EXHIBIT 10.1
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LINE OF CREDIT LOAN AND SECURITY AGREEMENT
THIS AGREEMENT made this 14th day of August, 2002, by and among Biotech
Research Fund I LLC, a Delaware limited liability company, having a principal
place of business at 00000 Xxxxx Xxx Xxxx, Xxxxx 000, Xxxxx Xxxxxxx, XX 00000
(hereinafter referred to as "Lender"), Hand Brand Distribution, Inc. d/b/a
GeneThera Inc. having a principal place of business c/o 1919, Inc. at 000
Xxxxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx, 00000 and GeneThera, Inc., having a
principal place of business at 0000 Xxxxxxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxxx
00000 (hereinafter and collectively referred to as the "Borrowers").
W I T N E S S E T H:
WHEREAS, Hand Brand Distribution, Inc. d/b/a GeneThera, Inc. and
GeneThera, Inc. have an agreement for business combination and desire to jointly
borrow from lender.
WHEREAS, Borrowers have requested that Lender make available to it a
line of credit Loan in the amount up to One Million Dollars ($1,000,000.00) (the
"Loan); and
WHEREAS, Lender is willing to make the Loan to Borrowers, but only on
the terms and conditions set forth in this agreement;
NOW, THEREFORE, in consideration of the Loan evidenced hereby and the
covenants and agreements herein contained, it is mutually agreed as follows:
1. DEFINITIONS.
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(a) The term "Accounts" shall include (i) any right to payment now or
hereafter owing to Borrowers by reason of any lease, sale, manufacture, repair,
processing or fabrication of personal property now or hereafter owned or
otherwise held by Borrower, by reason of any services now or hereafter rendered
by or on behalf of Borrowers or by reason of any existing or future contract for
any said lease, sale, manufacture, repair, processing, fabrication and/or
services, whether such right to payment be classified by law as an instrument,
chattel paper, contract right, account, general intangible or otherwise; (ii)
the security, if any, for such right to payment, (iii) Borrower's right, title
and interest (including, without limitation, any applicable right of stoppage in
transit) in or to the personal property, if any, which is the subject of such
right to payment; and (iv) all products and proceeds of the foregoing (including
insurance proceeds), irrespective of the form or kind thereof;
(b) The term "Account Debtor" shall include any person or entity
obligated to pay all or any part of any Account in any manner, and includes
(without limitation) any guarantor, surety, or endorser thereof;
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c) The term "Affiliate" shall mean any Person, directly or indirectly,
controlling, controlled by, or under common control with Borrower. A Person
shall be conclusively deemed to be in control of or to be controlled by another
Person if it holds 30% or more of the outstanding equity interest in such other
person or such other person holds 30% or more of its outstanding equity
interest. As used herein the term "equity interest" in the case of a corporation
shall mean the outstanding shares of such corporation having voting power to
elect a majority of its Board of Directors, whether or not at the time the
holders of any other class or classes of securities of such corporation shall or
might have such voting power by reason of the happening of any contingency;
(d) The term "Chattel Paper" shall mean a writing or writings, which
evidence both a monetary obligation and a security interest in or a lease of
specific goods, whether now or hereafter held by the Borrower;
(e) The term "Collateral" shall include all of Borrower's tangible and
intangible personal property, together with the proceeds thereof, whether now
owned or hereafter acquired by the Borrower, including without limitation
Accounts, Chattel Paper, Equipment, General Intangibles, Instruments and
Inventory;
(f) The Company shall reserve such number of shares of its common stock
as may, from time to time, be the maximum number of shares issuable, assuming
conversion of all the Notes into fully paid and non-assessable shares of
restricted Company common stock ("Conversion Stock"), as contemplated herein.
(g) The term "Equipment" shall have the same meaning as is given to
this term in the Uniform Commercial Code the State of Colorado, including,
without limitation, all machinery, equipment, furniture, tools and other
tangible personal property (including certain motor vehicles) now owned or
hereafter acquired by the Borrower; together with any and all such property in
replacement thereof or placed thereon which shall become a component part
thereof, and together with any and all products and proceeds of all of the
foregoing (including insurance proceeds), and any and all after-acquired
property of the like nature to that described herein;
(h) The term "Event of Default" shall have the meaning as set forth in
Paragraph 13 hereof;
(i) The term "General Intangibles" shall mean any intangible personal
property (including, without limitation, things in action, trademarks, trade
names, goodwill, patents, copyrights, and the Borrower's corporate names) now or
hereafter held by the Borrower, other than Accounts, Chattel Paper and
Instruments;
(j) The term "Instruments" shall mean a negotiable instrument or a
security, as defined in the Uniform Commercial Code of the State of Colorado, or
any other writing which evidences a right to the payment of money and is not
itself a security agreement or lease and is of a type which, in the ordinary
course of business, is transferred by delivery with any necessary endorsement or
assignment, whether now or hereafter held by the Borrower;
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(k) The term "Inventory" shall have the same meaning as is given to
this term in the Uniform Commercial Code of Colorado, and also including all
goods, supplies, merchandise, raw materials, work in process, finished goods and
products and other tangible personal property now owned or hereafter acquired by
the Borrowers and held for sale or lease or furnished or to be furnished under
contracts of service or used or consumed in the Borrower's business, including
Borrower's right of stoppage in transit with respect thereto; and products and
proceeds (including insurance proceeds) of all of the foregoing and any and all
after-acquired property of the like nature to that described herein; and
(l) The term "Obligations" shall mean all debts, liabilities, and
obligations of Borrower, its sureties, and endorsers, to the Lender of every
kind and description, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, whether under this Agreement or
under any other agreement or instrument, past, present or future, and whether or
not of the same class of debt as that originally contemplated by the parties
hereto, including, without limiting the generality of the foregoing, any debt,
liability or obligation of Borrower, its sureties, or endorsers, to others,
which the Lender may have obtained by assignment or otherwise, and also
including, without limitation, all interest, fees, charges and expenses,
including expenses of the Lender's counsel, connected with or related to the
preservation, realization, enforcement, protection or defense of the Collateral,
this Agreement, the Notes (as hereinafter defined) or the Loan Documents (as
hereinafter defined), and the rights and remedies hereunder or thereunder.
2. AMOUNT AND TERMS OF LOAN.
Lender shall loan to Borrowers the sum of up to $1,000,000.00 in
connection with the Loan as follows:
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FUNDING DATE PRINCIPAL AMOUNT OF DRAWDOWN
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Upon signing this agreement $150,000.00
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August 20, 2002 $200,000.00
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September 15, 2002 $200,000.00
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October 15, 2002 $200,000.00
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November 15, 2002 $250,000.00
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for the benefit of the Borrowers. It is the intent of the Borrowers and Lender
hereunder to create a line of credit agreement between Borrowers and Lender
whereby Borrowers may borrow up to $1,000,000.00 from Lender; provided, however,
that Lender has no obligation to lend to Borrowers any amounts hereunder in the
case of an Event of Default, or the discovery of an incorrect representation and
warranty as defined in Section 6 or a breach of Negative Covenants as defined in
Section 7. In the absence of such events the Lender shall lend on the funding
dates. If the lender is late on a funding, interest shall be waived from the
funding date to the actual funding date on the outstanding balance of the loan.
