EXHIBIT 10.1
BRIDGE LOAN SECURITY AGREEMENT
THIS BRIDGE LOAN SECURITY AGREEMENT, dated as of January 12, 2006, is
entered into by and among GENELINK, INC., a Pennsylvania corporation, having an
address at Newport Financial Center, 000 Xxxxxxx Xxxxxx, Xx. 000, Xxxxxx Xxxx,
Xxx Xxxxxx 00000 ("Borrower"); XXXXX XXXXXXX, INC., a California corporation,
having an address at 00000 Xxxxxxxx Xxxx., Xxx 0000, Xxx Xxxxxxx, XX 9024, Attn:
Xxxxx Xxxxx; XXXXXX XXXXXXXX, an individual, having an address at 000 Xxxxxx
Xxxx., #000, Xxxxxx Xxxxxxx, XX, 00000; XXXXXXX X. XXXXXX XX., an individual,
having an address at 0000 00xx Xxxxx XX, Xxx 000, Xxxxxx XX, 00000; XXXXX
XXXXXXXXX, an individual, having an address at 0000 Xxxxx Xxxxxx, Xxx. 000, Xxx
Xxxxxxxxx, XX 00000; XXXXXXX X. XXXXXX, an individual, having an address at 0000
Xxxxxxxx, Xxx 0000, Xxx Xxxx, XX 00000;xxx STRANCO INVESTMENTS, LTD., a British
Virgin Islands company, having an address at Idriss Building, 4th floor, Xxxxxx
Xxxxxx Street, Verdun, Beirut, Lebanon (each a "Bridge Lender" and collectively
the "Bridge Lenders"); and XXXXX XXXXXX, an individual residing at 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as Collateral Agent for the Bridge Lenders
("Collateral Agent").
RECITALS:
A. Borrower has requested that each Bridge Lender lend it a Bridge
Loan (each a "Bridge Loan" and collectively the "Bridge Loans") as set forth in
and evidenced by the CONVERTIBLE SECURED PROMISSORY NOTE executed and delivered
by Borrower to each Bridge Lender concurrently with its execution and delivery
hereof (each a "Bridge Loan Note" and collectively the "Bridge Loan Notes").
Each Bridge Lender has agreed to make such a loan to Borrower on the terms and
conditions of the Bridge Loan Note issued to it and on condition that Borrower
execute and deliver this Security Agreement to Collateral Agent and grant the
security interest set forth herein.
B. Borrower has agreed to grant to Collateral Agent for the benefit of
the Bridge Lenders a first priority security interest in its Patents, as
described in Schedule 1 hereto (the "Collateral").
C. The Bridge Lenders have agreed that this Security Agreement shall
also constitute an intercreditor agreement among them, establishing their mutual
rights with respect to the Collateral and proceeds therefrom.
NOW, THEREFORE, in consideration of the mutual covenants, conditions,
and agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. GRANT OF SECURITY INTEREST. Borrower hereby grants to Collateral
Agent, for the benefit of the Bridge Lenders, a first priority security interest
in and lien on (which security
interest and lien shall be continuing), and pledges and assigns as security to
Collateral Agent, all of Borrower's right, title and interest in and to the
Collateral, for the purpose of securing, in such order of priority as Lender
shall elect, all Obligations, and Collateral Agent shall have all rights of a
secured party with respect to the Collateral.
Section 2. COVENANTS OF BORROWER.
(a) No Transfers or Liens. Except as expressly permitted under this Agreement or
the other documents executed by Borrower in connection with this Agreement or
the Bridge Loan (the "Loan Documents") or any Qualifying Loan Agreement (as that
term is defined in the Bridge Loan Notes), Borrower agrees that it will not,
without the prior written consent of Collateral Agent, (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of any of the Collateral or
any interest in the Collateral, or (ii) create or suffer to exist any lien,
security interest, encumbrance or other charge upon or with respect to any
Collateral; provided, however, that Borrower shall be entitled to license any of
the Collateral that constitutes intellectual property in arm's length
transactions to bona fide third parties in the ordinary course of business
without seeking the consent of the Collateral Agent; provided further that
Borrower shall notify Collateral Agent of any such licensing (in reasonable
detail) as soon as practical thereafter.
