UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

Date of Report (Date of earliest event reported): June 30, 2020

 

BioLargo, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

000-19709

 

65-0159115

(State or other jurisdiction

of incorporation)

 

(Commission File Number)

 

(IRS Employer

Identification No.)

 

 

14921 Chestnut St., Westminster, California 

 

92683

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (888) 400-2863

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

BLGO

OTCQB

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 1.01      Entry into a Material Definitive Agreement

 

On June 30, 2020, BioLargo, Inc. (“we”, or the “Company”) and our partially owned subsidiary Clyra Medical Technologies, Inc., amended our technology license agreement. The amendment:

 

 

 

Expanded the scope of the license to allow Clyra to sell non-prescription and over-the-counter products, including its flagship product, Clyraguard Personal Protective Spray; and

 

 

Expanded the scope of the license to include oral, dental, and periodontis products, including mouthwash and rinse, and hydration for patients.

 

Through the amendment, BioLargo also converted the “Initial License Fee” that would have required $50,000 per month payments from Clyra once Clyra began generating $4,000,000 in annual revenues. The license fee of $6,979,039 was converted to 22,513.03 shares of Clyra common stock.

 

Additionally on June 30, 2020, Clyra and BioLargo board member Jack B. Strommen agreed to convert the $1,125,000 that would be due on the consulting agreement between Clyra and his company Beach House Consulting, LLC, into 3,629.03 shares of Clyra common stock. Payments under the consulting agreement were due to begin once Clyra generated $250,000 in gross sales for three consecutive months.

 

Following these conversions, BioLargo owns 50% of Clyra’s issued and outstanding common stock. This percentage does not include approximately 10,000 shares issuable upon the exercise of options and 10,500 shares issuable to Scion Solutions, LLC upon the occurrence of certain conditions as set forth in the agreements through which BioLargo and Clyra acquired intellectual property from Scion, dated September 26, 2018 (see Closing Agreement, attached hereto as Exhibit 10.9).

 

Finally, on June 30, 2020, Clyra entered into a Revolving Line of Credit Agreement whereby Vernal Bay Capital Group, LLC, a current BioLargo investor, committed to provide a $1,000,000 inventory line of credit to Clyra, with a first draw of $200,000 received July 6, 2020. Clyra is required to use funds from the line of credit to manufacture inventory. Its first draw will allow it to complete manufacturing of 50,000 units of its Clyraguard Personal Protective Spray. Additional draws are conditional upon Clyra presenting invoices or purchase orders to the lender equal to the greater of one-half of principal outstanding on the line of credit, and $200,000.

 

The line of credit note earns interest at 15%, matures in one year, and requires Clyra pay interest and principal from gross product sales. For the first 180 days, on a monthly basis, Clyra is required to pay 30% of gross product sales to reduce amounts owed, and thereafter 60% of gross sales. Clyra issued Vernal Bay 323 shares of its common stock as a commitment fee for the line of credit, valued at $100,000. A security agreement of the same date grants Vernal Bay a security interest in Clyra’s inventory, as that term is defined in the Uniform Commercial Code. Clyra may prepay the note at any time.

 

 

 

Item 9.01 Financial Statements and Exhibits

 

 

Exhibit

Number

 

Exhibit Description

Form

File Date

10.1

License Agreement to Clyra Medical Technologies, Inc., dated December 17, 2012

Form 8-K

1/6/2016

10.2

Amendment dated December 30, 2015 to License Agreement with Clyra Medical Technologies, Inc.

Form 8-K

1/6/2016

10.3*

Amendment dated June 30, 2020 to License Agreement with Clyra Medical Technologies, Inc.

   

10.4

Consulting Agreement dated December 30, 2015 between Clyra Medical and Beach House Consulting LLC

Form 8-K

1/6/2016

10.5*

Amendment dated June 30, 2020 to Consulting Agreement dated December 30, 2015 between Clyra Medical and Beach House Consulting LLC

   

10.6*

Revolving Line of Credit Agreement dated June 30, 2020, between Clyra Medical and Vernal Bay

   

10.7*

Security Agreement dated June 30, 2020, between Clyra Medical and Vernal Bay

   

10.8*

Revolving Line of Credit Note issued by Clyra Medical to Vernal Bay on June 30, 2020

   

10.9

Closing Agreement dated December 17, 2018 between Clyra Medical and Scion Solutions

Form 8-K

12/19/2018

 

 

*

Filed herewith

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

                 

Date: July 7, 2020

 

 

 

BIOLARGO, INC.

         
 

 

 

 

 

 

By:

 

/s/ Dennis P. Calvert

 

 

 

 

 

 

 

 

Dennis P. Calvert

 

 

 

 

 

 

 

 

President and Chief Executive Officer

 

 

Exhibit 10.3

 

SECOND AMENDMENT TO LICENSE AGREEMENT

 

 

THIS SECOND AMENDMENT TO LICENSE AGREEMENT (“Amendment”) is made and entered into as of this June 30, 2020, by and between BIOLARGO, INC., a Delaware corporation, and its wholly owned subsidiary BioLargo Life Technologies, Inc., a California corporation (collectively, “Licensor”), and CLYRA MEDICAL TECHNOLOGIES, INC., a California corporation (“Licensee”), with respect to the following:

 

r e c i t a l s :

 

A.     Licensor and Licensee are parties to that certain License Agreement dated December 17, 2012 (“License Agreement”), as amended on December 30, 2015 (“First Amendment”), which grants Licensee certain rights to Licensor’s technologies in the field of human Wound Care.

 

B.     The License Agreement requires Licensee pay Licensor an Initial License Fee of $6,979,039 pursuant to the terms of a Promissory Note dated December 17, 2012.

 

C.     Licensor and Licensee desire that Licensee satisfy its obligations under the note through the issuance of shares of Licensee’s common stock at a per-share price equal to the current securities offering of $310.

 

D.     Licensee has developed a product called Clyraguard, a derivative of the licensed technologies, that it believes could fulfill a pivotal role in the COVID-19 pandemic, and desires to manufacture, market and sell that product;

 

E.     The definition of Field of Use in the License Agreement specifically does not include over-the-counter products available without a prescription, and Licensor and Licensee desire to expand the scope of License to allow for over-the-counter sales of Clyraguard;

 

F.     The License Agreement contemplates thirteen expanded Fields of Use, include “oral/dental/periodontics: mouthwash and rinse, hydration for patients”, and Licensee has developed such a product (OraClyr), and therefore desires to further expand the License to include such product;

 

G.     Capitalized terms used but not otherwise defined herein shall have the meaning given to such terms in the License Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree to amend, modify and supplement the License Agreement as follows:

 

1.     Payment of Initial License Fee. Section 3(a) of the License Agreement provides for the payment by Licensee to Licensor of an Initial License Fee of $6,979,039, payable upon the occurrence of certain trigger events, which, as modified by the First Amendment, have not yet occurred. In full satisfaction of its obligations to pay the Initial License Fee, Licensee shall issue Licensor 22,513.03 shares of Licensee’s common stock, paid at $310 per share. Licensor acknowledges receipt of same and the satisfaction of Licensee’s obligations to pay the Initial License Fee. The parties agree that the promissory note dated December 17, 2012, is hereby cancelled and of no further force and effect.