Any disbursements shall to be applied upon the following terms and conditions:
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(a) Upon each Loan drawdown, the Borrowers shall execute and
deliver to Lender a promissory note in the amount of such
drawdown as per the schedule in Section 2$1,000,000.00 and in
the form of EXHIBIT A annexed hereto and made a part hereof
(the "Notes").
(b) The Notes shall bear interest on the unpaid principal amount
at the rate of six percent (6.0%) per year, payable on January
15th of each year, through the Maturity Date. To the extent
that any Obligations, in all or in part, is outstanding at any
time after the Maturity Date, the interest rate shall be
twelve percent (12.0%) per year. For the purposes of
calculating interest for any period for which the interest
shall be payable, such interest shall be calculated on the
basis of a thirty (30) day month and a three hundred sixty
(360) day
(c) The Loan shall be used for the purposes specified in Exhibit B
hereto.
(d) The Loan shall mature and be paid in full on or before January
4, 2004.
(e) The Company will promptly and punctually pay to Lender or
their nominee the interest on any of the Notes held by Lender
without presentment of the Notes. In the event any Lender
shall sell or transfer any of the Notes, such Lender shall
notify the Company of the name and address of the transferee.
In the event the Company defaults on any installment of
interest or principal, then any Lender may, at such Lender's
option, without notice, declare the entire principal and the
interest accrued thereon immediately due and payable and may
proceed to enforce the collection thereof.
3. SECURITY.
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(a) The Borrowers hereby grants to Lender a first priority security
interest in all of its tangible and intangible personal property, together in
each instance with the renewals, substitutions, replacements, additions,
products and proceeds thereof, whether now owned or hereafter acquired by said
Borrowers including Accounts, Chattel Paper, Equipment, General Intangibles,
instruments and Inventory (excluding Motor Vehicles); and
(b) Borrowers also hereby grants to Lender a lien on and a right of
set-off against all monies, deposits and securities, and the proceeds thereof,
now or hereafter held or received by, or in transit to, Lender from or for
Borrower, whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all deposits (general or special), balances, sums and credits
with and all claims of Borrowers against Lender at any time existing. Lender may
at any time after the occurrence of an Event of Default hereunder and five (5)
business days' notice thereof to Borrower, apply the same or any part thereof to
the Obligations, or any part thereof, whether or not matured at the time of such
application.
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(c) The security interests granted in this Paragraph 3 shall secure
payment and performance of the Obligations of Borrowers to Lender, specifically
including, but without limitation, the Notes.
(d) Notwithstanding anything contained herein to the contrary, no
additional financing shall be obtained by Borrowers at any time in connection
with the, Collateral until the Loan is paid in full.
Notwithstanding the above, the Lender agrees that in the event that at least 50%
of the Notes under this agreement have been converted to common shares in the
Company, then the Collateral requirements and financing limitations placed upon
the Company under this Paragraph 3 will thereafter be eliminated.
4. COLLECTION OF ACCOUNTS.
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(a) On and after the occurrence of any Event of Default hereunder, any
and all proceeds from its Accounts received by Borrowers shall be held in trust
by the Borrowers for Lender, shall not be commingled with any other funds or
property of the Borrower, and Borrowers shall turn over such proceeds to Lender
daily in the exact form in which they are received, together with a collection
report in form satisfactory to Lender. Lender shall thereafter promptly apply,
subject to collection, all or such portion (as Lender may determine in its
discretion) of such proceeds from Accounts, and all or such portion of any
proceeds of Accounts otherwise received by it pursuant hereto, to the payment of
the Obligations in such order of application as Lender, in its sole discretion,
may determine, and Lender shall deposit the balance, if any, of such proceeds
into Borrower's operating account.
(b) Borrowers shall, when requested by Lender after the occurrence of
an Event of Default:
(i) Assign or endorse the Accounts to Lender and notify
Account Debtors that the Accounts have been assigned
and should be paid directly to Lender,
(ii) Xxxx or stamp each of its individual ledger sheets or
cards pertaining to its Accounts with the legend
"Assigned to Biotech Research Fund I LLC" and stamp
or otherwise xxxx and keep its books, records,
documents and instruments relating to the Accounts in
such manner as Lender may require; and/or
(iii) Xxxx or stamp all invoices with a legend satisfactory
to Lender so as to indicate that the same should be
paid directly to Lender.
(c) Notwithstanding the foregoing, Lender shall have the right, at any
time after the occurrence of an Event of Default, or a state of facts which but
for the passage of time, giving of notice, or both, would constitute an Event of
Default, to itself so notify such Account Debtors to make such payments of the
Accounts directly to Lender and Lender shall have the further right to notify
the post office authorities to change the address for delivery of mail of
Borrowers to an address designated by Lender and to receive, open and dispose of
all mail addressed to Borrowers relating to the Accounts.
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(d) For the purpose of this Paragraph 4, Borrowers hereby irrevocably
constitutes Lender as its attorney-in-fact, coupled with an interest, to issue
in the name and execute or endorse on behalf of Borrowers each and every notice,
instrument and document necessary to carry out the purpose of the provisions of
this Paragraph 4, and to take such action in connection with the collection of
the Accounts, including, without limitation, suing thereon, compromising or
adjusting the same, as Lender, in its sole discretion, deems necessary. The
power of attorney granted hereby shall be self-executing, but Borrowers shall
promptly execute and deliver to Lender, upon written request of Lender, such
additional separate powers of attorney, as Lender may from time to time
reasonably request.
5. REPRESENTATIONS AND WARRANTIES.
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Borrowers gives the following representations and warranties to the
Lender as an inducement to Lender to make the Loan contemplated by this
Agreement, and understands that Lender is relying on the foregoing
representations and warranties, and agrees further that the following
representations shall survive bankruptcy, insolvency, reorganization and
rehabilitation proceedings:
(a) All of the financial statements and information of Borrower,
previously furnished by Borrowers to Lender, are accurate in every material
respect; there has not been any material adverse change in the financial
condition of Borrowers since the date of said financial statements; nor does
Borrowers have any material liabilities fixed or contingent which are not fully
shown or provided for in said financial statements as at the date thereof,
except obligations to perform after that date under contracts, purchase orders
and other commitments incurred in the ordinary course of business, none of which
materially and adversely affect the ability of Borrowers to perform hereunder.
There is no fact that Borrowers has not disclosed to Lender in writing which
could materially adversely affect the properties, business, or financial
condition of Borrower, or of the Collateral;
(b) Borrowers is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida and Colorado; having all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as now being conducted and it is duly qualified and
in good standing in every jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary;
(c) There is no litigation or governmental proceeding pending, or to
the knowledge of the officers of Borrower, threatened against Borrowers which in
either case might materially and adversely affect Borrower's financial position,
which has not been disclosed to Lender. Tax returns have not yet been filed by
accountants. Returns will show a loss for each year.
