executed by the Company in favor of the
Holder in connection with this Note, in each case as amended,
restated, supplemented, extended or otherwise modified from time to
time.
-14-
EXHIBIT B
Security
Agreement
[Continued
on Next Page]
-15-
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, restated,
supplemented, extended or otherwise modified from time to time,
this "Agreement")
dated as of April 8, 2020, is jointly and severally entered into by
Charlie's Holdings, Inc., a Nevada corporation
("Holdings"),
Charlie's Chalk Dust, LLC, a Delaware limited liability company
("Chalk
Dust"), and ▇▇▇ ▇▇▇▇▇ LLC, a
Nevada limited liability company ("▇▇▇
▇▇▇▇▇" and together with
Holdings and Chalk Dust, individually and collectively, the
"Debtor"),
as debtor in favor of Red ▇▇▇▇▇ Holdings, LLC, a Delaware limited
liability Company ("Red
▇▇▇▇▇" and together with its
successors and assigns, "Secured
Party").
WHEREAS, concurrently herewith, Debtor is issuing
that certain Secured Promissory Note of even date herewith in favor
of Secured Party (as amended, restated, supplemented, extended or
otherwise modified from time to time, the "Red ▇▇▇▇▇
Note").
WHEREAS,
as a condition to the obligation of Secured Party to enter into the
Red ▇▇▇▇▇ Note and to loan and advance funds thereunder pursuant to
the Red ▇▇▇▇▇ Note, Secured Party has required Debtor to enter into
this Agreement, and Debtor to grant the security interests
described herein in the Collateral in favor of Secured
Party.
NOW
THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good, valuable, and binding
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Definitions.
(a) Capitalized
terms used herein and not otherwise defined herein shall have the
meanings provided in the Red ▇▇▇▇▇ Note. This Agreement is the
"Security Agreement" referred to in the Red ▇▇▇▇▇ Note. This
Agreement is one of the "Transaction Documents" referred to in the
Red ▇▇▇▇▇ Note. To the extent that any terms or concepts defined or
used herein are defined or used in the UCC (as defined below), such
terms or concepts shall be interpreted for purposes hereof in a
manner that is consistent with such definition or use in the
UCC.
(b) The
following terms shall have the meanings set forth
below:
"Collateral" shall
mean all right, title, and interest of the Debtor in and to all of
the following property of the Debtor, whether now owned or
hereafter acquired and whether now existing or hereafter coming
into existence:
(i) Accounts;
(ii) Chattel
Paper and rights to receive monies included thereby;
(iii) Commercial
Tort Claims;
(iv) Deposit
Accounts;
(v) Documents;
(vi) Equity
Collateral;
(vii) General
Intangibles;
-16-
(viii) Goods,
including Inventory and Equipment;
(ix) Instruments
and rights to receive monies included thereby;
(x) Intellectual
Property;
(xi) Investment
Property, including Commodity Accounts and Commodity
Contracts;
(xii) Letter-of-Credit
Rights;
(xiii) Notes;
(xiv) other
tangible and intangible personal property and Fixtures of the
Debtor;
(xv) to
the extent related to any property described in the clauses (i)
through (xiv), all books, correspondence, loan files, records,
invoices, and other papers, including without limitation all tapes,
cards, computer runs, and other papers and documents in the
possession or under the control of the Debtor or any computer
service company from time to time acting for the Debtor;
and
(xvi) cash
and non-cash Proceeds of any and all of the foregoing.
"Copyright
Collateral" shall mean all Copyrights, whether now owned
or hereafter acquired by the Debtor.
"Copyrights" shall
mean all copyrights, copyright registrations, and applications for
copyright registrations, including, without limitation, all
renewals and extensions thereof, the right to recover for all past,
present, and future infringements thereof, and all other rights of
any kind whatsoever accruing thereunder or pertaining
thereto.
"Equity
Collateral" shall mean Pledged Equity and Pledged Equity
Proceeds.
"Intellectual
Property" shall mean, collectively, all Copyright
Collateral, all Patent Collateral, and all Trademark Collateral,
together with (a) all inventions, processes, production
methods, proprietary information, know-how, and trade secrets;
(b) all licenses or user or other agreements granted to the
Debtor with respect to any of the foregoing, in each case whether
now or hereafter owned or used; (c) all information, customer
lists, identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, catalogs, computer and
automatic machinery software and programs, splash screens, films,
masters, and artwork; (d) all field repair data, sales data,
and other information relating to sales or service of products now
or hereafter manufactured; (e) all accounting information and
all media in which or on which any information or knowledge or data
or records may be recorded or stored and all computer programs used
for the compilation or printout of such information, knowledge,
records, or data; and (f) all licenses, consents, permits,
variances, certifications, and approvals of governmental agencies
now or hereafter held by the Debtor.
"Lien" shall
mean a pledge, assignment, lien, charge, mortgage, encumbrance, or
other security interest obtained under this Agreement or under any
other agreement or instrument with respect to any present or future
assets, property, contract rights, or revenues in order to secure
the payment of indebtedness of the party referred to in the context
in which the term is used.
-17-
"Motor
Vehicles" shall mean motor vehicles, tractors,
trailers, and other like property, whether or not the title thereto
is governed by a certificate of title or
ownership.
"Notes" shall
mean all Promissory Notes or other debt instruments (including,
without limitation, bonds and debentures of any nature whatsoever)
from time to time issued to, or held by, the
Debtor.
"Obligations" shall
mean (i) (x) the principal of and any interest on the Red ▇▇▇▇▇
Note (including, without limitation, any further advances), and (y)
all other obligations and liabilities of the Debtor, whether now
existing or hereafter incurred, under, arising out of, or in
connection with, the Red ▇▇▇▇▇ Note and the due performance and
compliance by the Debtor with all of the terms, conditions, and
agreements contained in the Red ▇▇▇▇▇ Note; (ii) any and all sums
advanced by the Secured Party in order to preserve the
Collateral or preserve its Lien and security interest in the
Collateral; (iii) in the event of any proceeding for the collection
or enforcement of any indebtedness, obligations, or liabilities
referred to in clauses (i) and (ii) above, all costs and expenses
of any exercise by the Secured Party of its rights hereunder,
together with attorneys' fees and court costs; and (iv) to the
extent not otherwise included in clauses (i), (ii), or (iii) above,
the Debtor's obligations set forth in this Agreement, including,
without limitation, the Debtor's obligations set forth
in Section
21.
"Patent
Collateral" shall mean all Patents, whether now owned or
hereafter acquired by the Debtor.
"Patents" shall
mean all patents and patent applications, including, without
limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations,
renewals, extensions, and continuations-in-part thereof, all
income, royalties, damages, and payments now or hereafter due
and/or payable under and with respect thereto, including, without
limitation, damages and payments for past or future infringements
thereof, the right to ▇▇▇ for past, present, and future
infringements thereof, and all rights corresponding thereto
throughout the world.
"Pledged
Equity" shall mean (i) the shares of stock of, or
partnership and other ownership interest in, any entity, and any
and all equity interests now or hereafter issued in substitution,
exchange or replacement therefor or with respect thereto, and (ii)
all ownership interests of any class or character of a successor
entity formed by or resulting from a consolidation or merger in
which any such issuer is not the surviving entity; in each case,
whether now or hereafter owned by the Debtor, together with any
certificates evidencing any of the foregoing.