 

 

 

2.      Modification of Definition of Field of Use. License and Licensee hereby agree to amend and replace the definition of Field of Use in the License Agreement, Section 1(c), to the following (which shows additions in underlined italics, and deletions through strikethrough text:

 

  Field of Use means prescription-based and over-the-counter products in:

 

 

(i)

the commercial field of human “Wound Care” (“Wound Care” is defined below) in the medical, dental and ophthalmologic fields of prescription-based; and

     
 

(ii)

the commercial field of oral, dental, and periodontis, including mouthwash and rinse, and hydration for patients.

     
 

(iii)

“Field of Use” does NOT include products or processes intended for use on surfaces (e.g., disinfection of a hospital floor or other a hard surface) or other devices usable in a medical setting (e.g., disinfection of a metal instrument used to treat a patient). “Field of Use” does NOT include over-the-counter products available without a prescription.

 

3.       Modification of Definition of Wound Care. License and Licensee hereby agree to amend and replace the definition of Wound Care in the License Agreement, Section 1(k), to the following (which shows additions in underlined italics, and deletions through strikethrough text:

 

  Wound Care means articles, compositions, and methods for medical treatment to treat a condition comprising damage to a human patient, the condition including substantive traumatic or non-traumatic breach of the derma. Such medical treatment may include extended application of an article of manufacture (wraps, bandages, bandaids and appliqués) over the epidermis, or wipes or direct application of medication such as liquid, ointment, spray, cream or paste, including any chemistry used on or in a patient during surgery. As non-limiting examples of traumatic damage are cuts, scrapes, punctures, incisions and other intentional or accidental penetration damage through the epidermis. As non-limiting examples of non-traumatic damage are treatment, prophylaxis or prevention of sores, topical infections, insect bites, sub-epidermal infections, boils, and lesions (in the absence of a previous wound at the site). “Wound Care” includes surgical damage to tissues and organs during surgical or other medical procedures as well as from accidental damage to tissues and organs. Surgical and medical procedures, and traumatic events, also include care of the mouth, gums, eyes, optical system and all other organs and tissues. “Wound Care” does NOT include products intended for the treatment of animals.

 

4.       Modification of Definition of Licensed Processes. License and Licensee hereby agree to amend and replace the definition of Licensed Processes in the License Agreement, Section 1(d), to the following (which shows additions in underlined italics, and deletions through strikethrough text): “Licensed Processes means any method, process, modality, procedure, practice, or course of action within the Field of Use covered by a claim of Patent Rights, and/or that incorporates or includes know-how, trade secret, or proprietary information of Licensor.”

 

 

 

5.         Modification of Definition of Licensed Products. License and Licensee hereby agree to amend and replace the definition of Licensed Processes in the License Agreement, Section 1(e), to the following (which shows additions in underlined italics, and deletions through strikethrough text): “Licensed Products means any means any article, kit, equipment, system, method, apparatus or unit within the Field of Use covered by a claim of Patent Rights and/or that incorporates or includes know-how, trade secret, or proprietary information of Licensor.”

 

6.         Assignment of Patent Applications. Licensee filed application number 63019922 with the U.S. Patent and Trademark Office on May 4, 2020, Pursuant to Section 6(a) of the License Agreement, Licensee agrees to cause the inventors listed on such application to assign the application to BioLargo Life Technologies, Inc.

 

7.         Sublicensing. License and Licensee hereby agree to amend and replace Section 2(e) titled Sublicensing, and Section 3(c) title Sublicensing Fees, with the following:

 

Licensee shall have the right, with the permission of Licensor, to grant non-exclusive or exclusive sublicenses of its rights under this Agreement to third parties during the term of this Agreement in the Field of Use or any subcategory of the Field of Use, subject to the payment of royalties pursuant to and terms consistent with this Agreement.

 

8.         Miscellaneous.

 

  a.     Effect of Amendment. Except to the extent the License Agreement is modified by this Amendment, the remaining terms and conditions of the License Agreement shall remain unmodified and in full force and effect. In the event of any conflict between the terms and conditions of the License Agreement and the terms and conditions of this Amendment, the terms and conditions of this Amendment shall prevail and control.

 

  b.     Entire Agreement. The License Agreement, together with this Amendment, embodies the entire understanding between the parties hereto with respect to its subject matter and can be changed only by an instrument in writing signed by the parties hereto.

 

  c.     Counterparts. This Amendment may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

  d.     Governing Law. The parties hereto expressly agree that this Amendment shall be governed by, interpreted under, and construed and enforced in accordance with the laws of the jurisdiction identified in the License Agreement.

 

 

 

[Signature Page Follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, the Parties have executed this Amendment to License Agreement as of the date set forth above.

 

 

 

Licensor

Biolargo, Inc.

BioLargo Life Technologies, Inc.

 

/s/Dennis P. Calvert

 

 

Licensee

Clyra Medical Technologies, Inc.

 

 

/s/Steven V. Harrison

By: Dennis P. Calvert, President

 

By: Steven V. Harrison, President

 

 

 

 

 

 

Exhibit 10.5

 

SECOND AMENDMENT TO CONSULTING AGREEMENT

 

 

THIS SECOND AMENDMENT TO CONSULTING AGREEMENT (“Amendment”) is made and entered into as of this June 30, 2020, by and between Beach House Consulting, LLC, a Minnesota limited liability company (“Consultant”) and Clyra Medical Technologies, Inc., a California corporation (“Client”), with respect to the following:

 

r e c i t a l s :

 

A.     Consultant and Client are parties to that certain Consulting Agreement dated December 30, 2015 (“Consulting Agreement”), as amended December 31, 2019 (“First Amendment”).

 

B.     The Consulting Agreement provides that Consultant is to receive a consulting fee of $1,125,000, payable over 48 months, beginning after Client has generated $250,000 in gross sales of products for three consecutive months.

 

C.     Client has represented to Consultant that this and other obligations are impeding its efforts to raise capital needed to further its business plan, and has offered Consultant 3,639.03 shares of its common stock in lieu of cash due under the Consulting Agreement.

 

D.     Company and Consultant desire to amend the Consulting Agreement to reflect the issuance of shares in lieu of cash payment as set forth herein.

 

E.     Capitalized terms used but not otherwise defined herein shall have the meaning given to such terms in the Consulting Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree to amend, modify and supplement the Consulting Agreement as follows:

 

1.     Payment of Fees. Section 6 of the Consulting Agreement provides for the payment by Client to Consultant of $1,125,000, payable in 48 monthly installments, payable upon the occurrence of certain trigger events, which, as modified by the First Amendment, have not yet occurred. In full satisfaction of its obligations to pay the consulting fees of $1,150,000, Client shall issue Consultant 3,639.03 shares of Client’s common stock, paid at $310 per share. Client acknowledges receipt of same and the satisfaction of Client’s obligations to pay the consulting fees.

