Document:

ex10-1.htm

Exhibit 10.01

 

		
Liquid

Capital

FINANCING SUCCESS

	 	 
	 	 

 

 

 

PURCHASE AND SALE AGREEMENT

 

 

THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is executed by and between Liquid Capital Exchange, Inc., a corporation organized under the laws of the state of Delaware, having a mailing address at MacArthur Plaza 5525 N. MacArthur Blvd, Ste 625, Irving, TX 75038 (hereinafter referred to as "Factor") and Organic Alliance, Inc., a Nevada Corporation located at 401 Monterey Street, Suite 202 Salinas, CA 93901 (hereinafter referred to as "Seller"). All capitalized terms in this Agreement shall have the meanings given (hose terms in the as defined under the Uniform Commercial Code ("UCC") of Texas as in effect from time to time. Seller and Factor agree to the following terms and conditions:

 

 

1.     Purchase and Sale of Accounts. Pursuant to the terms of this Agreement, Seller agrees to sell, transfer, convey, assign and deliver to Factor, and Factor agrees to purchase and receive from Seller, all of Seller's right, title and interest in and to certain Accounts arising from the sale of Goods or the rendering of services by Seller in the ordinary course of Seller's business.

 

 

2.     Sale Procedure. Upon Seller's submission of any Account to Factor for purchase, Seller shall execute a Schedule of Accounts in a form provided by and acceptable to Factor for each such Account or group of Accounts that Seller offers for sale to sell to Factor. The Invoice Schedule must, among other things, identify and describe the Accounts being offered for purchase and the total face amount of such Accounts. Each Account offered for sale to Factor shall be evidenced by an identical duplicate written invoice or other such equivalent document(s) as Factor may require, together with supporting documentation, including, but not limited to, the purchase order or contract referencing the sale of goods and/or services and any modification(s) or amendment(s) thereto and any such other documentation that Factor may request. Factor may accept or reject any Account offered for sale in its sole discretion. Upon submission of any Account to Factor for purchase, Seller shall not seek or authorize any modification to the terms of the Account.

 

 

3.     Purchase Price and Payment.  Factor, in its sole discretion, may advance up to Eighty percent (80%) percent (hereinafter referred to as "Advance") of the face amount of the Accounts purchased, less the applicable discount fee. The purchase price of any Accounts shall be the amount actually received in payment of such Accounts, but for purposes of any Advance, the purchase price shall be equal to the face amount of the Accounts less any selling, payment or other discounts offered, in addition, Factor, in its sole discretion, may elect to maintain a reserve from each Advance (hereinafter referred to as "Reserve"). [As a general rule, Reserves on paid invoices are released upon the request of the Seller or when the Factor's next purchase of Accounts from Seller is funded, however Factor may increase or decrease the amount of such Reserve at any time and from time to time if it deems it necessary in order to protect its interests] The Reserve is designed to protect Factor against losses or potential losses that Factor may reasonably anticipate might arise in the future due to contingencies, disputes, potential breach of warranties, or other potential non-payments, reductions or losses from the purchase of the Accounts.  Payments received will be credited to specific Invoices when credit is given by Factor's bank, not to exceed three banking days. The applicable discount fee is calculated based on the discount rate set forth in the Discount Rate Schedule (attached as an addendum hereto and incorporated herein by reference). Factor may condition future purchases on Seller's agreeing to modification(s) of the Discount Rate Schedule. IT IS THE INTENTION OF THE PARTIES HERETO THAT AS TO ALL ACCOUNTS THAT FACTOR ELECTS TO PURCHASE SHALL CONSTITUTE A TRUE PURCHASE AND SALE OF ACCOUNT(S) UNDER § 9-318 OF THE UCC AND AS SUCH, THE SELLER SHALL HAVE NO LEGAL OR EQUITABLE INTEREST IN THE ACCOUNTS SOLD.

 

 

1

 

 

4.      Maximum Amount It is further understood and agreed that the maximum face amount of purchased accounts sold to Factor and outstanding at any time shall not exceed the amount set forth on the Discount Rate Schedule (attached as an addendum hereto and incorporated herein by reference), in which event, Factor shall have no obligation to purchase additional accounts.