(b) Prior Notice. Borrower will give Collateral Agent prior written notice of
any change in its address or the office where it keeps its records concerning
the Collateral.
(c) Defense of Title. Borrower shall, at its expense, defend the Collateral
Agent's right, title and security interest in and to the Collateral against any
and all claims of any entity, except to the extent arising out of Collateral
Agent's gross negligence or willful misconduct.
(d) Further Actions. Borrower shall not take or fail to take any action when
requested by Collateral Agent or expressly required by the Loan Documents to do
so which Borrower knows would impair the enforceability of Collateral Agent's
security interest in any Collateral.
(e) No Further Assignments. Borrower shall have no right to further assign its
rights and/or its obligations under this Agreement or to further pledge or
otherwise encumber its interest in the Collateral, and any such attempted
assignment, pledge or encumbrance shall be null and void.
Section 3. INDEMNITY. Borrower shall indemnify, defend and hold harmless
Collateral Agent and each Bridge Lender from and against any and all claims,
losses and liabilities growing out of or resulting from this Agreement,
including, without limitation, (i) enforcement of any right under this Agreement
and (ii) any liability for taxes in respect of income from any Collateral
received by or on behalf of Borrower.
Section 4. EVENTS OF DEFAULT; REMEDIES.
(a) Events of Default. Each of the following shall constitute an "Event of
Default" under this Agreement:
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(i) If Borrower shall fail to pay when due and payable any payment
required to be made under any Bridge Loan Note or hereunder; or
(ii) If Borrower shall fail to perform any obligation required
hereunder within ten (10) business days of receiving notice of such
failure by the Collateral Agent; or
(iii) if any default beyond the expiration of any applicable grace and
notice periods shall occur under any other Loan Document.
(b) Remedies. Upon the happening of any Event of Default, Collateral Agent shall
have the right, if such Event of Default shall then be continuing, in addition
to all of the remedies conferred upon Collateral Agent by law or equity or by
the terms of any of the Loan Documents (including, without limitation, the right
to declare the Bridge Loan Notes to be immediately due and payable as provided
therein (unless such Note shall have been automatically declared immediately due
and payable as provided therein)) to exercise in respect of the Collateral, on
behalf of the Bridge Lenders all of the rights and remedies of a secured party
on default under the Uniform Commercial Code of the State of New York, and each
other State with applicable jurisdiction, then in effect.
(c) Interim Use of Patents. Pending appropriate disposition of the Collateral in
accordance herewith, upon the occurrence and during the continuance of an Event
of Default, Collateral Agent shall have the exclusive right, but not the duty,
with respect to all Patents that are part of the Collateral, from time to time
to enforce or use the Patents or to grant or issue any exclusive or
non-exclusive license under the Patents to any third party, upon such terms as
it may in its sole discretion deem commercially reasonable.
Section 5. ATTORNEY-IN-FACT. Borrower hereby irrevocably appoints Collateral
Agent as Borrower's attorney-in-fact and agent, said appointment to be
irrevocable during the term hereof and to be coupled with an interest, with full
authority in the place and stead of Borrower and in the name of Borrower, upon
the occurrence of an Event of Default and acceleration to take any action and to
execute any instrument which Collateral Agent, in its sole discretion, may deem
necessary to perfect or protect the first priority perfected security interest
created hereby, including, without limitation by means of executing and
delivering financing and continuation statements and any extensions,
modifications and refilings thereof, with the right (but not the duty) from time
to time to create, prepare, complete, execute, deliver, endorse or file, in the
name and on behalf of Borrower, any and all instruments, documents, applications
and other agreements and writings required to be obtained, executed, delivered
or endorsed by Borrower to give effect to the matters contemplated by this
Agreement, or necessary as the secured party after an Event of Default, to
enforce or use the Patents or to grant or issue any exclusive or non-exclusive
license under the Patents to any third party, or to sell, assign, transfer,
pledge, encumber or otherwise transfer title in or dispose of the Patents to any
third party. Borrower hereby ratifies all that such attorney shall lawfully do
or cause to be done by virtue hereof. The power of attorney granted
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herein shall terminate upon the payment and performance of all obligations of
Borrower under the Loan Documents.