 

2.     Miscellaneous.

 

(a)     Effect of Amendment. Except to the extent the Consulting Agreement is modified by this Amendment, the remaining terms and conditions of the Consulting Agreement shall remain unmodified and in full force and effect. In the event of any conflict between the terms and conditions of the Consulting Agreement and the terms and conditions of this Amendment, the terms and conditions of this Amendment shall prevail and control.

 

 

 

(b)     Entire Agreement. The Consulting Agreement, together with this Amendment, embodies the entire understanding between the parties hereto with respect to its subject matter and can be changed only by an instrument in writing signed by the parties hereto.

 

(c)     Counterparts. This Amendment may be executed in one or more counterparts, including the transmission of counterparts by facsimile or electronic mail, each of which shall be deemed an original but all of which, taken together, shall constitute one in the same Amendment.

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Consulting Agreement as of the day and year first-above written.

 

 

CLIENT

 

CLYRA MEDICAL TECHNOLOGIES, INC. 

 

/s/Steven V. Harrison

By: _______________________

Steven V. Harrison, President

 

 

CONSULTANT

 

BEACH HOUSE CONSULTING, LLC

 

/s/Jack B. Strommen

By: _________________________

Jack B. Strommen, Manager

 

 

 

Exhibit 10.6

 

REVOLVING LINE OF CREDIT AGREEMENT

 

This Revolving Line of Credit Agreement is made and entered into this 30th day of June, 2020 (the “Effective Date”), by and between Vernal Bay Capital Group, LLC, a California limited liability company (the “Lender”), and Clyra Medical Technologies, Inc., a California corporation (“Borrower”).

 

In consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

 

1.     Line of Credit.  Lender hereby establishes for a period of one (1) year from the Effective Date (the “Maturity Date”) a revolving line of credit (the “Credit Line”) for Borrower in the principal amount of One Million dollars ($1,000,000) (the “Credit Limit”) which indebtedness shall be evidenced by and repaid in accordance with the terms of a promissory note for the amount of the Credit Limit in substantially the form attached hereto as Exhibit A (the “Promissory Note”).  All sums advanced on the Credit Line or pursuant to the terms of this Agreement (each an “Advance”) shall become part of the principal of the Promissory Note. Each Advance may be used solely for the purchase of inventory, or raw materials used by Borrower to manufacture or produce inventory, for sale by Borrower (“Use of Proceeds”).

 

2.     Advances.

 

a.     Lender agrees to make funds available under this Credit Line on the following schedule:

 

 

i.

a first Advance of $200,000 on or before July 6, 2020; and

 

ii.     provided that Borrower has satisfied the Conditions Precedent (as defined in Section 6 below) Borrower may request additional Advances in any amount up to the available Credit Limit (each, a “Request”) by written notice to Lender, which Advances Lender agrees to make within three (3) business days of written request for each Advance.

 

b.     Subject to subparagraph (a) above, Requests may be made from time to time and in such amounts as Borrower may choose, providedhowever, any Request will not, when added to the outstanding principal balance of all previous Advances, exceed the Credit Limit.  Requests must be made in writing, delivered to the Lender, by such officer of Borrower authorized by it to request such Advances, and include a use of proceeds that identifies with specificity the purpose of the funds (e.g., $10,250 to purchase bottles) consistent with the Use of Proceeds permitted herein. For each valid Request, the Lender shall advance to Borrower’s Account an amount equal to the Advance set forth in the Request within three (3) business days following receipt of a valid Request. The Lender may refuse to make any requested Advance if an Event of Default has occurred and is continuing hereunder either at the time the request is given or the date the Advance is to be made, or if an event has occurred or condition exists which, with the giving of notice or passing of time or both, would constitute an Event of Default hereunder as of such dates.

 

c.     Borrower agrees to receive and hold each Advance in a pre-designated bank account approved by Lender and set aside for such purpose (“Borrower’s Account”).

 

3.     Interest. All sums advanced pursuant to this Agreement shall bear interest from the date each Advance is made until paid in full at an interest rate of fifteen percent (15%) simple interest per annum (the “Interest Rate”). Interest will be calculated on a basis of a 360-day year and charged for the actual number of days elapsed.

 

 

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4.     Default Interest. Notwithstanding the foregoing, upon the occurrence of an Event of Default hereunder, the Interest Rate shall immediately increase to the lesser of ten percent (10%) over the Interest Rate set forth in Section 3 above or the highest rate allowable under applicable law, and shall continue at such rate, both before and after judgment, until the Credit Line has been repaid in full and all of Borrower’s other obligations to Lender hereunder have been fully paid and discharged.

 

5.     Interest Payments; Repayment. Borrower shall make monthly payments on the 10th day of each calendar month equal to all accrued interest for the immediately preceding month. In addition, for the first 180 days after the Effective Date, no later than the 10th day of the month, Borrower shall pay to Lender an amount equal to thirty percent (30%) of cash received from product sales (“Gross Product Sales”) for the immediately preceding month, and after 180 days, it shall pay sixty percent (60%) of Gross Product Sales for the immediately preceding month, for the purpose of repaying principal, interest, and other amounts due to Lender hereunder. Payment shall be made to the Lender at such place as the Lender may, from time to time, designate in lawful money of the United States of America. All payments received hereunder shall be applied as follows: first, to any late charge; second, to any costs or expenses incurred by Lender in collecting such payment or to any other unpaid charges or expenses due hereunder; third, to accrued interest; fourth, to principal; and fifth, the balance, if any, to such person entitled thereto; provided, however, upon occurrence of an Event of Default, a Lender may, in its discretion, change the priority of the application of payments as it deems appropriate. Subject to the foregoing application of payments, Borrower may prepay principal and/or interest at any time without penalty. The entire unpaid principal balance, together with any unpaid accrued interest and other unpaid charges, fees or other amounts due hereunder, shall be due and payable on the Maturity Date. 

 

6.     Conditions Precedent. Lender shall not be required to make any Advance hereunder unless and until all of the following have been satisfied as of the date of the Request and the date such Advance is to be made (collectively, the “Conditions Precedent”):

 

a.     All of the documents required by such Lender, including this Agreement, the Promissory Note and Security Agreement (defined in Section 14 below) (collectively, the “Loan Documents”), have been duly executed and delivered to such Lender and shall be in full force and effect, and Borrower has delivered to Lender resolutions of Borrower’s board of directors authorizing the Credit Line pursuant to this Loan Agreement and related documents.

 

b.     Lender has received the Commitment Fee (defined in Section 7 below).

 

c.     The representations and warranties contained in this Agreement are true as of the Effective Date and then true on the date of request and date such Advance is to be made with the same effect as though the representations and warranties had been made at such time.  The request for an Advance by Borrower shall constitute a reaffirmation to Lender that all representations and warranties made herein remain true and correct in all material respects to the same extent as though given the time such request is made, and that all conditions precedent listed in this Paragraph 5 have been, and continue to be, satisfied in all respects as of the date such request is made.