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(d) The execution, delivery and performance of the Notes, this
Agreement, and all other agreements and instruments delivered by Borrowers
pursuant to the terms thereof or in connection therewith (hereinafter sometimes
referred to as the "Loan Documents"), have been duly authorized, are within the
corporate powers of Borrower, are not in contravention of any statute or
regulation to which Borrowers is subject, or any provisions of Borrower's
Certificate of Incorporation or By-laws, or Articles of Organization and
Operating Agreement, as the case may be, or any amendments thereto, or of any
agreement or undertaking to which Borrowers is a party or by which it or they
are bound, and no action of, filing with, or consent by, any person, entity, or
any governmental or public body or authority, is required to authorize or is
otherwise required in connection with the execution, delivery and performance of
this Agreement or any of the instruments or documents to be delivered pursuant
to this Agreement. The execution, delivery and performance of this Agreement,
the Notes, or any one or more of the Loan Documents will not result in the
creation of any lien, charge or encumbrance upon any Borrower's assets (other
than the security interest granted to Lender hereunder) pursuant to any of the
terms, conditions or provisions of any agreement, instrument or other
undertaking to which Borrowers is a party or by which Borrowers is bound;
(e) Subject to any limitations stated therein or in connection
therewith, all information furnished or to be furnished by Borrowers pursuant to
the terms hereof, or of the Notes is, or will be at the time the same is
furnished, accurate and complete in all material respects;
(f) Except as otherwise disclosed in writing to Lender, Borrowers has
as of the effective date of this Agreement, or will have when acquired by it,
good and marketable title to the Collateral free from any adverse claims, liens,
security interests or encumbrances except as permitted under Paragraph 8(g)
hereof; and except as otherwise disclosed in writing to Lender, no financing
statements of Borrowers covering all or any part of the Collateral are on file
in the office of the Secretary of State of the State of Florida and Colorado, or
the office of any town clerk, or in any other proper governmental office;
(g) There are no liens or encumbrances on any of the other properties
of Borrower, except as otherwise disclosed to Lender as described on EXHIBIT D
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(h) The Collateral is located at the Borrower's offices and plants at
the addresses first hereinabove set forth. The Borrowers will not remove any of
the Collateral from said locations without the prior written consent of Lender,
which shall not be unreasonably withheld or delayed, except as otherwise
provided in Paragraph 10 hereof;
(i) The offices where the Borrowers keeps its records concerning the
Accounts and relating to the Inventory are located at the address of the
Borrowers first hereinabove set forth. The Borrowers will not remove any such
records from said offices without the prior written consent of Lender;
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(j) Each of the Accounts is valid, enforceable, and in full force and
effect, and arises or will arise out of the sale or delivery of merchandise or
the performance of labor or services; the due date stated on any Account or on
any report reciting any Account is or shall be correct; each Account Debtor is
justly indebted to the Borrowers in the amount indicated by the Borrowers
subject to no offsets or credits except as has been disclosed to Lender; and no
agreement has been made, nor will be made, with any Account Debtor for any
reduction, discount, compromise, credit or settlement of any Account reported to
Lender in excess of $10,000.00 without Lender's prior written consent;
(k) To the best of its knowledge, Borrowers is in compliance with all
laws, ordinances, rules or regulations, applicable to it, of all federal, state
or local governments or any instrumentality or agency thereof, including without
limitation, pharmaceutical drug laws and regulations, the Employee Retirement
Income Security Act (hereinafter referred to as "ERISA"), the United States
Occupational Safety and Health Act (hereinafter referred to as "OSHA") and all
federal, state and municipal laws, ordinances, rules and regulations relating to
health, safety and the environment, nor has Borrowers received any notice,
order, petition or similar document evidencing the basis for any claim for such
a violation or of any threat thereof.
(l) Borrowers has not, during the preceding five (5) years, been known
as or used any corporate or fictitious name other than that first hereinabove
set forth;
(m) With this agreement Borrowers has sufficient capital to carry on
its businesses, and each is solvent and able to pay its debts as they mature,
and is generally paying such debts, and Borrowers owns property whose fair
market value exceeds the dollar amount required to pay Borrower's debts;
(n) Borrowers possesses all the trademarks, trade names, copyrights,
licenses and governmental permits, licenses, orders and approvals, or rights in
any thereof, necessary for the conduct of its business as now conducted and
presently proposed to be conducted, without conflict of the rights or claimed
rights of others.
(o) The Company has timely made all filings require of it by the
Securities Exchange Commission since its incorporation, which are a part of its
public record.
(p) The Company has timely made all filings require of it by the
Securities Exchange Commission since its incorporation, which are a part of its
public record.
(q) The Company has not declared, set aside, paid or made any dividend
or other distributions with respect to its capital stock and has not made or
caused to be made directly or indirectly any payment or other distribution of
any nature whatsoever to any of the Lender of its capital stock except for
regular salary payments for services rendered and the reimbursement of business
expenses.
(r) The Company will endeavor to amend its Articles of Incorporation to
increase its authorized capital stock to at least 100 million shares. At such
time as such amendment becomes effective and all times thereafter, the Company
shall reserve such number of shares of its common stock as may, from time to
time, be the maximum number of shares issuable, assuming conversion of all the
Notes into fully paid and non-assessable shares of restricted Company common
stock ("Conversion Stock"), as contemplated herein.
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All representations and warranties set forth in this Paragraph 6 shall
be true and correct in all material respects as of the execution of this
Agreement and on and as of the time of each advance made pursuant to this
Agreement, to the same effect as though such representations and warranties had
been made on and as of such time.
6. AFFIRMATIVE COVENANTS.
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Borrowers covenants and agrees that from the effective date hereof
until the termination of this Agreement and full payment of all sums due, and
the performance of all other obligations, under the Loan Documents unless Lender
otherwise agrees in writing, they shall:
(a) File all required federal, state and local tax returns and pay and
discharge all taxes, general and special, charges and assessments, and other
governmental obligations, which may have been or shall be levied, charged or
assessed on or against Borrowers (including its subsidiaries), its property, or
the income and profits thereof, before they become delinquent; and pay and
discharge on or before their due date any and all other lawful claims and
demands whatsoever, provided, however, Borrowers shall have the right to contest
the validity or amount of the foregoing, provided such contest is in good faith
and is diligently pursued, and Borrower, upon Lender's request, maintain
reserves therefore in amount and form satisfactory to Lender;
(b) Keep its properties insured against loss by fire or other casualty
customarily covered by a comprehensive policy and such other risks as Lender may
reasonably request, and in such amounts and with such insurers as may be
satisfactory to Lender, which insurance, insofar as it insures property pledged
or mortgaged to Lender, or in which Lender may have a security interest, shall
be first payable in case of loss to Lender as its interest may appear.