Section 6. COLLATERAL AGENT.
(a) Appointment of Collateral Agent. By its execution hereof, each Bridge Lender
hereby designates and appoints Xxxxx Xxxxxx as its agent to receive on its
behalf the grant of security and assignment of interest in the Collateral to
secure Borrower's repayment of the principal and interest of the Bridge Loan
made by such Bridge Lender, and all other obligations to such Bridge Lender in
respect of its Bridge Loan and this Agreement and the other Loan Documents (the
"Security Interest"). By her acceptance hereof, Xxxxx Xxxxxx accepts such
designation and appointment and agrees to act as the agent for each Bridge
Lender pro rata as its interest may appear in (i) accepting and holding the
Security Interest, (ii) protecting and defending the Security Interest, (iii)
enforcing the rights conferred upon the Collateral Agent by this Agreement
against the Collateral, and (iv) distributing the proceeds from the realization
of such enforcement among the Bridge Lenders according to the percentage equal
to the percentage that the principal amount of the Bridge Loan such Bridge
Lender made to Borrower constitutes of the aggregate of all Bridge Loans made
(such percentage being such Bridge Lender's "Sharing Percentage"). Collateral
Agent agrees that it will comply with the terms hereof and exercise reasonable
care to assure the safe custody of the Collateral under its control and in
carrying out its other duties under this Agreement; provided, however, that
Collateral Agent may at any time and from time to time condition its undertaking
of any action or executing any document upon the provision to it by Borrower
and/or the Bridge Lenders of such assurances or financial accommodations as it
may reasonably determine to be necessary for the protection of its interest.
(b) Indemnification of Collateral Agent; Standard of Care. Notwithstanding the
indemnity of Borrower provided hereinabove, each Bridge Lender, severally
according to its Sharing Percentage, hereby agrees to indemnify and hold
harmless the Collateral Agent from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement, including, without
limitation, (i) enforcement of any right under this Agreement and (ii) any
liability for taxes in respect of income from any Collateral received by or on
behalf of Borrower. Collateral Agent shall be at all times indemnified hereunder
for any action taken or document executed by it with respect to which it had
received the written instruction or approval of Bridge Lenders with Sharing
Percentages of at least 51%, except to the extent of her willful misconduct or
gross negligence.
Section 7. INTERCREDITOR AGREEMENT. By its execution hereof, each Bridge Lender
hereby agrees to and for the exclusive benefit of each other Bridge Lender that:
(a) It will not seek to enforce its Bridge Loan Note against the Collateral or
otherwise without providing the other Bridge Lenders at least five (5) business
days' prior written notice thereof, and will desist from taking any enforcement
action if so requested in writing by other Bridge Lenders with Sharing
Percentages totaling at least 51%; provided, however, that if the underlying
Event of Default with respect to which it sought to enforce its Bridge Loan Note
is not cured within thirty
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(30) days after having received such a desist request, it shall be able to take
such enforcement action on its own behalf as it deems necessary or appropriate.
(b) If any Bridge Lender receives from Borrower or any third party any payment
in cash or property in respect of its Bridge Loan Note, whether by direct
payment, enforcement action or otherwise, other than in a distribution which it
has valid reason to believe was made pro rata to all Bridge Lenders according to
their respective Sharing Percentages, such Bridge Lender shall hold such payment
IN TRUST for all the Bridge Lenders and use commercially reasonable efforts to
assure that each Bridge Lender receives directly from such Bridge Lender or from
Borrower or such third party either additional funds or such portion of the
payment received by such Bridge Lender (net of costs of administration thereof)
as to cause each Bridge Lender to receive its Sharing Percentage of such
payment.
Section 8. MISCELLANEOUS.
(a) Notices. Except as otherwise expressly provided herein, any communications,
requests or notices required or appropriate to be given under this Agreement,
whether or not stated herein to be "in writing" or "written", shall be in
writing and either personally delivered, delivered by overnight courier, or
mailed by certified, registered, or express mail, return receipt requested,
deposited in the United States mail postage prepaid, addressed to the party for
whom the notice is intended as follows:
To Borrower: GENELINK, INC.
