Exhibit 10.04
NOTE
(PAYCHECK PROTECTION PROGRAM)
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SBA LOAN #
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44861473-03
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SBA Loan Name
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Reach Construction Group LLC
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Date
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May 2, 2020
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Loan Amount
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$ 404,200.00
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Interest Rate
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1% per year
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Borrower
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Reach Construction Group, LLC
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Lender
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DOGWOOD STATE BANK
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In return for the Loan, Borrower promises to pay to the order of Lender the amount of Four Hundred Four Thousand Two Hundred and NO/100 Dollars ($404,200.00 ) plus interest on the unpaid balance, and all other amounts required by this Note.
“Loan” means the loan evidenced by this Note.
“Loan Documents” means the documents related to this loan signed by Borrower.
“SBA” means the Small Business Administration, an Agency of the United States of America.
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A.
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Maturity: This Note will mature in 2 years from the date of Note.
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The Interest rate is 1% per year. The interest rate may only be changed in accordance with SBA Standard Operating Procedures.
Borrower must pay principal and interest payments of $22,754.57 every month, beginning seven months from the month this Note is dated; payments must be made on the fifth calendar day in the months they are due. The monthly payment amount may change if any portion of the Loan is forgiven.
Lender will apply each installment payment first to pay interest accrued to the day Lender receives the payment, then to bring principal current, then to pay any late fees, and will apply any remaining balance to reduce principal.
Notwithstanding any provision in this Note to the contrary:
Borrower may prepay this Note. Borrower may prepay 20 percent or less of the unpaid principal balance at any time without notice. If Borrower prepays more than 20 percent and the Loan has been sold on the secondary market, Borrower must:
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1.
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Give Lender written notice;
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2.
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Pay all accrued interest; and
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3.
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If the prepayment is received less than 21 days from the date Lender receives the notice, pay an amount equal to 21 days’ interest from the date lender receives the notice, less any interest accrued during the 21 days and paid under subparagraph 2, above.
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If Borrower does not prepay within 30 days from the date Lender receives the notice, Borrower must give Lender a new notice.
All remaining principal and accrued interest is due and payable 2 years from the date of the Note.
Late Charge: If a payment on this Note is more than 10 days late, Lender may charge Borrower a late fee of up to 5% of the unpaid portion of the regularly scheduled payment.
Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower:
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A.
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Fails to do anything required by this Note and other Loan Documents;
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B.
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Defaults on any other loan with Lender;
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C.
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Does not disclose, or anyone acting on their behalf does not disclose, any material fact to Lender or SBA;
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D.
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Makes, or anyone acting on their behalf makes, a materially false or misleading representation to Lender or SBA;
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E.
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Defaults on any loan or agreement with another creditor, if Lender believes the default may materially affect Borrower’s ability to pay this Note;
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F.
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Fails to pay any taxes when due;
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G.
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Becomes the subject of a proceeding under any bankruptcy or insolvency law;
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H.
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Has a receiver or liquidator appointed for any part of their business or property;
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I.
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Makes an assignment for the benefit of creditors;
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J.
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Has any adverse change in financial condition or business operation that Lender believes may materially affect Borrower’s ability to pay this Note;
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K.
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Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without Lender’s prior written consent; or
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L.
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Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower’s ability to pay this Note.
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5.
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LENDER’SRIGHTS IF THERE IS A DEFAULT:
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Without notice or demand and without giving up any of its rights, Lender may:
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A.
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Require immediate payment of all amounts owing under this Note;
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B.
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Collect all amounts owing from any Borrower; or,
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C.
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File suit and obtain judgment.
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6.
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LENDER’SGENERAL POWERS:
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Without notice and without Borrower’s consent, Lender may:
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A.
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Incur expenses to collect amounts due under this Note and enforce the terms of this Note or any other Loan Document. Among other things, the expenses may include reasonable attorney’s fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principal balance;
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B.
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Release anyone obligated to pay this Note; and,
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C.
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Take any action necessary to collect amounts owing on this Note.
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7.
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WHEN FEDERAL LAW APPLIES:
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When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law.
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8.
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SUCCESSORS ANDASSIGNS:
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Under this Note, Borrower includes its successors, and Lender includes its successors and assigns.
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A.
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All individuals and entities signing this Note are jointly and severally liable.
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B.
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Borrower waives all suretyship defenses.
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C.
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Borrower must sign all documents necessary at any time to comply with the Loan Documents.
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D.
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Lender may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay or forgo enforcing any of its rights without giving up any of them.
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E.
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Borrower may not use an oral statement of Lender or SBA to contradict or alter the written terms of this Note.
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F.
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If any part of this Note is unenforceable, all other parts remain in effect.
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G.
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To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor.
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[Remainder of page intentionally blank – State-Specific Provisions Follow]
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10.
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STATE-SPECIFIC PROVISIONS: NONE.
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[Signature page follows]
[Signature Page to Note]
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11.
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BORROWER’S NAME(S) AND SIGNATURE(S):
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By signing below, each individual or entity becomes obligated under this Note as Borrower.
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Reach Construction Group, LLC
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By:
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/s/ Daniel N. Ford
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(SEAL)
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Name:
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Daniel N. Ford
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Its:
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Authorized Representative
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SBA Loan Number: 44861473-03
SBA Loan Name: Reach Construction Group LLC
SBA Loan No. 44861473-03
LOAN AGREEMENT
THIS LOAN AGREEMENT (this “Agreement”), made as of May 2, 2020, by and between Reach Construction Group, LLC (“Borrower”) and DOGWOOD STATE BANK (“Lender”).
RECITALS
A. Borrower has applied to Lender for a SBA 7(a) Paycheck Protection Program loan (the “Loan”) pursuant to Sections 1102 and 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Pub. L. 116-136 (signed into law March 27, 2020)) (the “CARES Act”).
B. Lender has agreed to make the Loan upon the terms and conditions set forth herein and in the other Loan Documents (as hereinafter defined).
NOW, THEREFORE, in consideration of the Loan and the mutual covenants herein contained, Borrower and Lender agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions. In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined):
“Application” shall mean that certain SBA Form 2483 (Paycheck Protection Program Borrower Application Form), and all payroll documentation submitted therewith by Borrower to Lender.
“Beneficial Ownership Certification” shall mean a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230.
“Forgiveness Period” shall mean the eight-week period following the date of this Agreement.
“Governmental Authority” shall mean the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency (including, without limitation, the SBA), authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
“Loan Documents” shall mean, collectively, this Agreement, the Note, the Application, and any and all other instruments, agreements, documents and writings executed in connection with any of the foregoing.
“Note” shall mean the promissory note of even date herewith given by Borrower payable to the order of Lender in the principal amount of the Loan.
“Payroll Costs” has the meaning found in Section 1102(a)(2) of the CARES Act.
“PPP Regulations” shall mean the Business Loan Program Temporary Changes; Paycheck Protection Program, Interim Final Rule, Docket No. SBA-2020-0015 (April 2, 2020) (to be codified at 13 C.F.R. pt. 120), as the same may be in effect from time to time, and any successor regulations.
“SBA” shall mean the Small Business Administration, an agency of the United States of America.
ARTICLE II.
AMOUNT AND TERMS OF THE LOAN
Section 2.1. Commitment; Repayment.
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(a)
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Lender agrees to make the Loan to Borrower, subject to the terms and conditions herein set forth and in accordance with the CARES Act, PPP Regulations and the Application.
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(b)
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The Loan shall be repaid in accordance with the terms of the Note.