 

d.     No Event of Default hereunder has occurred and is continuing, and no condition exists or event has occurred which, with the passing of time or the giving of notice or both, would constitute an Event of Default hereunder.

 

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e.     Following the first Advance, Borrower has presented Lender copies of written purchase orders (or equivalent evidence of sell-through from consignment distributor FFF Enterprises, Inc., including invoices on delivered product) from “Unaffiliated Purchasers” (defined below) for Borrower’s inventory and outstanding (or unpaid) on the date of the Request but less than 90-days old, the sum total of which is at least equal to greater than (i) one-half of the then existing balance due under the Promissory Note without taking into consideration such Advance, or (ii) $200,000. “Unaffiliated Purchasers” mean any purchaser that (A) does not own or control Borrower, (B) is not owned or controlled by, or under common ownership or control with, Borrower, and (C) does not own and is not owned or controlled by, or under common ownership with, a “Controlling Party” (defined below). As used herein, ownership or control means the ownership of 25% or more of the profit or voting interest of an entity or the power to direct the management of an entity through employment, contract, ownership, fiduciary position or otherwise. “Controlling Party” means a person or entity that has the power to direct the management of Borrower through employment, contract, ownership, fiduciary position or otherwise, including without limitation all of the officers and directors and beneficial owners, directly or indirectly, of 10% or more of the voting interests of Borrower, or any family member of such person, including spouse and any parent, sibling, or lineal descendant of such person or such person’s spouse.

 

7.     Commitment Fee. In consideration of Lender extending the Credit Line to Borrower, Borrower agrees to issue to Lender three hundred twenty-three (323) fully paid and nonassessable shares of the Borrower’s common stock (the “Stock”), which Borrower and Lender agree have a value of One Hundred Thousand Dollars ($100,000) (the “Commitment Fee”), by delivery of one or more duly authorized original share certificates in the name of Lender prior to the first Advance.

 

8.     Accounting. Upon request by Lender, Borrower shall provide to Lender bank statements, invoices, and other documentation necessary to evidence the Use of Proceeds of all Advances, including without limitation monthly bank statements for, and evidence of the current balance in, Borrower’s Account and all recent credits and withdraws therefrom.

 

9.     Representations and Warranties.  In order to induce Lender to enter into this Agreement and to make the advances provided for herein, Borrower represents and warrants to Lenders as follows:

 

a.     Borrower is a duly organized, validly existing, and in good standing under the laws of the State of California with the power to own its assets and to transact business in California, and in such other states where its business is conducted.

 

b.     Borrower has the authority and power to execute and deliver any document required hereunder and to perform any condition or obligation imposed under the terms of such documents, and each person signing this Agreement on behalf of Borrower is authorized to so sign.

 

c.     There is no action, suit, investigation, or proceeding pending or, to the knowledge of Borrower, threatened, against or affecting Borrower or any of its assets which, if adversely determined, would have a material adverse effect on the financial condition of Borrower or the operation of its business.

 

d.     No information or report furnished by Borrower to Lender in connection with the negotiation of this Agreement contained or will contain any material misstatement of fact or omitted or will omit to state a material fact or any fact necessary to make the statements contained therein not misleading.

 

e.     The Stock, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable and free of liens or encumbrances or restrictions on transfer other than restrictions on transfer under applicable state and federal securities laws. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required in connection with the issuance of the Stock to Lender contemplated by this Agreement, except for filings pursuant to Regulation D of the Securities Act, and applicable state securities laws, which have been made or will be made in a timely manner by Borrower.

 

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f.     Borrower’s entry into this Agreement and performance of its obligations hereunder does not contravene or constitute a breach of any agreement binding on Borrower or the Inventory, and this Agreement constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms

 

10.  Affirmative Covenants.  So long as any sum remains unpaid hereunder, in whole or in part, Borrower covenants and agrees that except with the prior written consent of the  Lender, which consent will not be unreasonably withheld, it shall do the following:

 

a.     Borrower shall duly observe and conform to all valid requirements of any governmental authority relative to the conduct of its business, its properties, or its assets and will maintain and keep in full force and effect its corporate existence and all licenses and permits necessary to the proper conduct of its business.

 

b.     Borrower shall keep proper books of records and accounts in which full, true, and correct entries will be made of all dealings or transactions relating to its business and activities.

 

c.     Borrower shall (i) file all applicable reports which it is required to file with the Securities and Exchange Commission in a timely manner; (ii) file all applicable federal, state, and local tax returns or other statements required to be filed in connection with its business, including those for income taxes, sales taxes, property taxes, payroll taxes, payroll withholding amounts, FICA contributions, and similar items; (iii) maintain appropriate reserves for the accrual of the same; and (iv) pay when due all such taxes, or sums or assessments made in connection therewith.  Provided, however, that (until distraint, foreclosure, sale, or similar proceedings have been commenced) nothing herein will require Borrower to pay any sum or assessment, the validity of which is being contested in good faith by proceedings diligently pursued and as to which adequate reserves have been made.

 

11.  Negative Covenants.  So long as any amounts due hereunder remain unpaid in whole or in part, Borrower covenants that except with the prior written consent of the Lender, which consent will not be unreasonably withheld, it will not do any of the following:

 

a.     Borrower shall not make any loans or advances to any person or other entity other than in the normal and ordinary course of business now conducted; make any investment in securities of any person or other entity; or guarantee or otherwise become liable upon the obligations of any person or other entity, except by endorsement of negotiable instruments for deposit or collection in the normal and ordinary course of business.  This restriction will apply, without limitation, to loans to any subsidiaries of Borrower.

 

b.     Borrower shall not create or permit to exist any lien, claim, or encumbrance on the assets of Borrower or any part thereof, except as may be granted to Lender.

 

c.     Borrower shall not do any act or omit to do any act, or permit any act or omission that will cause a breach of any representation or warranty made in this Agreement.

 

12.  Events of Default.   An event of default (each, an “Event of Default”) will occur if any one of the following events occurs:

 

a.     Failure to pay any interest or principal on or before the date due, subject to an opportunity to cure said default by payment of a penalty equal to one percent (1%) of the then principal amount outstanding, upon five (5) days notice.

 

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b.     Failure to pay any principal on the date due or any other amount due hereunder, the Promissory Note or the Security Agreement, on or before the date due.

 

c.     Any representation or warranty made by Borrower in this Agreement, a Request or in connection with any other borrowing from Lender, or in any certificate, financial statement, or other statement furnished by Borrower to Lender is untrue at the time when made or becomes untrue in any material respect at any time prior to payment in full of all obligations under the Loan Documents.

 

d.     Any material breach of any of Borrower’s covenants, obligations, representations or warranties under any other Loan Document beyond any express requirement for notice and opportunity to cure.

 

e.     Default by Borrower in the observance or performance of any other covenant or agreement contained in this Agreement, other than a default constituting a separate and distinct event of default under this Section 12, and the continuance of the same unremedied for a period of fourteen (14) days after notice thereof is delivered to Borrower.