 

5.      Notice of Assignment Upon Seller's execution of this Agreement, Factor shall be entitled to notify each customer (hereinafter referred to as "Account Debtor") of the sale and/or assignment of the Accounts in a manner and method as Factor, in its sole discretion, may elect, which may include Seller's written acknowledgement.   Seller agrees that each document evidencing Accounts (i.e., invoice) shall bear the following language, conspicuously placed, which language may be modified or amended at Factor's request:

 

 

This invoice has been assigned, sold and is payable only to Liquid Capital Exchange, Inc. P.O. Box 17000, Greenville, South Carolina 29606. In the event of any dispute as to quantity, quality or otherwise, notification must be given to Liquid Capital Exchange, Inc., in writing, within five (5) days of receipt of goods or rendition of services.

 

Seller agrees to use its best efforts to assist Factor in procuring the Account Debtor's acknowledgment and acceptance of such notice of assignment and redirection of payment if requested to do so by Factor. Factor's inability, for whatever reason, to receive Account Debtor's acknowledgment and acceptance may result in the rejection of the Accounts submitted for purchase or revocation of a conditional approval to purchase Accounts without any obligation or liability on the part of Factor.

 

 

6.      Security. In addition to those Accounts Factor purchases, in order to secure the payment of all indebtedness and obligations of Seller to Factor, whether presently existing or hereafter arising, Seller hereby grants to Factor a security interest in and lien upon all of Seller's right, title and interest in and to the following, whether now existing or hereafter arising or acquired and wherever located: (a) Accounts, (b) Chattel Paper, (c) Commercial Tort Claims, (d) Deposit Accounts, (e) Documents, (f) Equipment, (g) General Intangibles, (h) Goods, (i) Instruments, (j) Inventory, (k) Investment Property, (1) Supporting Obligations, (m) Letter of Credit Rights, (n) Payment Intangibles, (o) any and all Reserves and all payments (if any) due or to become due to Seller from the Reserves as well as all monies on deposit, holdbacks and credits, (p) all books and records pertaining to all of the foregoing, including but not limited to computer programs, data and lists, and (q) and all Proceeds of the foregoing (collectively the "Collateral").  Seller agrees to comply with all appropriate laws in order to perfect Factor's security interest in and to the Collateral. The security interest and lien granted in this paragraph shall remain in full force and effect until all me Accounts purchased hereunder are paid in full, all obligations owed to Factor are satisfied, Factor has received a Release, in the form annexed hereto, and Factor has filed a UCC termination statement   Seller authorizes Factor, its counsel or representative to file financing statements and amendments describing the Collateral in such jurisdictions as Factor shall deem necessary to perfect its rights in those Accounts purchased as well as to perfect the security interests granted hereunder. Seller shall take such actions as may be necessary to ensure that Factor shall gain control (as defined in the UCC) with respect to Collateral consisting of Deposit Accounts, Documents, Investment Property and financial assets, Instruments, Chattel Paper, Letters of Credit and Letters of Credit rights and Electronic Chattel Paper. Seller agrees to execute any security agreements, assignments, endorsements, affidavits, reports, notices, schedules of accounts, letters of authority and all other documents that Factor may request, in form and substance satisfactory to Factor, to perfect and maintain perfection of Factor's security interests in the Collateral and in order to fully consummate or give effect to all of the transactions contemplated under this Agreement. Seller hereby agrees that until all Accounts have been paid in full to Factor, Seller shall not permit any security interests or liens on any of the Collateral, except those in favor of Factor, nor will Seller sell or transfer any of the Collateral to any third party, except inventory in the ordinary course of business.

 

 

2

 

 

7. Seller's Representations. As an inducement for Factor to purchase Accounts from Seller, Seller, and each of its principals as identified on Factor's list of authorized signatories, hereby makes the following representations, warranties and covenants to Factor. The following representations, warranties and covenants shall be, as may be applicable, deemed made upon the execution of this Agreement, in each instance in which Seller submits an Account to Factor for purchase and for long as there are any obligations outstanding under this Agreement from Seller to Factor.