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Section 2.2. Loan Forgiveness. Pursuant to the terms of the CARES Act and PPP Regulations all or a portion of the Loan may be forgiven. The actual amount of loan forgiveness will depend, in part, on the total amount of Payroll Costs, payments of interest on mortgage obligations incurred before February 15, 2020, rent payments on leases dated before February 15, 2020, and utility payments under service agreements dated before February 15, 2020, paid by Borrower during the Forgiveness Period, provided, however, not more than twenty-five percent (25%) of the Loan forgiveness amount may be attributable to non- Payroll Costs. In the event Borrower fails to satisfy the loan forgiveness provisions of the CARES Act and PPP Regulations and some or all of the Loan is not forgiven, the unforgiven portion of the Loan is an obligation of Borrower that must be paid back to Lender with interest at the rates and times as provided for in the Note.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender as follows:
Section 3.1. Organizational Power; Authorization. The execution, delivery and performance by Borrower of the Loan Documents to which it is a party are within Borrower’s organizational powers and have been duly authorized by all necessary organizational, and if required, member, manager, partnership, shareholder or director action. This Agreement has been duly executed and delivered by Borrower, and constitutes, and each other Loan Document to which it is a party, when executed and delivered by Borrower, will constitute, valid and binding obligations of Borrower, enforceable against it in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity. There has been no change in any entity documentation delivered to Lender prior to the date hereof, including with respect to articles of incorporation, articles of organization, certificates of limited partnership, operating agreements, bylaws, partnership agreements, borrowing resolutions and the like.
Section 3.2. Affiliation Rules; Eligible Recipient. SBA’s existing affiliation rules apply to the Loan. Borrower has reviewed and fully understands the SBA’s affiliation rules, found at 13 C.F.R. § 121.301, et seq. (“Affiliation Rules”). Obtaining the Loan and the execution, delivery and performance by Borrower of this Agreement and the other Loan Documents to which it is a party do not violate the Affiliation Rules. Borrower is an “eligible recipient” (as defined in the CARES Act).
Section 3.3. Application. All representations, warranties and certifications made in the Application are true and correct as of the date hereof with the same force and effect as if all representations and warranties were fully set forth herein.
Section 3.4. Employment Information; Mortgage, Lease and Utility Information. All employment data, including documentation verifying the number of full-time equivalent employees on Borrower’s payroll and the dollar amounts of Borrower’s Payroll Costs, Borrower’s mortgage or rent payments (as applicable), and Borrower’s utility costs, that have been delivered to Lender in respect of Borrower: (i) were true, complete and correct in all material respects when delivered, and remain true and correct in all material respects as of the date hereof, (ii) accurately represent the employment data or other charges and costs contained therein as of the date of such reports, and (iii) have been prepared in accordance with PPP Regulations and the CARES Act.
ARTICLE IV.
COVENANTS OF BORROWER
Borrower covenants and agrees that so long as the Loan remains unpaid or outstanding:
Section 4.1. Existence; Conduct of Business. Borrower will do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence and its respective rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business and will continue to engage in the same business as presently conducted.
Section 4.2. Compliance with Laws. Borrower will comply in all material respects with all laws, rules, regulations and requirements of any Governmental Authority, including the SBA, applicable to its business.
Section 4.3. Representations and Warranties. Borrower will cause all representations, warranties and certifications contained herein and in the Application to remain true and correct at all times while any portion of the Loan remains outstanding.
Section 4.4. Use of Proceeds. The proceeds of the Loan are to be used for: (i) Payroll Costs; (ii) costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums; (iii) mortgage interest payments (but not mortgage prepayments or principal payments); (iv) rent payments; (v) utility payments; (vi) interest payments on any other debt obligations that were incurred before February 15, 2020; and/or (vii) refinancing an SBA Economic Injury Disaster Loan made between January 31, 2020 and April 3, 2020. NO PART OF THE PROCEEDS OF THE LOAN WILL BE USED, WHETHER DIRECTLY OR INDIRECTLY, FOR ANY PURPOSE THAT WOULD VIOLATE THE CARES ACT, PPP REGULATIONS, OR ANY OTHER RULE OR REGULATION OF THE SBA PROMULGATED THEREUNDER, OR IN ANY MANNER WHICH WOULD CAUSE THE REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS CONTAINED IN THIS AGREEMENT OR THE APPLICATION TO BE FALSE. BORROWER ACKNOWLEDGES THAT LOAN FORGIVENESS IS LIMITED TO THE USES OF PROCEEDS IDENTIFIED IN SECTION 2.2 OF THIS AGREEMENT.
Section 4.5. Further Assurances. Lender reserves the right to request, subsequent to the date hereof, the timely execution and delivery by Borrower of such additional documents, certificates, instruments or agreements, as may be determined by Lender as reasonably necessary to comply with the CARES Act or PPP Regulations. Borrower agrees to timely execute or re-execute and deliver, or grant to Lender a limited power of attorney to execute or re-execute, any Loan Document containing typographical or clerical errors relating to names, dates, addresses, etc. or as may be required to fully comply with the CARES Act or PPP Regulations. Failure to cooperate within fifteen (15) days after Lender has given written notice with respect thereto will be deemed an immediate Event of Default under this Agreement.
Section 4.6. Reporting Requirements. Borrower will deliver to Lender:
(a) as soon as available and in any event within ten (10) days after the Forgiveness Period, in form and substance satisfactory to Lender, documentation verifying the employment and salary criteria for forgiveness under the CARES Act and PPP Regulations, and documentation verifying the amount and uses of proceeds Borrower certifies as eligible for forgiveness;
(b) promptly upon request by Lender, in form and substance satisfactory to Lender, documentation verifying use of all Loan proceeds was in accordance with this Agreement, PPP Regulations and the CARES Act;
(c) such other reports, data, information and certificates as Lender may reasonably request; and
(d) information and documentation reasonably requested by Lender for purposes of compliance with applicable “know your customer” requirements under the PATRIOT Act or other applicable anti-money laundering laws.
ARTICLE V.
EVENTS OF DEFAULT
Section 5.1. Events of Default. The term “Event of Default”, as used in this Agreement shall mean the occurrence or happening, from time to time, of any one or more of the following:
(a) Payment Defaults. Borrower shall fail to make any payment of the Loan when and as the same shall become due and payable.
(b) Representations and Warranties. Any representation, warranty or certification made or deemed made by or on behalf of Borrower in or in connection with this Agreement, the Application or any other Loan Document (including the schedules attached thereto), or in any amendments or modifications hereof or waivers hereunder, or in any certificate, report, financial statement or other document submitted to Lender by Borrower or any representative of Borrower pursuant to or in connection with this Agreement, the Application or any other Loan Document shall prove to be incorrect in any material respect when made or deemed made or submitted.
(c) Compliance with Covenants. Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement or in any of the other Loan Documents, and the continuance of such failure for thirty (30) days (or such shorter period provided in any other Loan Document) after the earlier to occur of (i) Borrower’s knowledge of such failure or (ii) written notice by Lender to Borrower; provided, however, that, subject to any shorter period for curing any failure by Borrower as specified in any of the other Loan Documents, Borrower shall have an additional period of time as is reasonably necessary to cure such failure if: (1) such failure does not involve the failure to make payments on a monetary obligation; (2) such failure cannot reasonably be cured within thirty (30) days; (3) Borrower is diligently undertaking to cure such default; and (4) Borrower has provided Lender with security reasonably satisfactory to Lender against any interruption of payment as a result of such continuing failure; provided, however that such additional cure period shall not exceed ninety (90) days.
