REIMBURSEMENT AGREEMENT
EXHIBIT
10.23
This
Reimbursement Agreement (“Agreement”), dated as of December 18, 2007, is by
and between Organic Farm Marketing, LLC (“Company”), a Wisconsin limited
liability company, and Advanced Biotherapy, Inc. (“Investor”), a Delaware
corporation.
R
E C I T A L S:
A. Concurrently
herewith, Investor is loaning to the Company the principal amount of Eight
Hundred Thousand Dollars ($800,000.00), to be evidenced by a Company convertible
note (“December Convertible Note”), pursuant to an agreement between the Company
and the Investor of even date herewith (“Investment Agreement”). The Company
agreed to secure its obligations under the December Convertible Note by a
General Business Security Agreement of even date herewith (“Security
Agreement”).
B. The
Wisconsin Department of Agriculture, Trade and Consumer Protection
(“Department”) has required the Company to secure an irrevocable letter of
credit in the amount of $1.0 million (“Letter of Credit”) in favor of the
Department so that the Company may distribute dairy products in the State of
Wisconsin.
C. The
Investor has arranged on behalf of the Company to obtain the Letter of Credit
from The Northern Trust Company of Chicago, Illinois (“Bank”).
D. As
a
condition to issuing the Letter of Credit, the Bank requires that the Investor
grant the Bank a security interest in a certificate of deposit account
maintained at the Bank as collateral for payment by the Company of funds
advanced pursuant to the Letter of Credit (“Bank Pledge
Agreement”).
E. To
induce
the Investor to execute the Bank Pledge Agreement, the Company has agreed to
enter into this Agreement and to issue a secured promissory note (“Secured
Promissory Note”) in favor of the Investor of even date herewith which evidences
the Company’s obligations to pay the Investor the amount which the Investor
shall be obligated to pay the Bank pursuant to the Bank Pledge Agreement or
otherwise, and to secure its obligation hereunder and thereunder by a General
Business Security Agreement of even date herewith.
NOW,
THEREFORE, in consideration of the foregoing recitals and the covenants
contained herein, and to induce the Investor to lend its credit so that the
Company may apply for the Letter of Credit, the parties agree as
follows:
SECTION
1. DEFINITIONS.
As
used
in this Agreement, the following terms shall have the indicated
meanings:
“Agreed
Rate”
means
the rate of interest charged the Company by the Investor on any outstanding
principal under the Secured Promissory Note.
“Agreement”
or
“Reimbursement
Agreement”
means
this Reimbursement Agreement, and all of the exhibits, appendices and schedules
attached hereto, all of which are incorporated herein by this reference and
made
a part hereof.
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“Bank”
means
The Northern Trust Bank of Chicago, Illinois.
“Date
of Issuance”
means
the date as of which the Letter of Credit is issued and delivered to the
Department.
“Default”
-
See
Section 7.
“Department”
-
See
Recitals.
“Draw”
or
“Drawn”
with
respect to the Letter of Credit means payment by the Bank on account of the
Letter of Credit.
“Events
of Default”
means
any condition or event stated in Sections 4.1 through 4.4 which, with the lapse
of time or the giving of notice, or both, would constitute a
Default.
“Expiration
Date”
means
the date the Company’s obligations in connection with the Letter of Credit
expire.
“Investor”
-
See
Recitals.
“L/C
Certificates”
means
those certain certificates required by the Bank from the Company.
“Letter
of Credit”
means
that certain irrevocable letter of credit in the amount of One Million Dollars
($1,000,000.00), dated concurrently herewith, issued by the Bank with the
Company as account party, and the Department as beneficiary, and such other
letter of credit that may be issued in substitution or replacement
thereof.
“Lien”
means
any lien, mortgage, pledge, security interest, charge or encumbrance of any
kind
(including any conditional sale or other title retention agreement, any lease
in
the nature thereof, and any agreement to give any lien or security
interest).
“Security
Documents”
means,
collectively, the General Business Security Agreement dated of even date
herewith and all documents or instruments executed in connection
therewith.
