BRIDGE LOAN AND WARRANT PURCHASE AGREEMENT
THIS BRIDGE LOAN AND WARRANT PURCHASE AGREEMENT (this "Agreement ")
is entered into as of June 2, 1998, between Baltia Air Lines, Inc., a New
York corporation ("Borrower") and , ("Lender"), with
reference to the following.
RECITALS
A. Borrower desires to borrow certain funds from Lender to meet
working capital needs until the funding of its anticipated private placement
of stock.
B. Borrower desires to borrow a total of $400,000 in increments of
$50,000 from accredited investors.
C. Lender desires to lend $50,000 to Borrower pursuant to the terms
of that certain Promissory Note, of even date herewith, a copy of which is
attached hereto as Exhibit "A" (the "Note"). The note shall be accompanied
by 50,000 common stock purchase warrants of the Borrower (the "Warrants").
Each Warrant entitles the registered holder thereof to purchase one share of
the common stock at 110% of the Public Offering price of the Common Stock,
at any time commencing six months after the Effective Date of The Public
Offering until five years after the Effective Date of the Offering. The
Warrants and the Note together shall be referred to as a "Unit."
AGREEMENT
NOW, THEREFORE, in consideration of the forgoing premises, the
provisions set forth below, and other good and valuable consideration, the
parties agree as follows.
1. LOAN. Borrower hereby borrows from Lender and Lender hereby makes a
loan to Borrower, in the amount of $50,000 (the "Loan") in accordance with
the terms of the Note. The proceeds of the Loan shall be delivered to
Borrower through an escrow, net all fees, commissions and costs associated
with the loan.
2. SENIOR DEBT. The Note will rank senior in right of payment to all
existing and future indebtedness of Borrower, except for: (i) purchase money
indebtedness incurred in arm's length transactions in the ordinary course of
business; (ii) unsecured obligations currently payable and paid by borrower
in the ordinary course of business; and (iii) indebtedness approved in
writing by Lender. Notwithstanding the foregoing, Lender does not hereby
subordinate or agree to subordinate to any debt or obligation of Borrower,
regardless of how or when incurred and nothing in this Agreement shall
affect the relationship between Lender and Borrower's creditors and no such
creditors are intended third party beneficiaries of this Agreement.
3. SALE OF WARRANTS. Borrower hereby delivers to Lender 50,000 common
stock purchase warrants of the Borrower. The certificate for the Warrants
shall be delivered to Borrower within 10 days of the date of this Agreement,
and shall be
subject to the provisions of this Agreement.
4. PIGGYBACK REGISTRATION. If Borrower or its successors or
assigns conducts an initial public offering of any of its securities or
securities of any of its subsidiaries or merges with a public company,
Borrower shall include in the registration statement such number of the
shares of the Common Stock underlying the Warrants as Lender may request,
subject to reasonable limitations established by the underwriter. Such
inclusion, in any event, shall be at no cost to Lender and shall be at the
sole cost and expense of the Borrower. In connection with any notification
or registration statement, Borrower shall take any reasonable steps to make
the securities covered thereby eligible for public offering and sale by the
effective date of such notification or registration statement. In
connection with any filing hereunder Borrower shall bear all the expenses
and professional fees which arise in connection with such filings and
keeping them effective and correct as provided hereunder and shall provide
Lender with a reasonable number of printed copies of the prospectus or
offering circulars. Borrower consents to the use of such prospectus or
offering circular in connection with the sale of the Lender's shares.
5. REPRESENTATION AND WARRANTIES OF BORROWER. Borrower hereby
represents and warrants to Lender as follows:
a. ORGANIZATION. Borrower: (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York; (ii) is duly qualified and licensed to do business in
each jurisdiction in which it operates; and (iii) has all requisite power
and authority to carry on its business, to own and hold its properties and
assets, to enter into and perform this Agreement and to issue and carry out
the provisions of the Note and this Agreement.
b. AUTHORIZATION. The execution, performance and
delivery by Borrower of this Agreement, the Warrants and Note have been duly
and validly authorized by Borrower's Board of Directors and no authorization
or approval of Borrower's shareholders is required in connection therewith.