(d) Voluntary Proceeding. Borrower shall (i) commence a voluntary case under the United States Bankruptcy Code or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar official of it or any substantial part of its property, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any case or petition described in clause (i) of this subsection, (iii) apply for or consent to the appointment of a custodian, trustee, receiver, liquidator or other similar official for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such case or petition described in clause (i) of this subsection, (v) make a general assignment for the benefit of creditors, or (vi) take any action for the purpose of effecting any of the foregoing.
(e) Involuntary Proceeding. An involuntary case under the United States Bankruptcy Code shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of Borrower or its debts, or any substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or (ii) the appointment of a custodian, trustee, receiver, liquidator or other similar official for Borrower or for a substantial part of its assets, and in any such case, such case or petition shall remain undismissed for a period of sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered.
Section 5.2. Remedies. Upon the occurrence of an Event of Default (other than an event with respect to Borrower described in clause (d) or (e) of Section 5.1), and at any time thereafter during the continuance of such Event of Default, Lender at its election may (but shall not be obligated to), without notice, exercise any and all rights and remedies afforded by this Agreement, the other Loan Documents, applicable law, equity or otherwise, including (a) declaring the Loan immediately due and payable; (b) reducing any claim to judgment; and (c) setting-off and applying, to the extent thereof and to the maximum extent permitted by applicable law, any and all deposits, funds, or assets at any time held and any and all other indebtedness at any time owing by Lender to or for the credit or account of Borrower against the Loan; provided that, if an Event of Default specified in either clause (d) or (e) of Section 5.1 shall occur, the principal of the Loan then outstanding, together with accrued interest thereon, and all fees, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Borrower.
ARTICLE VI.
MISCELLANEOUS
Section 6.1. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications to any party herein to be effective shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail, as follows:
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To Borrower:
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Reach Construction Group, LLC
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2400 Reliance Avenue Ste B
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Apex, NC 27539
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Attention: Daniel N. Ford
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To Lender:
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Dogwood State Bank
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5401 Six Forks Road, Suite 100
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Raleigh, North Carolina 27609
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Attention: SBA Loan Administration
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Any party hereto may change its address for notices and other communications hereunder by notice to the other parties hereto. All such notices and other communications shall be effective, when transmitted by overnight delivery, one (1) Business Day after the date on which the notice is deposited with a recognized overnight courier service; or if mailed, upon the third (3rd) Business Day after the date deposited into the mails or if hand-delivered, upon delivery; provided, that notices delivered to Lender shall not be effective until actually received by Lender at its address specified in this Section.
Section 6.2. Governing Law; Jurisdiction.
(a) This Agreement and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement and the transactions contemplated hereby and thereby shall be construed in accordance with and be governed by the laws (without giving effect to the conflict of law principles thereof) of the State of North Carolina. Notwithstanding the foregoing, to the extent that any of such laws may now or hereafter be preempted by federal law, such federal law shall so govern and be controlling.
(b) Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the United States District Court for the Eastern District of North Carolina, Raleigh Division, or the Wake County, North Carolina Superior Court, and of any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby. Nothing in this Agreement or any other Loan Document shall affect any right that Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against Borrower or its properties in the courts of any jurisdiction.
Section 6.3. Patriot Act. Lender hereby notifies Borrower that (a) pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “PATRIOT Act”), it is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow Lender, as applicable, to identify Borrower in accordance with the PATRIOT Act and (b) pursuant to the Beneficial Ownership Regulation, it is required to obtain a Beneficial Ownership Certificate. Borrower shall provide to the extent commercially reasonable, such information and take such other actions as are reasonably requested by Lender in order to assist Lender in maintaining compliance with the PATRIOT Act and the Beneficial Ownership Regulation.
Section 6.4. Counterparts; Integration. This Agreement, the Note and any other Loan Document may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission, electronic signature or by electronic mail in pdf format), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Agreement, the other Loan Documents, constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements and understandings, oral or written, regarding such subject matters.
Section 6.5. No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby, Borrower acknowledges and agrees that (i) (A) the services regarding this Agreement provided by Lender are arm’s-length commercial transactions between Borrower, on the one hand, and Lender, on the other hand, (B) Borrower has consulted their own legal, accounting, regulatory and tax advisors to the extent they have deemed appropriate, and (C) Borrower is capable of evaluating and understanding, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; and (ii) Lender is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for Borrower or any other person or entity. To the fullest extent permitted by applicable law, Borrower hereby waives and releases any claims that it may have against Lender with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
Section 6.6. Time is of the Essence. Time is of the essence of each and every provision of this Agreement.
(Signature Pages Follow)
LOAN AGREEMENT
[Signature Page]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
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BORROWER:
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Reach Construction Group, LLC
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By: /s/ Daniel N. Ford
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Name: Daniel N. Ford
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Title: Authorized Representative
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ACKNOWLEDGEMENT OF BORROWER: BORROWER ACKNOWLEDGES AND UNDERSTANDS THAT LOAN FORGIVENESS WILL BE PROVIDED FOR THE SUM OF DOCUMENTED PAYROLL COSTS, COVERED MORTGAGE INTEREST PAYMENTS, COVERED RENT PAYMENTS, AND COVERED UTILITIES, AND NOT MORE THAN 25% OF THE FORGIVEN AMOUNT MAY BE FOR NON-PAYROLL COSTS. IN THE EVENT BORROWER FAILS TO OBTAIN LOAN FORGIVENESS PURSUANT TO THE CARES ACT AND PPP REGULATIONS, THE LOAN IS AN OBLIGATION OF BORROWER THAT MUST BE PAID BACK TO LENDER WITH INTEREST AT THE RATES AND TIMES AS PROVIDED FOR IN THE NOTE.
LOAN AGREEMENT
[Signature Page]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
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LENDER:
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DOGWOOD STATE BANK
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By: /s/ Greg Heaton
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Name: Greg Heaton
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Title: President
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OMB Approval No.: 3245-0200
Expiration Date: 04/30/2022
SBA FORM 1050, SETTLEMENT SHEET
Purpose: The purpose of this form is to document and verify that loan proceeds have been disbursed in accordance with the Authorization and to document that the Borrower’s contribution has been injected into the business prior to the Lender disbursing any loan proceeds.
General Instructions: This form may be used for all 7(a) loans and for all disbursements. It must be used for the first disbursement on all standard 7(a) loans over $350,000.
This form is to be completed by the Lender and signed by the Lender and the Borrower at the time of the initial loan disbursement. The Lender must retain a copy of the signed form in its loan file. For all disbursements, the Lender must also retain documentation that is acceptable to SBA (such as joint payee checks, cancelled checks, paid receipts or invoices, wire transfer account records, etc.) and that evidences compliance with the Use of Proceeds section of the Authorization.
The Lender must submit the completed form and all supporting documentation to SBA upon request, or, in the event of a loan default, with the Lender’s request for guaranty purchase.
Providing this information is required to comply with program requirements; failure to provide it when required may impair the Lender’s ability to collect on the SBA loan guaranty.
If additional space is required to complete the form or provide additional details please attach a separate sheet.
Specific Instructions for Completing the Form:
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1)
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In the first section, fill in all identifying information. For “Loan Type,” check the box to indicate whether the loan is a term loan or a revolving line of credit.
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2)
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Complete the “Use of Proceeds” section with information related to the initial disbursement.
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a)
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On the line associated with each applicable use of proceeds, indicate:
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i)
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The name of the payee (must identify the ultimate recipient, not an intermediary such as a title company);
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ii)
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Amount disbursed; and
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iii)
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Remaining amount to be disbursed, in accordance with the Authorization.