 

 

(a)           If Seller is a registered entity, it is duly organized and existing under the laws of Nevada, is duly qualified, and as may be required, properly licensed, is in good standing in such state and every other state in which it is doing business, the execution, delivery and performance of this Agreement are within its corporate powers and have been duly authorized as evidenced by the Corporate Resolution attached hereto, and are not in contravention of any law or the powers of its charter, bylaws, articles of incorporation, operating agreement, partnership agreement, or other incorporation papers, or of any indenture, agreement or undertaking to which Seller is a party or by which it is bound. Seller's true and correct legal name is as set forth on the signature line below and Seller will notify Factor in writing no less than 30 days prior to any change of name, dba, place of business, state of incorporation or corporate status or organizational identification number.

 

 

(b)           If Seller is operating under a trade or assumed name, said name has been filed with the proper authorities and each name has been provided, in writing, to Factor.

 

 

(c)           Seller has and will maintain good, clear and undisputed exclusive title to the Accounts offered for sale to Factor hereunder, and such sale will vest absolute ownership to such Accounts in Factor, free and clear of any lien, encumbrances, claims or security interest of any kind or nature including but not limited to Federal and/or State tax liens.

 

 

(d)           Each Account sold and assigned to Factor shall be an Account based upon a bona fide sale and the delivery and acceptance of Goods or performance of services by Seller to an Account Debtor and shall be an unconditional, valid and enforceable obligation of the Account Debtor, with no claim,  offset,  allowance, discount, deduction,   dispute, contingency or counterclaim, which could reduce the amount of such Account, affect me validity thereof, or hinder Factor's ability to collect or receive payment of the full face amount of said Account.

 

 

(e)           All information furnished by Seller to Factor, including, but not limited to, past histories of the payment of Account Debtors, and any and all information given to Factor in connection with me Accounts, is true, complete and accurate, and contains no material omissions, misstatements or misrepresentations.

 

 

3

 

(f)           Seller is the sole and absolute owner of the Collateral and any other property in which Factor is given a security interest; has good right and authority to grant a security interest to Factor in such Collateral or other property; there is no presently outstanding lien, security interest or encumbrance in or on the Collateral or proceeds and there is no financing statement covering the Collateral or proceeds on file in any public office except as may show on the exhibit 6(f) attached hereto. There are no judgments outstanding against Seller and there are no actions, charges, suits, proceedings or investigations pending or threatened against Seller or any of its property and none of Seller's inventory has been produced in violation of the Fair Labor Standards Act or imported in violation of any United States Custom treaty.

 

 

(g)           All financial records (including, but not limited to, balance sheets, income statements, federal income tax returns, and Accounts agings, listing or reports) which may have been or may hereafter be furnished to Factor by Seller shall fairly and accurately represent the financial conditions and operating results of Seller as of the dates or for the periods stated thereon.   Such financial records shall be accurate and correct in all material respects and complete insofar as necessary to give Factor a true and accurate knowledge of the subject matter.

 

 

(h) Seller shall reflect on its books the absolute sale of the Purchased Accounts to Factor. Seller shall furnish Factor, upon request, such information and statements, as Factor shall request from time to time regarding Seller's business affairs, financial condition and results of its operations. Without limiting the generality of the foregoing, Seller shall provide Factor, on or prior to the 30th day of each month, unaudited financial statements with respect to me prior month and, within ninety (90) days after the end of each of Seller's fiscal years, annual financial statements and such certificates relating to the foregoing as Factor may request including, without limitation, a monthly certificate from the president and chief financial officer of Seller stating whether any Events of Default have occurred and stating in detail the nature of the Events of Default, Seller will furnish to Factor upon request a current listing of all open and unpaid accounts payable and Accounts, and such other items of information that Factor may deem necessary or appropriate from time to time.

 

 

(i) If Seller should change the location of the principal office or the offices where the books and records of Seller are kept, Seller shall notify Factor immediately in writing of such change.

 

 

(j) The Accounts are due and payable on the selling terms noted on the face of each invoice, none of the Accounts represents a pack, bill and hold sale, or a consignment, guaranteed sale, cash on delivery sale or sale to an affiliate of Seller or to any entity to whom Seller has a financial or performance obligation of any kind.