(c) Maintain and preserve the Collateral in good order and condition
and not permit or suffer the Collateral to be wasted or destroyed, ordinary wear
and tear excepted and replace said Collateral in the ordinary course of
business;
(d) Immediately notify Lender of any event causing material loss or
depreciation in the value of the Collateral and the amount of such loss or
depreciation. In the event any Accounts due and owing in excess of $10,000 are
in dispute between any Account Debtor and Borrower, Borrowers shall provide
Lender with written notice thereof, explaining in detail the reason for the
dispute, all claims related thereto and the amount in controversy. In the event
any Account becomes evidenced by a promissory note, trade acceptance, or any
other instrument for the payment of money, Borrowers will immediately thereafter
deliver such instruments to Lender, appropriately endorsed to Lender, regardless
of the form of presentment, demand, notice of dishonor, protest, and notice of
protest with respect thereto;
(e) Give immediate notice to Lender of, and copies of all relevant
documents concerning: (1) any litigation or proceeding in which Borrowers is a
party if an adverse decision therein would require Borrowers to pay over more
than $10,000 or deliver assets the value of which exceeds such sum (whether or
not the claim is considered to be covered by insurance); and (2) the institution
of any other suit or proceeding involving Borrowers that might materially and
adversely affect Borrower's operations, financial condition, property or
business;
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(f) Allow Lender by or through any of its officers, agents, attorneys,
or accountants designated by it, for the purpose of ascertaining whether or not
each and every provision hereof and of any related instrument is being performed
and for the purpose of examining the Collateral and the records relating
thereto, upon reasonable notice to enter the offices and plants of Borrowers to
examine, inspect or make copies of any of the corporate books and financial
records of Borrower, and to inspect the Collateral, and to discuss the affairs,
finances and accounts thereof with the principal officers thereof, all during
normal business hours and as often as Lender may reasonably request;
(g) Maintain general public liability insurance against claims for
personal injury, death or property damage in such amounts as are satisfactory to
Lender, and Worker's Compensation insurance in statutory amounts, with such
companies as are licensed to do business in the State of Colorado;
(h) Defend the Collateral against all claims and demands of all persons
at any time claiming the same or any interest therein, it being understood and
agreed, however, that Lender may contest any such claims or demands made against
Borrower, in the name of Borrower, if Lender's security interest in the
Collateral would be impaired; and pay, upon demand, Lender's reasonable costs,
charges and expenses, including reasonable attorney's fees, in defending any
such claim or demand; and cause the security interest of Lender to be properly
noted on all certificates of title issued or outstanding with respect to any of
the Collateral and deposit the same with Lender;
(i) Pay to Lender, on demand, any and all reasonable expenses,
including reasonable attorneys' fees, incurred or expended by Lender in the
collection of the Obligations, including all sums due under the Loan Documents,
the collection or attempted collection of the Accounts and in protecting and
enforcing the rights of Lender and sustaining the security interests granted to
Lender under the Loan Documents, including this Agreement.
(j) From time to time, at the request of Lender, execute, deliver and
file one or more financing statements on Form UCC-1 and other instruments, and
do all other acts as Lender deems necessary or desirable to create, maintain and
perfect fully its first priority security interest in the Collateral and pay,
upon demand, all reasonable expenses, including reasonable attorneys' fees,
incurred by Lender in connection therewith;
(k) Keep complete and accurate books and records reflecting all facts
and concerning the Collateral (including each of the Accounts) and pertaining to
the Notes and Borrower's covenants under this Agreement, all in accordance with
generally accepted accounting principles. Borrowers shall provide Lender, at its
reasonable request, from time to time with: copies of all invoices relating to
the Accounts; names and addresses of customers; collection reports; lists of
Inventory; and such further information and/or schedules concerning the
Collateral as Lender may reasonably require, all in form satisfactory to Lender;
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(l) Comply with all laws, orders, rules and regulations applicable to
Borrowers of any governmental body or agency, including without limitation,
pharmaceutical drug laws and regulations, environmental and health and safety
laws, orders, rules and regulations and fully indemnify, defend and hold Lender
harmless from and against any loss, claim or damage arising as a consequence of
any failure by Borrower, or by Borrower's officers, employees or agents to so
comply.
(m) Give prompt written notice to Lender upon the occurrence of an
Event of Default, or of any state of facts which would constitute an Event of
Default hereunder or, which, but for the giving of notice or passage of time, or
both, would constitute an Event of Default;
(n) Give prompt written notice to Lender of the commencement of
litigation, including arbitration proceedings, and any proceedings before any
governmental agency, or the occurrence of any other event, which, if decided
adversely to Borrowers could have a material adverse effect upon the condition,
operations or prospects (financial or otherwise) of Borrower.
(o) Give prompt written notice to Lender of any labor dispute or
controversy resulting or likely to result in a strike or work stoppage against
Borrower;
(p) Maintain at all times a principal place of business in Colorado, as
the case may be.
7. NEGATIVE COVENANTS.
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Borrowers covenants and agrees that at all times during the term hereof
and so long as the Notes issued hereunder shall remain unpaid, it will not,
without prior written consent of Lender:
(a) Except as specifically permitted in Paragraph 3(d) herein, create
or assume any obligations for money borrowed from any person other than Lender,
except for purchase money obligations;
(b) Except for the items listed on Exhibit D; Mortgage, pledge or
otherwise voluntarily subject to any lien, any assets or property now or
hereafter owned by it, nor permit any of its assets or property to become
subject to any liens or charges other than (i) liens for taxes, assessments or
other governmental charges not then delinquent, (ii) other liens arising in the
usual course of business which shall be inchoate and shall not have been
perfected, (iii) liens for alleged claims, the validity or amount of which is
being contested in good faith by the Borrowers or Borrower, provided that to the
extent permitted by law, the Borrowers shall immediately bond or otherwise lift
such lien, and (iv) purchase money security interests for fixed assets;
(c) Enter into any merger or consolidation, nor dissolve or liquidate,
nor enter into any proceedings preliminary to any of the foregoing, nor assign,
sell, transfer, lease or otherwise dispose of any or all of its assets, except
in the normal course of its business, nor change its name;
(d) The Company will cause its Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Exchange Act, will use its
reasonable efforts to comply in all respects with its reporting and filing
Obligations under the Exchange Act, and will not take any action or file any
document (whether or not permitted by Exchange Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing Obligations under said Act.
11
(e) The Company's stock will continue to trade under the NAFD
over-the-counter electronic bulletin board exchange.
8. PAYMENTS BY LENDER.
-------------------
At its option, but without any liability for failure to do so, Lender
may pay for insurance on the Collateral and taxes, assessments or other charges
which Borrowers fails to pay in accordance with the provisions hereof, and may
discharge any security interest in or lien upon the Collateral. No such payment
or discharge of any such security interest or lien shall be deemed to constitute
a waiver by Lender of the violation of any covenant hereunder by Borrowers as a
result of Borrower's failure to make any such payment or Borrower's suffering of
any such security interest or lien. Any payment made or expense incurred by
Lender pursuant to this or any other provision hereof shall be added to the
indebtedness of Borrowers to Lender, and shall bear interest at the highest rate
payable under the Notes and shall be payable on demand.
9. USE OF INVENTORY.
-----------------
Until the occurrence of an Event of Default by Borrowers hereunder,
Borrowers may use the Inventory in any lawful manner not inconsistent with this
Agreement, or with the terms or conditions of any policy of insurance thereon
and may also sell, lease or otherwise dispose of the Inventory in the ordinary
course of business. A sale in the ordinary course of business does not include a
transfer in partial or total satisfaction of a debt.
