Exhibit 10.1

REVOLVING LINE OF CREDIT AGREEMENT

 

This Revolving Line of Credit Agreement (the “Agreement”) is made and entered
into this 15th day of February, 2012 (the “Effective Date”), by and between
Chachas Land Co., Inc., a Nevada Corporation (the “Lender”), and Omnitek
Engineering Corp., a California corporation (“Borrower”).

 

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

 

1.  

Line of Credit.  Lenders hereby establishes for a period of six (6) months from
the Effective Date (the “Maturity Date”) a revolving line of credit (the “Credit
Line”) for Borrower in the principal amount of Fifty Thousand dollars ($50,000)
(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
applicable Promissory Note.

 

2.

Renewal and Extension of Line of Credit.  Provided that Borrower is not in
default under this Agreement or the Promissory Note, at the Maturity Date, the
Borrower, at the Borrower’s option may extend and renew this Credit Line for one
additional term of six (6) months.

3.  

Advances.

 

(a)   

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

 

(i)

$40,000 on or before February 15, 2012; and

(ii)

$10,000 within three days of written request.

 

(b)  

Subject to subparagraph (a) above, any request for an Advance may be made from
time to time and in such amounts as Borrower may choose, provided, however, any
requested Advance will not, when added to the outstanding principal balance of
all previous Advances, exceed the Credit Limit.  Requests for Advances must be
made in writing, delivered to the Lender, by such officer of Borrower authorized
by it to request such advances.  Until such time as Lender may be notified
otherwise, Borrower hereby authorizes its Chief Executive Officer or its Chief
Financial Officer to request Advances.  For each Advance, properly requested,
the Lender shall advance an amount equal to the Advance amount.  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.

  

4.    

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 nine
percent (9%) 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.

 

5.

Default Interest.  Notwithstanding the foregoing, upon the occurrence of an
Event of Default hereunder, the Interest Rate shall immediately increase to 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.

 

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6.

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.  Borrower may prepay principal and/or
interest at any time without penalty.

 

7.   

Conditions Precedent.  No Lender shall not be required to make any advance
hereunder unless and until:

(a)  

All of the documents required by such Lender, including a Promissory Note, have
been duly executed and delivered to such Lender and shall be in full force and
effect.

 

(b) 

The representations and warranties contained in this Agreement are then true
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.

 

(c)    

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.

 

8.

[Intentionally Deleted]

9.

Warrants.  In consideration of Lender's extending the Credit Line to Borrower,
Borrower agrees to issue to Lender a Warrant (the "Warrant") to purchase 5,000
shares of the Borrower Common Stock at an exercise price of $2.68 for a period
of five years.

10.   

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.

 

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(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 any material misstatement of fact or
omitted to state a material fact or any fact necessary to make the statements
contained therein not misleading.

 

11.  

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 (1) file all applicable reports which it is required to file with
the Securities and Exchange Commission in a timely manner; (2) 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; (3) maintain appropriate reserves for the
accrual of the same; and (4) 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.

12.  

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.

 

13.  

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

 

(a)

Failure to pay interest on a monthly basis when due;

(b)

Failure to pay any principal within five (5) days after the same becomes due.

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(c)

Any representation or warranty made by Borrower in this Agreement or in
connection with any borrowing or request for an advance hereunder, or in any
certificate, financial statement, or other statement furnished by Borrower to
Lender is untrue in any material respect at the time when made.

 

(d)

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 Paragraph 13.

 

(e)

 Default by Borrower in the observance or performance of any other covenant or
agreement contained in any other document or agreement made and given in
connection with this Agreement, other than a default constituting a separate and
distinct event of default under this Paragraph 13, and the continuance of the
same unremedied for a period of fourteen (14) days after notice thereof is given
to Borrower.

 

(f)

Any of the documents executed and delivered in connection herewith 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 defaults in the payment
of the deferred purchase price of property beyond the period of grace, if any,
provided with respect thereto, or 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)

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.

14.  

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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15. 

Collateral; Security.  As security for all obligations of Borrower to Lender,
this Credit Line and the Promissory Note shall be secured by such number of
shares of the Common Stock of the Borrower (the “Shares”), which value of said
Shares based on the closing bid is equal to two (2) times the then outstanding
principal and unpaid interest under this Credit Line and the Promissory Note.
 In order to facilitate the Security for this Credit Line the Borrower shall
issue 100,000 Shares in the name of the Borrower to be held as Security in
accordance with a separate Pledge Agreement (the “Pledge Agreement”) of even
date herewith between the Borrower and the Lender.  In case of an Event of
Default the Lender shall have the rights set forth in the Pledge Agreement.

16.

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 within five (5) business days if 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:

If to the Borrower, addressed to:

Omnitek Engineering Corp.

Attn: Werner Funk, President

1945 S. Rancho Santa Fe Road

San Marcos, CA 92078

If to Lender, addressed to:

Chachas Land Co., Inc.

Attn: Gregory J. Chachas

P.O. Box 151538

Ely, Nevada 89315

17.  

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, the Promissory Note, 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.  Lender may set off against any debt or account it owns Borrower, now
existing or hereafter arising, in accordance with its rules and regulations
governing deposit accounts then in existence, and for such purposes is hereby
granted a security interest in all such accounts.  This Agreement will be deemed
to express, embody, and supersede any previous understanding, agreements, or
commitments, whether written or oral, between the parties with respect to the
general subject matter hereof.  This Agreement may not be amended or modified
except in writing signed by the parties.

 

18.

Waiver of Jury Trial.  The Parties hereto hereby voluntarily and irrevocably
waive trial by jury in any Proceeding brought in connection with this Agreement,
any of the related agreements and documents, or any of the transactions
contemplated hereby or thereby. For purposes of this Agreement, “Proceeding”
includes any threatened, pending, or completed action, suit, arbitration,
alternate dispute resolution mechanism, investigation, inquiry, administrative
hearing, or any other actual, threatened, or completed proceeding, whether
brought by or in the right of any party or otherwise and whether civil,
criminal, administrative, or investigative, in which a Party was, is, or will be
involved as a party or otherwise.

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19.

Counterparts; Facsimile Signatures.  This Agreement may be executed in one or
more counterparts, 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.

20.

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.

21. 

Entire Agreement.  This Agreement, together with the Promissory Note, and the
Pledge 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.

 

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

BORROWER

OMNITEK ENGINEERING CORP.

/s/ Werner Funk              

By: Werner Funk

Its: President and CEO

LENDER

CHACHAS LAND CO., INC.

/s/ Gregory J. Chachas   

By: Gregory J. Chachas

Its:  President

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