Newport Financial Center
000 Xxxxxxx Xxxxxx, Xx. 000
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attn: Xxxxx Xxxxxx, Xx., President
Telephone: 000-000-0000
To Collateral Agent: XXXXX XXXXXX
000 Xxxx 00xx Xxxxxx, Xxx. 000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
To each Bridge Lender: To their respective address set forth above or as
otherwise notified to the Collateral Agent and the
other Bridge Lenders.
These addresses may be changed by notice as provided herein. All notices
shall be deemed to have been received on the earlier of actual receipt, or, if
given by mail, four (4) business days following the postmark date thereof unless
sent by overnight mail in which event they shall be deemed to have been received
one (1) business day following the date of sending thereof.
(b) No Waivers; Approvals. Any failure by Borrower or Collateral Agent to
insist, or election by either party not to insist, upon the strict performance
of any of the terms and provisions of this Agreement, shall not be deemed to be
a waiver of any of the terms and provisions hereof by such
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party, and such party, notwithstanding any such failure(s), shall have the right
thereafter to insist upon the strict performance by the other party of any and
all of the terms and provisions of this Agreement to be performed by the other
party. The parties hereby specifically agree that no provision of this Agreement
can be waived by course of conduct.
(c) Further Assurances.
(i) Borrower agrees that at any time and from time to time, at its expense,
it will promptly execute and deliver all further instruments and documents
and take all further actions as Collateral Agent may reasonably request in
order to perfect and protect any assignment, pledge, lien and security
interest purported to be created hereby or to effectuate the terms of this
Agreement.
(ii) Borrower hereby authorizes Collateral Agent to file, whether or not an
Event of Default shall have occurred without the signature of Borrower
where permitted by law, one or more financing or continuation statements,
and amendments thereto, relating to the Collateral.
(d) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the law of the State of New York, except to the
extent the law of another jurisdiction is required to control the validity,
attachment and/or perfection of any security interest granted hereunder by the
choice of law principles of the Uniform Commercial Code of the State of New
York.
(e) Borrower irrevocably consents that any legal action or proceeding against it
under, arising out of or in any manner relating to this agreement may be brought
in any court of the State of New York, County of New York, or in the United
States District Court for the State of New York. Borrower, by the execution and
delivery of this agreement, expressly and irrevocably assents and submits to the
personal jurisdiction of any of such Court in any such action or proceeding.
Each of Borrower, Collateral Agent and the Bridge Lenders agrees that any and
all legal action relating to this agreement shall be brought, and maintained,
only in such Courts. The Borrower further irrevocably consents to the service of
any complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to it at the address set forth above or such
other address as Borrower shall have theretofore notified the Collateral Agent
in writing or in any other manner permitted by law. In the event service on
Borrower is effected as set forth in the preceding sentence, Borrower hereby
expressly and irrevocably waives any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper venue,
forum non conveniens, or any similar basis. Borrower shall not be entitled in
any action or proceeding to assert any defense given or allowed under the law of
any State other than the State of New York unless such defense is also given or
allowed by the law of the State of New York.
(f) Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
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any other jurisdiction. Where provisions of any law or regulation resulting in
any such prohibition or unenforceability may be waived they are hereby waived by
the parties hereto to the full extent permitted by law so that this Agreement
shall be deemed a valid, binding agreement, enforceable in accordance with its
terms.
(g) Continuing Security Interest; Successors and Assigns; Termination.
(i) This Agreement shall create a continuing security interest in the
Collateral and shall (A) remain in full force and effect until the
satisfaction and repayment of all Obligations shall have occurred, (B) be
binding on and inure to the benefit of Borrower and its permitted
successors and assigns, and (C) with respect to Collateral Agent, be
binding on and inure, together with all rights and remedies of Collateral
Agent hereunder, to the benefit of, Collateral Agent and her successors,
transferees and assigns. Notwithstanding the foregoing, each of Borrower
and Collateral Agent, as the case may be, may only assign or otherwise
transfer any of its rights hereunder to a party to whom all of its rights
and obligations under the Loan Documents are assigned and provided such
party assumes all of such obligations, and upon such assumption, such other
party shall thereupon become vested with all of the benefits in respect of
each of Borrower and Collateral Agent, as the case may be, herein or
otherwise. Except as provided in the preceding sentence, none of the rights
or obligations of Borrower and Collateral Agent hereunder may be assigned
or otherwise transferred.