10. FINANCIAL INFORMATION AND STATEMENTS.
-------------------------------------
The Borrowers shall furnish to the Lender annually, on or before April
30th of each calendar year, a profit and loss statement and balance sheet,
including all supporting schedules and comments reported on by the certified
public accountant of Borrower, together with a complete, signed copy of the
Borrower's Federal Income Tax Returns, including all schedules, for the prior
year. In the event that the Borrower's has obtained an extension for the filing
of its tax returns, the Borrowers shall provide Lender with a copy of such
extension and will submit a copy of the complete tax return to Lender
immediately upon filing.
11. EVENTS OF DEFAULT.
------------------
Lender shall have the right at its option to terminate the Loan and in
connection therewith to declare any or all of the Obligations to be immediately
due and payable without notice upon the occurrence of any one of the following
events (each being an "Event of Default"):
12
(a) The failure by Borrowers to pay any of the Obligations for a period
of ten (10) days after the same shall be due and payable, or such failure by the
Borrowers to pay any of the Obligations upon demand pursuant to the Guaranties;
(b) The failure by Borrowers to observe, perform or comply with any
condition or covenant in this Agreement, the Notes or any of the other Loan
Documents that is not cured within a period of thirty (30) days after written
notice of any such default has been given;
(c) The existence of an Event of Default under the Notes or under any
of the other Loan Documents;
(d) If any representation or warranty made by Borrowers in this
Agreement or in any of the other Loan Documents, or any statement, certificate
or other data furnished by Borrowers in connection with any of the Obligations
proves to be incorrect or untrue in any material respect when made;
(e) The entry of a judgment for the payment of money in excess of
$10,000.00 against Borrower, which remains unsatisfied and in effect for any
period of thirty (30) consecutive days without a stay of execution, or appeal;
(f) The insolvency of Borrowers (the term "insolvency" shall mean
either a negative tangible net worth or an inability to pay Borrower's debts as
they mature);
(g) The filing by or against Borrowers of any petition seeking an
arrangement, reorganization or the like, the commencement of any proceedings
under any bankruptcy or insolvency law by or against Borrower, the appointment
of a receiver for all or any part of Borrower's assets, or the making of an
assignment for the benefit of creditors, or the calling of a meeting of
creditors, or the appointment of a committee of creditors or liquidating agents,
by, for, or of any one or more of them; provided, however, in the event of any
involuntary petition or proceedings commenced against Borrower, there shall be a
ninety (90) day grace period during which such petition or proceedings may be
discharged or vacated;
(h) The dissolution, liquidation, insolvency, or termination of legal
existence, death, of Borrower, or merger or consolidation of Borrower, with or
into any other person or entity;
(i) The failure by Borrower, to pay when due (including applicable
grace periods) any other material indebtedness or obligations owed to others for
borrowed money, or if any such other indebtedness (or obligation shall be
accelerated);
13
12. REMEDIES OF LENDER.
-------------------
(a) Upon the occurrence of an Event of Default, and thereafter so long
as such Event of Default remains uncured, Lender may, in addition to and not in
limitation of Lender's rights under this Agreement, pursue any legal remedy
available to it to collect the Obligations outstanding at that time, and to
enforce its rights hereunder and under the Loan Documents and/or the Guaranties,
and to seek all of the rights and remedies of a secured party as provided in the
Uniform Commercial Code, including but not limited to:
(1) the right to require Borrowers to assemble the Collateral
and make it available to Lender at a place designated by Lender which is
reasonably convenient to both parties;
(2) the right to take immediate possession and remove all
Collateral, and for this purpose the Lender is authorized to enter upon the
premises where the Collateral is kept;
(3) the right to take exclusive possession of the premises on
which the Collateral is stored and to conduct any sale on those premises in a
commercially reasonable manner and/or to store the Collateral free of rent on
the premises, and Borrowers expressly agrees to pay any rents due on the
premises while the Lender is in possession thereof pursuant to this Agreement;
and
(4) the right to apply the proceeds of any sale or disposition
to the payment in whole or in part of any amounts owing to Lender from Borrower,
or the Borrower's surety, or endorser, whether principal or interest, all at the
sole discretion of Lender, after deducting therefrom the following expenses
(together with interest thereon if applicable), with respect to any of such
Obligations: the reasonable expenses of retaking and storing the Collateral,
transporting the Collateral from the place of possession to the place of sale,
preparation for the sale, including court costs, bond premiums and reasonable
attorneys' fees.
(b) Borrowers agrees that the requirements of reasonable notification
to Borrowers of the time and place of any public sale or of the time after which
any private sale or other intended disposition is to be made shall be met if
such notification is sent by certified mail, postage prepaid, at least seven (7)
days prior to the date of sale or other disposition, addressed to Borrowers at
its principal place of business, such address being the place held out by
Borrowers for the receipt of all communications relative to this Agreement. No
change of such address shall be effective until specific written notice thereof
is received by the Lender;
(c) Borrowers will be liable for all reasonable attorneys' fees
incurred in enforcing this Agreement. Borrowers agrees to hold the Lender
harmless from any damages or other costs incurred by the Lender by reason of the
breach of any provision of this Agreement by Borrower;
(d) On request by Lender, Borrowers shall deliver to Lender all
original and other documents evidencing and relating to the sale and delivery of
any merchandise or the performance of labor or services, which created any part
of the Accounts, including, without limitation, contracts, orders, invoices,
bills of lading, warehouse receipts and shipping receipts, together with
appropriate written endorsements and/or assignments of the same to Lender.
14
13. RIGHTS OF LENDER.
-----------------
Lender shall have no duty as to the collection or protection of the
Collateral, nor as to the preservation of any rights against prior parties, nor
as to the preservation of any rights pertaining thereto. Lender may exercise its
rights with respect to the Collateral, without resorting or regard to other
collateral or sources of reimbursement for the Obligations. Lender shall not be
deemed to have waived any of its rights under the Loan Documents or upon or
under the Obligations unless such waiver is in writing and signed by Lender. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right on any future occasion. Lender may revoke any permission or waiver
previously granted to Borrowers and such revocation shall be effective whether
given orally or in writing. All rights and remedies of Lender with respect to
the Obligations or the Collateral whether evidenced hereby or by any other
document, shall be cumulative and may be exercised singularly or concurrently.
14. REPRESENTATIONS AND WARRANTIES BY LENDER.
-----------------------------------------
(a) The Lender is lending for the Notes for investment purposes and not
with the view to or for sale in connection with any distribution thereof and
that he has no present intent to sell, give or otherwise transfer the Notes or
Stock. Upon conversion of the Note, the Conversion Stock will be received by the
Lender for investment purposes for its own account, and not with the view to, or
for resale in connection with, any distribution thereof. Lender understands that
the Conversion Stock will not been registered under the Securities Act, or under
the securities laws of various states, by reason of a specified exemption from
registration provisions thereunder.