“Units”
means
five thousand (5,000) Units of the Company, representing a membership interest
in the Company and such other rights, privileges and preferences as set forth
in
the Company’s Operating Agreement, made as of February 23, 2007, as amended
by Certificate of Amendment to Operating Agreement dated April 17, 2007, and
as
amended by the Amendment to Operating Agreement dated concurrently herewith,
and
as otherwise provided under the laws of the State of Wisconsin.
SECTION
2. UNDERTAKING
FOR LETTER OF CREDIT, REIMBURSEMENT AND OTHER PAYMENTS.
2.1 Undertaking
to Obtain Letter of Credit.
The
Company shall undertake and obtain the Letter of Credit from the Bank and to
execute the L/C Certificates, and to execute all agreements, documents and
instruments that may be necessary or desirable to obtain the Letter of
Credit.
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2.2 Reimbursement
for Draw Upon Letter of Credit and Other Amounts.
The
Company hereby agrees (i) to pay the Investor the aggregate amount which
the Investor shall pay to the Bank pursuant to or in connection with the Bank
Pledge Agreement or otherwise, and any interest thereon at the Agreed Rate
accruing from the date of advance or payment by the Investor, subject to and
in
accordance with the Secured Promissory Note; and (ii) to reimburse the
Investor on demand for all costs, expenses, fees, of whatever kind and any
liabilities or obligations paid or payable by the Investor to the Bank pursuant
to or in connection with or arising from the Letter of Credit, the L/C
Certificates or the Secured Promissory Note, including, without limitation,
all
origination and administration fees and attorneys’ fees and
disbursements.
2.3 Fees.
The
Company shall pay to the Investor a fee equal to ten percent (10%) of the face
amount of the original Letter of Credit, payable as follows:
(a) on
the
Date of Issuance, Fifty Thousand Dollars ($50,000.00), by cash or immediately
available funds. The Company hereby agrees and authorizes the Investor to deduct
from and retain for its own benefit, subject to the occurrence of the Date
of
Issuance, such $50,000 fee from the loan proceeds to be advanced to the Company
under the Working Capital Loan at the closing as provided in the Investment
Agreement; and
(b) on
the
Date of Issuance, the Company shall issue the five thousand (5,000) Units to
Investor, representing an agreed value per Unit of Ten Dollars ($10.00),
together with a certificate in form satisfactory to the Investor. Concurrently
with the issuance of such 5,000 Units, the Investor agrees to execute a Joinder
Agreement pursuant to which the Investor agrees to be bound by the terms and
conditions of the Operating Agreement as in effect on the date hereof, and
any
amendments thereto as to which the Investor has consented in writing.
The
Investor will maintain the Bank Pledge Agreement
or make other arrangements suitable to the Bank to maintain the Letter of Credit
for one year from the Date of Issuance. In the event the Letter of Credit shall
be outstanding beyond December 31, 2008, and for any such additional period
the
Investor shall have an obligation to the Bank in connection with the Letter
of
Credit, the Company shall pay to the Investor a fee equal to Eight Thousand
Three Hundred Thirty-Three Dollars and Thirty-Three Cents ($8,333.33) per month
for each month, or portion thereof, in which the Letter of Credit is outstanding
beyond December 31, 2008, payable in advance in cash or immediately available
funds, provided that the Company shall not cause the Letter of Credit to be
extended without the consent of the Investor.
2.4 Application
of Funds.
Except
as otherwise expressly provided herein, all payments received by the Investor
from the Company shall be applied by the Investor to the payment of amounts
then
owing by the Company to the Investor, in such order and manner as the Investor
chooses, in its sole discretion.
SECTION
3. CONDITIONS
PRECEDENT.
The
Investor’s obligation to execute the Bank Pledge Agreement is conditioned upon
the satisfaction by the Company of all of the following conditions on or prior
to the Date of Issuance.
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3.1 Execution
and Delivery of Closing Documents.
The
Investor shall have received and approved the following documents, each of
which
shall be in form and substance satisfactory to the Investor and its legal
counsel and duly executed and delivered by the appropriate parties
thereto:
(a) The
Security Documents and all financing statements, notices, deliveries and
instruments required in connection therewith; and
(b) Such
other documents and instruments as the Investor may reasonably
require.
3.2 Representations
Correct; No Default.