"Pledged
Equity Proceeds" shall mean all shares, securities, moneys,
or property representing a dividend on any of the Pledged Equity,
or representing a distribution or return of capital upon or in
respect of the Pledged Equity, or resulting from a split-up,
revision, reclassification, or other like change of the Pledged
Equity or otherwise received in exchange therefor, and any
subscription warrants, rights, or options issued to the holders of,
or otherwise in respect of, the Pledged Equity.
"Trademark
Collateral" shall mean all Trademarks, whether now owned
or hereafter acquired by the Debtor.
"Trademarks" shall
mean all trade names, trademarks and service marks, logos, domain
names, trademark and service ▇▇▇▇ registrations, and applications
for trademark and service ▇▇▇▇ registrations, including, without
limitation, all renewals of trademark and service ▇▇▇▇
registrations, all rights corresponding thereto throughout the
world, the right to recover for all past, present, and future
infringements thereof, all other rights of any kind whatsoever
accruing thereunder or pertaining thereto, together, in each case,
with the product lines and goodwill of the business connected with
the use of, and symbolized by, each such trade name, trademark, and
service ▇▇▇▇.
-18-
"UCC" shall
mean the Uniform Commercial Code as in effect in the State of
California from time to time.
2. Grant
of Liens.
As security for the due and punctual
payment and performance in full of all Obligations (whether at the
stated maturity, by acceleration, or otherwise and whether now
owing or incurred in the future), the Debtor hereby pledges,
assigns, charges, delivers, and grants to the Secured Party a
continuing perfected first priority security interest in and a general Lien upon all
of the Debtor's right, title, and interest in and to the Collateral
and all additions thereto and substitutions therefor, whether
heretofore, now or hereafter received by or delivered or
transferred to the Secured
Party hereunder.
3. Continuing
Security Interest. This
Agreement creates an assignment, pledge, charge, continuing
perfected first priority security interest in, and general Lien upon, the
Collateral and shall (a) remain in full force and effect until all
Obligations have been indefeasibly paid in full in cash, (b) be
binding upon the Debtor and its successors, permitted transferees,
and permitted assigns, and (c) inure, together with the rights and
remedies of the Secured Party hereunder, to the benefit of the
Secured Party and its successors, transferees, and
assigns.
4. Debtor
Remains Liable. Anything herein
to the contrary notwithstanding, (a) the Debtor shall remain liable
under any agreements which have been (in whole or in part) pledged
or assigned herein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been
executed; (b) the exercise by the Secured Party of any of the
rights hereunder shall not release the Debtor from any of its
duties or obligations under any such agreements; and (c) the
Secured Party shall not have any obligation or liability under
any such agreements by reason of this Agreement, nor shall the
Secured Party be obligated to perform any of the obligations
or duties of the Debtor thereunder or to take any action to collect
or enforce any claim for payment assigned
hereunder.
5. Delivery
and Perfection. The Debtor
hereby authorizes the Secured Party to file one or more
financing or continuation statements, and amendments thereto,
relating to all or any part of the Collateral, and agrees to take
all such other actions and to execute and deliver and file or cause
to be filed such other instruments or documents, as the Secured
Party may reasonably require in order to establish and
maintain a perfected, valid, and continuing security interest and
Lien in the Collateral in accordance with this Agreement and the
UCC and other applicable law.
(a) The
Debtor shall, at the request of the Secured
Party:
(i) immediately
deliver any and all Documents, Instruments, and Chattel Paper
(including, without limitation, any Certificates of Title)
evidencing or relating to the Collateral to the Secured Party at
the time and place and manner specified in the Secured Party's
request;
(ii) immediately
execute (if applicable) and deliver to the Secured Party (or
file or record in such offices as the Secured Party may deem
necessary or appropriate) any and all financing and continuation
statements, other agreements, instruments, or other documents or
amendments thereto, and perform any acts which may be necessary or
desirable (A) to create, perfect, preserve, or otherwise protect
the security interest and Liens granted herein or (B) to enable the
Secured Party to exercise and enforce its rights
hereunder;
(iii) with
respect to any Certificated Security not otherwise credited to a
Securities Account, the Debtor shall immediately effect transfer
thereof to the Secured Party (A) by physical delivery of such
Certificated Security to the Secured Party endorsed to the
Secured Party or its nominee or in blank or (B) in the case of
a Certificated Security in registered form, by physical delivery of
such Certificated Security to the Secured Party specially
endorsed to the Secured Party or its nominee and thereafter
reregistered in the name of the Secured Party or their
nominee;
-19-
(iv) with
respect to any Uncertificated Security not otherwise credited to a
Securities Account, the Debtor shall immediately (A) effect
transfer thereof to the Secured Party by registration thereof
on the books and records of the issuer in the name of the Secured
Party or its nominee or (B) obtain the agreement of the issuer
of such Uncertificated Securities that it will comply with
instructions originated by the Secured Party without further
consent by the registered owner, through a written agreement in
form and substance satisfactory to the Secured Party;
and
(v) ▇▇▇▇
all Certificates of Title in the manner specified in a written
notice of the Secured Party to the Debtor requesting such
marking, to evidence the fact that such Certificates of Title are
subject to the security interest and Lien of the Secured
Party granted herein.
(b) Upon
the request of the Secured Party, the Debtor agrees immediately to
deliver to the Secured Party, appropriately endorsed to the order
of the Secured Party, any Notes, trade acceptance, Chattel Paper,
or other Instrument in which a security interest must be perfected
by delivery or transfer of such Collateral to a secured party,
which are acquired by the Debtor from time to
time.
(c) Notwithstanding
Section 9207 of the UCC, the Secured Party may hold as additional
security any Proceeds, including money and funds, received from the
Collateral, all of which shall constitute Collateral hereunder, and
the Secured Party shall not be required to apply such money or
funds to reduce the Obligations other than as expressly set forth
herein.
6. Proceeds
of Sale. Nothing contained in
this Agreement shall limit or restrict in any way the Secured
Party's right to receive Proceeds of the Collateral in any form in
accordance with the provisions of this Agreement. All Proceeds that
are received by the Debtor contrary to the provisions of this
Agreement shall be received in trust for the benefit of the Secured
Party, shall be segregated from other property or funds of the
Debtor and shall be forthwith paid over to the Secured
Party as Collateral in the same form as so received (with any
necessary endorsement, document or instrument of
transfer).
7. Records
and Information. The Debtor
agrees to keep, at its office set forth in Section
11(d), its records concerning
the Collateral. The Debtor agrees to promptly furnish to the
Secured Party such information concerning itself, the
Collateral, and any Account Debtor as the Secured Party may
request at any time and from time to time.
8. Inspection.
The Debtor agrees upon notice provided by the Secured Party, to
permit the Secured Party, through its officers and agents, to
examine and inspect the Collateral and all records pertaining
thereto, and to make extracts from such records as the Secured
Party may require.
9. Use
of Collateral. Except upon the
occurrence and during the continuance of any Event of Default, the
Debtor may in the ordinary course of its business use, consume,
exhibit, demonstrate, sell, lease, or otherwise dispose of its
Inventory in carrying on its businesses substantially in the same
manner as now conducted; provided, however,
that a sale, disposition or transfer in the ordinary course of
business shall not include any sale, disposition or transfer in
satisfaction, partial or complete, of a debt owed by the Debtor or
any sale, transfer or disposition to any shareholder or affiliate
of the Debtor; and provided further that
any such sale, disposition or transfer shall be for fair equivalent
value and shall not be unlawful or inconsistent with the terms of
this Agreement or of any policy of insurance covering such
Collateral.
10. No
Disposition. The Debtor
covenants and agrees that it will not sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect
to, any of the Collateral, except as provided for
in Section
9 hereof, nor will it
create, incur, or permit to exist any Lien on or with respect to
any of the Collateral, any interest therein, or any Proceeds
thereof.