This Agreement and the Note constitute the legal, valid and binding
obligations of Borrower and each is enforceable against Borrower in
accordance with their respective terms, except as such enforcement maybe
limited by bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally.
c. NO CONFLICT. The execution, delivery and
performance by Borrower of this Agreement, the Warrants and the issuance of
the Note: (i) will not conflict with, result in a breach of or constitute a
default under any contract, agreement, indenture, loan or credit agreement,
deed of trust, mortgage, lease, security agreement lock-up agreement, or
other arrangement to which Borrower is a party by which Borrower or any of
its properties or assets is bound or affected; (ii) will not cause Borrower
to violate or contravene any provision of its Articles of Incorporation or
Bylaws; or (iii) require any authorization, consent, approval, permit,
exemption or other action by or notice to any court or administrative or
governmental body pursuant to the Articles of Incorporation or Bylaws of
Borrower, any law, statute, rule or regulation to which Borrower is subject
or any agreement, instrument, order, judgment, or decree to which Borrower
is subject.
d. PATENTS, TRADEMARKS, AND OTHER INTANGIBLE RIGHTS.
Borrower has good title (without known misappropriation) to all inventions
(whether patentable or not), patents, trademarks, copyrights, trade names,
proprietary information, processes, designs, trade secrets, computer
programs, source codes, modules, and technical materials (collectively, the
"Trade Secrets"), or adequate licenses and rights to used the Trade Secrets
of others on terms deemed favorable by Borrower, that are necessary for the
successful conduct of the Business of the Borrower, free of any claim by an
officer, director, employee or other person, and that Borrower's business is
being carried on without known conflicts or infringements with the Trade
Secrets of others; and Borrower has taken reasonable security measures to
protect the secrecy, value and confidentiality of such Trade Secrets, and
any former or current employees who have worked on, developed or contributed
to the development of such Trade Secrets have been informed and have entered
into agreements that such Trade Secrets are proprietary and not to be
developed. Borrower knows of no reason why any Trade Secrets of Borrower
which are eligible for patent, copyright or trademark protection cannot be
patented, copyrighted or trademarked. No shareholder or employee is under
any restriction, whether contractual or by virtue of previous employment or
otherwise, that would prevent him from performing his duties for Borrower or
prevent Borrower from using the Trade Secrets.
e. LITIGATION. There are no (i) actions, proceedings
or investigations pending or to Borrower's knowledge, threatened or any
verdicts or judgments entered against Borrower, its officers or directors or
shareholders before any court or before any administrative agency or officer
that might result in any material adverse change in the business, properties
or condition, financial or otherwise, of Borrower and Borrower has received
no correspondence or communications with respect to any possible violation
or investigation of the same.
f. TAX RETURNS AND PAYMENTS. Borrower has filed or
caused to be filed all federal and state income tax returns and all other
federal and state tax returns that are required to be filed, completed all
such returns accurately and paid or caused to be paid or set aside adequate
reserves for all taxes, penalties and interest due or that may become due.
The federal and state returns of Borrower are not now and have never been
audited by the Internal Revenue Service or the Franchise Tax Board or the
Board of Equalization of each jurisdiction in which its conducts business,
respectively, and no waivers of the applicable statute of limitations have
been executed.
g. MATERIAL LICENSES, AGREEMENTS, RELATED PARTY
AGREEMENTS. Borrower is not a party to, nor is its property bound by any
agreement not entered into in the ordinary course of business and that is
materially adverse to the business, properties or financial condition of
Borrower. There is no default or event that with notice or lapse of time,
or both, would constitute a default by Borrower, or to Borrower's knowledge,
by any other party to any of these agreements. Borrower has not received
notice nor does it have knowledge that any party to any of these agreements
intends to cancel or terminate any of these agreements or to exercise or not
exercise any options under any of these agreements or seek a re-negotiation
or adjustment of any material provisions.
h. INSURANCE. Borrower maintains insurance coverage
with respect to its properties, assets and business which is customary and
sufficient for corporations of similar size and engaged in similar lines of
business and is in full force and effect.
I. LIABILITIES. Borrower does not have any debt,
liability or obligation of any nature, whether accrued, absolute, contingent
or otherwise arising out of any transaction entered into or any state of
facts existing prior hereto, including without limitation liabilities or
obligations on account of taxes or government charges penalties, interest or
fines thereon in respect thereof other than as disclosed in writing to
Lender. Borrower does not know and has no reasonable grounds to know of any
basis for any claim against it as of the date of this Agreement or of any
debt, liability, or obligation other than those mentioned herein.
j. MATERIAL FACTS DISCLOSED. There are no material
facts relating to Borrower not fully disclosed to Lender; no representation,
covenant or warranty made by Borrower herein or with the transaction
contemplated hereby contains or will contain any untrue statement of or
omits to state a material fact necessary to make the statement not misleading.