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b)
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For the “Settlement charges/out of pocket costs” line, insert total amount of settlement charges and other out of pocket costs in the appropriate field within the grid. Attach an itemized list of all charges and costs, including the name of payee and amount paid for each charge or cost. Reminder: SBA Form 159 is required for all fees paid or to be paid by the Lender (except Lender Service Provider fees) and for all fees paid or to be paid by the Applicant to any agent in connection with the SBA loan application.)
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c)
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For “Other (Explain),” enter any other use of proceeds authorized in the Authorization that is not already listed in the grid, if applicable.
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3)
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Complete the “Borrower’s Injection” section.
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a)
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For each type of injection, indicate the source.
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b)
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If the Seller contributed toward required equity, attach a copy of the Note and evidence of full standby for the life of the loan.
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c)
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Note: The Borrower’s Injection must be in the business bank account prior to any disbursement of loan proceeds.
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4)
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The Lender and the Borrower must review the certification and execute the form in the space provided.
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SBA Form 1050 (04-19) Previous Editions Obsolete
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Page 1 of 2
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At the time of completion of this form, the Lender and the Borrower certify that:
1. The loan proceeds were disbursed and received and will be used in accordance with the Use of Proceeds section of the Authorization, including any and all SBA/Lender approved modifications, and that all required equity or Borrower injections have been made in accordance with the Authorization and any approved modifications; and
2. There has been no unremedied adverse change in the Borrower’s or Operating Company’s financial condition, organization, management, operations or assets since the date of application that would warrant withholding or not making this disbursement or any further disbursement.
At the time of each subsequent disbursement on this loan, the Lender, by disbursing the loan proceeds, and the Borrower by receiving them, are deemed to certify that the above certifications are true with respect to each and every disbursement made.
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WARNING: By signing below you are certifying that the above statements are accurate to the best of your knowledge. Submitting false information to the Government may result in criminal prosecution and fines up to $250,000 and/or imprisonment for up to 5 years under 18 USC § 1001. Submitting false statements to a Federally insured institution may result in fines up to $1,000,000 and/or imprisonment for up to 30 years under 18 USC § 1014, penalties under 15 USC § 645, and/or civil fraud liability.
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Authorized Lender Official
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Borrower
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Signature:
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/s/ Greg Heaton
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Signature:
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/s/ Daniel N. Ford
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Print Name:
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Greg Heaton
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Print Name:
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Daniel N. Ford
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Title:
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President
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Title:
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Authorized Representative
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Date:
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May 2 , 2020
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Date:
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May 2 , 2020
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SBA Form 1050 (04-19) Previous Editions Obsolete
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Page 2 of 2
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NOTE: According to the Paperwork Reduction Act, you are not required to respond to this collection of information unless it displays a currently valid OMB Control Number. The estimated burden for completing this form, including time for reviewing instructions, and gathering data needed, is 30 minutes. Comments or questions on the burden estimates or other aspects of this information collection should be sent to U.S. Small Business Administration, Director, RMD, 409 3rd St., SW, Washington DC 20416 and/or SBA Desk Officer, Office of Management and Budget, New Executive Office Building, Rm. 10202, Washington DC 20503. PLEASE DO NOT SEND THE COMPLETED FORMS TO THESE ADDRESSES.
BORROWER'S CERTIFICATION
In order to induce DOGWOOD STATE BANK ("Lender") to make a U. S. Small Business Administration ("SBA") guaranteed Loan, SBA Loan Number _44861473-03 ("Loan") to Reach Construction Group, LLC (the “Borrower"),
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A.
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Borrower certifies that:
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1.
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Acknowledgments - Borrower acknowledges that:
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a.
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The Note will require Borrower to give Lender prior notice of intent to prepay.
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b.
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If Borrower defaults on Loan, SBA may be required to pay Lender under the SBA guarantee. SBA may then seek recovery of these funds from Borrower. Under SBA regulations, 13 CFR Part 101, Borrower may not claim or assert against SBA any immunities or defenses available under local law to defeat, modify or otherwise limit Borrower’s obligation to repay to SBA any funds advanced by Lender to Borrower.
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c.
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Payments by SBA to Lender under SBA’s guarantee will not apply to the Loan account of Borrower, or diminish the indebtedness of Borrower under the Note or the obligations of any personal guarantor of the Note.
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2.
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Adverse Change - That there has been no adverse change in Borrower's financial condition, organization, operations or fixed assets since the date the Loan application was signed.
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3.
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Child Support - No principal who owns at least 50% of the ownership or voting interest of the company is delinquent more than 60 days under the terms of any (1) administrative order, (2) court order, or (3) repayment agreement requiring payment of child support.
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4.
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Current Taxes - Borrower is current (or will be current with any loan proceeds specified for eligible tax payments) on all federal, state, and local taxes, including but not limited to income taxes, payroll taxes, real estate taxes, and sales taxes.
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B.
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Borrower certifies that it will:
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1.
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Books, Records, and Reports -
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a.
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Keep proper books of account in a manner satisfactory to Lender;
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b.
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Furnish financial records as provided in the Loan Agreement;
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c.
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Furnish additional financial statements or reports whenever Lender requests them;
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d.
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Allow Lender or SBA, at Borrower’s expense, to:
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1.
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Inspect and audit books, records and papers relating to Borrower's financial or business condition; and
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2.
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Inspect and appraise any of Borrower's assets; and
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3.
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Allow all government authorities to furnish reports of examinations, or any records pertaining to Borrower, upon request by Lender or SBA.
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2.
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Equal Opportunity - Post SBA Form 722, Equal Opportunity Poster, where it is clearly visible to employees, applicants for employment and the general public.
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3.
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American-made Products - To the extent practicable, purchase only American-made equipment and products with the proceeds of the Loan.
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4.
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Taxes - Pay all federal, state, and local taxes, including income, payroll, real estate and sales taxes of the business when they come due.
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C.
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Borrower certifies that they will not, without Lender’s prior written consent:
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1.
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Distributions - Make any distribution of company assets that will adversely affect the financial condition of Borrower.
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2.
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Ownership Changes – Change the ownership structure or interests in the business during the term of the Loan.
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3.
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Transfer of Assets – Sell, lease, pledge, encumber (except by purchase money liens on property acquired after the date of the Note), or otherwise dispose of any of Borrower’s property or assets, except in the ordinary course of business.
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[SIGNATURES APPEAR ON FOLLOWING PAGE]
[SIGNATURE PAGE – BORROWER CERTIFICATION]
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BORROWER:
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Reach Construction Group, LLC
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By: /s/ Daniel N. Ford
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Name: Daniel N. Ford
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Title: Authorized Representative
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SBA Certification to Financial Institution under Right to Financial Privacy Act (12 U.S.C. 3401)
By signing SBA Form 2483, Borrower Information Form in connection with this application for an SBA-guaranteed loan, the Applicant certifies that it has read the Statements Required by Law and Executive Orders, which is attached to Form 2483. As such, SBA certifies that it has complied with the applicable provisions of the Right to Financial Privacy Act of 1978 (12 U.S.C. 3401) and, pursuant to that Act, no further certification is required for subsequent access by SBA to financial records of the Applicant/Borrower during the term of the loan guaranty.
Lender Certification
On behalf of the Lender, I certify that:
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●
|
The Lender has complied with the applicable lender obligations set forth in paragraphs 3.b(i)-(iii) of the Paycheck Protection Program Rule.
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|
●
|
The Lender has obtained and reviewed the required application (including documents demonstrating qualifying payroll amounts) of the Applicant and will retain copies of such documents in the Applicant’s loan file.
|
I certify that:
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●
|
Neither the undersigned Authorized Lender Official, nor such individual’s spouse or children, has a financial interest in the Applicant.
