Exhibit 10.14

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION
MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

THIS NOTE AND ALL PAYMENT OBLIGATIONS HEREUNDER ARE SUBORDINATE TO THE
OBLIGATIONS OF THE COMPANY TO ANB BANK, AS AND TO THE EXTENT SET FORTH IN THE
SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH BY AND AMONG THE COMPANY, THE
HOLDER, AND ANB BANK, PROVIDED THAT NO SUCH SUBORDINATION SHALL IMPAIR, LIMIT,
OR OTHERWISE ADVERSELY AFFECT THE RIGHTS OF THE HOLDER TO CONVERSION AS SET
FORTH HEREIN.

 

CONVERTIBLE SECURED PROMISSORY NOTE

 

$6,000,000.00 December 7, 2015 (the "Issue Date") CPN-1 Denver, Colorado

 

For value received, MusclePharm Corporation, a Nevada corporation (the
"Company") promises to pay to Ryan Drexler or his assigns (the "Holder") the
principal sum of Six Million Dollars ($6,000,000.00), together with interest on
the outstanding principal amount at the rate of eight percent (8%) per annum,
provided that, upon and during the continuance of any Event of Default (as
defined below), the rate of interest shall increase to ten percent (10%) per
annum. Interest shall commence on the date hereof and shall continue and accrue
daily at the applicable rate on the outstanding principal until paid in full or
converted in accordance with this note (the "Note"). Interest shall be computed
on the basis of a year of 365 days for the actual number of days elapsed.
Interest shall be paid by the Company to the Holder in cash on the Maturity
Date, provided that any interest not paid when due shall be capitalized and
added to the principal amount of this Note and begin to bear interest on the
applicable interest payment date along with all other unpaid principal,
capitalized interest, and other capitalized obligations hereunder.

 

This Note is secured by a lien on and security interest in all of the assets and
properties of the Company, as described in the Security Agreement of even date
herewith by and between the Company and the Holder (the "Security Agreement").

 

This Note is subject to the following terms and conditions:

 

 

 

 

1.           Maturity.

 

(a)          Repayment.         Unless converted or repaid (as applicable) as
provided in Sections l (b), 2 or 3, all outstanding principal and any accrued
but unpaid interest under this Note (whether or not that interest has been
capitalized) (the "Conversion Amount") shall be due and payable on January 15,
2017 (the "Maturity Date"). Notwithstanding the foregoing, at the option and
upon the declaration of the Holder and upon written notice to the Company, the
entire Conversion Amount shall become due and payable upon an Event of Default.
An "Event of Default" shall occur if (i) the Company fails to pay any and all
unpaid principal, accrued interest and all other amounts owing under the Note
when due and payable pursuant to the terms of the Note, provided, however, that
an Event of Default shall not occur on account of a failure to pay due solely to
an administrative or operational error of any depositary institution that is
crediting by ACH or wiring such payment if Company had the funds to make the
payment when due and makes the payment within two (2) business days following
Company's knowledge of such failure to pay; (ii) the Company files any petition
or action for relief under any bankruptcy, reorganization, insolvency or
moratorium law or any other law for the relief of, or relating to, debtors, now
or hereafter in effect, or makes any general assignment for the benefit of
creditors; (iii) an involuntary petition is filed against the Company (unless
such petition is dismissed or discharged within forty-five (45) days) under any
bankruptcy statute or similar law now or hereafter in effect, or a custodian,
receiver, trustee, assignee for the benefit of creditors (or other similar
official) is appointed to take possession, custody or control of any property of
the Company; or (iv) the Company breaches any other material term of this Note
or the Security Agreement (unless, in the case of any curable material breach,
such material breach is cured within thirty (30) days of the earlier of the date
on which (x) Holder has given notice of such breach to Company and (y) Company
has actual knowledge of such breach); provided, however, that all obligations
under this Note, including without limitation all principal and all accrued and
unpaid interest, shall be accelerated, and shall be immediately and
automatically due and payable without any notice to the Company or other action,
upon the occurrence of any Event of Default described in clauses (ii) or (iii)
of this sentence.

