Attached files
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| EX-10.2 - SECOND AMENDED AND RESTATED SECURITY AGREEMENT, DATED JULY 24, 2017, BETWEEN MUS - MusclePharm Corp | mslp_ex102.htm |
| 8-K - CURRENT REPORT - MusclePharm Corp | mslp_8k.htm |
Exhibit 10.1
Secured Demand Promissory Note
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$1,000,000.00
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July 27,
2017
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DPN-1
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Denver,
Colorado
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For
value received, MusclePharm
Corporation, a
Nevada corporation (the “Company”), promises to pay to
Ryan Drexler or his assigns
(the “Holder”)
the principal sum of One Million
Dollars ($1,000,000.00), together with interest on
the outstanding principal amount at the rate of fifteen percent
(15%) per annum. Interest shall commence on the Issue Date (as
defined below) and shall continue and accrue daily at the
applicable rate on the outstanding principal amount until paid in
full in accordance with this note (the “Note”). Interest shall be computed
on the basis of a year of 365 days for the actual number of days
elapsed. Accrued and unpaid interest shall be paid by the Company
to the Holder in cash on the Payment Date, provided that any
interest not paid when due shall be capitalized and added to the
principal amount of this Note and begin to bear interest on such
date along with all other unpaid principal, capitalized interest
and other capitalized obligations hereunder. The “Issue
Date” shall be July 6, 2017.
This
Note is secured by a lien on and security interest in all of the
assets and properties of the Company, as described in the Second
Amended and Restated Security Agreement of even date herewith by
and between the Company and the Holder (the “Security Agreement”).
WHEREAS, after
considering the Company’s short-term cash needs and other
available sources of funding, the Board of Directors of the Company
(the “Board”)
has determined that the issuance and sale of this Note is necessary
and advisable to ensure the Company’s ability to operate as a
going concern and thereby protect the interests of the Company and
its stockholders;
This
Note is subject to the following terms and conditions:
1. Maturity on Demand. Unless earlier due
and payable as provided in Section 2, all outstanding principal and
any accrued but unpaid interest under this Note (whether or not
that interest has been capitalized) (the “Repayment Amount”) shall be due
and payable on demand of the Holder (the “Payment Date”). Demand for payment
hereunder shall be made by notice in writing, delivered by
overnight courier to the undersigned at 4701 Irontron Street
Building A, Denver, Co 80219 or sent by email to
Bill.Bush@musclepharm.com or by fax to 800/490-7165 (with such
demand being deemed made and effective one (1) business day after
being sent via overnight courier, and effective on the same day it
was sent (or, if not sent on a business day, on the following
business day) if sent via email or fax), setting out details of the
amount outstanding and the appropriate method of payment. Without
limiting the foregoing, at the option and upon the declaration of
the Holder and upon written notice to the Company, the entire
Repayment Amount shall become due and payable upon an Event of
Default. An “Event of
Default” shall occur if (i) the Company fails to pay
any and all unpaid principal, accrued and unpaid interest and all
other amounts owing under the Note when due and payable pursuant to
the terms of the Note, provided, however,
that an Event of Default shall not be deemed to have occurred on
account of a failure to pay due solely to an administrative or
operational error of any depositary institution that is crediting
by ACH or wiring such payment if the Company had the funds to make
the payment when due and payment is received by the Holder within
two (2) business days following the Company’s knowledge of
such failure to pay; (ii) the Company or any of its subsidiaries
files any petition or action for relief under any bankruptcy,
reorganization, insolvency or moratorium law or any other law for
the relief of, or relating to, debtors, now or hereafter in effect,
or makes any general assignment for the benefit of creditors; (iii)
an involuntary petition is filed against the Company or any of its
subsidiaries (unless such petition is dismissed or discharged
within forty-five (45) days) under any bankruptcy statute or
similar law now or hereafter in effect, or a custodian, receiver,
trustee, assignee for the benefit of creditors (or other similar
official) is appointed to take possession, custody or control of
any property of the Company; or (iv) the Company breaches any other
material term of this Note or the Security Agreement (unless, in
the case of any curable material breach, such material breach is
cured within thirty (30) days of the earlier of the date on which
(x) the Holder has given notice of such breach to the Company and
(y) the Company has actual knowledge of such breach); provided, however,
that all obligations under this Note, including without limitation
all principal and all accrued and unpaid interest, shall be
accelerated, and shall be immediately and automatically due and
payable without any notice to the Company or other action, upon the
occurrence of any Event of Default described in clause (ii) or
(iii) of this sentence.
