Exhibit 10.3
------------
LOAN AGREEMENT
THIS AGREEMENT dated for reference the 27th day of September, 2002.
BETWEEN:
HEMPTOWN CLOTHING INC., a company incorporated under the laws
of British Columbia and having its office at #0000-000 Xxxx
Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
(hereinafter collectively called the "Borrower")
OF THE FIRST PART
AND:
DRAKE ENTERPRISES LTD., a company incorporated under the laws
of British Columbia and having its office at 11th Floor 000
Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
(hereinafter called the "Lender")
OF THE SECOND PART
WHEREAS the Lender has agreed to make a loan of Fifty Thousand
United States Dollars ($50,000.00) to the Borrower.
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the
covenants and agreements contained herein, and each party intending to be
legally bound hereby, the parties hereto hereby represent, warrant, and
agree as follows:
1. DEFINITIONS
1.1 In this Agreement, the following terms have the meanings set
forth after each:
(a) "Borrower" means Hemptown Clothing Inc.;
(b) "Event of Default" has the meaning assigned to that term
in section 6.1;
(c) "Loan" means the loan of $50,000.00 U.S. made to the
Borrower by the Lender;
(d) "Security Instruments" means the instruments referred to
in Article 3 by which the Loan is or is to be secured;
1.2 For purposes of this Agreement, except as otherwise expressly
provided:
2
(a) "this Agreement" means this loan agreement as it may from
time to time be supplemented or amended and in effect;
(b) all references to this Agreement to designated "sections",
"subsections" and other subdivisions are to the designated
sections, subsections and other subdivisions of this
Agreement;
(c) the words "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not
to any particular section, subsection or other
subdivision;
(d) the headings are for convenience only and do not form a
part of this Agreement and are not intended to interpret,
define or limit the scope, extent or intent of this
Agreement or any provision hereof.
2. THE $50,000.00 LOAN
2.1 Subject to the terms and conditions hereof, the Lender will
lend to the Borrower the sum of Fifty Thousand ($50,000.00)
U.S. Dollars (the "$50,000.00 Loan") and which will be
guaranteed by Xxx Xxxxx Xxxxx.
2.2 The principal, shall become due and be paid as follows:
(a) the sum of $50,000.00 U.S. to be paid in full one year
from the date hereof;
2.3 The Borrower will pay fees to the Lender in connection with the
$50,000.00 U.S. Loan as follows:
(a) Legal fees for the preparation of all security documents;
2.4 The Borrower may prepay the $50,000.00 Loan in whole or in part
at any time.
2.5 As consideration for the granting of the Loan the Lender is
hereby granted an option to purchase up to 200,000 free trading
shares of the Company at $0.25 per share for a term of one year
from the disbursement of the Loan.
3. SECURITY
3.1 The $50,000.00 Loan, interest thereon, if any, and all other
amounts from time to time payable hereunder will be secured as
follows:
(a) A Promissory Note executed by the Borrower;
(b) a mortgage granted by Xxx Xxxxx Xxxxx (the "Guarantor") on
the property situated in the Municipality of West
Vancouver, Province of British Columbia legally described
as Xxx X Xxxxx 0 Xxxxxxxx Xxx 000 Plan LMP19313 to the
Lender or a nominee of the Lender;
3
(c) a guarantee by Xxx Xxxxx Xxxxx;
(hereinafter referred to as "Security Instruments")
4. REPRESENTATIONS AND WARRANTIES
4.1 The Borrower represents and warrants to the Lender that:
(a) the Borrower is duly incorporated and validly existing and
in good standing under the laws of the Province of British
Columbia and has full power and authority to own its
assets, to carry on its business, to execute and deliver
this Agreement and the Security Instruments to be executed
and to comply with the provisions hereof and thereof and
to duly perform and observe all of their obligations
hereunder and thereunder;
(b) this Agreement constitutes a legal, valid and binding
obligation of the Borrower enforceable in accordance with
its terms;
(c) each of the Security Instruments, when executed and
delivered by the Borrower and the Guaranator will
constitute a legal, valid and binding obligation of the
Borrower and the Guarantor, enforceable in accordance with
its terms;
(d) all appropriate corporate and other acts, conditions and
things required to be done and performed and to have
happened prior to the execution and delivery of this
Agreement and the Security Instruments, respectively, in
order to make all of the obligations expressed to be
incurred by the Borrower thereunder, legal, valid and
binding and enforceable in accordance with their
respective terms have been, or will have been, done and
performed in due and strict compliance with all applicable
laws prior to the execution and delivery thereof;
(e) the officers of the Borrower executing this Agreement and
the Security Instruments, respectively, and all notices,
certificates and other documents required hereunder or
thereunder or otherwise related hereto or thereto, as the
case may be, have, or will prior to such execution have
been, fully authorized to execute the same for or on
behalf of the Borrower;
(f) there is no law, decree, regulation or similar enactment,
no provision of any instrument, agreement or other
obligation by which the Borrower or its assets or