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11. Representations
and Warranties. The Debtor
represents, warrants and covenants to the Secured
Party throughout the term of this Agreement
that:
(a) The
Debtor is and will be the sole legal and beneficial owner of all of
the Collateral now owned or hereafter acquired free and clear of
any Lien, security interest, assignment, option, or other charge or
encumbrance;
(b) This
Agreement has been duly and validly authorized by the Debtor and
executed and delivered by the Debtor and constitutes the legal,
valid, and binding obligation of the Debtor, enforceable against
the Debtor in accordance with its terms (subject to applicable
bankruptcy, reorganization, insolvency, moratorium, or similar laws
affecting creditors' rights generally) and, subject to the
performance of the relevant procedures as specified
in Section
5herein with respect to such
Collateral, creates a valid, binding, enforceable, and first
priority perfected security interest in and general first Lien upon
all of the Collateral, and the Debtor is duly authorized to make
all filings and take all other actions necessary or desirable to
perfect and to continue perfected such security
interest;
(c) As
of the date hereof and on the date of delivery or transfer to the
Secured Party of any Collateral under this Agreement, the
Debtor has good and marketable title to the
Collateral;
(d) The
office where the Debtor maintains all records relating to the
Collateral is located at:
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(e) Holdings
is a corporation duly incorporated and validly existing under the
laws of the State of Nevada. Chalk Dust is a limited liability
company duly organized and validly existing under the laws of the
State of Delaware. ▇▇▇ ▇▇▇▇▇ is a limited liability company duly
organized and validly existing under the laws of the State of
Nevada.
(f) The
Debtor's exact legal name as that name appears on the Debtor's
Certificate of Formation or equivalent formation document is
exactly as set forth in the signature page for Debtor
below.
(g) All
Pledged Equity in which the Debtor currently has or shall hereafter
acquire an interest is and will be, as applicable, duly authorized,
validly existing, fully paid, and non-assessable (in the case of
any equity interest in a corporation) and duly issued and
outstanding (in the case of any equity interest in any other
entity), and none of such Pledged Equity is or will be subject to
any contractual restriction, or any restriction under the charter,
by-laws, partnership agreement, or other organizational document of
the respective issuer, upon the transfer of such Pledged
Equity;
(h) Except
pursuant to licenses and other user agreements entered into by the
Debtor in the ordinary course of business, the Debtor owns and
possesses the right to use, and has done nothing to authorize or
enable any other Person to use, any Copyright, Patent or Trademark
owned or used by the Debtor on the date hereof, and all
registrations therefor are valid and in full force and effect; and
the Debtor owns or possesses the right to use all such Copyrights,
Patents and Trademarks;
(i) To
the Debtor's knowledge, (i) there is no violation by others of
any right of the Debtor with respect to any Copyright, Patent or
Trademark of Debtor and (ii) the Debtor is not infringing in
any respect upon any Copyright, Patent or Trademark of any other
Person; and no proceedings have been instituted or are pending
against the Debtor or, to the Debtor's knowledge, threatened, and
no claim against the Debtor has been received by the Debtor,
and
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(j) To
the best of Debtor's knowledge, there are no actions, suits,
proceedings or investigations pending or threatened in writing
against Debtor before any governmental authority which could
reasonably be expected to cause any portion of the Intellectual
Property to be adjudged invalid or unenforceable, in whole or in
part.
12. Covenants.
(a) The
Debtor shall:
(i) Maintain,
or cause to be maintained, all items of the Collateral in good
condition and repair, ordinary wear and tear excepted in the case
of Equipment, and pay, or cause to be paid, the costs of repairs to
or maintenance of that Collateral which is of a type that could be
repaired or maintained;
(ii) Take
all steps to preserve and protect the Collateral, including, with
respect to the Intellectual Property, the filing of any renewal
affidavits and applications;
(iii) Not
use any Collateral in violation of applicable laws or any
applicable policy of insurance;
(iv) Pay
or cause to be paid when due all taxes, assessments, and other
charges relating to the Collateral or this Agreement and reimburse
the Secured Party for all costs of and fees incurred in
connection with any filing of the documents and instruments
referred to in Section
5;
(v) Not
change its: (a) name or the name under which it does business; (b)
chief executive office; (c) type of organization; (d) jurisdiction
of incorporation; or (e) other legal structure without at least 30
day's prior written notice to the Secured Party. Prior to
effectuating any change described in the preceding sentence, the
Debtor shall take or cause to be taken all actions deemed by the
Secured Party to be necessary or desirable to prevent any
financing or continuation statement from becoming seriously
misleading or rendered ineffective, or the security interests
granted herein from becoming unperfected or the relative priority
thereof otherwise impaired, as a result of such removal or
change;
(vi) Perform
and observe all the terms and provisions of any agreement for the
sale or lease of goods, or any agreement for the rendering of
services, giving rise to an Account to be performed or observed by
it, maintain any such agreement in full force and effect, enforce
any such agreement in accordance with its terms, and take all such
action to such end as may be from time to time reasonably requested
by the Secured Party;
(vii) Render
any assistance, as Secured Party may solely determine is necessary,
to Secured Party in any proceeding before the USPTO, the USCO, any
federal or state court, or any similar office or agency in the
United States of America, or any State therein, to maintain any
Patent Collateral, Trademark Collateral or Copyright Collateral and
to protect Secured Party's security interest therein, including,
without limitation, filing of renewals, affidavits of use,
affidavits of incontestability and opposition, interference, and
cancellation proceedings;
(viii) Immediately
notify Secured Party if Debtor learns of any use by any Person of
any term or design likely to cause confusion with any of the
Trademark Collateral, or of any use by any Person of any other
process or product which infringes upon any of the Trademark
Collateral in a manner which is adverse to Debtor's business, and
if requested by Secured Party, Debtor, at its expense, shall join
with Secured Party in such action as Secured Party in Secured
Party's discretion may deem advisable for the protection of Secured
Party's interest in and to the Trademark
Collateral;
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(ix) Assume
all responsibility and liability arising from the use of the
Intellectual Property, and Debtor hereby indemnifies and holds
Secured Party harmless from and against any claim, suit, loss,
damage or expense (including attorneys' fees) arising out of any
alleged defect in any product manufactured, promoted, or sold by
Debtor in connection with any Intellectual Property or out of the
manufacture, promotion, labeling, sale, or advertisement of any
such product by Debtor;
(x) Immediately
notify Secured Party in writing of any adverse determination in any
proceeding in the USPTO, USCO, or any other foreign or domestic
governmental authority, court or body, Debtor becomes aware of
regarding Debtor's claim of ownership in any of the Trademark
Collateral, Patent Collateral or Copyright Collateral, and in the
event of any infringement of any Trademark, Patent or Copyright
owned by Debtor by a third party which is adverse to Debtor's
business, Debtor shall promptly notify Secured Party of such
infringement and ▇▇▇ for and diligently pursue damages for such
infringement, and if Debtor shall fail to take such action within
one (1) month after such notice is given to Secured Party, Secured
Party may, but shall not be required to, itself take such action in
the name of Debtor, and Debtor hereby appoints Secured Party the
true and lawful attorney of Debtor, for it and in its name, place
and stead, on behalf of Debtor, solely, without limitation on any
other rights of Secured Party under this Agreement, to commence
judicial proceedings in any court or before any other tribunal to
enjoin and recover damages for such infringement, any such damages
due to Debtor, net of costs and attorneys' fees, to be applied to
the Obligations;
(xi) (A)
Maintain, with responsible insurance companies, insurance covering
the Collateral against such insurable losses as is consistent with
sound business practice and, in any event, as is required by the
Transaction Documents and, (B) cause Secured Party to be designated
as loss payee (as customary for secured parties based on the type
of insurance) with respect to all insurance (whether or not
required by the Transaction Documents), (C) obtain the written
agreement of the insurers that such insurance shall not be
cancelled, terminated or materially modified to the detriment of
Secured Party without at least 30 days' prior written notice to
Secured Party, and (D) furnish copies of such insurance policies or
certificates to Secured Party immediately upon request therefor and
otherwise comply with the terms and provisions of the Transaction
Documents with respect to such insurance coverage;
and
(xii) with
respect to the Copyright Collateral, at its sole expense, do, make,
execute and deliver all such additional and further acts, things,
deeds, assurances, and instruments, in each case in form and
substance satisfactory to Secured Party, relating to the creation,
validity, or perfection of the security interests provided for in
this Agreement under 35 U.S.C. Section 261, 15 U.S.C. Section 1051
et seq., 17 U.S.C. Sections 101, 201 et seq., the UCC or other law
of the United States of America, the State of California, other
States or any other domestic or foreign jurisdiction as Secured
Party may from time to time reasonably request, and shall take all
such other action as Secured Party may reasonably require to
perfect Secured Party's security interest in any of the Copyright
Collateral and to completely vest in and assure to Secured Party
its rights hereunder in any of the Copyright Collateral;
and
(xiii) within
10 days after any request by Secured Party, Debtor shall, and shall
cause each depository or intermediary holding any of the Debtor's
Deposit Accounts, Securities Accounts, or other deposit, brokerage,
securities or other similar accounts to, enter into control
agreements in favor of Secured Party, in form and substance
satisfactory to Secured Party in its sole and absolute discretion,
over such accounts.