2. Payment; Prepayment. All payments shall
be made in lawful money of the United States of America at such
place as the Holder hereof may from time to time designate in
writing to the Company. Payment shall be credited first to any fees
and expenses due and payable hereunder, then to accrued and unpaid
interest, and then the remainder shall be applied to principal. The
Company may prepay this Note in whole or in part at any time
following at least fifteen (15) and no more than sixty (60)
days’ advance written notice to the Holder.
3. Restrictions
on Additional Indebtedness and Liens and Subordination. The
Company may not incur or suffer to exist any Indebtedness (as
defined below) other than Permitted Indebtedness (as defined below)
or any Lien (as defined below) other than Permitted Liens (as
defined below).
(a) “Indebtedness” shall mean any and
all indebtedness for borrowed money; all obligations in respect of
any deferred purchase price; all obligations in respect of capital
leases; all reimbursement obligations in respect of letters of
credit, surety bonds and similar instruments; all obligations
evidenced by notes, bonds, loan agreements, debentures and similar
instruments; and all guarantee obligations and contingent
obligations in respect of any of the foregoing.
(b) “Permitted Indebtedness” shall mean
(a) Indebtedness evidenced by this Note, by that existing
Convertible Secured Promissory Note dated November 8, 2016, issued
by the Company in favor of the Holder (the “2016 Note”), or by that existing
Convertible Secured Promissory Note dated December 7, 2015, and
amended as of January 14, 2017, issued by the Company in favor of
the Holder (the “2015
Note” and, together with the 2016 Note, the
“Prior Notes”);
(b) Indebtedness in respect of taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being
contested in good faith by appropriate proceedings; provided, that
Company maintains adequate reserves therefor; (c) Indebtedness
existing as of the date hereof and set forth on the schedule of
Permitted Indebtedness attached hereto, or pursuant to an
instrument set forth on such schedule; (d) Indebtedness to trade
creditors (including suppliers) incurred in the ordinary course of
business, including Indebtedness incurred in the ordinary course of
business with corporate credit cards; (e) extensions, refinancings,
repayment and renewals of the obligations under the Note or the
Prior Notes and under any Permitted Indebtedness described in
clause (d) above, provided that the
principal amount is not increased or the terms modified to impose
materially more burdensome terms upon the Company, and (f)
Subordinated Indebtedness incurred after the date of this Note and
approved by a majority of the Board.
(c) “Subordinated Indebtedness”
means secured and/or unsecured Indebtedness expressly subordinated
to the obligations of the Company to the Holder hereunder, under
the Prior Notes and under the Security Agreement, including in
payment and lien priority.
(d) “Lien” shall mean any lien, claim,
encumbrance or similar interest in or on any asset, including
without limitation any security interest or mortgage.