 

(b)          Conversion. The Holder may at any time, in the sole discretion of
the Holder, upon written notice to the Company, elect to convert the Conversion
Amount into shares of the Company's Common Stock, $0.001 per share ("Common
Stock"), at a price per share equal to Two Dollars and Thirty Cents ($2.30),
rounded down to the nearest whole share.

 

(c)          Change of Control. The Company shall not enter into any agreement
that would effect, and shall not effect, any Change of Control (as defined
below) unless the Company has provided the Holder with at least fifteen (15)
days' advance written notice of such Change of Control, including the
anticipated consideration to be received by the holders of the Company's Common
Stock, and has otherwise provided the Holder with a meaningful opportunity to
exercise its conversion rights hereunder prior to the consummation of such
Change of Control. The term "Change of Control" means (i) a sale of all or
substantially all of the Company's assets other than to an Excluded Entity (as
defined below), (ii) a merger, consolidation or other capital reorganization or
business combination transaction of the Company with or into another
corporation, limited liability company or other entity other than an Excluded
Entity, in each case pursuant to which stockholders of the Company prior to such
merger, consolidation or other capital reorganization or business combination
transaction own less than fifty percent (50%) of the voting interests in the
surviving or resulting entity, or (iii) the consummation of a transaction, or
series of related transactions, in which any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) becomes the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of all of the Company's then outstanding
voting securities. Notwithstanding the foregoing, a transaction shall not
constitute a Change of Control if its purpose is to (A) change the jurisdiction
of the Company's incorporation, (B) create a holding company that will be owned
in substantially the same proportions by the persons who hold the Company's
securities immediately before such transaction, or (C) obtain funding for the
Company in a financing that is approved by the Company's Board of Directors. An
"Excluded Entity" means a corporation or other entity of which the holders of
voting capital stock of the Company outstanding immediately prior to such
transaction are the direct or indirect holders of voting securities representing
at least a majority of the votes entitled to be cast by all of such
corporation's or other entity's voting securities outstanding immediately after
such transaction.

 

 

 

 

(d)          Restrictions on Additional Indebtedness and Liens and
Subordination. The Company may not incur or suffer to exist any Indebtedness (as
defined below) other than Permitted Indebtedness (as defined below) or any Lien
(as defined below) other than Permitted Liens (as defined below). All
obligations of the Company in respect of this Note shall be subordinated to any
Permitted Senior Debt (as defined below) in accordance with the terms of a
commercially reasonable subordination agreement by and among the Company, the
holder of any Permitted Senior Debt, and the Holder (a "Permitted Senior Debt
Subordination Agreement"). The Holder agrees to negotiate in good faith and
execute a Permitted Senior Debt Subordination Agreement with the Company and any
holder of Permitted Senior Debt.

 

(i)          "Indebtedness" shall mean any and all indebtedness for borrowed
money; all obligations in respect of any deferred purchase price; all
obligations in respect of capital leases; all reimbursement obligations in
respect of letters of credit, surety bonds, and similar instruments; all
obligations evidenced by notes, bonds, loan agreements, debentures, and similar
instruments; and all guarantee obligations and contingent obligations in respect
of any of the foregoing.

 

(ii)         "Permitted Indebtedness" shall mean (a) Permitted Senior Debt, (b)
Indebtedness evidenced by this Note, (c) Indebtedness in respect of taxes, fees,
assessments or other governmental charges or levies, either not delinquent or
being contested in good faith by appropriate proceedings; provided, that Company
maintains adequate reserves therefor, (d) Indebtedness existing as of the date
hereof and set forth on the schedule of Permitted Indebtedness attached hereto,
(e) Indebtedness to trade creditors (including suppliers) incurred in the
ordinary course of business, including Indebtedness incurred in the ordinary
course of business with corporate credit cards, (f) extensions, refinancings,
repayment and renewals of the obligations under the Note and under any Permitted
Indebtedness described in clause (d) above, provided that the principal amount
is not increased or the terms modified to impose materially more burdensome
terms upon the Company, and (g) Subordinated Indebtedness incurred after the
date of this Note and approved by a majority of the Board of Directors of the
Company.