13. Further
Assurances and Protections.
(a) The
Debtor shall at its expense do, file, record, make, execute, and
deliver all such acts, notices, instruments, statements, or other
documents as the Secured Party may request to perfect, preserve, or
otherwise protect the security interest and Liens of the Secured
Party in the Collateral or any part thereof or to give effect
to the rights, powers, and remedies of the Secured Party under
this Agreement;
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(b) The
Debtor will give prompt written notice to the Secured
Party of, and defend the Collateral against, any suit, action,
or proceeding related to the Collateral or which could adversely
affect the security interests and Liens granted hereunder;
and
(c) Debtor
authorizes Secured Party to have this or any other similar
agreement recorded or filed with the USCO, USPTO or other
appropriate federal, state or foreign government
office.
14. Events
of Default. The occurrence of
any of the following events or conditions shall constitute an event
of default (each an "Event of
Default") under this
Agreement:
(a) The
occurrence and continuation of an Event of Default as defined in
the Red ▇▇▇▇▇ Note;
(b) any
representation or warranty made in this Agreement or the Red ▇▇▇▇▇
Note or any written statement pursuant hereto or thereto or any
other report, financial statement or certificate made or delivered
to the Secured Party shall be untrue or incorrect in any respect as
of the date when made or deemed made;
(c) The
failure or refusal by the Debtor to perform, or the breach or
violation of, any of the terms, obligations, covenants, or
warranties of this Agreement or the Red ▇▇▇▇▇
Note.
15. Remedies
upon an Event of Default. On
and after the occurrence and continuance of an Event of Default,
the Secured Party may, in its discretion:
(a) request
that the Debtor, and upon such request the Debtor shall, assemble
the Collateral at such place or places convenient to the Secured
Party designated in such request;
(b) enforce
collection of any of the Collateral by suit or any other lawful
means available to the Secured Party, or demand, collect, or
receive any money or property at any time payable or receivable on
account of or in exchange for any of the
Collateral;
(c) surrender,
release, or exchange or otherwise modify the terms of all or any
part of the Collateral, or compromise or extend or renew for any
period any indebtedness thereunder or evidenced
thereby;
(d) assert
all other rights and remedies of a secured party under the UCC
(whether or not in effect in any applicable jurisdiction) and all
other applicable law, including, without limitation, the right to
take possession of, hold, collect, sell, lease, deliver, grant
options to purchase, or otherwise retain, liquidate, or dispose of
all or any portion of the Collateral. The proceeds of any
collection, liquidation, or other disposition of the Collateral
shall be applied by the Secured Party first to the payment of
all expenses (including, without limitation, all fees, taxes,
attorneys' fees and legal expenses) incurred by the Secured
Party in connection with retaking, holding, collecting, or
liquidating the Collateral. The balance of such proceeds, if any,
shall, to the extent permitted by law, be applied to the payment of
the Obligations in the order and manner designated by the Secured
Party in its sole discretion until all Obligations are indefeasibly
paid in full in cash. After all of the Obligations have been
indefeasibly paid in full in cash, the balance of such proceeds, if
any, shall be remitted to the Debtor or as otherwise required by
law. In case of any deficiency, the Debtor shall, whether or not
then due, remain liable therefor. If notice prior to disposition of
the Collateral or any portion thereof is necessary under applicable
law, written notice mailed to the Debtor at its notice address
specified in the Red ▇▇▇▇▇ Note ten (10) days prior to the date of
such disposition shall constitute commercially reasonable notice,
but notice given in any other reasonable manner shall be
sufficient. Without precluding any other methods of sale or other
disposition, the sale or other disposition of the Collateral or any
portion thereof shall have been made in a commercially reasonable
manner if conducted in conformity with commercial practices of
creditors disposing of similar property; but in any event the
Secured Party may sell, lease, deliver, grant options to
purchase or otherwise retain, liquidate or dispose such Collateral
on such terms and to such purchaser(s) (including the Secured
Party) as the Secured Party in its absolute discretion may
choose, and for cash or for credit or for future delivery, without
assuming any credit risk, at public or private sale or other
disposition, without demand of performance, and without any
obligation to advertise or give notice of any kind other than that
necessary under applicable law. The Debtor hereby waives and
releases to the fullest extent permitted by law any right or equity
of redemption with respect to the Collateral, whether before or
after sale or other disposition hereunder, and all rights, if any,
of marshalling the Collateral and any other security for the
Obligations or otherwise. At any such sale or other disposition,
unless prohibited by applicable law, the Secured Party may bid
for and purchase all or any part of the Collateral so sold free
from any such right or equity of redemption. The Secured
Party shall not be liable for failure to collect or realize
upon any or all of the Collateral or for any delay in so doing nor
shall it be under any obligation to take any action whatsoever with
regard thereto.
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The
Secured Party shall incur no liability as a result of the sale
of the Collateral, or any part thereof, at any private sale
pursuant to this Agreement. The Debtor hereby waives any claims
against the Secured Party arising by reason of the fact that
the price at which the Collateral may have been sold at such a
private sale was less than the price that might have been obtained
at a public sale or was less than the aggregate amount of the
Obligations, even if the Secured Party accepts the first offer
received and does not offer the Collateral to more than one
offeree.