(e) “Permitted Lien” shall mean (a)
Liens securing Indebtedness evidenced by this Note and the Prior
Notes; (b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided that the
Company maintains adequate reserves therefor; (c) claims of
materialmen, mechanics, carriers, warehousemen, processors or
landlords arising out of operation of law so long as the
obligations secured thereby (i) are not past due or (ii) are being
properly contested and for which the Company has established
adequate reserves; (d) liens consisting of deposits or pledges made
in the ordinary course of business in connection with
workers’ compensation, unemployment insurance, social
security and similar laws; (e) liens on equipment (including
capital leases) to secure purchase money Indebtedness existing as
of the date hereof, or any permitted refinancing thereof, so long
as such security interests do not apply to any property of the
Company other than the equipment so acquired, and the Indebtedness
secured thereby does not exceed the cost of such equipment, and
provided
that any extension, renewal or replacement Lien shall be limited to
the property encumbered by the existing Lien and the principal
amount of the Indebtedness being extended, renewed, or refinanced
(as may have been reduced by any payment thereon) does not
increase; and (f) liens on accounts, inventory, machinery,
equipment, instruments, documents, chattel paper, general
intangibles and other assets to secure purchase money Indebtedness
under agreements set forth on the schedule of Permitted
Indebtedness attached hereto.
4. Transfer; Successors and Assigns. The
terms and conditions of this Note shall inure to the benefit of and
be binding upon the respective successors and assigns of the
Company and the Holder. Notwithstanding the foregoing, the Holder
may not assign, pledge or otherwise transfer this Note without the
prior written consent of the Company. Subject to the preceding
sentence, this Note may be transferred only upon surrender of the
original Note for registration of transfer, duly endorsed, or
accompanied by a duly executed written instrument of transfer in
form satisfactory to the Company. Thereupon, a new note for the
same principal amount and interest will be issued to, and
registered in the name of, the transferee. Interest and principal
are payable only to the registered holder of this
Note.
5. Governing Law. This Note shall be
governed by and construed in accordance with the laws of the State
of New York (without giving effect to any conflict of laws
principles that would require application of the laws of another
jurisdiction other than Section 5-1401 of the General Obligations
Law of the State of New York.).
6. Jurisdiction. Each of the Company and
the Holder irrevocably submits to the jurisdiction of the courts of
the State of New York and of the United States sitting in the State
of New York, and of the courts of its own corporate or individual
domicile with respect to actions or proceedings brought against it
as a defendant, for purposes of all proceedings. Each of the
Company and the Holder irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have
to the laying of venue of any proceeding and any claim that any
proceeding has been brought in an inconvenient forum. Any process
or summons for purposes of any proceeding may be served on the
Company or the Holder, as applicable, by mailing a copy thereof by
registered mail, or a form of mail substantially equivalent
thereto, addressed to it at its address as provided for notices
under this Note.
7. Waiver of Jury Trial. Each of the Company and the Holder hereby
irrevocably waives any and all right to trial by jury in any
proceeding.
8. Notices. Except as set forth in Section
1, any notice required or permitted by this Note shall be in
writing and shall be deemed sufficient when delivered personally or
by overnight courier or sent by email or fax (upon customary
confirmation of receipt), or forty-eight (48) hours after being
deposited in the U.S. mail as certified or registered mail with
postage prepaid, addressed to the party to be notified at such
party’s address or fax number as set forth on the signature
page, as subsequently modified by written notice, or if no address
is specified on the signature page, at the most recent address set
forth in the Company’s books and records; provided, that, any
notice to the Company by the Holder also shall be provided to the
Board.
9. Amendments and Waivers. Any term of this
Note may be amended only with the written consent of the Company
and the Holder. Any amendment or waiver effected in accordance
herewith shall be binding upon the Company, the Holder and each
transferee of this Note.
10. Entire Agreement. This Note, together
with the Security Agreement, constitutes the entire agreement
between the Company and the Holder pertaining to the subject matter
hereof, and any and all other written or oral agreements existing
between the Company and the Holder are expressly
canceled.
11. Counterparts. This Note may be executed
in any number of counterparts, each of which will be deemed to be
an original and all of which together will constitute a single
agreement.
12. Action to Collect on Note. The Company
promises to pay all costs and expenses, including reasonable
attorney’s fees, incurred in connection with the collection
or enforcement of this Note or any obligation hereunder, including
without limitation during or in the context of any bankruptcy,
receivership, trusteeship, reorganization or insolvency proceeding
or other proceeding under any other law for the relief of, or
relating to, debtors, now or hereafter in effect, and all such
amounts shall be payable on demand (or, if the Holder is prevented
by applicable law from making demand, as and when incurred by the
Holder) and, if not paid when due, shall be capitalized and become
part of the principal amount of this Note, and interest shall
accrue thereon as set forth for other principal amounts under this
Note.