 

(iii)        "Subordinated Indebtedness" means secured and/or unsecured
Indebtedness expressly subordinated to the obligations of the Company to the
Holder hereunder and under the Security Agreement, including in payment and lien
priority, on terms and conditions acceptable to Holder in its sole discretion.

 

 

 

 

(iv)        "Lien" shall mean any lien, claim, encumbrance or similar interest
in or on any asset, including without limitation any security interest or
mortgage.

 

(v)         "Permitted Lien" shall mean (a) Liens securing Permitted Senior
Debt, (b) Liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by appropriate
proceedings, provided that Company maintains adequate reserves therefor, (c)
claims of materialmen, mechanics, carriers, warehousemen, processors or
landlords arising out of operation of law so long as the obligations secured
thereby (i) are not past due or (ii) are being properly contested and for which
Company has established adequate reserves; (d) liens consisting of deposits or
pledges made in the ordinary course of business in connection with workers'
compensation, unemployment insurance, social security and similar laws; (e)
liens on equipment (including capital leases) to secure purchase money
Indebtedness existing as of the date hereof and set forth on the schedule of
Permitted Indebtedness attached hereto, or any permitted refinancing thereof, so
long as such security interests do not apply to any property of Company other
than the equipment so acquired, and the Indebtedness secured thereby does not
exceed the cost of such equipment, and provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the Indebtedness being extended, renewed, or
refinanced (as may have been reduced by any payment thereon) does not increase.

 

(vi)        "Permitted Senior Debt" shall mean Indebtedness to ANB Bank (or any
assignee) and extensions, refinancings, and renewals thereof, in a principal
amount up to the principal amount of such Indebtedness outstanding as of the
date hereof, together with any interest, fees, charges, or other amounts owing
in respect thereof pursuant to the loan documents governing such Indebtedness as
in effect on the date hereof.

 

2.           Mechanics and Effect of Conversion.

 

(a)          Effectiveness of Conversion. Upon conversion of this Note, the
Company will be forever released from all of its obligations and liabilities
under this Note with regard to that portion of the principal amount and accrued
interest being converted, including without limitation the obligation to pay
such portion of the principal amount and accrued interest. Any interest accrued
on this Note that is not simultaneously converted into such equity securities by
reason of such conversion shall be repaid upon demand by the Holder. Upon
conversion of this Note, the Company shall take all such actions as are
necessary in order to ensure that the capital stock issuable with respect to
such conversion shall be validly issued, fully paid and nonassessable.

 

(b)          Issuance of Certificates. Upon conversion of this Note, the Holder
shall surrender this Note, duly endorsed, at the principal offices of the
Company or any transfer agent of the Company. At its expense, the Company shall,
as soon as practicable thereafter, issue and deliver to such Holder, at such
principal office, a certificate or certificates for the number of shares to
which such Holder is entitled upon such conversion, together with any other
securities and property to which the Holder is entitled upon such conversion
under the terms of this Note, including a check payable to the Holder for any
cash amounts payable as described herein.

 

 

 

 

(c)          Fractional Shares. No fractional shares of the Company's capital
stock will be issued upon conversion of this Note. If any fractional share of
capital stock would, except for the provisions hereof, be deliverable upon
conversion of this Note, the Company, in lieu of delivering such fractional
share, shall pay an amount equal to the value of such fractional share, as
determined by the per share conversion price used to effect such conversion.

 

3.           Payment; Prepayment. All payments shall be made in lawful money of
the United States of America at such place as the Holder hereof may from time to
time designate in writing to the Company. Payment shall be credited first to any
fees and expenses due and payable hereunder, then to the accrued interest then
due and payable hereunder, and then the remainder shall be applied to principal.
The Company may prepay this Note in whole or in part at any time following at
least fifteen (15) and no more than sixty (60) days' advance written notice to
the Holder, provided that the Holder shall retain all rights of conversion until
the date of repayment, notwithstanding the pendency of any prepayment notice.