The
Debtor recognizes that, by reason of certain prohibitions contained
in the Securities Act of 1933, as amended, and applicable state
securities laws, the Secured Party may be compelled, with
respect to any sale of all or any part of the Collateral, to limit
purchasers to those who will agree, among other things, to acquire
the relevant Collateral for their own account, for investment and
not with a view to the distribution or resale thereof. The Debtor
acknowledges that any such private sale may be at prices and on
terms less favorable to the Secured Party than those
obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially reasonable
manner and that the Secured Party shall have no obligation to
engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to enable the
registration of the Collateral or related transaction so as to
permit a public offer to be made with respect thereto;
(e) license
or sublicense, whether general, special or otherwise, and whether
on an exclusive or non-exclusive basis, any Intellectual Property
included in the Collateral throughout the world for such term or
terms, on such conditions and in such manner as the Secured
Party shall in its sole discretion
determine;
(f) without
assuming any obligation or liability thereunder, at any time and
from time to time, in its sole discretion, enforce (and shall have
the exclusive right to enforce) against any licensee or sublicensee
all rights and remedies of the Debtor in, to and under any of its
Intellectual Property and take or refrain from taking any action
under any thereof, and the Debtor releases the Secured
Party from liability for, and agrees to hold the Secured
Party free and harmless from and against any claims and
expenses arising out of, any lawful action so taken or omitted to
be taken with respect thereto;
(g) make
a request upon the Debtor (which shall not be construed as implying
any limitation on the rights or powers of the Secured Party), and
upon such request the Debtor shall, execute and deliver to the
Secured Party a power of attorney, in form and substance
satisfactory to the Secured Party, for the implementation of any
sale, lease, license or other disposition of Intellectual Property
owned by the Debtor or any such action related thereto. In
connection with any such disposition, the Debtor will supply to the
Secured Party its know-how and expertise relating to the
relevant Intellectual Property, and its customer lists and other
records relating to such Intellectual Property and to the
distribution of said products or services;
(h) to
the extent not already so transferred, transfer all or any part of
the Collateral into the Secured Party's names or the name of their
nominee or nominees; and
(i) give
all consents, waivers, and ratifications in respect of the
Collateral and otherwise act with respect thereto as though it were
the outright owner thereof (the Debtor hereby irrevocably
constituting and appointing the Secured Party the proxy and
attorney-in-fact of the Debtor, with full power of substitution to
do so, which power is coupled with an interest), including, without
limitation, the exercise of all voting, consensual and other powers
of ownership pertaining to the Collateral.
16. Secured
Party Appointed Attorney-in-Fact. Without limiting any rights or powers granted to
the Secured Party pursuant to this Agreement, applicable law
or otherwise, the Debtor hereby appoints the Secured Party as
its attorney-in-fact, with full power and authority in the place
and stead of the Debtor and in the name of the Debtor or otherwise,
from time to time in the Secured Party's discretion to take any and
all action and to execute, file and record any and all instruments,
agreements, and documents which the Secured Party may deem
necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to execute any assignment
of Intellectual Property to the Secured Party or other
transferee, and to receive, endorse and collect all instruments
made or payable to the Debtor representing any Collateral or
Proceeds in respect of the Collateral or any part thereof and to
give full discharge for the same. The appointment set forth in
this Section
16 is coupled with an
interest and is irrevocable.
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17. Secured
Party May Perform. If the
Debtor fails to perform any agreement, covenant, or obligation
contained herein, the Secured Party may itself perform, or
cause performance of such agreement, covenant or obligation and the
expenses and costs of the Secured Party incurred in connection
therewith shall be payable by the Debtor.
18. Security
Interest Absolute. All rights
of the Secured Party and all Liens hereunder, and all
obligations of the Debtor hereunder, shall be absolute and
unconditional irrespective of:
(a)
lack
of validity or enforceability of this Agreement or the Red ▇▇▇▇▇
Note or any other Transaction Document;
(b) any
change in the time, manner, or place of payment of, or in any other
term of any or all of the Obligations or any amendment or waiver of
any provision of this Agreement or the Red ▇▇▇▇▇ Note or any other
Transaction Document;
(c) any
release or non-perfection of any portion of the Collateral or any
exchange, release, or non-perfection of any other collateral, or
any release, amendment, or waiver of any guaranty for all or any of
the Obligations; or
(d) any
other circumstance which might otherwise constitute a defense
available to, or a discharge of the Debtor in respect of the
Obligations or this Agreement or the Red ▇▇▇▇▇ Note or any other
Transaction Document.
19. Secured
Party's Duties.
The powers conferred to the Secured Party hereunder are solely
to protect the Secured Party's interest in the Collateral and shall
not impose any duty upon it to exercise any such powers except for
the safe custody of any Collateral or any portion thereof in its
possession, and the Secured Party shall exercise that standard
of care with respect to the Collateral in its possession which it
exercises in the administration of its own assets and
property; provided, however,
that the Secured Party shall not be liable for any action
taken or omitted with respect to the Collateral or this Agreement
unless such liability results solely from the gross negligence or
willful misconduct of the Secured Party as determined by a final
non-appealable judgment by a court of competent jurisdiction. The
Secured Party shall have no duty as to the Collateral or as to
the taking of any necessary steps to preserve rights against other
parties pertaining to the Collateral.
20. Rights
Cumulative. The rights, powers,
and remedies of the Secured Party under this Agreement shall
be in addition to all rights, powers, and remedies given to the
Secured Party by virtue of any statute or rule of law or any
agreement, all of which rights, powers and remedies shall be
cumulative and may be exercised successively or concurrently
without impairing the Secured Party's security interest, Lien, and
assignment in the Collateral.
21. Indemnity
and Expenses.
(a) The Secured
Party shall not have any liability to any Person and shall be
indemnified and held harmless by the Debtor for any liability
incurred by reason of taking or refraining from taking any action
with respect to the Collateral, except in the case such liability
results solely from the gross negligence or willful misconduct of
the Secured Party as determined by a final non-appealable judgment
by a court of competent jurisdiction. The Debtor agrees to
indemnify the Secured Party from and against any and all
claims, losses, and liabilities arising out of or connected with
this Agreement (including, without limitation, enforcement of this
Agreement), except such claims, losses, or liabilities resulting
solely from the Secured Party's gross negligence or willful
misconduct as determined by a final non-appealable judgment by a
court of competent jurisdiction. This Section
21(a) shall survive any
termination of this Agreement.
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(b) The
Debtor agrees to pay all expenses, costs, and disbursements
incurred by the Secured Party (including, without limitation,
all attorneys' fees and other legal expenses incurred by the
Secured Party in connection therewith) in connection with (i)
retaking, holding, collecting, preparing for sale, and selling or
otherwise realizing upon, liquidating, or disposing of the
Collateral, (ii) the enforcement of its rights hereunder upon the
occurrence and during the continuance of an Event of Default, (iii)
the performance by the Secured Party of any agreement,
covenant, or obligation of the Debtor contained herein that the
Debtor has failed or refused to perform, and (iv) the participation
or other involvement of the Secured Party with (x) bankruptcy,
insolvency, receivership, foreclosure, winding up, or liquidation
proceedings, or any actual or attempted sale, or any exchange,
enforcement, collection, compromise, or settlement in respect of
any of the Collateral, and for the care of the Collateral and
defending or asserting rights and claims of the Secured Party in
respect thereof, by litigation or otherwise, including expenses of
insurance, (y) judicial or regulatory proceedings, and (z) workout,
restructuring, or other negotiations or proceedings (whether or not
the workout, restructuring or transaction contemplated thereby is
consummated).
22. Amendment
or Waiver. Neither this
Agreement nor any terms hereof may be changed, waived, discharged,
or terminated unless such change, waiver, discharge or termination
is in writing signed by the parties hereto.
23. Notices.
Except as otherwise expressly provided herein, all notices and
other communications provided for hereunder shall be in writing and
mailed or delivered to the Debtor or the Secured Party at the
respective addresses specified in the Red ▇▇▇▇▇ Note; or at such
other address as shall be designated by any party in a written
notice to the other parties hereto. All such notices and
communications shall, when mailed, be effective three business days
after deposit in the mails and shall, when delivered, be effective
upon delivery of such notice.