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|
Authorized Lender Official:
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/s/ Greg Heaton
|
|
Date:
|
May 2 , 2020
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Signature
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Type or Print Name:
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GREG HEATON
|
|
Title:
|
President
|
NOTE: According to the Paperwork Reduction Act, you are not required to respond to this collection of information unless it displays a currently valid OMB Control Number. The estimated burden for completing this form, including time for reviewing instructions, gathering data needed, and completing and reviewing the form is 25 minutes per response. Comments or questions on the burden estimates should be sent to U.S. Small Business Administration, Director, Records Management Division, 409 3rd St., SW, Washington DC 20416, and/or SBA Desk Officer, Office of Management and Budget, New Executive Office Building, Rm. 10202, Washington DC 20503. PLEASE DO NOT SEND FORMS TO THESE ADDRESSES.
|
SBA Form 2484 (Revised 04/20)
|
2
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|
|
This Statement of Policy is Posted
In Accordance with Regulations of the
Small Business Administration
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|
This Organization Practices
Equal Employment Opportunity
We do not discriminate on the ground of race, color, religion, sex, age, disability or national origin in the hiring, retention, or promotion of employees; nor in determining their rank, or the compensation or fringe benefits paid them.
This Organization Practices
Equal Treatment of Clients
We do not discriminate on the basis of race, color, religion, sex, marital status, disability, age or national origin in services or accommodations offered or provided to our employees, clients or guests.
These policies and this notice comply with regulations
of the United States Government.
Please report violations of this policy to :
Administrator
Small Business Administration
Washington, D.C. 20416
In order for the public and your employees to know their rights under 13 C.F.R Parts 112, 113, and 117, Small Business Administration Regulations, and to conform with the directions of the Administrator of SBA, this poster must be displayed where it is clearly visible to employees, applicants for employment, and the public.
Failure to display the poster as required in accordance with SBA Regulations may be considered evidence of noncompliance and subject you to the penalties contained in those Regulations.
SBA FORM 722 (10-02) REF: SOP 9030 PREVIOUS EDITIONS ARE OBSOLETE
This form was electronically produced by Elite Federal Inc,.
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|
Esta Declaración De Principios Se Publica
De Acuerdo Con Los Reglamentos De La
Agencia Federal Para el Desarrollo de la Pequen:a Empresa
|
|
Esta Organizacio3 n Practica
lgual Oportunidad De Empleo
No discriminamos por razón de raza, color, religión, sexo, edad, discapacidad o nacionalidad en el empleo, retención o ascenso de personal ni en la determinación de sus posiciones, salarios o beneficios marginales.
Esta Organizacio3 n Practica
Igualdad En El Trato A Su Clientela
No discriminamos por razón de raza, color, religión, sexo, estado civil, edad, discapacidad o nacionalidad en los servicios o facilidades provistos para nuestros empleados, clientes o visitantes.
Estos principios y este aviso cumplen con los reglamentos del Gobierno de los Estados Unidos de América.
Favor de informar violaciones a lo aquí indicado a:
Administrador
Agencia Federal Para el Desarrollo de la
Pequeña Empresa
Washington, D.C. 20416
A fin de que el público y sus empleados conozcan sus derechos según lo expresado en las Secciones 112 , 113 y 117 del Co3digo de Regulaciaones Federales No. 13, de los Reglamentos de la Agenc.ia Federal Para el Desarrollo de la Pequen:a Empresa y de acuerdo con las instrucciones del Administrador de dicha agencia, esta notificación debe fijarse en un lugar claramente visible para los empleados, solicitantes de empleo y público en general. No fijar esta notificación según lo requerido por los reglamentos de la Agencia Federal Para el Desarrollo de la Pequen:a Empresa, puede ser interpretado como evidencia de falta de cumplimiento de los mismos y conllevará la ejecución de los castigos impuestos en estos reglamentos.
SBA FORM 722 (10-02)REF:SOP 9030 PREVIOUS EDITIONS ARE OBSOLETE
U.S. GOVERNMENT PRINTING OFFICE : 1994 0- 153-346
This form was electronically produced by Elite Federal Inc,.
Exhibit 10.05
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement, dated as of May 5, 2020 (this “Agreement”), is entered into by and among CUI-Canada, Inc., a Canadian corporation (“Seller”), CUI Global, Inc., a Colorado corporation (“Parent”), and Virtual Power Systems, Inc., a Delaware corporation (“Buyer”).
RECITALS
WHEREAS, Buyer, Seller and Parent have entered into that certain Asset Purchase Agreement, dated as of March 30, 2019 (the “Purchase Agreement”), pursuant to which Seller and Parent have agreed to sell and assign to Buyer, and Buyer has agreed to purchase and assume from Seller and Parent, certain assets and liabilities of Seller and Parent, all as more fully described therein;
WHEREAS, in order to ensure an orderly transition of the Business to Buyer and as a condition to consummating the transactions contemplated by the Purchase Agreement, Buyer, Seller, and Parent have agreed to enter into this Agreement, pursuant to which the parties will provide, or cause its Affiliates to provide, certain of the other parties with certain services, in each case on a transitional basis and subject to the terms and conditions set forth herein; and
WHEREAS, capitalized terms used herein and not otherwise defined shall have the meaning ascribed to such terms in the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth, Buyer, Seller, and Parent hereby agree as follows:
ARTICLE I
SERVICES
Section 1.01 Provision of Services.
(a) Seller, Parent, and Buyer each agree to provide, or to cause their respective Affiliates to provide, the services (the “Services”) set forth on the exhibits attached hereto (as such exhibits may be amended or supplemented pursuant to the terms of this Agreement, collectively, the “Service Exhibits”) to other of the parties for the respective periods and on the other terms and conditions set forth in this Agreement and in the respective Service Exhibits.
(b) Notwithstanding the contents of the Service Exhibits, Seller, Parent, and Buyer agree to respond in good faith to any reasonable request by the other parties hereto for access to any additional services that are necessary for the operation of the Business or the Seller, as the case may be and which are not currently contemplated in the Service Exhibits, at a price to be agreed upon after good faith negotiations between the parties. Any such additional services so provided by Seller, Parent, or Buyer, shall constitute Services under this Agreement and be subject in all respect to the provisions of this Agreement as if fully set forth on a Service Exhibit as of the date hereof.
(c) The parties hereto acknowledge the transitional nature of the Services. Accordingly, as promptly as practicable following the execution of this Agreement, Seller, Parent, and Buyer each agree to use commercially reasonable efforts to make a transition of each Service to their respective own internal organizations or to obtain alternate third-party sources to provide the Services.
(d) Subject to Section 2.03 and Section 2.04, the obligations of each party under this Agreement to provide Services shall terminate with respect to each Service on the end date specified in the applicable Service Exhibit (the “End Date”). Notwithstanding the foregoing, the parties acknowledge and agree that each party may determine from time to time that it does not require all the Services set out on one or more of the Service Exhibits or that it does not require such Services for the entire period up to the applicable End Date. Accordingly, any party may terminate any Service, in whole and not in part, upon notification to the appropriate other party in writing of any such determination.
Section 1.02 Standard of Service.
(a) Seller and Parent each represent, warrant and agree that the Services they provide shall be provided in good faith, in accordance with applicable law and, except as specifically provided in the Service Exhibits, in a manner generally consistent with the historical operation of the Business and with the same standard of care as historically provided to the Business. Seller and Parent each agree to assign sufficient resources and qualified personnel as are reasonably required to perform the Services in accordance with the standards set forth in the preceding sentence.