 

f.     Any Loan Document for any reason ceases to be valid or in full force and effect or the validity or enforceability of which is challenged or disputed by any signer thereof, other than Lender.

 

g.     Borrower shall default in the payment of principal or interest on any other obligation for borrowed money other than hereunder, or Borrower defaults in the performance or observance of any obligation or in any agreement relating thereto if the effect of such default is to cause or permit the holder or holders of such obligation (or trustee on behalf of such holder or holders) to cause such obligation to become due prior to the stated maturity.

 

h.     Filing by Borrower of a voluntary petition in bankruptcy seeking reorganization, arrangement or readjustment of debts, or any other relief under the Bankruptcy Code as amended or under any other insolvency act or law, state or federal, now or hereafter existing.

 

i.      Filing of an involuntary petition against Borrower in bankruptcy seeking reorganization, arrangement or readjustment of debts, or any other relief under the Bankruptcy Code as amended, or under any other insolvency act or law, state or federal, now or hereafter existing, and the continuance thereof for sixty (60) days undismissed, unbonded, or undischarged.

 

j.     Termination of Borrower’s existence, the dissolution, insolvency, or business failure of Borrower; the appointment of a receiver of any part of the property of Borrower, or the assignment for the benefit of creditors by Borrower.

 

k.     All or any substantial part of the property of Borrower shall be condemned, seized, or otherwise appropriated, or custody or control of such property is assumed by any governmental agency or any court of competent jurisdiction, and is retained for a period of thirty (30) days.

 

13.  Remedies.  Upon the occurrence of an Event of Default as defined above, the Lender may declare the entire unpaid principal balance, together with accrued interest thereon, to be immediately due and payable without presentment, demand, protest, or other notice of any kind.  Lender may suspend or terminate any obligation it may have hereunder to make additional Advances.  To the extent permitted by law, Borrower waives any rights to presentment, demand, protest, or notice of any kind in connection with this Agreement.  No failure or delay on the part of the Lender in exercising any right, power, or privilege hereunder will preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.  The rights and remedies provided herein are cumulative and not exclusive of any other rights or remedies provided at law or in equity.  Borrower agrees to pay all costs of collection incurred by reason of the default, including court costs and reasonable attorney’s fees, whether or not the attorney is a salaried employee of Lender, including such expenses incurred before or after any legal action or Bankruptcy proceeding involving Borrower has commenced, during the pendency of such proceedings, and continuing to all such expenses in connection with any appeal to higher courts arising out of matters associated herewith.

 

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14.  Collateral; Security.  As security for all obligations of Borrower to Lender, this Credit Line and the Promissory Note shall be secured by the inventory held for sale by the Borrower pursuant to a separate Security Agreement on the terms and conditions and in the form attached hereto as Exhibit B (the “Security Agreement”).

 

15.  General Provisions.  All representations and warranties made in this Agreement and the Promissory Note shall survive the execution and delivery of this Agreement and the making of any loans hereunder.  This Agreement will be binding upon and inure to the benefit of Borrower and Lender, their respective successors and assigns, except that Borrower may not assign or transfer its rights or delegate its duties hereunder without the prior written consent of Lender. This Agreement and all documents and instruments associated herewith will be governed by and construed and interpreted in accordance with the laws of the State of California. Time is of the essence hereof. This Agreement may not be amended or modified except in writing signed by the parties.

 

 

16.  Arbitration of Disputes. Any dispute related to this Agreement or any other Loan Document will be resolved exclusively by a representative from JAMS in Newport Beach, California pursuant to its streamlined rules. If the parties cannot agree upon a representative from JAMS, then JAMS will select an arbitrator. The arbitrator will be authorized to order specific performance, damages or any other legal or equitable remedy as would be available to a court of law. The prevailing party in such arbitration will be entitled to have and recover from the other parties participating in the arbitration all costs and expenses of arbitration, including reasonable attorneys' fees, in addition to any other relief that may be granted.

 

NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THIS "ARBITRATION OF DISPUTES" PROVISION DECIDED EXCLUSIVELY BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THIS "ARBITRATION OF DISPUTES" PROVISION OR, IN THE CASE OF APPEAL, IN SECTIONS 1280-1294.4 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.

 

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.

 

          /s/                                        /s/

Lender     ______          Borrower     ______

 

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17.  Counterparts; Facsimile Signatures.  This Agreement may be executed electronically and in one or more counterparts, including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com, www.echosign.adobe.com, etc., each of which shall be deemed an original and all of which together shall constitute one and the same agreement.  Facsimile signatures shall be sufficient for execution of this Agreement.

 

18.  Independent Advice of Counsel.  The Parties hereto, and each of them, represent and declare that in executing this Agreement they relied solely upon their own judgment, belief, knowledge and the advice and recommendations of their own independently selected counsel, concerning the nature, extent, and duration of their rights and claims, and that they have not been influenced to any extent whatsoever in executing the Agreement by any representations or statements covering any matters made by any other party or that party’s representatives hereto.

 

19.  Entire Agreement.  This Agreement, together with the Promissory Note and the Security Agreement, constitutes the entire understanding and agreement of the parties with respect to the general subject matter hereof; supersede all prior negotiations and agreements with respect thereto; may not be contradicted by evidence of any alleged oral agreement; and may not be amended, modified, or rescinded in any manner except by a written agreement signed by Lender which clearly and unequivocally expresses an intent to amend, modify, or rescind the same.

 

20.  Compliance with Law. It is the intention of Lender and Borrower to comply with all applicable usury laws. In furtherance of this intention of Lender and Borrower, all Loan Documents are expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid to Lender, for the use, forbearance, or detention of money under this Agreement, the Promissory Note, or any other Loan Document or agreement, exceed the maximum amount permissible under applicable law. If, due to any circumstance, payment of any amount required thereunder shall be prohibited by law, the obligation to be fulfilled shall be reduced to the maximum allowed by law. If, due to any circumstance, Lender should ever receive as interest an amount which would exceed the highest lawful rate, the amount that would be excessive interest shall either be applied to the reduction of the principal of the Note and not to the payment of interest or refunded if principal has been paid in full. This provision shall control every other provision of all agreements between any Borrower and Lender.

 

21.  Assignment. Borrower shall not assign its rights hereunder without the prior written consent of Lender. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted assigns. No assignment by Borrower of any interest, right or obligation hereunder shall relieve Borrower of its obligations or liability hereunder.

 

22.  Modifications and Waiver. No alteration, change or modification of or to this Agreement shall be effective unless it is made in writing and signed on behalf of each party to be charged. A waiver by any party of a breach of any of the covenants, conditions or agreements under this Agreement or any other Loan Document made or to be performed by any other party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions of this Agreement or any other Loan Document.