24. No
Waiver. No failure or delay on
the part of the Secured Party in exercising any right, power
or privilege hereunder or under the UCC or any other applicable law
shall operate as a waiver hereof or thereof; nor shall any single
or partial exercise of any right, power, or privilege hereunder or
under the UCC or any other applicable law preclude any other or
further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. No notice to or demand on the
Secured Party in any case shall entitle the Debtor to any
other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of the Secured Party to
any other or further action in any circumstances without notice or
demand.
25. Severability
of Provisions. Any provision of
this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the
extent of that prohibition or unenforceability without invalidating
the remaining provisions hereof or affecting the validity or
enforceability of that provision in any other
jurisdiction.
26. Non-Assignment.
The Debtor shall not have the right to assign its rights or
delegate its obligations hereunder or any part thereof to any other
person without the Secured Party's prior written consent. This
Agreement shall be binding upon any successors or assigns of the
Debtor, and shall benefit any successors or assigns of the Secured
Party.
27. Integration
of Terms. This Agreement
contains the entire agreement between the parties with respect to
the subject matter hereof and supersedes all oral statements and
prior writings with respect thereto.
28. Governing
Law. This Agreement and the
rights and obligations of the parties hereunder shall be construed
in accordance with and be governed by the law of the State of
California without regard to choice of law principles thereof that
would cause the laws of any other jurisdiction to
apply.
29. Counterparts.
This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all
of which shall together constitute one and the same
instrument.
30. Joint
and Several Liability. Each of
Holdings, Chalk Dust and ▇▇▇ ▇▇▇▇▇ acknowledge that each of the
undersigned are parties to this Agreement as the "Debtor" as joint
and several grantors hereunder. Any references in this Agreement to
the "Debtor" shall refer to any of Holdings, Chalk Dust or ▇▇▇
▇▇▇▇▇, or both such Persons as the context may require. Each of
Holdings, Chalk Dust and ▇▇▇ ▇▇▇▇▇ accept joint and several
liability for the payment and performance of all of the obligations
of the Debtor hereunder, and each of such obligations constitute
the absolute and unconditional full recourse obligations of each
such Person enforceable against each such Person to the full extent
of its properties and assets. Each of Holdings, Chalk Dust and ▇▇▇
▇▇▇▇▇ hereby waive, to the fullest extent permitted by law, any and
all defenses or benefits that may be derived from or afforded by
applicable law limiting the liability of or exonerating guarantors
or sureties (including co-borrowers to the extent applicable),
including , including but not limited to any rights and defenses
that are or may become available to any such Person by reason of
Sections 2787 to 2855, inclusive, 2899 and 3433 of the California
Civil Code.
[Signature Page Follows]
-27-
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first written
above.
DEBTOR:
CHARLIE'S HOLDINGS, INC.,
a Nevada corporation
By: ▇▇▇▇▇▇▇
▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
CHARLIE'S CHALK DUST, LLC,
a Delaware limited liability company
By: ▇▇▇▇▇▇▇
▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
▇▇▇ ▇▇▇▇▇ LLC,
a Nevada limited liability company
By: ▇▇▇▇▇▇▇
▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
SECURED PARTY:
RED ▇▇▇▇▇ HOLDINGS, LLC
a Delaware limited liability company
By: ▇▇▇▇▇
▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: General Partner
-28-
EXHIBIT C
Amendment
No. 1
to
[Continued
on Next Page]
-29-
AMENDMENT NO. 1
TO
SECURED PROMISSORY NOTE
AND SECURITY AGREEMENT
This
AMENDMENT NO. 1 TO
SECURED PROMISSORY NOTE
AND SECURITY AGREEMENT (this
“Amendment”),
dated August, 27, 2020, is made by and between Charlie’s
Holdings, Inc., a Nevada corporation (“Holdings”), Charlie’s Chalk
Dust, LLC, a Delaware limited liability company
(“Chalk Dust”),
and ▇▇▇ ▇▇▇▇▇ LLC, a Nevada limited liability company
(“▇▇▇ ▇▇▇▇▇”,
and together with Holdings and Chalk Dust, individually and
collectively, “Company”), on the one hand, and
Red ▇▇▇▇▇ Holdings, LLC, a Delaware limited liability company
(“Red ▇▇▇▇▇”)
on the other. Company and Red ▇▇▇▇▇ are sometimes collectively
referred to herein as the “Parties” and each individually as
a “Party”.
RECITALS
WHEREAS, the Parties executed that
certain Secured Promissory Note on April 8, 2020, in favor of Red
▇▇▇▇▇ in the original principal amount of Seven Hundred Fifty
Thousand and 00/100 Dollars ($750,000.00), a copy of which is
attached hereto as Exhibit
A and by this reference incorporated herein (the
“Note”);
WHEREAS, to secure repayment of the
Note, the Company executed and delivered to Red ▇▇▇▇▇ that certain
Security Agreement also dated April 8, 2020, a copy of which is
attached hereto as Exhibit
B and by this reference incorporated herein (the
“Security
Agreement”); and
WHEREAS, Company has requested, and Red
▇▇▇▇▇ has agreed, to increase the amount that can be borrowed under
the Note.
AGREEMENT
NOW, THEREFORE, in consideration of the
foregoing and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Parties hereto
agree as follows:
1. Increase in Principal. The
Principal Amount of the Note shall be increased from Seven Hundred
Fifty Thousand and 00/100 Dollars ($750,000.00) to One Million Four
Hundred Thousand and 00/100 Dollars ($1,400,000.00).
2. Increase in Guaranteed Minimum
Interest. The Guaranteed Minimum Interest shall be increased
from Seventy Five Thousand and 00/100 Dollars ($75,000.00) to One
Hundred Thousand and 00/100 Dollars ($100,000.00).
3. Amendment to Security
Agreement. The Security Agreement is hereby amended so that
any reference to the “Note” in the Security Agreement
shall mean the Note as amended by this Amendment.
4. Event of Conflict. The
provisions of the Note, as modified in this Amendment, shall remain
in full force and effect in accordance with their terms and are
hereby ratified and confirmed. In the event of any conflict between
the terms and conditions of this Amendment and the terms and
conditions set forth in the Note, the terms and conditions set
forth herein shall control. This Amendment shall be governed by and
construed in accordance with the laws of the State of
California.
5. Counterparts; Electronic
Execution. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed
counterpart of this Amendment by telefacsimile or other electronic
method of transmission (including without limitation a PDF
attachment) shall be equally as effective as delivery of an
original executed counterpart of this Amendment.
-30-
IN
WITNESS WHEREOF, this Amendment was duly executed on the date first
written above.
|
“COMPANY”
CHARLIE’S
HOLDINGS, INC.,
a
Nevada corporation
|
“RED
▇▇▇▇▇”
RED
▇▇▇▇▇ HOLDINGS, LLC
a
Delaware limited liability company
|
|
|
By: /s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇
Chief
Executive Officer
|
By:
/s/ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇
General
Partner
|
|
|
CHARLIE’S
CHALK DUST, LLC
a
Delaware limited liability company
|
|
|
|
By:
/s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
|
|
|
|
▇▇▇
▇▇▇▇▇ LLC
a
Nevada limited liability company
|
|
|
|
By:
/s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
|
|
|
-31-
EXHIBIT D
Amendment
No. 2
to
[Continued
on Next Page]
-32-
AMENDMENT NO. 2 TO SECURED PROMISSORY NOTE
AND SECURITY AGREEMENT
This AMENDMENT NO. 2
TO SECURED PROMISSORY
NOTE (this
“Amendment”), dated September 30, 2020, is made by and
between Charlie’s Holdings, Inc., a Nevada corporation
(“Holdings”), Charlie’s Chalk Dust, LLC, a
Delaware limited liability company (“Chalk Dust”), and ▇▇▇ ▇▇▇▇▇ LLC, a Nevada limited
liability company (“▇▇▇ ▇▇▇▇▇”, and together with Holdings and Chalk
Dust, individually and collectively, “Company”), on the one hand, and Red ▇▇▇▇▇ Holdings,
LLC, a Delaware limited liability company
(“Red
▇▇▇▇▇”) on the other.