13. Loss of Note. Upon receipt by the
Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Note or any Note exchanged for
it, and indemnity satisfactory to the Company (in case of loss,
theft or destruction) or surrender and cancellation of such Note
(in the case of mutilation), the Company will make and deliver in
lieu of such Note a new Note of like tenor.
14. Interest Rate Limitation.
Notwithstanding anything to the contrary contained herein, the
interest paid or agreed to be paid under this Note shall not exceed
the maximum rate of non-usurious interest permitted by applicable
law (the “Maximum
Rate”). If the Holder shall receive interest in an
amount that exceeds the Maximum Rate, the excess interest shall be
applied to the principal amount remaining owed under this Note or,
if it exceeds such unpaid principal amount, refunded to the
Company. In determining whether the interest contracted for,
charged, or received by the Holder exceeds the Maximum Rate, the
Holder may, to the extent permitted by applicable law, (i)
characterize any payment that is not principal as an expense, fee,
or premium rather than interest, (ii) exclude voluntary prepayments
and the effects thereof, and (iii) amortize, prorate, allocate and
spread in equal or unequal parts the total amount of interest
throughout the contemplated term of this Note.
15. Indemnification. The Company shall, to
the fullest extent permitted by law, indemnify (but only to the
extent of and out of Company assets) the Holder against all
reasonable expenses (including reasonable attorneys’ fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by the Holder in connection with any claim,
action, suit or proceeding, whether civil, criminal, administrative
or investigative, before or by any court or any administrative or
legislative body or authority, in which the Holder is involved, as
a party or otherwise, or with which the Holder may be threatened,
arising in connection with this Note, the Prior Notes or the
Security Agreement (each, an “Action”), except to the extent the
same has been finally adjudicated to constitute fraud, gross
negligence or willful misconduct of the Holder or a breach by the
Holder of this Note, the Prior Notes or the Security Agreement.
Promptly after receipt by the Holder of notice of the commencement
or threatened commencement against it of any third party Action,
the Holder will notify the Company. The Company will be entitled to
assume the defense of the Action unless the Holder shall have
reasonably concluded that a conflict may exist between the Company
and the Holder in conducting the defense of the Action. If the
Company assumes the defense of any Action in accordance with the
provisions of this Section, it will not be liable to the Holder for
any legal or other expenses subsequently separately incurred by the
Holder in connection with the defense of such Action. The Company
shall not be liable for any settlement of a third-party Action
effected without its written consent, which consent may not be
unreasonably withheld.
16. Severability. In the event that any
provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of
any other provision of this Note.
[Remainder of Page
Intentionally Left Blank]
IN WITNESS WHEREOF, the Company has
caused this Secured Demand Promissory Note to be executed as of the
date indicated herein.
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MusclePharm
Corporation
By:
/s/ William Bush
Name:
William
Bush
Title:
Lead
Director
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Schedule of Permitted Indebtedness
Convertible
Secured Promissory Note issued on November 8, 2017 by Holder to the
Company in an aggregate principal amount of
$11,000,000.
Convertible
Secured Promissory Note issued on December 7, 2015 by Holder to the
Company in an aggregate principal amount of $6,000,000, as amended
by the First Amendment to Convertible Secured Promissory Note dated
as of January 14, 2017.
Purchase
and Sale Agreement, dated as of January 11, 2016, between the
Company and Prestige Capital Corporation, as amended or modified
through the date hereof, and as hereafter amended or modified with
the consent of the Holder in his capacity as such or as a director
or officer of the Company.
Capital
leases outstanding at March 31, 2017 described in Note 8 to the
Condensed Consolidated Financial Statements contained
in the
Company’s 10-Q for the quarter ended March 31,
2017.