6. REPRESENTATIONS AND WARRANTIES AND AGREEMENTS OF LENDER.
Lender hereby represents and warrants to Borrower as follows:
(a) KNOWLEDGE AND EXPERIENCE. Lender has sufficient
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of investments generally and of
investment in Borrower in particular and LENDER IS ABLE TO BEAR THE ECONOMIC
RISK OF THIS LOAN TRANSACTION WITH FULL UNDERSTANDING THAT IT CAN LOSE ITS
ENTIRE INVESTMENT IN BORROWER WITHOUT PRODUCING A MATERIAL ADVERSE CHANGE IN
LENDER'S FINANCIAL CONDITION.
(b) TRANSFERABILITY RESTRICTIONS. The Stock cannot be
transferred or sold unless such transfer or sale is registered pursuant to
the Securities Act of 1933 (the "Act") and registered or qualified pursuant
to applicable securities laws, or exemptions from such registrations or
qualifications are available or without prior written consent of Borrower
which consent may require an opinion of the transferor's legal counsel
(concurred with by Borrower's legal counsel) to the effect that the
proposed transfer is exempt from the registration provisions of the Act and
from the registration or qualification provisions of any applicable
securities law.
(c) NO PUBLIC MARKET. Lender is aware that there is
currently no public market for the Warrants or the Note and that Lender may
not be able to readily liquidate Lender's investment in Borrower.
(d) SUBSCRIPTION AGREEMENT. Lender will execute a
Subscription Agreement concerning the purchase of the Stock and Note.
7. AFFIRMATIVE COVENANTS OF BORROWER. Borrower makes the
following affirmative covenants to Lender, upon which Lender is relying in
entering into this Agreement and which, unless otherwise indicated, shall
survive the repayment of the Note until the earlier of (i) Borrower
conducting an initial public offering, or (ii) ninety (90) days.
(a) PAYMENT OF PRINCIPAL AND INTEREST. Borrower will
duly and punctually pay or caused to be paid all amounts due under the Note
at the time and place in the manner specified in the Note and this
Agreement. To the extent Borrower has sufficient revenues. Borrower will
duly and punctually pay or cause to be paid all debts and obligations of
Borrower in accordance with the terms of each agreement pursuant to which
such obligation was incurred by borrower.
(b) RECORDS. Borrower shall: (i) at all time keep
proper books of record and account in which full, true and correct entries
shall be made of its transactions in accordance with generally accepted
accounting principles, consistently applied; (ii) set aside on its books
from its earnings for each fiscal year all such proper reserves, including
reserves for depreciation, depletion, obsolescence and amortization of its
properties during such fiscal year, in connection with Borrower's business.
(c) TAXES. Borrower shall pay and discharge promptly
as they become due and payable all taxes, assessments and other governmental
charges or levies imposed upon it or its income or upon any of its property,
real, personal or mixed, or upon any part thereof, as well as all material
claims of any kind (including claims for labor, materials and supplies)
which if unpaid might by law become a lien or charge upon its property;
provided, however, that it shall not be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate
proceedings or other appropriate actions promptly initiated and diligently
conducted.
(d) EXISTENCE. Borrower shall do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence.
(e) PROPERTIES. Borrower shall maintain and keep its
properties in good repair, working order and condition, ordinary wear and
tear excepted, and from time to time make all necessary and proper repairs,
renewals and replacements and preserve all licenses, contracts and rights as
in its judgment may be necessary so that the Business carried on in
connection therewith may be properly and advantageously conducted at all
times, provided, however, that nothing in this Section shall prevent
Borrower from selling abandoning or otherwise disposing of any property that
is not material to its business or property (including any lease of
property) if in its judgment the same is no longer useful in the business.
This covenant shall terminate upon payment of the Note in full.
(f) COMPLIANCE WITH LAWS. Borrower shall comply in
all material respect with all applicable statutes, rules, regulations and
orders of and all applicable restrictions imposed by all governmental
authorities related to the conduct of its business and the ownership of its
property to environmental, safety and other similar standards or controls)
unless the failure to so comply would not have a material adverse effect on
the business or condition (financial or otherwise) of Borrower.