 

23.  Notices. All notices, requests, demands and other communications under this Agreement, shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given or three (3) business days after mailed to the party to whom notice is to be given, by first-class mail, registered, or certified, postage prepaid and properly addressed as follows:

 

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If to Borrower:

 

4830 West Kennedy Blvd., Ste. 600

Tampa, FL 33069

Attn: Steven V. Harrison, President

 

Copy via email to: steveh@clyramedical.com

If to Lender:

 

1601 Dove Street, Suite 250
Newport Beach CA 92660
Attn: Anthony Jacobson, Managing Member

 

Copy via email to: anthonyjohnjacobson@gmail.com

 

 

24.  Further Assurances. Each party shall sign any other and further instruments and documents and shall take any other and further actions as might be necessary or proper in order to accomplish the intent and purposes of this Agreement.

 

IN WITNESS WHEREOF, the parties hereto have executed this Revolving Line of Credit Agreement the day and year first above written.

 

Clyra Medical Technologies, Inc.,

a California corporation
 

Vernal Bay Capital Group, LLC,

 

  a California limited liability company  
 

 

 

 

 

 

 

/s/ Steven V. Harrison

 

 

/s/Anthony Jacobson 

 

By:     By:    
 

Steven V. Harrison, President

 

 

Anthony Jacobson, Managing Member

 

 

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Exhibit 10.7

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT is dated as of June 30, 2020, and made by and between Clyra Medical Technologies, Inc., a California corporation, with offices at 4830 West Kennedy Blvd., Ste. 600, Tampa, FL 33069 (“Debtor”), and Vernal Bay Capital Group, LLC, a California limited liability company, with offices at 1601 Dove Street, Suite 250, Newport Beach CA 92660 (“Secured Party”), with reference to the following recitals:

 

A. The Secured Party has agreed to advance to Debtor funds pursuant to a credit line of up to the principal sum of $1,000,000 outstanding from time-to-time, as evidenced by that certain Revolving Line of Credit Note dated as of even date herewith in favor of the Secured Party (the “Note”) delivered pursuant to that certain Revolving Line of Credit Agreement (the “Loan Agreement”), the proceeds of which will be used by Borrower solely for the purchase of inventory and raw goods and materials used to manufacture inventory; and

 

B. As a condition to such advance, the Secured Party required Debtor to grant to it a security interest in the Collateral (as defined herein) in order to secure Debtor’s obligations under the Note and Loan Agreement (collectively, the “Loan Documents”), upon the terms and conditions more fully set forth herein.

 

NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto agree to the foregoing and as follows:

 

1. DEFINED TERMS.

 

Capitalized terms not otherwise defined herein, are used herein as defined in the California Uniform Commercial Code (the “UCC”).

 

2. SECURITY INTEREST.

 

As collateral security for payment in full by Debtor of all amounts when due under the Note and the other obligations to be performed under this Security Agreement and the Loan Documents (collectively, the “Obligations”), Debtor hereby pledges, assigns, and grants to the Secured Party a continuing first priority security interest in and lien on the following, whether now owned or hereafter acquired, (the “Collateral”):

 

Inventory as defined in the UCC, including without limitation, all inventory now or hereinafter acquired by Debtor, and all raw materials and component parts, goods and materials used in the manufacture of Debtor’s inventory, wherever located; all documents and documents of title relating to or covering any of the foregoing; and all products and proceeds of any of the foregoing, including, without limitation, insurance proceeds, all payments made upon the sale thereof, and other proceeds with respect thereto.

 

3. REPRESENTATIONS AND WARRANTIES.

 

Debtor represents and warrants to the Secured Party as follows:

 

(a) Debtor has full power and authority to execute, deliver, and perform this Security Agreement, which has been duly authorized by all necessary and proper corporate action.

 

(b) This Security Agreement has been duly executed and delivered, and constitutes the legal, valid, and binding obligation of Debtor, enforceable in accordance with its terms.

 

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(c) No effective security agreement, financing statement, equivalent security or lien instrument, or continuation security agreement covering all or any part of the Collateral is on file or of record in any public office.

 

(d) Debtor has good title to and is the lawful owner of the Collateral, free from all claims, liens, encumbrances, charges, or security interests whatsoever except as otherwise granted by this Security Agreement.

 

(e) The provisions of this Security Agreement create a valid and, upon the filing of the related financing statement(s) in accordance with this Security Agreement, perfected security interest in the Collateral, enforceable in accordance with its terms.

 

4. COVENANTS.

 

Debtor covenants and agrees that, until the Obligations are irrevocably satisfied in full or otherwise discharged:

 

(a) The Secured Party may sign and file on Debtor’s behalf one or more financing statements pursuant to the UCC, in such jurisdictions as the Secured Party shall determine. At any time and from time to time, upon request of the Secured Party, Debtor shall give, execute, file, and/or record any notice, financing statement, statement, instrument, document, or agreement that the Secured Party considers necessary to create, preserve, continue, perfect, or validate any security interest granted hereunder or which the Secured Party considers necessary or desirable to exercise or enforce the Secured Party’s rights hereunder with respect to such security interest. Without limiting the generality of the foregoing, the Secured Party is authorized to file with respect to the Collateral one or more additional financing statements, continuation statements, or other documents without the signature of Debtor and to name therein Debtor as debtor and the Secured Party as secured party; or to correct or complete, or cause to be corrected or completed, any financing statements, continuation statements or other such documents as have been filed naming Debtor as debtor and the Secured Party as secured party.

 

(b) Debtor shall keep the Collateral insured for the benefit of the Secured Party against fire, theft, and such other hazards, and in amounts and with such insurance underwriters, as are prudent and customary in Debtor’s industry.

 

(c) Debtor shall:

 

(i) defend the Collateral against adverse claims and demands of all persons;

 

(ii) not remove Collateral from any warehouse or any future location to any location outside the states of Texas, Florida, California or North Carolina, without providing the Secured Party with reasonable advance notice (not less than 15 days) sufficient to give the Secured Party an opportunity to file such financing statements and otherwise perfect its security interest in such Collateral at such locations;

 

(iii) not sell, assign, convey, grant, create, or suffer to exist any lien, claim, security interest, or encumbrance upon the Collateral in favor of any person other than the Secured Party; and

 

(iv) not otherwise transfer or dispose of any Collateral (“Transfer”), except for a Transfer, other than a security interest, made in the ordinary course of business for reasonably equivalent value.

 

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5. REMEDIES.