(b) The Lender understands that investing in the Notes is a highly
speculative investment in a Company, which is insolvent both from a legal and an
equity standpoint.
(c) The Lender has a net worth in excess one million dollars
($1,000,000) exclusive of their residences and that they are sophisticated
investors who are knowledgeable about the business.
(d) The Lender shall hold the Conversion Stock indefinitely unless such
shares are subsequently registered under the Securities Act and under applicable
state securities laws or an exemption from such registration is available.
Lender has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act which permits limited resale of the securities
purchased in a private placement subject to the satisfaction of certain
conditions including, among other things, the availability of certain current
public information about Company and compliance with applicable requirements
regarding the holding period and the amount of securities to be sold and the
manner of sale.
(e) The Lender has (i) received and carefully reviewed all other
information filed by Company pursuant to the Securities Act or the Securities
Exchange Act of 1934, as amended and asked questions, including financial, of
the Company's management concerning the Company.
(f) The Lender represents it is an "Accredited Investor" as the term is
defined in Rule 501(a) of Regulatin D under the Securities Act.
15
15. NOTE CONVERSION OF LENDER TO BORROWERS COMMON STOCK
---------------------------------------------------
(i) The Lender has the right to convert the Note to the
Borrowers Common Stock.
(a) The Lender at any time up to on or prior to the Maturity Date, or,
as to any of the Notes to which notice of prepayment shall have been given, at
any time up to the close of business on the third business day prior to the day
fixed for prepayment but not thereafter, may convert the Notes in whole or in
part into as many shares of Conversion Stock as the principal amount of the Note
on a one share for $1.40 basis. If any of the Notes shall be converted in part,
the Company shall, without charge to the Lender execute and deliver to the
Lender a new Note for the balance of the principal amount so converted.
(b) All Notes shall automatically convert at any time the price of the
shares on the Principal Market as a publicly traded security closes above three
dollars ($3.00) per share basis (or as adjusted for any future stock split) for
twenty (20) trading consecutive days, on a one share of Conversion Stock for
$1.40 basis or as adjusted to the provisions herein.
(c) Upon conversion of any of the Notes, all accrued and unpaid
interest on the principal amount converted shall be paid to the Lender by the
Company in Conversion Stock on a one share of Conversion Stock for $1.40 basis,
or as adjusted to the provisions herein.
(d) In the event the Company shall at any time divide its outstanding
shares of Common Stock into a greater number of shares, the conversion price is
in effect immediately prior to such sub-division, should be proportionately
reduced, and conversely, in the case of outstanding shares of Common Stock of
the Company shall be combined into a smaller number of shares, the actual
conversion price in effect immediately prior to such combination shall be
proportionately increased.
(e) In the event the Company shall declare a dividend or make a
distribution of any Stock of the Company payable in Common Stock or in
convertible securities, the aggregate maximum number of shares of Common stock
or in convertible securities, the aggregate maximum number of shares of Common
Stock available for issue in payment of such dividend or distribution, or upon
conversion of or in exchange for such convertible securities available for issue
in payment of such dividend or distribution, shall be deemed to have been issued
or sold without consideration.
16
(f) No fractional share of Common Stock shall be issued upon conversion
of any of the Notes. If any Holder of the Notes shall have converted all the
Notes held by him other than a principal amount so small that less than a whole
share of Common Stock would be available for issue upon conversion thereof, the
Company may elect to prepay such balance, with interest accrued thereon to the
date fixed for prepayment, or leave the same outstanding until the maturity of
the Note.
(g) In any reclassification or change of outstanding shares of Common
Stock available for issue upon conversion of the Notes (other than a change in
stated value or from no par to par value) or in the case of any consolidation or
merger of the Company with any other corporation, or in the case of the sale and
conveyance to another corporation or person of the property of the Company in
its entirety or substantially as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made that each
Holder of the Notes then outstanding shall have the right thereafter to convert
the Notes into the kind and amount of shares of Stock and other securities and
property receivable upon such reclassification, change, consolidation, merger,
sale or conveyance by a Holder of the number of shares of Common Stock in the
Company into which such Notes might have been converted immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance. In the
event of a change of control of the Company, it shall have the right, at its
option, to covert any or all of the Notes, pursuant to the terms and conditions
of this agreement.
(h) Not withstanding anything to the contrary in this Section 15 the
Lender may not convert the Note into shares of Conversion Stock if at the time
of (or as a result of) such conversion the Company has or will have insufficient
shares of authorized but un-issued common stock to issue such Conversion Stock.
If the Lender shall request conversion and conversion stock is not available,
company shall make all efforts to authorize additional capital, and notify the
Lender of Lenders ability to convert.
17
16. SECURITIES MATTERS
------------------
(a) Lender is aware that no federal or state or other agency has
passed upon or made any finding or determination concerning the fairness of the
transactions contemplated by this Agreement or the adequacy of the disclosure of
the exhibits and schedules hereto and the Lender must forego the Conversion
Stock, if an, that such a review would provide.
(b) Lender understands and acknowledges that neither the Internal
Revenue Service nor any other tax authority has been asked to rule on nor has it
ruled on the tax consequences of the transactions contemplated hereby.
(c) Lender understands that all certificates for the Conversion Stock
shall bear a legend in substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES
MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT SUCH
REGISTRATION OR THE DELIVERY TO THE ISSUER OF AN OPINION OF COUNSEL,
SATISFACTORY TO THE ISSUER, THAT SUCH DISPOSITION WILL NOT REQUIRE REGISTRATION
OF SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS."
17. GENERAL PROVISIONS
------------------
(a) No delay or failure of Lender in exercising any right, power or
privilege hereunder shall affect such right, power or privilege, nor shall any
single or partial exercise preclude any further exercise thereof or the exercise
of any other rights, powers or privileges;
(b) This Agreement and every representation, warranty, covenant,
promise and other terms herein contained, including without limitation, the
security interests granted hereby, shall survive until all amounts due hereunder
have been paid in full;
(c) This Agreement is an integrated document, and all terms and
provisions are embodied herein and shall not be varied by parol evidence;
(d) This Agreement is made and executed and is to be construed under
the laws of the State of Colorado, without giving effect to any conflict of laws
principles.
(e) The captions for the paragraphs contained in this Agreement have
been inserted for convenience only, and form no part of this Agreement, and
shall not be deemed to affect the meaning or construction of any of the
covenants, agreements, conditions or terms hereof;
(f) This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and assigns; provided,
however, that Borrowers may not assign, whether voluntarily or by operation of
law or otherwise, any of its rights hereunder without the prior written consent
of Lender which may be withheld at their sole discretion, any such attempted
assignment without consent shall be null and void. This Agreement shall be the
joint and several obligation of all makers, and each provision hereof shall
apply to each and all jointly and severally;
(g) Any notice or statement required hereunder shall be in writing, and
shall be deemed to have been validly served, given or delivered upon deposit in
the United States mails, with proper postage prepaid, and addressed to the party
to be notified as follows unless either party shall hereafter instruct the other
to direct notices to another address:
18
If to Lender, at:
----------------
BioTech Research Fund, LLC
00000 Xxxxx Xxx Xxxx., Xxxxx 000
Xxxxx Xxxxxxx, XX 00000
If to Borrower, at:
------------------
Hand Brand Distribution, Inc.
d/b/a GeneThera, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
and
GeneThera, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
(h) If any provision of this Agreement is invalid or unenforceable
under applicable law, such provision is and will be totally ineffective to that
extent, but the remaining provisions shall be unaffected.