 

 

(k) Seller assigns and transfers to Factor, effective upon an Event of Default hereunder, a nonexclusive right and license to use any trade names, marks, and styles used or owned by Seller together with any goodwill associated therewith, to the extent necessary to enable Factor to realize on the assets of Seller in which Factor has been granted a security interest. Such right and license is granted free of charge with no monetary payment requirement to Seller or any third party.

 

 

(l)       Each Account Debtor's business is solvent to the best of Seller's knowledge.

 

 

(m) Seller has paid and will pay all taxes and governmental charges imposed with respect to sale of Goods and furnish to Factor upon request satisfactory proof of payment and compliance with all federal, state and local tax requirements.

 

 

4

 

(n) Seller will promptly notify Factor of (i) the filing of any lawsuit against Seller involving amounts greater than Ten Thousand Dollars, and (ii) any attachment or any other legal process levied against Seller.

 

 

(o) In no event shall the funds paid to Seller hereunder be used directly or indirectly for personal, family, household or agricultural purposes.

 

 

(p) Any invoice or written communication that is issued by Seller to Factor by facsimile transmission is a duplicate of the original.

 

 

(q) Any electronic communication of data, whether by e-mail, tape, disk, or otherwise, Seller remits or causes to be remitted to Factor shall be authentic and genuine.

 

 

(r) Seller's principal(s) acknowledge that the duty to accurately complete each Schedule of Accounts is critical to this Agreement and as such all obligations with respect thereto are non-delegable. Each of Seller's principals) acknowledge that he/she shall remain fully responsible for the accuracy of each Schedule of Accounts delivered to Factor regardless of who is delegated the responsibility to prepare and/or complete such Schedule of Accounts.

 

 

(s) Seller agrees to execute any and all forms (i.e. Forms 8821 and/or 2848) that Factor may require in order to enable Factor to obtain and receive tax information issued by the Department of the Treasury, Internal Revenue Service, or receive refund checks.

 

 

8.     Recourse To Seller.  In the event that:

 

 

(a)           an Account purchased by Factor is not paid in full by the Account Debtor for any reason (or for no reason), on or before the date when due in accordance with its terms,

 

 

(b)           an Account Debtor objects to the quality of property sold or services performed by Seller, or rejects, revokes acceptance or fails or refuses to accept or receive any property or services represented by any Account purchased by Factor,

 

 

(c)           an Account Debtor suspends business, requests a general extension of time within which to pay debts or makes an assignment for the benefit of creditors, or if a petition in bankruptcy for liquidation or reorganization under the Bankruptcy Code, or a similar petition under state law, is filed by or with respect to an Account Debtor, a creditor's committee is appointed with respect to an Account Debtor, or if an event occurs amounting to a general business failure of an Account Debtor, or

 

 

(d)           Factor in its sole and absolute discretion determines that any Account is or has become uncollectible (a "Worthless Account"), then, Factor may require the Seller to promptly repurchase such Account from Factor by either (i) making payment to Factor of the amount represented by Factor to be owing on such Account or (ii) by providing Factor with another Account acceptable to Factor in its sole discretion with a face value equal to or exceeding the face value of the unpaid Account (the "Replacement Account") in substitution therefor or (iii) by Factor charging Seller's Reserve.   The method of repayment or replacement shall be determined by Factor in its sole discretion. The provisions of this Section are cumulative to and may be exercised concurrently with any other rights, powers or remedies of Factor.

 

 

9.     Power of Attorney. In order to carry out the intention of the parties hereto, Seller hereby irrevocably appoints Factor, or any person designed by Factor, as its agent and attorney-in-fact, which agency shall be deemed to be coupled with an interest and which

appointment shall be irrevocable until all obligations Seller owes Factor are fully satisfied. Factor's express authority under this appointment shall include the rights to (i) sign and endorse on behalf of Seller all checks, drafts and other forms of payment received by Factor, waiving any notice of presentment and dishonor, whether or not said checks represent payment on purchased Accounts, (ii) receive, open and dispose of Seller's mail received at Factor's address, (iii) change the Seller's address in order to re-route the delivery of all mail to Factor, (iv) strike out Seller's address on any billing or statement sent to an Account Debtor and substitute Factor's address, (v) in Seller's name demand, sue for, collect and give releases for any and all monies due on or to become due on purchased Accounts, (vi) compromise, prosecute, or defend any and all things necessary and proper to carry out this Agreement, specifically including, but not limited to, executing any documents necessary to perfect or continue the perfection of the security interest granted herein.