undertaking is bound and no judgment, injunction or other
order or award of any judicial, administrative,
governmental or other authority or arbitrator which is or
will be contravened by the execution and delivery of this
Agreement or any of the Security Instruments or which will
be contravened by the performance or observance of any of
the obligations expressed to be incurred by the Borrower,
in or pursuant hereto or thereto;
4
(g) the Borrower is not in breach of any of the terms,
covenants, conditions and provisions of, in default under
and have not done or omitted to do anything which, with
the giving of notice or lapse of time or otherwise, might
constitute a default under any law, decree, regulation or
similar enactment, any instrument, agreement or other
obligation or any judgment, injunction or other order or
award of any judicial, administrative, governmental or
other authority or arbitrator by which the Borrower or any
of its respective assets or undertakings is bound; and
(h) no litigation or administrative or arbitration or other
proceeding before or of any court, tribunal, arbitrator or
governmental or municipal or other authority or dispute
with any governmental or municipal or other authority is
presently in process, pending or threatened against the
Borrower or any of its assets or undertaking which, if
determined adversely to the Borrower might have a material
adverse effect on the financial condition or operations of
the Borrower or which might have an adverse effect on the
ability of the Borrower to duly perform and observe any of
their obligations under this Agreement or any of the
Security Instruments.
5. COVENANTS
5.1 The Borrower covenants and agrees with the Lender that the
Borrower will:
(a) duly and punctually pay or cause to be paid to the Lender
the Loan, interest thereon, if any, and all other amounts
from time to time payable hereunder on the date, at the
place and in the manner set forth herein;
(b) preserve and maintain its corporate existence, licenses,
rights, franchises, leases and real estate and privileges
and all authorizations, consents, approvals, orders,
licences, exemptions from or registrations or
qualifications with any court or governmental department,
public body, authority, commission, board, bureau, agency
or instrumentality that is necessary or materially
valuable in the operation of its business;
(c) comply with the requirements of all applicable laws,
rules, regulations, orders and decrees of any
administrative, governmental or judicial authority or
organization or body, non-compliance with which might
materially adversely affect the ability of the Borrower
duly to perform and observe its obligations in or pursuant
to this Agreement or any of the Security Instruments;
(d) as soon as practicable and in any event within five days
after the occurrence thereof notify the Lender forthwith
in writing of any occurrence of an Event of Default or any
event which, with the giving of notice or lapse of time or
otherwise, might constitute an Event of Default or of any
failure by the Borrower to perform and observe any of its
respective obligations in or pursuant to this Agreement or
any of the
5
Security Instruments, as the case may be, and at the same
time inform the Lender of any action taken or proposed to
be taken by the Borrower in connection therewith;
(e) at any time and from time to time upon the written request
of the Lender, execute and deliver such further documents
and do such further acts and things as the Lender may
reasonably request in order to effect the purposes of this
Agreement or any of the Security Instruments, as the case
may be.
6. EVENTS OF DEFAULT
6.1 Each of the following events is an "Event of Default":
(a) the Borrower defaulting in the payment of the principal or
any other payments required to be made hereunder and not
making such payments within five (5) days after written
demand by the Borrower;
(b) any material representation or warranty made by the
Borrower herein or in any of the Security Instruments or
in any certificate or notice provided to the Lender by the
Borrower pursuant hereto or thereto being or proving to be
untrue or incorrect on the date as of which it was made in
any material respect;
(c) any financial charge or encumbrance on the whole or any
substantial part of the undertaking or assets of the
Borrower becoming enforceable and the person or persons
entitled to the benefit thereof taking steps to enforce
such charge or encumbrance;
(d) any action or proceeding of or before any judicial,
administrative, governmental or other authority or
arbitrator being commenced, and not stayed or discharged
within 15 days after it is commenced, to enjoin or
restrain the performance or observance by the Borrower of
the terms of this Agreement or any of the Security
Instruments, to question in any manner the right or power
of the Borrower to enter into, exercise their rights under
or perform or observe the terms or conditions, or to
question the legality, validity, binding nature or
enforceability, hereof or thereof;
(e) any or all of the obligations of the Borrower in or
pursuant to this Agreement or any of the Security
Instruments being void or unenforceable or this Agreement
or any of the Security Instruments in any material respect
ceasing to be in full force and effect.
(f) the Borrower defaulting in any of the terms or conditions
of any terms or conditions of any Permitted Encumbrances.