 

If there is an Event of Default under and as defined in the Note or Loan Agreement (an “Event of Default”), the Secured Party shall have, in addition to all other rights and remedies provided in this Security Agreement or otherwise, the remedies of a secured party under the UCC, including without limitation the right to take possession of the Collateral, and for that purpose the Secured Party may, so far as Debtor can give authority therefor, enter upon any premises upon which Collateral may be situated and remove the same therefrom. The Secured Party may require Debtor to assemble the Collateral and make it available to the Secured Party at a place to be designated by the Secured Party which is reasonably convenient to the Secured Party. Without limiting the generality of the foregoing, the Secured Party may immediately, without demand or performance and without notice of intention to sell or of time or place of sale or of redemption or other notice or demand whatsoever to Debtor, all of which are hereby expressly waived, and without advertisement, sell at public or private sale or otherwise realize upon, in San Diego, California, or elsewhere, the whole or from time to time any part of the Collateral upon which the Secured Party shall have a security interest or lien hereunder, or any interest which Debtor may have therein, and after deducting from the proceeds of sale or other disposition of the Collateral all expenses (including all reasonable expenses for legal services), shall apply the residue of such proceeds toward the payment of the Obligations and other liabilities of Debtor, Debtor remaining liable for any deficiency remaining unpaid after such application. If notice of any sale or other disposition is required by law to be given, Debtor hereby agrees that a notice sent at least two days before the time of any intended public sale or of the time after which any private sale or other disposition of the Collateral is to be made, shall be reasonable notice of such sale or other disposition. The Secured Party, in its discretion, may in its name or in the name of Debtor, demand, sue for, collect, and receive any money, receivables, or proceeds included in the Collateral and extend the time of payment or otherwise modify any of the terms of or release Debtor under any such Collateral, without thereby incurring responsibility to or discharging or otherwise affecting any liability of Debtor. Debtor shall pay to the Secured Party on demand any and all attorney’s fees reasonably and necessarily incurred or paid by the Secured Party in protecting or enforcing the Obligations and the other rights of the Secured Party under this Security Agreement, including its right to take possession of and realize on Collateral.

 

6. POWER OF ATTORNEY.

 

Debtor authorizes the Secured Party and does hereby make, constitute, and appoint the Secured Party and agents of the Secured Party with full power of substitution, as Debtor’s true and lawful attorney-in-fact with power, in its own name or in the name of Debtor, upon the occurrence and continuance of any Event of Default, to endorse any notes, checks, drafts, money orders, or other instruments of payment (including, payments under or in respect of any policy of insurance) in respect of the Collateral that may come into possession of the Secured Party; to sign and endorse any documents relating to the Collateral; to pay or discharge taxes, liens, security interests, or other encumbrances at any time levied or placed on or threatened against the Collateral; to grant, collect, receipt for, compromise, settle, and sue for sums due in respect of the Collateral; and generally, to do at the Secured Party’s option and at Debtor’s expense, at any time, or from time to time all acts and things which the Secured Party deems necessary to protect, preserve, and realize upon the Collateral and Debtor’s security interests therein in order to effect the intent of this Security Agreement, as fully and effectually as Debtor might or could do; and Debtor hereby ratifies all that said attorney shall do or cause to be done by virtue hereof. THIS POWER OF ATTORNEY IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE FOR AS LONG AS ANY OF THE OBLIGATIONS SHALL BE OUTSTANDING. Debtor agrees that any reasonable fees, costs, and expense incurred by the Secured Party pursuant to the foregoing authorization shall become part of the Obligations and be secured by the Collateral.

 

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7. MISCELLANEOUS.

 

(a) TERM OF SECURITY AGREEMENT.

 

The term of this Security Agreement shall commence on the date hereof and continue in full force and effect until all of the Obligations have been fully and indefeasibly paid and performed and such payment and performance has been acknowledged in writing by the Secured Party. At such time, this Security Agreement shall terminate, Secured Party shall release its security interests hereunder (and deliver and sign appropriate UCC termination statements), and the Collateral shall be reassigned to Debtor.

 

(b) NOTICES.

 

All notices, demands, consents, requests, instructions, and other communications to be given or delivered or permitted under or by reason of the provisions of this Security Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient at such places and in the manner set forth in the Loan Agreement. If any notice, demand, consent, request, instruction, or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this paragraph), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions, and other communications will be sent to the addresses in the Loan Agreement or to such other address as any party may specify by notice given to the other party in accordance with this paragraph.

 

(c) AMENDMENT.

 

Except as otherwise provided herein, no amendment of this Security Agreement shall be valid or effective, unless in writing and signed by or on behalf of the parties hereto.

 

(d) WAIVER.

 

No course of dealing or omission or delay on the part of either party hereto in asserting or exercising any right hereunder shall constitute or operate as a waiver of any such right. No waiver of any provision hereof shall be effective, unless in writing and signed by or on behalf of the party to be charged therewith. No waiver shall be deemed a continuing waiver or waiver in respect of any other or subsequent breach or default, unless expressly so stated in writing.

 

(e) GOVERNING LAW; JURISDICTION.

 

This Security Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of California applicable to agreements made and to be performed therein, without regard or reference to its choice of laws or conflicts of laws principles. This Security Agreement shall not be construed or interpreted against the party causing this note to be drafted. The Debtor hereby unconditionally and irrevocably consents to the exclusive personal and subject matter jurisdiction of the courts located in Orange County, California in respect of any claim, action, suit or other proceeding arising out of or relating to this Security Agreement. Notwithstanding the foregoing, Debtor acknowledges and agrees that all disputes pursuant to this Security Agreement shall be resolved in accordance with the arbitration provisions set forth in the Loan Agreement. The Debtor further agrees that Debtor shall at all times maintain in State of California an agent for purposes of accepting service of process in any such claim, action, suit, or other proceeding and that service upon such agent in accordance with the rules of either of the aforesaid courts shall constitute valid and effective service upon the matter.

 

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(f) EQUITABLE REMEDIES.

 

In the event of any actual or prospective breach or default by either party, the other party shall be entitled to equitable relief, including remedies in the nature of injunction and specific performance. All remedies hereunder are cumulative and not exclusive, and nothing herein shall be deemed to prohibit or limit either party from pursuing any other remedy or relief available at law or in equity for any actual or prospective breach or default, including the recovery of damages.

 

(g) SEVERABILITY.

 

The provisions hereof are severable and in the event that any provision of this Security Agreement shall be determined to be invalid or unenforceable in any respect by a court of competent jurisdiction, the remaining provisions hereof shall not be affected but shall, subject to the discretion of such court, remain in full force and effect, and any invalid or unenforceable provision shall be deemed, without further action on the part of the parties hereto, amended and limited to the extent necessary to render such provision, as so amended and limited, valid, and enforceable.

 

(h) ASSIGNMENT.

 

This Security Agreement, and each right, interest, and obligation hereunder, may not be assigned by either party hereto without the prior written consent of the other party hereto. Any purported assignment without such consent shall be void and without effect.

 

(i) BINDING EFFECT.

 

This Security Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Security Agreement is not intended, and shall not be deemed, to create or confer any right or interest for the benefit of any person not a party hereto.

 

(j) ENTIRE AGREEMENT.

 

This Security Agreement as well as the Note and Loan Agreement contain the entire agreement of the parties hereto with respect to the subject matter hereof and supersede any prior agreement, commitment, or arrangement relating thereto.

 

(k) COUNTERPARTS.

 

This Security Agreement may be executed electronically and in any number of counterparts, including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com, www.echosign.adobe.com, etc., each of which shall be deemed an original and which together shall constitute one and the same agreement.

 

[signatures begin on next page]

 

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IN WITNESS WHEREOF, the parties, by their respective duly authorized officers, have duly executed this Security Agreement on the date set forth in the Preamble hereto.