(b) Buyer represents, warrants, and agrees that the Services it provides shall be provided in good faith, in accordance with applicable law and, except as specifically provided in the Service Exhibits, in a manner generally consistent with the historical operation of the Seller and with the same standard of care as historically provided by Seller. Buyer agrees to assign sufficient resources and qualified personnel as are reasonably required to perform its Services in accordance with the standards set forth in the preceding sentence.
(c) Except as expressly set forth above in this Section 1.02 or in any contract entered into hereunder, none of Seller, Parent, or Buyer makes any representations or warranties of any kind, implied or expressed, with respect to the Services, including, without limitation, any warranties of merchantability or fitness for a particular purpose, which are specifically disclaimed. Seller, Parent, and Buyer each acknowledge and agree that this Agreement does not create a fiduciary relationship, partnership, joint venture or relationships of trust or agency between the parties and that all Services are provided by the parties hereto as independent contractors.
Section 1.03 Access to Premises. In order to enable the provision of the Services each party agrees that it shall provide to the other parties and their respective Affiliates’ employees and any third-party service providers or subcontractors who provide Services, at no cost to the providing party, access to the receiving party’s facilities, assets and books and records, in all cases to the extent necessary for the providing party to fulfill their obligations under this Agreement.
ARTICLE II
COMPENSATION
Section 2.01 Responsibility for Wages and Fees. For such time as any employees of any party providing Services pursuant hereto or any of their respective Affiliates are providing the Services to any other party under this Agreement, (a) such employees will remain employees of such providing party or such Affiliate, as applicable, and shall not be deemed to be employees of any party receiving Services for any purpose, and (b) such party providing Services, or such Affiliate, as applicable, shall be solely responsible for the payment and provision of all wages, bonuses and commissions, employee benefits, including severance and worker’s compensation, and the withholding and payment of applicable taxes relating to such employment.
Section 2.02 Terms of Payment and Related Matters.
(a) As consideration for provision of the Services, each party receiving Services shall pay the amount specified for each Service on such Service’s respective Service Exhibit.
(b) It is the intent of the parties that the compensation set forth in the respective Service Exhibits reasonably approximate the cost of providing the Services, including the cost of employee wages and compensation, without any intent to cause any party providing Services to receive profit or incur loss. If at any time any party providing Services believes that the payments contemplated by a specific Service Exhibit are materially insufficient to compensate it for the cost of providing the Services it is obligated to provide hereunder, or any party receiving Services believes that the payments contemplated by a specific Service Exhibit materially overcompensates the providing party, such providing or receiving party, as the case may be, shall notify the other party in writing as soon as possible, and the parties hereto will commence good faith negotiations toward an agreement in writing as to the appropriate course of action with respect to pricing of such Services for future periods.
Section 2.03 Extension of Services. The parties agree that no party providing Services shall be obligated to perform any Service after the applicable End Date; provided, however, that if a party receiving Services desires and the providing party agrees to continue to perform any of the Services after the applicable End Date, the parties shall negotiate in good faith to determine an amount that compensates the providing party for all of its costs for such performance, including the time of its employees. The Services so performed by the providing party after the applicable End Date shall continue to constitute Services under this Agreement and be subject in all respects to the provisions of this Agreement for the duration of the agreed-upon extension period.
Section 2.04 Terminated Services. Upon termination or expiration of any or all Services pursuant to this Agreement, or upon the termination of this Agreement in its entirety, no party providing Services will have any further obligation to provide the applicable terminated Services and the party receiving Services will have no obligation to pay any future compensation relating to such Services (other than for or in respect of Services already provided in accordance with the terms of this Agreement and received by the receiving party prior to such termination).
Section 2.05 Right of Set-off. Buyer shall have the right to withhold and set off against any amount otherwise due to be paid by Buyer pursuant to this Agreement any amount to which any Buyer Indemnified Party may be entitled under Article VI of the Purchase Agreement or Section 5.02 of this Agreement.
ARTICLE III
TERMINATION
Section 3.01 Termination of Agreement. Subject to Section 3.04, this Agreement shall terminate in its entirety (i) on the date upon which no party providing Services shall have any continuing obligation to perform any Services as a result of each of their expiration or termination in accordance with Section 1.01(d) or Section 3.02 or (ii) in accordance with Section 3.03.
Section 3.02 Breach. Any party (the “Non-Breaching Party”) may terminate this Agreement with respect to any Service, in whole but not in part, at any time upon prior written notice to the other party (the “Breaching Party”) if the Breaching Party has failed to perform any of its material obligations under this Agreement relating to such Service, and such failure shall have continued without cure for a period of ten (10) days after receipt by the Breaching Party ofa written notice of such failure from the Non-Breaching party seeking to terminate such service.
Section 3.03 Insolvency. In the event that any party hereto shall (i) file a petition in bankruptcy, (ii) become or be declared insolvent, or become the subject of any proceedings (not dismissed within ninety (90) days) related to its liquidation, insolvency or the appointment of a receiver, (iii) make an assignment on behalf of all or substantially all of its creditors, or (iv) take any corporate action for its winding up or dissolution, then the other party shall have the right to terminate this Agreement by providing written notice in accordance with Section 6.01.
Section 3.04 Effect of Termination. Upon termination of this Agreement in its entirety pursuant to Section 3.01, all obligations of the parties hereto shall terminate, except for the provisions of Section 2.04, Article IV, Article V and Article VI, which shall survive any termination or expiration of this Agreement.
ARTICLE IV
CONFIDENTIALITY
Section 4.01 Confidentiality.
(a) During the term of this Agreement and thereafter, the parties hereto shall, and shall instruct their respective representatives to, maintain in confidence and not disclose the other party’s financial, technical, sales, marketing, development, personnel, and other information, records, or data, including, without limitation, customer lists, supplier lists, trade secrets, designs, product formulations, product specifications or any other proprietary or confidential information, however recorded or preserved, whether written or oral (any such information, “Confidential Information”). Each party hereto shall use the same degree of care, but no less than reasonable care, to protect the other party’s Confidential Information as it uses to protect its own Confidential Information of like nature. Unless otherwise authorized in any other agreement between the parties, any party receiving any Confidential Information of the other party (the “Receiving Party”) may use Confidential Information only for the purposes of fulfilling its obligations under this Agreement (the “Permitted Purpose”). Any Receiving Party may disclose such Confidential Information only to its representatives who have a need to know such information for the Permitted Purpose and who have been advised of the terms of this Section 4.01 and the Receiving Party shall be liable for any breach of these confidentiality provisions by such persons; provided, however, that any Receiving Party may disclose such Confidential Information to the extent such Confidential Information is required to be disclosed by a governmental order, in which case the Receiving Party shall promptly notify, to the extent possible, the disclosing party (the “Disclosing Party”), and take reasonable steps to assist in contesting such governmental order or in protecting the Disclosing Party’s rights prior to disclosure, and in which case the Receiving Party shall only disclose such Confidential Information that it is advised by its counsel in writing that it is legally bound to disclose under such governmental order.
(b) Notwithstanding the foregoing, “Confidential Information” shall not include any information that the Receiving Party can demonstrate: (i) was publicly known at the time of disclosure to it, or has become publicly known through no act of the Receiving Party or its representatives in breach of this Section 4.01; (ii) was rightfully received from a third party without a duty of confidentiality; or (iii) was developed by it independently without any reliance on the Confidential Information.
(c) Upon demand by the Disclosing Party at any time, or upon expiration or termination of this Agreement with respect to any Service, the Receiving Party agrees promptly to return or destroy, at the Disclosing Party’s option, all Confidential Information. If such Confidential Information is destroyed, an authorized officer of the Receiving Party shall certify to such destruction in writing.