Company and Red ▇▇▇▇▇ are sometimes collectively referred to herein
as the “Parties” and each individually as a
“Party”.
RECITALS
WHEREAS, the Parties executed that certain Secured
Promissory Note on April 8, 2020, in favor of Red ▇▇▇▇▇ in the
original principal amount of $750,000, a copy of which is attached
hereto as Exhibit
A (the
“Note”), and on August 27, 2020, the Parties
executed Amendment No. 1 to the Note, a copy of which is attached
hereto as Exhibit
B, to increase the principal
amount of the Note to $1,400,000 (“Amendment No.
1”);
WHEREAS, to secure repayment of the Note, the Company
executed and delivered to Red ▇▇▇▇▇ that certain Security Agreement
also dated April 8, 2020, a copy of which is attached hereto
as Exhibit
C (the
“Security
Agreement”);
and
WHEREAS, the Note, as amended by Amendment No. 1,
currently matures on October 1, 2020 (the
“Maturity
Date”);
and
WHEREAS, Company has requested, and Red ▇▇▇▇▇ has agreed,
to extend the Maturity Date to November 1,
2020.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties hereto agree as
follows:
1. Amendment
to Maturity Date. The Note, as
amended by Amendment No. 1, is hereby amended so that all
references to the “Maturity Date” in the Note shall,
hereafter, mean November 1, 2020.
2. Amendment
to Security Agreement. The
Security Agreement is hereby amended so that any reference to the
“Note” in the Security Agreement shall mean the Note as
amended by this Amendment.
3. Event
of Conflict. The provisions of
the Note, as modified by Amendment No. 1 and in this Amendment,
shall remain in full force and effect in accordance with their
terms and are hereby ratified and confirmed. In the event of any
conflict between the terms and conditions of this Amendment and the
terms and conditions set forth in the Note, as amended, the terms
and conditions set forth herein shall control. This Amendment shall
be governed by and construed in accordance with the laws of the
State of California.
4. Counterparts;
Electronic Execution. This
Amendment may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when
executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the
same Agreement. Delivery of an executed counterpart of this
Amendment by telefacsimile or other electronic method of
transmission (including without limitation a PDF attachment) shall
be equally as effective as delivery of an original executed
counterpart of this Amendment.
-33-
IN
WITNESS WHEREOF, this Amendment was duly executed on the date first
written above.
|
“COMPANY”
CHARLIE’S
HOLDINGS, INC.,
a
Nevada corporation
|
|
“RED
▇▇▇▇▇”
RED
▇▇▇▇▇ HOLDINGS, LLC,
a
Delaware limited liability company
|
|
By: /s/
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
|
|
By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
General
Partner
|
|
CHARLIE’S
CHALK DUST, LLC
a
Delaware limited liability company
|
|
|
|
By: /s/
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
|
|
|
|
▇▇▇
▇▇▇▇▇ LLC
a
Nevada limited liability company
|
|
|
|
By:
/s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
|
|
|
-34-
EXHIBIT E
Amendment
No. 3
to
[Continued
on Next Page]
-35-
AMENDMENT NO. 3
TO
SECURED PROMISSORY NOTE
AND SECURITY AGREEMENT
This
AMENDMENT NO. 3 TO
SECURED PROMISSORY NOTE
AND SECURITY AGREEMENT (this
“Amendment”),
dated October 29, 2020, is made by and between Charlie’s
Holdings, Inc., a Nevada corporation (“Holdings”), Charlie’s Chalk
Dust, LLC, a Delaware limited liability company
(“Chalk Dust”),
and ▇▇▇ ▇▇▇▇▇ LLC, a Nevada limited liability company
(“▇▇▇ ▇▇▇▇▇”,
and together with Holdings and Chalk Dust, individually and
collectively, “Company”), on the one hand, and
Red ▇▇▇▇▇ Holdings, LLC, a Delaware limited liability company
(“Red ▇▇▇▇▇”)
on the other. Company and Red ▇▇▇▇▇ are sometimes collectively
referred to herein as the “Parties” and each individually as
a “Party”.
RECITALS
WHEREAS, the Parties executed that
certain Secured Promissory Note on April 8, 2020, in favor of Red
▇▇▇▇▇ in the original principal amount of Seven Hundred Fifty
Thousand and 00/100 Dollars ($750,000.00) (the “Note”), a copy of which is
attached hereto as Exhibit
A and by this reference incorporated herein;
WHEREAS, to secure repayment of the
Note, the Company executed and delivered to Red ▇▇▇▇▇ that certain
Security Agreement also dated April 8, 2020 (the
“Security
Agreement”), a copy of which is attached hereto as
Exhibit B and by
this reference incorporated herein and made a part
hereof;
WHEREAS, the Parties amended the Note
and Security Agreement as set forth in that certain Amendment No. 1
to Secured Promissory Note and Security Agreement dated August 27,
2020 (“Amendment No.
1”), a copy of which is attached hereto as
Exhibit C and by
this reference incorporated herein and made a part
hereof;
WHEREAS, the Parties further amended the
Note and Security Agreement as set forth in that certain Amendment
No. 2 to Secured Promissory Note and Security Agreement dated
September 30, 2020 (“Amendment No. 2”), a copy of
which is attached hereto as Exhibit D and by this reference
incorporated herein and made a part hereof;
WHEREAS, the Note, as amended by
Amendment No. 2, currently matures on November 1, 2020 (the
“Maturity
Date”); and
WHEREAS, Company has requested, and Red
▇▇▇▇▇ has agreed, to extend the Maturity Date to November 1,
2020.
AGREEMENT
NOW, THEREFORE, in consideration of the
foregoing and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Parties hereto
agree as follows:
1. Amendment to Maturity Date. The
Note, as amended by Amendment No. 2 is hereby amended so that all
references to the Maturity Date in the Note shall, hereafter, mean
December 1, 2020.
2. Waiver of Default. Red ▇▇▇▇▇
hereby waives those rights granted to it under Section 5(b) of the
Note, including, without limitation, the acceleration and
accumulation of interest at the Default Rate, for any Event of
Default arising from, or related to, the Company’s failure to
pay dividends on its Series A Convertible Preferred Stock, par
value $0.001 (“Series A
Preferred”), and the Company’s receipt of that
certain notice of default dated August 13, 2020 from certain
holders of the Series A Preferred.
-36-
3. Amendment to Security
Agreement. The Security Agreement is hereby amended so that
any reference to the “Note” in the Security Agreement
shall mean the Note as amended by this Amendment.
4. Event of Conflict. The
provisions of the Note, as modified in this Amendment, Amendment
No. 1, and Amendment No. 2, shall remain in full force and effect
in accordance with their terms and are hereby ratified and
confirmed. In the event of any conflict between the terms and
conditions of this Amendment and the terms and conditions set forth
in the Note, Amendment No. 1, and/or Amendment No. 2, the terms and
conditions set forth herein shall control. This Amendment shall be
governed by and construed in accordance with the laws of the State
of California.