(ii) Upon the payment and performance in full of all Obligations,
Collateral Agent shall, upon the written request of and at the sole expense
of Borrower, deliver the Collateral under her control to Borrower (together
with all documents reasonably requested by Borrower to transfer the
Collateral under her control to Borrower and to terminate any instrument of
record confirming the Borrower's rights in the Collateral under her
control).
(h) Cross-Default. Any Event of Default under this Agreement shall be deemed to
be an Event of Default under each of the other Loan Documents, entitling
Collateral Agent, subject to the express restrictions, if any, contained
therein, to exercise any or all remedies available to Collateral Agent under the
terms of any or all such Loan Documents in accordance with the terms of such
documents.
(i) Survival. All of the representations, warranties, terms, covenants,
agreements and conditions contained in this Agreement shall specifically survive
the execution and delivery of this Agreement and the other Loan Documents and
shall, unless otherwise expressly provided, continue in full force and effect
until the Loan, together with Interest thereon, and all other costs, charges and
other sums payable hereunder or thereunder, are paid in full, and until the
Obligations have been satisfied.
(j) Counterparts. This Agreement may be executed in any number of counterparts
each of which shall be deemed an original but all of which together shall
constitute a single instrument.
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(k) Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement between the parties hereto as to the matters
contemplated herein and therein and this Agreement may not be modified or
amended in any manner other than by written agreement executed by the parties
against whom enforcement of such modification or amendment shall be sought.
(l) No Release; Waiver or Election of Remedies. Anything in this Agreement to
the contrary notwithstanding, (i) the exercise by the Collateral Agent of any of
her rights hereunder shall not release the Borrower from its obligations under
the Loan Documents, nor shall it constitute an election of remedies by
Collateral Agent or a waiver by the Collateral Agent of any of her rights and
remedies under the Loan Documents, and (ii) the Collateral Agent shall not be
obligated to perform any of the obligations or duties of the Borrower hereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
(m) Attorneys' Fees. If either Collateral Agent or Borrower fails to perform any
of its obligations under this Agreement or if any dispute arises between
Collateral Agent and Borrower concerning the meaning or interpretation of any
provision of this Agreement, then the defaulting party or the party not
prevailing in such dispute, as the case may be, shall pay any and all costs and
expenses incurred by the other party on account of such default and/or in
enforcing or establishing its rights hereunder, including, without limitation,
court costs and reasonable attorneys' fees and disbursements. Any such
attorneys' fees and other expenses incurred by Collateral Agent or Borrower in
enforcing a judgment in its favor under this Agreement shall be recoverable
separately from and in addition to any other amount included in such judgment,
and such attorneys' fees obligation is intended to be severable from the other
provisions of this Agreement and to survive and not be merged into any such
judgment.
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IN WITNESS WHEREOF, the parties hereto caused this Agreement to be executed
as of the day and year first above written.
GENELINK, INC.
By: /s/ Xxxxx X. Xxxxxx, Xx.
------------------------------------
Its: Acting Chief Executive Officer
XXXXX XXXXXXX, INC. [Sharing
Percentage 20%]
By: /s/ Xxxxx Xxxxx
---------------------------------
Its: President
XXXXXX XXXXXXXX [Sharing Percentage
10%]
/s/ Xxxxxx Xxxxxxxx
-------------------------------------
XXXXXXX X. XXXXXX XX. [Sharing
Percentage 20%]
/s/ Xxxxxxx X. Xxxxxx, Xx.
-------------------------------------
XXXXX XXXXXXXXX [Sharing Percentage
10%]
/s/ Xxxxx Xxxxxxxxx
-------------------------------------
STRANCO INVESTMENTS, LTD. [Sharing
Percentage 20%]
By: /s/ Gazwa Xxxxxx
---------------------------------
Its: Director
XXXXXXX X. XXXXXX [Sharing Percentage
20%]
/s/ Xxxxxxx X. Xxxxxx
-------------------------------------
COLLATERAL AGENCY ACCEPTED AND AGREED
TO:
/s/ Xxxxx Xxxxxx
-------------------------------------
XXXXX XXXXXX
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