ARTICLE V
LIMITATION ON LIABILITY; INDEMNIFICATION
Section 5.01 Limitation on Liability. In no event shall any party providing Services pursuant hereto have any liability under any provision of this Agreement for any punitive, incidental, consequential, special or indirect damages, including loss of future revenue or income, loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement, or diminution of value or any damages based on any type of multiple, whether based on statute, contract, tort or otherwise, and whether or not arising from the other party’s sole, joint, or concurrent negligence, strict liability, criminal liability or other fault. Each party receiving Services hereunder acknowledges that the Services to be provided to it hereunder are subject to, and that its remedies under this agreement are limited by, the applicable provisions of Section 1.02, including the limitations on representations and warranties with respect to the Services.
Section 5.02 Seller and Parent Indemnification. Subject to the limitations set forth in Section 5.01, Seller and Parent shall jointly and severally indemnify, defend and hold harmless Buyer and its Affiliates and each of their respective representatives (collectively, the “Buyer Indemnified Parties”) from and against any and all claims, judgments, damages, liabilities, settlements, losses, costs and expenses, including attorneys’ fees and disbursements, of the Buyer Indemnified Parties arising out of or resulting from (i) Seller or Parent’s breach of this Agreement; or (ii) the negligence, violation of law, or willful misconduct of Seller or Parent or their respective Affiliates.
Section 5.03 Buyer Indemnification. Subject to the limitations set forth in Section 5.01, Buyer shall indemnify, defend and hold harmless Seller and Parent and their Affiliates and each of their respective representatives (collectively, the “Seller and Parent Indemnified Parties”) from and against any and all claims, judgments, damages, liabilities, settlements, losses, costs and expenses, including attorneys’ fees and disbursements, of the Seller and Parent Indemnified Parties arising out of or resulting from (i) Buyer’s breach of this Agreement; or (ii) the negligence, violation of law, or willful misconduct of Buyer or its Affiliates.
Section 5.04 Indemnification Procedures. The process set forth in Section 6.4 of the Purchase Agreement shall be deemed incorporated into, and made a part of, this Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the thirds day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 6.01):
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(a)
|
if to Seller:
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20050 SW 112th Avenue
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Tualatin, OR 97062
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E-mail: wclough@cuiglobal.com
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Attention: William Clough
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(b)
|
if to Parent:
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20050 SW 112th Avenue
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Tualatin, OR 97062
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E-mail: wclough@cuiglobal.com
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Attention: William Clough
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(c)
|
if to Buyer:
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699 Milpitas Blvd
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Milpitas, CA 95035
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E-mail: dean@virtualpowersystems.com
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Attention: Dean Nelson
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With a copy to Sanjay Jain via email at
|
|
|
|
sanjay@virtualpowersystems.com
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Section 6.02 Other Matters.
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(a)
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Salary Coverage. The parties agree and acknowledge that Seller will pay the full and complete salary and all other expenses or fees of Mark Adams for his services to Buyer, which services shall be set forth by the Chief Executive Officer of Buyer, from time to time. For the avoidance of doubt, Buyer shall not be responsible for any compensation, expenses or fees associated with Mr. Adams’ services to Buyer.
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(b)
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Investment Sourcing. Seller shall use reasonable efforts to assist Buyer in sourcing investments in Buyer for no additional compensation.
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Section 6.03 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
Section 6.04 Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
Section 6.05 Entire Agreement. This Agreement, including all Service Exhibits, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event and to the extent that there is a conflict between the provisions of this Agreement and the provisions of the Purchase Agreement as it relates to the Services hereunder, the provisions of this Agreement shall control. Seller agrees and acknowledges that (a) this Agreement is in full satisfaction of the terms and conditions of Sections 5.4 and 5.5 of the Purchase Agreement of Buyer and Seller and (b) neither party is entitled to any further consideration, cash, securities, or other items of value from the other party (or its affiliates) under Sections 5.4 or 5.5 of the Purchase Agreement or any other related agreement except as set forth in this Agreement.
Section 6.06 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. No party may assign its rights or obligations hereunder without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.
Section 6.07 No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.
Section 6.08 Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an instrument in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
Section 6.09 Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of Oregon or any other jurisdiction). Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of California in each case located in the city of Milpitas and county of Santa Clara, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
Section 6.10 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
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SELLER
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CUI-CANADA, INC
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5/6/2020
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By:
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/s/ William Clough
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Name:
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William Clough
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Title:
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Executive Chairman
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PARENT
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CUI GLOBAL, INC.
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5/6/2020
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By:
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/s/ William Clough
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Name:
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William Clough
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Title:
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Executive Chairman
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BUYER
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VIRTUAL POWER SYSTEMS
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5/5/2020
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By:
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/s/ Dean Nelson
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Name:
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Dean Nelson
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Title:
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Interim CEO
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Signature Page to Transition Services Agreement
EXHIBIT A
MANUFACTURING SERVICES
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Description of Service:
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Seller shall provide manufacturing services to Buyer for all necessary products. Seller shall use Buyers “owned” inventory as part of any manufacturing. Seller will manage all aspects of manufacturing coordination.
● Seller agrees to build and deliver to Buyer 130 M2 ICE Blocks and 20 IC Packs (PO#VPS2018212) on or before the End Date below (collectively, the “Deliverables”). The Deliverables will be subject to Buyer’s review and inspection. Buyer shall have the right to reject all or any item of the Deliverables, in its reasonable discretion for any faulty, damaged, obsolete, malfunctioning, non-functioning, or otherwise not meeting Buyer’s specifications for Buyer’s particular use (“Misfunctioning Deliverables”), within 14 days of receipt of the Deliverables. Upon receipt of notice of rejection of the Deliverables from Buyer, Seller shall (i) replace such Misfunctioning Deliverables at its own expense and costs within 7 days or (ii) reduce the Fee or Other Consideration by the cost of such Misfunctioning Deliverable as set forth in the bullet point below.
● Seller and Buyer agree that the cost of those units will be $2,750 USD each/$412,500 USD total.
● Buyer agrees to a one-time tooling NRE charge of $6,200 USD.
● Seller and Buyer agree that these costs will be in exchange for equity as outlined in Exhibit F.
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Service Provider
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Seller
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Service Recipient
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Buyer
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End Date:
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September 30, 2020
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Fee or Other Consideration:
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Outlined in Exhibit F.
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Exhibits to Transition Services Agreement
EXHIBIT B
EMPLOYEE SEPARATION FACILITATION AND FEES
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Description of Service:
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● Buyer agrees that they are responsible for Canadian law requirements of separation for Buyer’s employees.
● Seller agrees that they will facilitate the layoffs in two stages:
o Stage 1—Dismissal of 3 individuals (designated below in Table B1) on November 1, 2019. Buyer agrees that they are responsible for the legally entitled separation compensation up to a maximum of $32,900.10 as outlined in Table B1. Buyer agrees that this reimbursement will be additional equity in Buyer as set forth in Exhibit F. Seller agrees that they will provide for necessary separation payments and benefits to those employees.
o Stage 2—Delayed dismissal of 6 individuals (designated below in Table B1) on or about July 31, 2020. Seller agrees that compensation for those individuals will be the responsibility of Seller until dismissal. Buyer agrees that at time of dismissal Buyer will be responsible for legally entitled separation compensation up to a maximum of $346,365.94 as outlined in Table B1. Buyer agrees that this reimbursement will be additional equity in Buyer as set forth in Exhibit F. Seller agrees that they will provide for necessary separation payments and benefits to those employees.