On the
Date of Issuance:
(a) the
representations and warranties contained in the Investment Agreement delivered
by the Company to the Investor shall be true and correct in all respects on
and
as of the Date of Issuance to the same extent as though made on and as of such
date (except for representations and warranties expressly referring to a
specific date which shall be true and correct as of such date);
(b) no
Event
of Default or Default shall have occurred and be continuing, and neither will
result from the issuance of the Letter of Credit.
3.3 Units.
The
Company shall simultaneously cause to be delivered pursuant to Section 2.3
hereof a certificate representing the five thousand (5,000) Units, or comparable
evidence of the Investor’s ownership of record of the Units, satisfactory to the
Investor.
3.4 Fees.
The
Company shall have paid the cash fee to the Investor, specified in Section
2.3(a).
SECTION
4. EVENTS
OF DEFAULT.
The
following events shall be, at the option of the Investor, constitute a “Default”
hereunder:
4.1 Payment
of Obligations.
The
Company shall fail to pay when due any amount due to the Investor under this
Agreement or under the Secured Promissory Note when due and such failure shall
continue for five (5) days.
4.2 Secured
Promissory Note Event of Default.
Any
Event of Default (as that term is defined in the Secured Promissory Note) shall
occur.
4.3 Security
Documents.
There
shall occur a default as described in any of the Security Documents
4.4 Invalidity.
Any
payment obligation of the Company under this Agreement or any Security Document
at any time for any reason ceases to be valid and binding thereon, or the
validity or enforceability thereof shall be contested or denied by the Company
or any governmental agency or authority.
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SECTION
5. RIGHTS
AND REMEDIES.
Upon
the
occurrence of a Default, the Investor shall have all rights and remedies under
law or equity, including, without limitation:
(a) All
rights and remedies under this Agreement, the Secured Promissory Note and the
Security Documents.
(b) All
remedies of the Investor provided for in this Agreement are cumulative and
shall
be in addition to any and all other rights and remedies available under the
Secured Promissory Note or the Security Documents or by law or equity. No
exercise by the Investor of any right or remedy shall in any way constitute
a
cure or waiver of any Event of Default or Default hereunder, or invalidate
any
act done pursuant to any notice of default, or prejudice the Investor in the
exercise of any other right or remedy available to the Investor. No failure
on
the part of the Investor to exercise, and no delay in exercising, any right
or
remedy shall operate as a waiver or otherwise preclude enforcement of any of
its
rights and remedies; nor shall any single or partial exercise of any right
or
remedy preclude any further exercise thereof or of any other right or remedy.
The Investor need not resort to any particular right or remedy before exercising
or enforcing any other.
SECTION
6. NOTICES.
All
notices or demands of any kind shall be in writing and sent by telecopier (with
evidence of transmission) or by reputable overnight courier (with evidence
of
delivery) addressed to the address specified below. Notice shall be deemed
complete (i) if given by telecopier, on the first business day immediately
following the date of transmission, and (ii) if given by overnight courier,
on the date of delivery. The addresses specified in this section for notice
are:
|
Investor:
|
Advanced
Biotherapy, Inc.
000
Xxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxxxxxxxx X. Xxxxx,
Chief
Executive Officer
Facsimile: (000)
000-0000
with
a copy to:
Xxxxxx
Xxxxx & Davidoff Incorporated
1901
Avenue of the Stars, Xxxxx 0000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx
Xxxxxxxxx, Esq.
Facsimile: (000)
000-0000
|
|
Company:
|
Organic
Farm Marketing, LLC
X.X.
Xxx 000
000
Xxxx Xxxxxxx Xxxxxx
Xxxxx,
Xxxxxxxxx 00000
Attention: Xxxx
X. Xxxxxx, Xx.
Facsimile: (000)
000-0000
with
a copy to:
Xxxxx
Xxxxxxxxxxx Xxxxx SC
00
Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxxx 00000
Attention: Xxxx
Xxxxx, Esq.
Facsimile: (000)
000-0000
|
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SECTION
7. INDEMNIFICATION.
Article
VIII of the Investment Agreement is incorporated herein by reference as if
set
forth verbatim.
SECTION
8. LIABILITY
OF INVESTOR GROUP.