(i) This Agreement shall be governed by Colorado State law.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
19
ITEM 2. IN WITNESS WHEREOF, THE PARTIES HAVE HEREUNTO SET THEIR HANDS
AND SEALS, AND TO A DUPLICATE INSTRUMENT OF THE SAME TENOR, AT
LENDER DAY AND YEAR FIRST ABOVE WRITTEN.
Signed, sealed and delivered:
"Lender"
By_________________________ ___________________________
Witness
Signed, sealed and delivered:
HAND BRAND DISTRIBUTION, INC.
D/B/A GENETHERA CORPORATION
(A FLORIDA CORPORATION)
"Borrower"
By _________________________ ___________________________
Witness
By ________________________ ___________________________
Secretary Witness
(a)
(b)
GENETHERA, INC.
(A COLORADO CORPORATION)
"Borrower"
By _________________________ ___________________________
Witness
By ________________________ ___________________________
Secretary Witness
20
(c) Exhibit A
CONVERTIBLE PROMISSORY NOTE
(TERM LOAN)
THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS
CONVERTIBLE PROMISSORY NOTE NOR ANY INTEREST THEREIN (INCLUDING THE SHARES OF
CLASS B NON-VOTING COMMON STOCK INTO WHICH THIS NOTE IS CONVERTIBLE) MAY BE
OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED UNLESS THIS CONVERTIBLE
PROMISSORY NOTE IS FIRST REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND/OR QUALIFIED UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR UNTIL
THE COMPANY SHALL HAVE RECEIVED AN OPINION OF LEGAL COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, THAT THIS CONVERTIBLE PROMISSORY NOTE MAY LAWFULLY
BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT SUCH REGISTRATION
AND/OR QUALIFICATION IN RELIANCE UPON AN APPLICABLE EXEMPTION.
CONVERTIBLE PROMISSORY NOTE
Interest Rate: 6% per year through Maturity Date
12% per year following Maturity Date
Convertible into shares of Common Stock of
Hand Brand Distribution, Inc. d/b/a GeneThera, Inc.
at $1.40 per Share, subject to adjustment
Amount: $[]
Wheat Ridge, Colorado Dated: []
FOR VALUE RECEIVED, the undersigned, Hand Brand Distribution, Inc.
d/b/a GeneThera Inc., a Florida corporation, and GeneThera Inc., a Colorado
corporation hereinafter called "MAKERS," promises to pay to the order of Biotech
Research Fund I LLC, or successor(s) or assign(s) (collectively "LENDER"), at
it's principal office, or such other place in New Jersey as the holder hereof
may from time to time designate in writing, the principal sum of [($)], or so
much thereof as may have been advanced and outstanding from time to time,
together with interest thereon from the date or dates of disbursement of the
aforesaid principal sum as hereinafter provided to be paid in lawful money of
the United State of America, which shall be legal tender in payment of all debts
and dues, public and private, at the time of payment.
This Note is executed pursuant to the LINE OF CREDIT LOAN AND SECURITY
AGREEMENT of even date herewith between the undersigned MAKERS and LENDER and
referred to as the "Agreement".
21
The terms and provisions of the Agreement are incorporated by this
reference as though set forth in full herein, and any default under the
Agreement shall constitute a default under this Note. In the event of any
conflict or inconsistency between the terms and provisions of this Note and
those of the Agreement, the terms and provisions of this Note shall in all
respects govern and control.
..
This Note is subject to the following terms and conditions:
1. Principal and Interest Payments.
-------------------------------
This Note bears interest from the date hereof at a rate of at the rate
per annum of (i) six percent (6%) per year through January 15, 2004 (the
"Maturity Date") and (ii) twelve percent (12%) from January 15, 2004.
The entire unpaid principal, together with any accrued but unpaid
interest, shall be due and payable in full on January 15, 2004 (the "Maturity
Date"). All computations of interest made or called for herein shall be made on
the basis of a 360-day year for the actual number of days elapsed.
Interest hereunder shall be charged only on the sums advanced from the
date of advance to the date of repayment. MAKERS hereof does not intend or
expect to pay, nor does LENDER intend or expect to charge, accept or collect any
interest which, when added to any other charge upon the principal, shall be in
excess of the highest lawful rate allowable under applicable law. Should
acceleration, prepayment or any other charges upon the principal or any portion
thereof result in the computation or earning of interest in excess of the
highest lawful rate allowable under applicable law, then any and all such excess
is hereby waived and shall be applied against the remaining principal balance
and/or refunded to MAKERS to the extent such excess exceeds the remaining
principal balance. All payments due on this Note shall be applied first to
accrued interest, and second, to any remainder in payment of principal.
Except as otherwise provided in this Note, all payments of principal and
interest on this Note shall be paid in the legal currency of the United States
of America, in immediately collectible clearing house funds at the Office.
2. Conversion of Note. This Note is issued and subject to all of the
rights of that certain Line of Credit Loan and Security Agreement,
dated August 14, 2002 between Borrowers and the.
3. Adjustment to Applicable Conversion Rate. This Note is issued and
subject to all of the rights of that certain Line of Credit Loan and
Security Agreement, dated August 14, 2002.
4. Place of Payment. Payment shall be made to Payee at the address for
Payee set forth herein or at such other place as Payee may designate in
writing.
22
5. Default.
--------
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
i. Failure of Company to pay the principal and any
accrued interest in full on the Maturity Date of this
Note and the continuation of such failure for ten
(10) business days (any date which is not a Saturday,
Sunday or a legal holiday in the state of Utah) after
receipt by Company of notice of such failure and
demand for payment; or
ii. Company's consent to the appointment of a receiver,
trustee or liquidator of itself or of a substantial
part of its property, or Company's admittance in
writing of its inability to pay its debts generally
as they become due, or Company's general assignment
for the benefit of creditors, or Company's filing of
a voluntary petition in bankruptcy, or a voluntary
petition or answer seeking reorganization in a
proceeding under any bankruptcy law (as now or
hereafter in effect), or the filing by Company of a
voluntary petition, answer or consent, seeking relief
under the provisions of any other now existing or
future bankruptcy or other similar law providing for
the reorganization or winding up of corporations, or
Company, fails to discharge within ninety (90) days
any involuntary petition in bankruptcy filed against
it or if it is adjudicated a bankrupt.
iii. Any event of default described in LINE OF CREDIT LOAN
AND SECURITY AGREEMENT.
Upon the occurrence of any Event of Default, all amounts due under this
Note, including the unpaid balance of principal and interest hereof,
shall become immediately due and payable at the option of Payee,
without demand or notice whatsoever, and Payee may immediately and
without demand exercise any of Payee's rights and remedies granted
herein, under applicable law, or which Payee may otherwise have against
Company or otherwise at law or equity.