6.2 Upon the occurrence and during the continuance of any Event of
Default the Lender may, by notice in writing:
6
(a) declare the Loan and all other amounts payable under this
Agreement and the Security Instruments to be forthwith due
and payable, whereupon the same shall become and be
forthwith due and payable, without protest, presentment,
demand or further notice of any kind.
7. MISCELLANEOUS
7.1 The Borrower shall pay all legal and other fees and
disbursements, if any, incurred by the Lender in respect of the
Loan, including the negotiation, preparation, execution and
carrying out of this Agreement and the Security Instruments
(including, without limitation, all legal fees and
disbursements of counsel for the Lender).
7.2 No failure or delay on the part of the Lender in exercising any
right, power or privilege under this Agreement or any of the
Security Instruments shall operate as a waiver thereof.
7.3 All representations and warranties of the Borrower contained in
this Agreement or any of the Security Instruments or in any
other certificate or other writing delivered in connection
herewith or therewith will survive the making of the Loan and
any advance thereof and are material and have been or will be
relied upon by the Lender notwithstanding any investigation
made by or on behalf of the Lender.
7.4 The Lender will execute and deliver and cause to be executed
and delivered all instruments necessary to discharge the
security created by the Security Instruments upon:
(a) payment to the Lender of the Loan, interest thereon, if
any, and all other amounts payable hereunder or thereunder
or as provided for herein;
(b) payment of all fees, charges and expenses (including legal
fees and disbursements of counsel for the Lender) incurred
by the Lender relating to the Loan, interest thereon, if
any, and all other amounts payable hereunder or thereunder
and such discharge;
(c) performance by the Borrower of all other obligations of
the Borrower contained herein or in any of the Security
Instruments.
7.5 Except as otherwise provided herein, any notice, statement or
other communication herein required or permitted to be given
shall be in writing, any notice or other document herein
required or permitted to be given or delivered hereunder may be
personally given or delivered or sent by prepaid registered
mail if mailed at a Post Office in Vancouver, British Columbia
at the address of the party for whom it is intended set out
above or such other address as such party may designate to the
other parties by notice in writing, and any such notice shall
be deemed to have been given to the Borrower (as the case may
be) upon the expiration of the first business day after the
date of mailing, unless there exists at the time of mailing, or
within three business days thereafter, a labour dispute or
7
other event which would adversely affect the normal delivery of
such notice or other document by Canada Post in which case such
notice or other document will only be deemed to be given or
delivered when actually given or delivered.
7.6 The Borrower agrees to do such further acts and things and to
execute and deliver to the Lender such further deeds,
instruments, powers and other documents as the Lender may from
time to time require or deem advisable to carry into effect the
purposes of this Agreement or any of the Security Instruments.
7.7 Nothing contained in this Agreement or any of the Security
Instruments shall prejudice or impair any other right or remedy
which the Lender may otherwise have with respect to the Loan or
any right or remedy the Lender may have with respect to other
loans which the Lender may make to the Borrower.
7.8 This Agreement and the Security Instruments shall be binding
upon and enure to the benefit of the parties hereto and their
respective successors and assigns.
7.9 If any provision of this Agreement or any of the Security
Instruments or any part hereof or thereof shall be found or
determined to be invalid, illegal or unenforceable it shall be
severable from this Agreement or such Security Instrument, as
the case may be, and the remainder of this Agreement or such
Security Instrument, as the case may be, shall be construed as
if such invalid, illegal or unenforceable provision or part had
been deleted herefrom or therefrom.
7.10 Time is of the essence of this Agreement and the Security
Instruments.
7.11 This Agreement and the Security Instruments and all matters
arising hereunder or thereunder shall be governed by the laws
of the Province of British Columbia and all disputes arising
hereunder shall be referred to the courts of the Province of
British Columbia.
7.12 In this Agreement all references to the singular shall be
construed to include the plural where the context so admits,
the masculine to include the feminine and neuter gender and,
where necessary, a body corporate and vice versa.
8
7.13 It is agreed that to the extent that any term, condition,
representation, covenant or other provision contained in the
Security Instruments is at any time inconsistent or conflicts
with any term, condition, representation, covenant or other
provision contained in this Agreement, then the provisions of
this Agreement shall govern.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed and delivered on the date set out above.
HEMPTOWN CLOTHING INC. DRAKE ENTERPRISES LTD.
Per: "Xxxxx Xxxxx", President Per: "Xxxxx Xxxxxx"
---------------------------- ----------------------------
Authorized Signatory Authorized Signatory
Per: "Xxxxx Xxxxxx", Secretary Per:
---------------------------- ----------------------------
Authorized Signatory Authorized Signatory