 

 

5

 

 

10.        Payments Received by Seller. Should Seller receive payment of all or any portion of an Account sold pursuant to mis Agreement, Seller shall immediately notify Factor of the receipt of the payment, hold said payment in trust for Factor separate and apart from Seller's own property and funds, and shall deliver said payment to Factor without delay in the identical form in which received.   Should Seller receive a check or other instrument of payment representing payment of amounts due to both Factor and Seller, Seller shall surrender said check or payment instrument to Factor. Should Seller receive a check or other instrument of payment representing payment of amounts due Factor and fail to surrender to Factor said check or payment instrument within two (2) business days, Seller shall be deemed to have committed a material default in this Agreement. In addition to all other damages to which Factor shall be entitled, Factor shall be entitled, in the event Seller violates its obligations under this paragraph, to charge Seller a misdirected payment fee equal to ten (10%) percent of the amount of the payment instrument or One Thousand Dollars, whichever is greater, to compensate Factor for the additional administrative expenses that are likely to be incurred as a result of a breach. In the event any merchandise, the sale of which gave rise to an Account purchased by Factor, is returned to or repossessed by Seller, such merchandise shall be held by Seller in trust for Factor, separate and apart from Seller's own property and subject to Factor's sole direction and control.

 

 

11.       Default. The term "Event of Default" as used in this Agreement shall mean the occurrence of any of the following events:

 

 

(a)           The failure of Seller to punctually and properly observe, keep or perform any covenant, agreement or condition herein required to be observed, kept or performed; or required under any other agreement or contract that may be executed between Seller and Factor.

 

 

(b)           A representation or warranty made by Seller in this Agreement shall prove to be untrue or incorrect or any financial statement or other statement purporting to represent the financial condition of Seller proves to be false or incorrect.

 

 

(c)           The failure of Seller to, within two (2) business days, deliver to Factor a remittance received by Seller in payment of a purchased Account

 

 

(d)           The failure of Seller to pay any indebtedness owed by Seller to Factor whether or not said indebtedness arises hereunder or under some other agreement or contract by and between Seller and Factor.

 

 

(e)           The appointment of a receiver or trustee for Seller or the suspension or cessation of Seller's business or operations.

 

 

6

 

(f)           Seller becomes insolvent, is unable to pay its debts as they mature or makes an assignment for the benefit of creditors.

 

 

(g)           Seller is adjudicated a debtor in bankruptcy or requests, either by way of petition or answer, that Seller be adjudicated a bankrupt or that Seller be allowed or granted any composition, reassignment, extension, reorganization or other relief under any bankruptcy law or any other law for the relief of debtors now or hereafter existing.

 

 

(h) An involuntary petition in bankruptcy is filed by or against Seller or any guarantor.

 

 

(i) A levy(s) or notice(s) of attachment, execution(s), tax lien(s) or assessments) or similar process is issued against Seller or the Collateral.

 

 

(j)       The dissolution of Seller.

 

(k)      The death or incompetency of any guarantor of Seller's obligation.

 

(l)       Factor has reasonable grounds to deem itself insecure.

 

 

(m) If there is a change in the ownership of Seller or Seller sells, leases transfers or otherwise disposes of all or substantially all of Seller's assets or consolidates with or merges into any other entity.

 

 

12. Remedies Upon Default. Factor shall have the rights and remedies provided in this Agreement and (without limiting the other rights and remedies exercisable by Factor either prior or subsequent to an Event of Default) as available to a Secured Party under the UCC in effect in any applicable jurisdiction in accordance with general law. Upon the occurrence of an Event of Default, Factor may resort to any one or more of the following remedies. The exercise or election of any particular remedy shall not prevent the concurrent or subsequent exercise or election of any other available remedy:

 

 

(a)           Declare any indebtedness secured hereby immediately due and payable.