6. Assignment. The rights and Obligations of the Company and the Payee of
this Note shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties but the rights of
assign by the Company are subject to the consent of the Payee.
7. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if telegraphed or mailed by
registered or certified mail, postage prepaid, at the respective
addresses of the parties as set forth herein. Any party hereto may by
notice so given change its address for future notice hereunder. Notice
shall conclusively be deemed to have been given when personally
delivered or when deposited in the mail or telegraphed in the manner
set forth above and shall be deemed to have been received when
delivered.
23
8. No Shareholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Payee or any other person the right to
vote or to consent or to receive notice as a stockholder in respect of
meetings of stockholders for the election of the Company or any other
matters or any rights whatsoever as a stockholder of the Company; and
no dividends or other distributions shall be payable or accrued in
respect of this Note or the interest represented hereby or the
Conversion Shares obtainable hereunder until, and only to the extent
that, this Note shall have been converted into Common Stock.
9. Governing Law. The validity, constructional interpretation and
enforceability of this Agreement and the Notes executed pursuant to
this Agreement shall be determined and governed by the laws of the
State of Colorado, without regard to conflict of law principles. Any
dispute with respect to the interpretation of this Agreement or the
rights or obligations of the parties hereto, or under the Notes shall
be exclusively be brought in the United States District Court for
Colorado, or if such court lacks subject matter jurisdiction in the
Supreme Court of the State of Colorado. Each of the parties waives the
right to object to the jurisdiction or venue of either such court or to
claim they are an inconvenient forum.
MAKERS and all endorsers, guarantors, sureties and other parties now or
hereafter liable for the payment of any sum or sums due or to become due under
the terms of this Note waive presentment, protest and demand, and notice of
protest, demand and dishonor, and nonpayment of this Note, and consent that the
holder hereof shall have the right, without notice, to deal in any way at any
time with any party hereto, or to grant any extension or extensions of time for
payment of any of said indebtedness or any other indulgences or forbearances
whatsoever without in any way affecting the liability of any other party for the
payment of this Note. No delay or omission on the part of the holder hereof in
exercising any right hereunder shall operate as a waiver of such right or any
other right under this Note, nor shall any waiver on one occasion be construed
as a bar to or waiver of any such right on any future occasion. No waiver shall
be effective unless in writing and signed by the holder.
MAKERS further agrees to pay all reasonable costs of collection,
including reasonable attorney's fees and court costs (inclusive of any
bankruptcy or appellate proceedings), in case the principal of this Note or any
interest thereon is not paid when due whether suit be brought or not.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
24
IN WITNESS WHEREOF, the Company has caused this Note to be executed on the day
and year first above written. This Note is being executed and delivered in Wheat
Ridge, Colorado.
(CORPORATE SEAL) GeneThera Corporation
a/k/a Hand Brand Distribution Incorporated,
a Florida corporation
"Maker"
By: _____________________________
(CORPORATE SEAL) GeneThera Inc,
a Colorado corporation
"Maker"
By: _____________________________
25
(d) Exhibit B
(i) Application of Loan Proceeds
RETIRE EXISTING DEBT
--------------------
PART II. PAYROLL AND TAXES...............................$177,000.00
PART III. PROFESSIONAL FEES...............................$ 35,000.00
PART IV. RETIRE EXHIBIT D................................$ 49,000.00
Accounts Payable ..........................$ 79,000.00
-----------
PART V. SUB-TOTAL $340,000.00
FUND COMPANY BUSINESS PLAN
--------------------------
Overhead..............................................$ 300,000.00
Fund CWD Market Entry.................................$ 270,000.00
E-Coli Research & Development.........................$ 90,000.00
Total $1,000,000.00
26
EXHIBIT C-1
-----------
CERTIFICATE
The undersigned, the Directors of Hand Brand Distribution, Inc. d/b/a
GeneThera Inc. does hereby certify that the following resolutions were adopted
at Board of Directors meetings duly held on Wednesday, July 31, 2002 and are in
full force and effect on the date hereof:
RESOLVED, that the Line of Credit Loan and Security Agreement between
Hand Brand Distribution, Inc. d/b/a GeneThera Inc. Corporation, GeneThera and
Biotech Research Fund I LLC. Providing, among other matters, for the loan
agreement dated as of August 14, 2002 and notes in the aggregate amount of
$1,000,000 in the form presented to this meeting is hereby adopted and approved;
FURTHER RESOLVED, that the appropriate officers of this Corporation are
hereby authorized and directed to execute the loan agreement and promissory
notes, together with such other documents or instruments necessary to consummate
the transactions contemplated thereby and to take such other action and make
amendments to the instruments as may be deemed necessary or advisable, with the
approval of counsel to the Corporation; and
FURTHER RESOLVED, that a copy of the loan agreement and form of promissory
note be filed with the minutes of this meeting.
IN WITNESS WHEREOF, the undersigned has signed this certificate and affixed
the seals of each for the Corporation this 31st day of July, 2002.
--------------------------------
Xxxxxxx Xxxxxxx, Director
--------------------------------
Xxxxx Xxxxxxx, Xx., Director
--------------------------------
Xxxx Xxxxxx, Director
27
EXHIBIT C-2
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CERTIFICATE
The undersigned, the Directors of GeneThera Incorporated does hereby
certify that the following resolutions were adopted at Board of Directors
meetings duly held on Wednesday, July 31,, 2002 and are in full force and effect
on the date hereof:
RESOLVED, that the Line of Credit Loan and Security Agreement between
Hand Brand Distribution, Inc. d/b/a GeneThera Inc. Corporation, GeneThera, Inc.
and Biotech Research Fund I LLC. (Providing, among other matters, for the loan
agreement and notes in the amount of $1,000,000 of August 14, 2002 in the form
presented to this meeting is hereby adopted and approved;
FURTHER RESOLVED, that the appropriate officers of this Corporation are
hereby authorized and directed to execute the loan agreement and promissory
notes, together with such other documents or instruments necessary to consummate
the transactions contemplated thereby and to take such other action and make
amendments to the instruments as may be deemed necessary or advisable, with the
approval of counsel to the Corporation; and
FURTHER RESOLVED, that a copy of the loan agreement and form of
promissory notes be filed with the minutes of this meeting.
IN WITNESS WHEREOF, the undersigned has signed this certificate and
affixed the seals of each for the Corporation this 31st day of July, 2002.
--------------------------------
Xxxx Xxxxxx
--------------------------------
Xxxxxx Xxxxxxxx
28
EXHIBIT X
Xxxxxxxxxx Redevelopment Authority $24,000.00
Tekquity 10,000.00(1)
Touch of Life 15,000.00
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Total $49,000.00
(1) There is a dispute on the performance of Tekquity.
Genethera, Inc. is pursuing damages from such non-performance.
Tekquity claims that Genethera, Inc. owes $50,000.00.
Genethera will defend vigorously any claims in which Tekquity
may bring, including recovery of damages from non-performance.
The Company has reserved $10,000 to resolve this matter.
29