(g) INSURANCE. Borrower shall maintain with
financially sound and reputable insurers, insurance with respect to its
properties and business against loss or damage of the kinds customarily
insured against by owners of established reputation engaged in the same or
similar business and similarly situated, in such amounts and by such methods
shall be customary for such owners.
(h) LITIGATION. Borrower shall promptly notify Lender
of any material litigation or legal proceedings initiated against Borrower
or any violation or potential violation of any representation, warranty or
covenant under this Agreement or the Note. This covenant shall terminate
upon payment of Note in full.
8. NEGATIVE COVENANTS OF BORROWER. Borrower makes the following
negative covenants to Lender, upon which Lender is relying in entering into
this Agreement and which shall survive until the Note is repaid in full.
(a) INDEBTEDNESS. Borrower shall not incur any
indebtedness, or any trade indebtedness other than in the usual and ordinary
course of business without the prior written consent of Lender.
(b) GUARANTEE. Borrower shall not guarantee or
otherwise in any way become liable for the obligations or liabilities of any
other person or entity.
(c) NO LIENS. Borrower shall not sell, except in the
ordinary course of business, encumber, pledge, mortgage, grant a security
interest in, assign, hypothecate or otherwise obligate any of Borrower's
assets, or permit any lien, charge, security interest, abstract of judgment
or any other encumbrance on any of its assets.
(d) NO RELATED PARTY AGREEMENT. Without the prior
written consent of Lender, Borrower shall not enter into or become a party
to any transaction with any affiliate, stockholder, officer or director,
except placement agents and employment agreements entered into in the
ordinary course of business on commercially reasonable terms.
(e) NO VIOLATION. Borrower shall not cause or permit
any violation of any representation, warranty or covenant under this
Agreement or cause or permit any action that could result in a violation of
any representation, warranty or covenant under this Agreement, violate or
take any action which is likely to result or will result in the violation of
any contract or agreement by which Borrower is bound.
(f) NO BORROWING. Prior to the repayment in full of
the Note, Borrower shall not borrow any additional funds or issue any form
of debt instrument or any security convertible into any form of debt or
charge against Borrower in excess of $500,000 in the aggregate, which is
part of this bridge financing on the same terms and conditions as the
indebtedness evidenced by this Agreement.
9. INVESTMENT COVENANT. By accepting the Warrant, the holder
thereof represents, warrants and covenants that it is an "accredited
investor" within the meaning of Section 496) of the Securities Act or an
"accredited person" within the meaning of Rule 242 of the Securities Act,
and is acquiring the Units for its own account for investment and not with
the view to resale or distribution thereof except in accordance with
applicable federal and state securities laws.
10. DEFAULT.
(a) EVENTS OF DEFAULT. The occurrence of any of the
following events shall be an event of default under this Agreement and the
Note ("Events of Default"):
(i) If default shall be made in the due and punctual
payment of any principal or interest or cost under the Note;
(ii) If the default shall be made in the due and
punctual payment, after applicable cure periods, under any note, bond,
indenture, loan agreement, note agreement, mortgage, security agreement or
other instrument entered into by Borrower;
(iii) If default shall be made in the due and punctual
performance or observance of any material non-payment term, condition or
covenant contained in this Agreement or the Note and such default continues
unremedied for a period thirty (30) days after written notice to Borrower by
Lender, or if any representations or warranties of Borrower contained in
this Agreement is untrue or inaccurate in any material respect as of the
date on which such representation or warranty is made;
(iv) The material breach of any warranty of Borrower
contained in this Agreement not cured within thirty (30) days of written
notice of such breach;
(v) If Borrower; (A) becomes unable to pay its debts
generally as they become due; (B) files a petition in bankruptcy or a
petition to take advantage of any insolvency act or other act for the relief
or aid of debtors; (C) makes an assignment for the benefit of its creditors;
(D) consents to or acquiesces in the appointment of a receiver, liquidator
or trustee of itself or of the whole or any part of its properties and
assets; (E) files a petition or answer seeking for itself reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the federal bankruptcy laws or any other applicable law; (F)on
a petition in bankruptcy filed against it, is adjudicated a bankrupt; or
(G) is served within a three-day notice to quit any of its leasehold
premises, which notice is not discharged or contested in good faith by
appropriate proceedings prior to the initiation of an unlawful detainer suit
against Borrower.