 

DEBTOR:

 

Clyra Medical Technologies, Inc.,
a California corporation

 

 /s/Steven V. Harrison

SECURED PARTY:

 

Vernal Bay Capital Group, LLC,
a California limited liability company

 

 /s/Anthony Jacobson

By:_____________________________________ By:_____________________________________
 Steven V. Harrison, President  Anthony Jacobson, Managing Member

 

 

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Exhibit 10.8

 

REVOLVING LINE OF CREDIT NOTE

 

FOR VALUE RECEIVED, Clyra Medical Technologies, Inc.,  a California  corporation (“Borrower”) promises to pay to Vernal Bay Capital Group, LLC, a California limited liability company (the “Lender”), or to order, the principal sum of One Million Dollars ($1,000,000) or the aggregate unpaid principal amount of all Advances made by Lender to Borrower pursuant to the terms of a Revolving Line of Credit Agreement dated June 30, 2020 (the “Loan Agreement”), together with interest thereon from the date each advance is made until paid in full. All capitalized terms used in this Revolving Line of Credit Note (this “Promissory Note”) shall have the meaning given to them in the Loan Agreement.

 

1.     Maturity.   Unless otherwise accelerated pursuant to the Loan Agreement, the principal, any unpaid accrued interest and other charges and fees, shall be due and payable one (1) year from the Effective Date (the “Maturity Date”).  Notwithstanding the foregoing, the entire unpaid principal sum of this Promissory Note, together with accrued and unpaid interest thereon, shall become immediately due and payable upon the Event of Default as set forth in the Loan Agreement.

 

2.     Payments Prior to Maturity. For the first 180 days after the Effective Date, no later than the 10th day of the month, Borrower shall pay to Lender an amount equal to thirty percent (30%) of Gross Product Sales for the prior month, and after 180 days, it shall pay sixty percent (60%) of Gross Product Sales, for the purpose of repaying principal, interest, and other amounts due to Lender hereunder.

 

3.     Interest.  All sums advanced pursuant to this Agreement shall bear interest from the date each Advance is made until paid in full at an interest rate of fifteen percent (15%) simple interest per annum (the “Interest Rate”). Interest will be calculated on a basis of a 360-day year and charged for the actual number of days elapsed. In addition to the payments made pursuant to Section 2 above, Borrower shall make monthly payments to Lender on the tenth day of each calendar month equal to all accrued interest for the immediately preceding month.

 

4.     Default Interest.  Notwithstanding the foregoing, upon the occurrence of an Event of Default hereunder or the Loan Agreement, the Interest Rate shall immediately increase to the lesser of ten percent (10%) over the Interest Rate set forth in Section 3 above or the highest rate allowable under applicable law, and shall continue at such rate, both before and after judgment, until all amounts due under this Note and the Loan Agreement have been repaid in full and all of Borrower’s other obligations to Lender under the Loan Documents have been fully paid and discharged.

 

5.     Interest Payments; Repayment.  Interest on the then outstanding principal balance shall be payable on a monthly basis commencing 30 days after the Effective Date, and continuing each month thereafter.   The entire unpaid principal balance, together with any unpaid accrued interest and other unpaid charges or fees hereunder, shall be due and payable on the Maturity Date.  Payment shall be made to the Lender at such place as the Lender may, from time to time, designate in lawful money of the United States of America.  All payments received hereunder shall be applied as follows: first, to any late charge; second, to any costs or expenses incurred by Lender in collecting such payment or to any other unpaid charges or expenses due hereunder; third, to accrued interest; fourth, to principal; and fifth, the balance, if any, to such person entitled thereto; provided, however, upon occurrence of an Event of Default, a Lender may, in its discretion, change the priority of the application of payments as it deems appropriate.  

 

6.     Prepayment.  Borrower may pre-pay the sums due under this Promissory Note, in whole or in part, at any time from time to time, without penalty or premium, subject to the requirements provided in the Loan Agreement.

 

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7.     Collateral; Security.  As security for all obligations of Borrower to Lender, the Loan Agreement and this Promissory Note shall be secured by the inventory of the Borrower. In order to facilitate the Security for this Credit Line the Borrower shall file a UCC-1 in the name of the Borrower to be held as Security.  In case of an Event of Default the Lender may foreclose on the collateral.

 

8.     Default.  Upon and after the occurrence of an Event of Default (as set forth in the Loan Agreement), this Note may, at the option of Lender and without further demand, notice or legal process of any kind, be declared by Lender, and in such case shall immediately become, due and payable.

 

9.     Waiver.  Demand, presentment, protest and notice of non-payment and protest, notice of intention to accelerate maturity, notice of acceleration of maturity and notice of dishonor are hereby waived by Borrower.  Subject to the terms of the Loan Agreement, Lender may extend the time of payment of this Note, postpone the enforcement hereof, grant any indulgences, release any party primarily or secondarily liable hereon, or agree to any subordination of Borrower’s obligations hereunder without affecting or diminishing Lender’s right of recourse against Borrower, which right is hereby expressly reserved.

 

10.     Transfer; Successors and Assigns. The terms and conditions of this Promissory Note shall inure to the benefit of Lender and its assigns and be binding upon Borrower and its successors. This Note is intended to be a negotiable instrument, and Lender may assign this Note upon surrender of the original Promissory Note for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer pursuant to the California Commercial Code. Thereupon, a new note for the same principal amount and interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered Lender of this Promissory Note.

 

11.     Governing Law. This Promissory Note and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law. Any dispute related to this Note shall be resolved exclusively by arbitration in accordance with the Loan Agreement.

 

12.     Notices. All notices, requests, demands and other communications under this Promissory Note, shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given or three (3) business days after mailed to the party to whom notice is to be given, by first-class mail, registered, or certified, postage prepaid and properly addressed as set forth in the Loan Agreement or otherwise known by the holder hereof as the last known address of Borrower.

 

13.     Amendments and Waivers.  The terms of this Note may be amended only in writing signed by Borrower and Lender. This Note, together with the Loan Agreement, constitutes and contains the entire agreement between and among the parties regarding the subject matter hereof, and supersedes and replaces all prior agreements, promises and understandings, whether written or oral, proposed or otherwise, regarding the subject matter hereof.

 

14.     Action to Collect on Note. If action is instituted to collect on this Promissory Note, the Borrower promises to pay all costs and expenses, including reasonable attorney’s fees, incurred in connection with such action.

 

15.     Loss of Note. Upon receipt by the Borrower of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Promissory Note or any Promissory Note exchanged for it, and indemnity satisfactory to the Borrower (in case of loss, theft or destruction) or surrender and cancellation of such Promissory Note (in the case of mutilation), the Borrower will make and deliver in lieu of such Promissory Note a new Note of like tenor.

 

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IN WITNESS WHEREOF, this Revolving Line of Credit Note is executed as of June 30, 2020.

 

  Borrower

 
   

  Clyra Medical Technologies, Inc.

 

 

/s/Steven V. Harrision

 

 

  By: Steven V. Harrison, President

 

 

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