Without
limiting any provision of Section 7 hereof, as between the Company and the
Investor, the Company assumes all risks of the acts or omissions of the
Department with respect to its use of the Letter of Credit and the Bank as
to
the issuance or dishonor of a draw upon the Letter of Credit; provided, however,
this assumption is not intended to, and shall not, preclude the Company from
pursuing such rights and remedies as it may have against the Bank or any Letter
of Credit beneficiary at law or under any agreement. Neither the Investor nor
any of its officers, directors, employees or agents shall be liable or
responsible for: (a) the use made of the Letter of Credit for any acts or
omissions of the Bank or any Letter of Credit beneficiary; (b) the
validity, sufficiency or genuineness of any documents, or endorsements, even
if
such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (c) payment by the Bank against
presentation of documents which do not comply with the terms of the Letter
of
Credit, including failure of any documents to bear adequate reference to the
Letter of Credit; or (d) any other circumstances in making or failing to
make payment under the Letter of Credit.
SECTION
9. SUCCESSORS
AND ASSIGNS.
This
Agreement is a continuing obligation and shall be binding upon the parties
and
their respective successors, transferees and assigns, and shall inure to the
benefit of and be enforceable by the parties and their respective successors,
transferees and assigns; provided, however, that the Company may not assign
all
or any part of this Agreement without the prior written consent of the Investor,
in its sole discretion.
SECTION
10. MISCELLANEOUS.
10.1 Governing
Law.
This
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware, without regard to its principles of conflict
of laws.
10.2 Survival
of Warranties.
All
agreements, representations and warranties made in this Agreement and in any
related certificates shall survive the execution and delivery of this Agreement
and the issuance and expiration of the Letter of Credit.
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10.3 Severability.
Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provision or affecting the validity or enforceability of such provision in
any
other jurisdiction.
10.4 Counterparts.
This
Agreement may be executed in any number of counterparts (and by facsimile,
followed by delivery of an original), and by different parties on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute but one and the same Agreement.
10.5 Time
of Essence.
Time is
of the essence of this Agreement and of each provision in which time is an
element.
10.6 No
Further Credits.
The
Investor shall not be obligated to issue any further credits or any other manner
to extend any financial consideration to the Company, except as expressly
provided in this Agreement.
10.7 Headings.
Section
and other headings in this Agreement are for convenience of reference only
and
shall not constitute a part of this Agreement for any other
purpose.
10.8 Independence
of Covenants.
All
covenants hereunder shall be given independent effect so that if a particular
action or condition is not permitted by any one of such covenants, the fact
that
it would be permitted by an exception to, or be otherwise within the limitations
of, another covenant shall not avoid the occurrence of an Event of Default
or
Default if such action is taken or condition exists.
10.9 Waivers.
No
waiver or consent under this Agreement shall be effective unless it is in
writing and signed by the Investor. Each waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given.
10.10 Compliance
with Usury Laws.
Notwithstanding any other provision of this Agreement, neither the Investor
Group nor any Investor shall be required to pay interest and other cost or
considerations that constitute inters under any applicable law which are
contracted for, charged or received pursuant to this Agreement in an amount
in
excess of the maximum amount of interest allowed under any applicable law.
That
portion of any interest payment in excess of the maximum legal rate of interest,
if any, provided for in this Agreement or related documents shall be canceled
automatically as of the date of such acceleration, or if theretofore paid,
credited to the principal amount.
10.11 Entire
Agreement.
This
Agreement and the other agreements and documents referred to herein or therein
constitute the entire understanding between the parties and may not be modified,
amended or terminated except by a written agreement signed by each of the
parties hereto. The provisions of this Agreement are not intended to supersede
the provisions of either the Investment Agreement or the Secured Promissory
Note, but shall be construed as supplemental thereto.
[SIGNATURES
ON FOLLOWING PAGE]
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IN
WITNESS WHEREOF, the parties have duly executed and delivered this Agreement
or
caused this Agreement to be duly executed and delivered by a duly authorized
officer as of the date first above written.
|
“COMPANY”
|
ORGANIC
FARM MARKETING, LLC
By
______________________________________
Xxxx
X. Xxxxxx, Xx., President
|
|
“INVESTOR”
|
ADVANCED
BIOTHERAPY, INC.
By
______________________________________
Xxxxxxxxxxx
X. Xxxxx,
Chief
Executive Officer
|
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