(vi) If a court of competent jurisdiction shall enter
an order, judgment or decree appointing, without the consent of acquiescence
of Borrower, as a receiver, liquidator or trustee of Borrower, or of the
whole of any substantial part of its properties and assets; or approving a
petition filed against it seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under the federal
bankruptcy laws of any other applicable law, and such order, judgment or
decree shall remain unvacated or not set aside or unstayed for an aggregate
of 30 days, whether or not consecutive, from the date of entry thereto; or
(vii) if, under the provisions, of any other law for
the relief or aid of debtors, any court of competent jurisdiction shall
assume custody or control of Borrower or the whole of any substantial part
of its operations and assets and such custody and control shall remain
un-terminated or unstayed for an aggregate of thirty (30) days, whether or
not consecutive, from the date of assumption of such custody or control.
(b) DUE AND PAYABLE. Upon the occurrences of any
such event of default, Lender at its option exercised by written notice to
Borrower shall deem the principal under the Note, together with the interest
and charges accrued thereon, become immediately due and payable.
(c) OTHER REMEDIES. The rights, powers, and remedies
granted to Lender pursuant to the provisions of this Agreement shall be in
addition to al the rights, powers and remedies granted to Lender under any
statute or rule of law. Any forbearance, failure or delay by Lender in
exercising any right, power or remedy under this Agreement shall not be
deemed to be waiver of such right, power or remedy. Any single or partial
exercise of any right, power or remedy under this Agreement shall not
preclude the further exercise thereof, and every right, power and remedy of
Lender under this Agreement shall continue in full force and effect until
such right, power or remedy is specifically waived by any instrument
executed by Lender.
11. DISPUTES. This Agreement will be interpreted in accordance
with New York Law, including all matters of construction, validity,
performance and enforcement, without giving effect to any principles of
conflict of laws.
12. ATTORNEY'S FEES. If any arbitration, litigation, action, suit
or other proceeding is instituted to remedy, prevent or obtain relief from a
breach of this Agreement, in relation to a breach of this Agreement or
pertaining to a declaration of rights under this Agreement, and prevailing
party will recover all such party's reasonable attorney's fees incurred in
each and every such action, suit or other proceedings, including any and all
appeals or petitions therefrom. As used in this Agreement, attorney's fees
will be deemed to the full and actual costs of any legal services actually
performed in connection with the matters involved, including those related
to any appeal or the enforcement of any judgment, calculated on the basis of
the usual fee charged by attorneys performing such services.
13. NOTICES. Any notice to be given hereunder shall be given
(except as otherwise expressly set forth herein) by registered or certified
mail, postage, prepaid, by cable, telex or facsimile, or may be delivered by
hand or by messenger and shall be deemed to have been received as follows:
if given by registered or certified mail, five business days after posting;
if given by cable, two business days after dispatch; if given by telex or
facsimile, one business day after dispatch, and if delivered by hand or by
messenger and receipted by for by or on behalf of the party to whom the
notice is directed, at the time of such delivery. Any notice shall be sent
to the address set forth below or to such other address as the relevant
party may notify to the other.
If to Borrower: Mr. Igor Dmitrowsky
Baltia Air Lines, Inc.
00-00 Xxxxxxxx Xxxxxx, Xxxxx 00
Xxxx Xxxx, XX 00000
If to Lender: _________________________
_________________________
_________________________
_________________________
14. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be an original but all of which shall be constituted one
and the same instrument.
15. INTERPRETATION. The language in all parts of this Agreement
shall be in all cases construed simply according to its fair meaning and not
strictly for or against any party. Whenever the context requires, all words
used in the singular shall be construed to have been used in the plural and
vice versa and each gender will include any other gender. The captions of
the paragraphs of this Agreement are for convenience only and shall not
affect the construction or interpretation of any such of the provisions herein.
16. MISCELLANEOUS. The recital and all exhibits, attachments or
other documents referenced in this Agreement are fully incorporated into
this Agreement by reference. Unless expressly set forth otherwise herein,
all references herein to a "day, month" or "year" will be deemed to be a
reference to a calendar day, month or year, as the case may be. Unless
expressly set forth otherwise, herein, all cross-references herein will
refer to provisions within this Agreement, and will not be deemed to be
references to the overall transaction or to any other agreement or documents.
17. MODIFICATIONS, AMENDMENTS, AND WAIVERS. No provision of this
Agreement or the documents referred to herein may be altered, amended,
canceled, revoked or otherwise modified, and no addition to this Agreement
may be made, unless in writing signed by each of the parties. There can be
no waiver with respect to this Agreement of any provision of this Agreement
by any party will be, nor will it be deemed to be, a waiver of the right of
any other party to enforce strict compliance with the provisions hereof.