 

4.           Transfer; Successors and Assigns. The terms and conditions of this
Note shall inure to the benefit of and be binding upon the respective successors
and assigns of the Company and the Holder. Notwithstanding the foregoing, the
Holder may not assign, pledge, or otherwise transfer this Note without the prior
written consent of the Company. Subject to the preceding sentence, this Note may
be transferred only upon surrender of the original Note for registration of
transfer, duly endorsed, or accompanied by a duly executed written instrument of
transfer in form satisfactory to the Company. Thereupon, a new note for the same
principal amount and interest will be issued to, and registered in the name of,
the transferee. Interest and principal are payable only to the registered holder
of this Note.

 

5.           Governing Law. This Note and all acts and transactions pursuant
hereto and the rights and obligations of the Company and the Holder shall be
governed, construed and interpreted in accordance with the laws of the State of
New York, without giving effect to principles of conflicts of law.

 

6.           Notices. Any notice required or permitted by this Note shall be in
writing and shall be deemed sufficient when delivered personally or by overnight
courier or sent by email or fax (upon customary confirmation of receipt), or
forty-eight (48) hours after being deposited in the U.S. mail as certified or
registered mail with postage prepaid, addressed to the party to be notified at
such party's address or fax number as set forth on the signature page, as
subsequently modified by written notice, or if no address is specified on the
signature page, at the most recent address set forth in the Company's books and
records.

 

7.           Amendments and Waivers. Any term of this Note may be amended only
with the written consent of the Company and the Holder. Any amendment or waiver
effected in accordance herewith shall be binding upon the Company, the Holder,
and each transferee of this Note.

 

 

 

 

8.           Entire Agreement. This Note, together with the Security Agreement
and the ANB Bank Subordination Agreement (as defined in the Security Agreement),
constitutes the entire agreement between the Company and the Holder pertaining
to the subject matter hereof, and any and all other written or oral agreements
existing between the Company and the Holder are expressly canceled.

 

9.           Counterparts. This Note may be executed in any number of
counterparts, each of which will be deemed to be an original and all of which
together will constitute a single agreement.

 

10.         Action to Collect on Note. The Company promises to pay all costs and
expenses, including reasonable attorney's fees, incurred in connection with the
collection or enforcement of this Note or any obligation hereunder, including
without limitation during or in the context of any bankruptcy, receivership,
trusteeship, reorganization, or insolvency proceeding or other proceeding under
any other law for the relief of, or relating to, debtors, now or hereafter in
effect, and all such amounts shall be payable on demand (or, if the Holder is
prevented by applicable law from making demand, as and when incurred by the
Holder) and, if not paid when due, shall be capitalized and become part of the
principal amount of this Note, and interest shall accrue thereon as set forth
for other principal amounts under this Note.

 

11.         Board Designees. The Holder shall have the right to designate two
(2) members of the Board of Directors of the Company, which shall be in addition
to the existing number of members of the Board of Directors of the Company prior
to the date hereof. The Company covenants and agrees to take any and all actions
necessary to permit the Holder to exercise this right including by amending any
such existing documents as may be necessary to increase the size of the Board of
Directors.

 

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

 

13.         Interest Rate Limitation. Notwithstanding anything to the contrary
contained herein, the interest paid or agreed to be paid under this Note shall
not exceed the maximum rate of non-usurious interest permitted by applicable law
(the "Maximum Rate"). If the Holder shall receive interest in an amount that
exceeds the Maximum Rate, the excess interest shall be applied to the principal
remaining owed under this Note or, if it exceeds such unpaid principal, refunded
to the Company. In determining whether the interest contracted for, charged, or
received by the Holder exceeds the Maximum Rate, the Holder may, to the extent
permitted by applicable law, (i) characterize any payment that is not principal
as an expense, fee, or premium rather than interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
contemplated term of this Note.

 

[Remainder of Page Intentionally Left Blank]

 

 

 

 

IN WITNESS WHEREOF, the Company has caused this Convertible Secured Promissory
Note to be executed as of the date first above written.

 

  MusclePharm Corporation         By: /s/ Brad Pyatt   Name:  Brad Pyatt  
Title:  Chief Executive Officer

 

SIGNATURE PAGE TO CONVERTIBLE SECURED PROMISSORY NOTE