5. Counterparts; Electronic
Execution. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed
counterpart of this Amendment by telefacsimile or other electronic
method of transmission (including without limitation a PDF
attachment) shall be equally as effective as delivery of an
original executed counterpart of this Amendment.
IN
WITNESS WHEREOF, this Amendment was duly executed on the date first
written above.
|
“COMPANY”
CHARLIE’S
HOLDINGS, INC.,
a
Nevada corporation
|
|
“RED
▇▇▇▇▇”
RED
▇▇▇▇▇ HOLDINGS, LLC,
a
Delaware limited liability company
|
|
By: /s/
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
|
|
By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
General
Partner
|
|
CHARLIE’S
CHALK DUST, LLC
a
Delaware limited liability company
|
|
|
|
By: /s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
|
|
|
|
▇▇▇
▇▇▇▇▇ LLC
a
Nevada limited liability company
|
|
|
|
By:
/s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
|
|
|
-37-
EXHIBIT F
Amendment
No. 4
to
[Continued
on Next Page]
-38-
AMENDMENT NO. 4
TO
SECURED PROMISSORY NOTE
AND SECURITY AGREEMENT
This
AMENDMENT NO. 4 TO
SECURED PROMISSORY NOTE
AND SECURITY AGREEMENT (this
“Amendment”),
effective as of December 1, 2020, is made by and between
Charlie’s Holdings, Inc., a Nevada corporation
(“Holdings”),
Charlie’s Chalk Dust, LLC, a Delaware limited liability
company (“Chalk
Dust”), and ▇▇▇ ▇▇▇▇▇ LLC, a Nevada limited liability
company (“▇▇▇
▇▇▇▇▇”, and together with Holdings and Chalk Dust,
individually and collectively, “Company”), on the one hand, and
Red ▇▇▇▇▇ Holdings, LLC, a Delaware limited liability company
(“Red ▇▇▇▇▇”)
on the other. Company and Red ▇▇▇▇▇ are sometimes collectively
referred to herein as the “Parties” and each individually as
a “Party”.
RECITALS
WHEREAS, the Parties executed that
certain Secured Promissory Note on April 8, 2020, in favor of Red
▇▇▇▇▇ in the original principal amount of Seven Hundred Fifty
Thousand and 00/100 Dollars ($750,000.00) (the “Note”), a copy of which is
attached hereto as Exhibit
A and by this reference incorporated herein;
WHEREAS, to secure repayment of the
Note, the Company executed and delivered to Red ▇▇▇▇▇ that certain
Security Agreement also dated April 8, 2020 (the
“Security
Agreement”), a copy of which is attached hereto as
Exhibit B and by
this reference incorporated herein and made a part
hereof;
WHEREAS, the Parties amended the Note
and Security Agreement as set forth in that certain Amendment No. 1
to Secured Promissory Note and Security Agreement dated August 27,
2020 (“Amendment No.
1”), a copy of which is attached hereto as
Exhibit C and by
this reference incorporated herein and made a part
hereof;
WHEREAS, the Parties further amended the
Note and Security Agreement as set forth in that certain Amendment
No. 2 to Secured Promissory Note and Security Agreement dated
September 30, 2020 (“Amendment No. 2”), a copy of
which is attached hereto as Exhibit D and by this reference
incorporated herein and made a part hereof;
WHEREAS, the Parties further amended the
Note and Security Agreement as set forth in that certain Amendment
No. 3 to Secured Promissory Note and Security Agreement dated
October 29, 2020 (“Amendment
No. 3”), a copy of which is attached hereto as
Exhibit E and by
this reference incorporated herein and made a part
hereof;
WHEREAS, the Note, as amended by
Amendment ▇▇. ▇, ▇▇▇▇▇▇▇▇▇ ▇▇. ▇, and Amendment No. 3, currently is
for the principal amount of One Million Four Hundred Thousand and
00/100 Dollars ($1,400,000.00), has a guaranteed minimum interest
of One Hundred Thousand and 00/100 Dollars ($100,000.00), and
matures on December 1, 2020 (the “Maturity Date”); and
WHEREAS, Company has requested, and Red
▇▇▇▇▇ has agreed, to, among other things, extend the Maturity Date
to January 1, 2021 in exchange for the guaranteed minimum interest
to be increased from One Hundred Thousand and 00/100 Dollars
($100,000.00) to One Hundred Twenty-Five Thousand and 00/100
Dollars ($125,000.00).
[Continues
on Next Page]
-39-
AGREEMENT
NOW, THEREFORE, in consideration of the
foregoing and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Parties hereto
agree as follows:
1. Amendment to Maturity Date. The
Note, as amended by Amendment No. 3 is hereby amended so that all
references to the Maturity Date in the Note shall, hereafter, mean
January 1, 2021.
2. Increase in Guaranteed Minimum
Interest. The Guaranteed Minimum Interest shall be increased
from One Hundred Thousand and 00/100 Dollars ($100,000.00) to One
Hundred Twenty-Five Thousand and 00/100 Dollars ($125,000.00). All
references to in the Note to the defined term “Guaranteed
Minimum Interest” shall hereafter be interpreted to reflect
the amended definition of Guaranteed Minimum Interest.
3. Waiver of Default. Red ▇▇▇▇▇
hereby waives those rights granted to it under Section 5(b) of the
Note, including, without limitation, the acceleration and
accumulation of interest at the Default Rate, for any Event of
Default arising from, or related to, the Company’s failure to
pay dividends on its Series A Convertible Preferred Stock, par
value $0.001 (“Series A
Preferred”), and the Company’s receipt of that
certain notice of default dated August 13, 2020 from certain
holders of the Series A Preferred.
4. Amendment to Security
Agreement. The Security Agreement is hereby amended so that
any reference to the “Note” in the Security Agreement
shall mean the Note as amended by this Amendment.
5. Event of Conflict. The
provisions of the Note, as modified in this Amendment, Amendment
▇▇. ▇, ▇▇▇▇▇▇▇▇▇ ▇▇. ▇, and Amendment No. 3, shall remain in full
force and effect in accordance with their terms and are hereby
ratified and confirmed. In the event of any conflict between the
terms and conditions of this Amendment and the terms and conditions
set forth in the Note, Amendment ▇▇. ▇, ▇▇▇▇▇▇▇▇▇ ▇▇. ▇, and/or
Amendment No. 3, the terms and conditions set forth herein shall
control. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
6. Counterparts; Electronic
Execution. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed
counterpart of this Amendment by telefacsimile or other electronic
method of transmission (including without limitation a PDF
attachment) shall be equally as effective as delivery of an
original executed counterpart of this Amendment.
[Signature
Page Follows]
-40-
IN
WITNESS WHEREOF, this Amendment was duly executed on the date first
written above.
|
“COMPANY”
CHARLIE’S
HOLDINGS, INC.,
a
Nevada corporation
|
“RED
▇▇▇▇▇”
RED
▇▇▇▇▇ HOLDINGS, LLC
a
Delaware limited liability company
|
|
|
By: /s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇
Chief
Executive Officer
|
By: /s/
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇
General
Partner
|
|
|
CHARLIE’S
CHALK DUST, LLC
a
Delaware limited liability company
|
|
|
|
By:
/s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
|
|
|
|
▇▇▇
▇▇▇▇▇ LLC
a
Nevada limited liability company
|
|
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By:
/s/ ▇▇▇▇▇▇▇
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Chief
Executive Officer
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