 

 

(b)           Exercise its rights as a Secured Party and enforce the security interest granted hereunder pursuant to applicable law, including, but not limited to, Factor's right to establish contact with and instruct any and all of Seller's customers to remit payment(s) due or to become due on Accounts directly to Factor at Factor's address, whether or not said payments relate to Accounts purchased by Factor hereunder. Furthermore, Factor shall have the right to establish contact with and instruct any other party from whom Seller may be entitled to receive monies now due or to become due in the future to remit said monies to Factor at Factor's address. In the event Factor deems it necessary to seek equitable relief, including, but not limited to, injunctive or receivership remedies, Seller waives any requirement that Factor post or otherwise obtain or procure any bond.  Seller also waives any right to attorney's fees or costs in the event any equitable relief awarded is subsequently, vacated, dissolved or reversed for whatever reason(s).

 

 

(c)           Immediately terminate this Agreement as to future transactions, without affecting the rights and obligations of the parties occurring with respect to prior transactions.

 

 

(d)           Enter the premises of Seller and take possession of the Collateral and of records pertaining to the Accounts and the Collateral.

 

 

7

 

 

(e)           Grant extensions, compromise claims and settle Accounts for less than face value, all without prior notice to or authority of Seller, except as granted herein.

 

 

(f)           Exercise all other rights conferred by law or equity or under this Agreement and exercise any remedy existing at law or in equity for the collection of any indebtedness secured hereby and for the enforcement of the covenants and agreements contained in this Agreement. Factor shall be entitled to any form of equitable relief that may be appropriate without having to establish any inadequate remedy at law or other grounds other than to establish that its Collateral is subject to being improperly used, moved, dissipated or withheld from Factor. Factor shall be entitled to freeze, debit and/or effect a set-off against any fund or account Seller may maintain with any Bank. In the event Factor deems it necessary to seek equitable relief, including, but not limited to, injunctive or receivership remedies, as a result of and Event of Default, Seller waives any requirement that Factor post or otherwise obtain or procure any bond. Alternatively, in the event Factor, in its sole and exclusive discretion, desires to procure and post a bond, Factor may procure and file with the court a bond in an amount up to and not greater than ten thousand dollars (10,000.00) notwithstanding any common or statutory law requirement to the contrary. Upon Factor's posting of such bond it shall be entitled to all benefits as if such bond was posted in compliance with state law. Seller also waives any right it may be entitled to, including an award of attorney's fees or costs, in the event any equitable relief sought by and awarded to Factor is thereafter, for whatever reason(s), vacated, dissolved or reversed. All post-judgment interest shall bear interest at either the contract rate, 18% per annum or such higher rate as may be allowed by law.

 

 

 

13.       Financial Statements. Seller agrees to keep proper books of record which books shall at all times be open to inspection by Factor, in addition, Seller shall furnish Factor upon request any prior or current income statement, balance sheet, tax return and report, along with any other supplementary financial information requested. Factor shall have the right, at all times during normal business hours, without prior written notice, to examine and make extracts from all books and records of Seller.

 

 

14.       Reimbursable Expenses. In the course of investigating, approving, purchasing and collecting Accounts  purchased under this Agreement,  Factor may incur routine and/or extraordinary expenses, including, but not limited to long distance telephone, postage, wire transfers, overnight mail delivery, courier delivery, check certification, UCC search and filing fees, other lien search fees, facsimile transmissions, auditing and legal fees, all of which shall be reimbursed to Factor by Seller upon demand or deducted from the proceeds payable on a purchased Account or from the Reserve.

 

 

15.       Account Debtor Claims. Seller shall notify Factor of the assertion of any claim, including any defenses, dispute or offset by an Account Debtor with respect to an Account purchased by and assigned to Factor or the merchandise or service relating thereto within three (3) days after receiving such information. Seller may settle all such claims with Factor's approval and at Seller's expense. Factor may, in its sole discretion, opt to settle any Account Debtor claim directly with the Account Debtor involved, at the Seller's expense, upon such terms as Factor may deem advisable at which time Seller shall cease any communications with the respective Account Debtor.  In the event Factor exercises its right to settle and compromise Account Debtor claims, Seller hereby specifically agrees to the terms, conditions and provisions of any and all settlements, compromises and other agreements, oral or written, entered into by Factor and Factor shall be deemed authorized to execute all releases, settlements or compromise agreements, and receive, for and in Seller's name, all money and property that Factor may receive in settlement, release or compromise of Account Debtor claims.  The foregoing is discretionary upon the part of Factor and Seller shall have no right to demand or require Factor's exercise of the aforesaid rights. Factor's failure to agree shall not otherwise adversely affect any rights) of Factor or Seller's waiver(s) herein. In the event of any claim against an Account by the Account Debtor or a breach by Seller of any representation hereunder as to an Account purchased by and assigned to Factor, Seller shall pay the unpaid balance of said Account in accordance with the provision of paragraph 7 above.