● Seller acknowledges and agrees that the employee separation fees, costs, and other expenses equal to an aggregate amount of $379,266.10 (“Costs”) are the only Costs that Buyer remains liable for and such amounts shall be paid in equity of Buyer as set forth in Exhibit F. Seller agrees and acknowledges that Buyer shall have no further liability to Seller or any other third party with respect to any Costs for the individuals set forth on Table B1 or any other employees of Seller and any other such separation fees, costs, and other expenses that are not Costs shall be the full responsibility of Seller.
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Service Provider
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Seller
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Service Recipient
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Buyer
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End Date:
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November 30, 2020
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Fee or Other Consideration:
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Outlined in Exhibit F
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TABLE B1
[redacted]
EXHIBIT C
DESIGN SERVICES AND ONGOING CUSTOMER SUPPORT
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Description of Service:
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Buyer understands that Seller still has customers that need to be supported through final production on or about November 30, 2020.
☐ Buyer agrees to provide de minimus engineering services needed to complete those production runs and will be provided to the Seller until all production is complete through facility is closure, which shall be on or before the End Date.
☐ Buyer agrees to provide any necessary engineering support/services until the End Date.
☐ To the extent that the services provided by Buyer are not covered by this agreement and are more than de minimus, Seller shall pay the fair market value for the services to Buyer.
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Service Provider
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Buyer
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Service Recipient
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Seller
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End Date:
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November 30, 2020
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Fee or Other Consideration:
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Buyer agrees to provide these services in exchange for Seller continuing the employment of required personnel to manufacture and test the ICE products that will be built before closing of facility, which shall be on or before the End Date.
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EXHIBIT D
LEASE, WAREHOUSE, AND SHIPPING SERVICES
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Description of Service:
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● Seller shall provide all 2nd floor office space for use.
o Includes all space on 2nd floor
o To include property taxes, insurance, all utilities, waste services, snow & lawn care, HVAC, alarm and sprinkler, pest control, and janitorial services.
● Warehouse space to store finished goods and raw materials. Finished goods designated space limited, once full Buyer must begin transferring to Buyer’s own location.
● Provide all required shipping services, but all shipping charges are the responsibility of Buyer.
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Service Provider
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Seller
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Service Recipient
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Buyer
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End Date:
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November 30, 2020 or the final date that CUI Canada may extend to, whichever is later, with respect to all of the items set forth in the Description of Service.
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Fee or Other Consideration:
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Outlined in Exhibit F
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EXHIBIT E
IT, HUMAN RESOURCES, AND INFRASTRUCTURE SERVICES
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Description of Service:
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Seller shall provide the following Services to support IT, Human Resources, and Infrastructure Services:
■ Human resources support; payroll processing, benefits administration, and consultative support to set up services and ongoing administration.
■ Information technology support and licenses to operate within SAP and Business Objects, as well as off-site data backup.
■ Infrastructure services; Internet, Telephone, Security, Server, Storage, Taxes, Shipping, etc.
■ HR, IT, storage, security, janitorial, inventory management, and other similar services.
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Service Provider
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Seller
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Service Recipient
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Buyer
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End Date:
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November 30, 2020 or the final date that CUI Canada may extend to, whichever is later, with respect to all of the items set forth in the Description of Service.
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Fee or Other Consideration:
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Outlined in Exhibit F
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EXHIBIT F
SUMMARY OF FEES
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Equity Exchange Buyer to Seller
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Total Value
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Exhibit A
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Manufacturing Services
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$418,700
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USD
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Exhibit B
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Employee Separation Fees
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11/1/19
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$32,900
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USD
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7/31/20
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$346,365
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USD
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Exhibit D
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Lease & Warehouse
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$172,000
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USD
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Exhibit E
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IT, Human Resources, Infrastructure
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$87,750
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USD
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Exhibit F
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CUI approved discount
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-($257,715)
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USD
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Total Equity Exchange Due Parent
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$800,000(1)
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USD
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(1)
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The total outstanding will payable by Buyer pursuant to a convertible promissory note in the form attached hereto as Exhibit G and issued under that certain Amended and Restated 2019 Note Purchase Agreement between the Company and the other parties thereto, dated on or around November 28, 2019, as amended to date.
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EXHIBIT G
CONVERTIBLE PROMISSORY NOTE
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
CONVERTIBLE PROMISSORY NOTE
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No. CPN-
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Date of Issuance
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$800,000.00
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May 4, 2020
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FOR VALUE RECEIVED, VIRTUAL POWER SYSTEMS, INC., a Delaware corporation (the “Company”), hereby promises to pay to the order of CUI Global, Inc. (the “Lender”), the principal sum of Eight Hundred Thousand Dollars ($800,000.00), together with interest thereon from the date of this Note. Interest shall accrue at a rate of two and a half percent (2.5%) per annum, compounded annually.
This Note is one of a series of Notes issued pursuant to that certain Amended and Restated 2019 Note Purchase Agreement, among the Company and other lenders listed on the Schedule of Lenders listed in Exhibit A thereto (the “Purchase Agreement”), and capitalized terms not defined herein shall have the meaning set forth in the Purchase Agreement.
1. Payment. All payments shall be made in lawful money of the United States of America at the principal office of the Company, or at such other place as the holder hereof may from time to time designate in writing to the Company. Payment shall be credited first to costs, if any, then to accrued interest due and payable and any remainder applied to principal. Prepayment of principal, and payment of interest, may not be made without the consent of the holder of the Note. The Company hereby waives demand, notice, presentment, protest and notice of dishonor.
2. Security. This Note is a general unsecured obligation of the Company.
3. Conversion of the Notes. This Note and any amounts due hereunder shall be convertible into Conversion Shares in accordance with the terms of Section 2.2 of the Purchase Agreement. As promptly as practicable after the conversion of this Note, the Company at its expense shall issue and deliver to the holder of this Note, upon surrender of the Note, a certificate or certificates for the number of full Conversion Shares issuable upon such conversion.
4. Amendments and Waivers; Resolutions of Dispute; Notice. The amendment or waiver of any term of this Note, the resolution of any controversy or claim arising out of or relating to this Note and the provision of notice shall be conducted pursuant to the terms of the Purchase Agreement.
5. Successors and Assigns. This Note applies to, inures to the benefit of, and binds the successors and assigns of the parties hereto; provided, however, that the Company may not assign its obligations under this Note without the written consent of the Majority in Interest of Purchasers. Any transfer of this Note may be effected only pursuant to the Purchase Agreement and by surrender of this Note to the Company and reissuance of a new note to the transferee. The Lender and any subsequent holder of this Note receives this Note subject to the foregoing terms and conditions, and agrees to comply with the foregoing terms and conditions for the benefit of the Company and any other Lenders.
6. Officers and Directors not Liable. In no event shall any officer or director of the Company be liable for any amounts due and payable pursuant to this Note.
7. No waiver. The Company agrees that any delay on the part of the holder in exercising any rights hereunder will not operate as a waiver of such rights. The holder of this Note shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies, and no waiver of any kind shall be valid unless in writing and signed by the party or parties waiving such rights or remedies.
8. Governing Law. This Note shall be governed by and construed under the laws of the State of Delaware.
9. Approval. The Company hereby represents that its board of directors, in the exercise of its fiduciary duty, has approved the Company’s execution of this Note based upon a reasonable belief that the principal provided hereunder is appropriate for the Company after reasonable inquiry concerning the Company’s financing objectives and financial situation. In addition, the Company hereby represents that it intends to use the principal of this Note primarily for the operations of its business, and not for any personal, family or household purpose.
[Signature page follows.]
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VIRTUAL POWER SYSTEMS, INC.
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5/4/2020
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By:
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/s/ Sanjay Jain
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Name:
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Sanjay Jain
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Title:
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Chief Financial Officer
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[Signature Page to Convertible Promissory Note]