18. SEVERABILITY. Each provision of this Agreement is intended to
be severable and if any term or provision herein is determined invalid or
unenforceable for any reason, such illegality or invalidity will not affect
the validity of the remainder of this Agreement and whenever possible,
intent will be given to the invalid or unenforceable provision.
19. MERGER. The terms of this Agreement and the agreements
contemplated hereby are intended by the parties as a final expression of
their agreement with respect to such terms and may not be contradicted by
evidence of any prior agreement or contemporaneous oral agreement, and this
agreement and the agreements referenced herein constitute the complete and
exclusive statement of its terms and no extrinsic evidence whatsoever may be
introduced in any judicial or arbitration proceeding, if any, involving this
Agreement.
IN WITNESS WHEREOF, this Agreement is entered into by the parties as of the
date set forth above.
"BORROWER"
BALTIA AIR LINES, INC.
By:
__________________________
Its:
__________________________
"LENDER"
______________________________
EXHIBIT "A"
PROMISSORY NOTE
$50,000 JUNE 2, 1998
NEW YORK
FOR VALUE RECEIVED, Baltia Air Lines, Inc., a New York
Corporation ("Borrower"), hereby covenants and promises to pay to
______________________, and individual, ("Lender"), Fifty Thousand Dollars
($50,000.00) in lawful money of the United States of America, together with
interest thereon computed from the date hereof at the rate of ten percent
(10%) per annum, on an actual day/360 day basis which shall accrue from June
2, 1998. All interest, principal and other costs hereunder shall be due and
payable to the holder ("Holder") of this Promissory Note (this "Note") on
the earlier of 90 days from June 2, 1998 or the first break of escrow on
Borrower's pending Initial Public Offering (the "Due Date").
Payments of principal and interest will be made in legal tender
of the United States of America. Borrower shall have the right to prepay
without penalty all or any part of the unpaid balance of this Note at any
time. Borrower shall not be entitled to re-borrow any prepaid amounts of the
principal, interest or other costs or charges. All payments made pursuant to
this Note will be first applied to accrued and unpaid interest, if any, then
to other proper charges under this Note and the balance, if any, to principal.
Notwithstanding anything in this Note to the contrary, the
entire unpaid principal amount of this Note, together will all accrued but
unpaid interest thereon and other unpaid charges hereunder, will become
immediately all due and payable without further notice at the option of the
Holder upon any of the following (the "Acceleration Date"): (i) Borrower
fails to timely make any payments hereunder when such payment becomes first
due and such failure continues for a period of five days after written
notice from Holder to Borrower; (ii) The occurrence of an "Event Of Default"
as defined in the Bridge Loan and Stock Purchase Agreement, of even date
herewith (the "Loan Agreement") or this Note and such default continues
unremedied for a period of ten (10) days after written notice to Borrower by
Lender; (iii) Borrower ceases to carry on business on a regular basis or
enters into an agreement to sell substantially all of its assets or an
agreement whereby it merges into, consolidates with or is acquired by any
other business entity; or
(iv) Borrower makes any assignment for the benefit of its creditors, makes
any election to wind up or dissolve or becomes unable to pay Borrower's
debts as they mature, insolvent or the subject of any proceeding under any
bankruptcy, insolvency or debtor's relief law.
If any amount payable to Holder under this note is not received
by Holder on or before the Due Date, then such amount (the "Delinquent
Amount") will bear interest from and after the Due Date until paid at an
annual rate of interest equal to the greater of (i) fifteen percent (15%),
(ii) the advance rate to member banks on the Acceleration Date as
established by the Federal Reserve Bank of New York, New York, pursuant to
Section 13 of the Federal Reserve Act, plus five percentage points, or (iii)
the maximum rate then permitted by law (the "Default Rate"). In addition,
Borrower will also pay to Holder each month a late payment processing fee
("Late Fee") in an amount each month equal to six percent (6%) of each
Delinquent Amount to defray. In addition, Borrower will also pay the Holder
each month that the note is in default a penalty of 5,000 shares of the
Company's Common Stock.
Dated as of June 2, 1998 "BORROWER"
BALTIA AIR
LINES, INC.
By: ____________________________________
Its: __________________________________
By:____________________________________
Its:__________________________________