 

 

8

 

 

 

16.       Attorney's Fees. Seller agrees to pay all reasonable attorney's fees, court costs and expenses incurred by Factor or its counsel in the event that Factor retains counsel for the purpose of enforcing any rights arising out of the relationship between Seller and Factor or under this Agreement.  Seller also acknowledges that Factor may charge and/or setoff against Seller's Reserve all such fees and costs as they are incurred. Notwithstanding the existence of any law, statute, rule, or procedure in any jurisdiction which may provide Seller with a right to attorney's fees or costs, Seller hereby waives any and all rights to hereafter seek attorney's fees or costs there under and Seller agrees that Factor exclusively shall be entitled to indemnification and recovery of any and all attorney's fees or costs in respect to any litigation based hereon, arising out of, or related hereto, whether under, or in connection with, this and/or any agreement executed in conjunction herewith, or any course of conduct, course of dealing, statements (whether verbal or written) or actions of either party.

 

 

17.       Notice.  Except for routine day to day business communications, any notice or communication required hereunder shall be in writing and given by personal delivery or delivery service or sent by regular, registered, or certified mail, postage prepaid to the addressee at the address shown below or at the most current address that the party has from time to time designated in writing.

 

 

18.       Term. This Agreement shall be effective from the date hereof and shall continue in full force and effect for a period of one (1) year and shall be deemed renewed from year to year thereafter unless terminated by Seller by delivery of written notice of termination, by registered or certified mail, not less than ninety (90) days prior to the last date of me then current term. Factor or Seller shall be entitled to terminate this Agreement at any time by giving thirty (30) days prior written notice. In addition, Factor shall have the right for any reason or no reason to terminate mis Agreement at any time without prior written or oral notice upon the occurrence of an Event of Default. Upon the effective date of termination, all of Seller's obligations, whether incurred under this Agreement or any amendment or supplement thereto or otherwise, shall become immediately due and payable without notice or demand.   Notwithstanding any termination, until all of Seller's obligations of every nature whatsoever shall have been fully paid and satisfied, Factor shall retain Factor's security interest in and title to all existing and future Accounts and other Collateral held by Factor hereunder. Until final termination following the notice thereof, Seller shall continue to offer all Accounts to Factor and Factor shall be under no obligation to make any further Advances or purchase any Account. Any termination of this Agreement shall not serve to release any security interest granted herein until all Accounts purchased hereunder and all indebtedness of Seller to Factor has been paid in full nor shall such termination affect any of the obligations incurred by the parties hereto.

 

 

19.       Indemnification. Seller shall indemnify, defend and save Factor harmless from and against any and all liability, claims, suits, demands, damages, judgments, costs, interest and expenses (including, but not limited to attorney's fees and costs) to which Factor may be subject including any loss arising out of the assertion of any Claim that is made by a party-in-interest in a bankruptcy proceeding that any payment received by Factor from or for the account of an Account Debtor is avoidable under the Bankruptcy Code or any other debtor relief statute or suffer by reason of any liability or claim arising or resulting from Seller's acts or omission to do any act. This paragraph 19 shall survive termination of this Agreement.

 

 

9

 

20.       Binding on Future Parties. The terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors and assigns.   Seller may not assign mis Agreement or any of Seller's rights hereunder to any person without Factor's prior written consent and this Agreement shall be deemed to be one of financial accommodation and not assumable by any debtor, trustee or debtor-in-possession in any bankruptcy proceeding without Factor's express written consent and may be suspended in the event a petition in bankruptcy is filed by or against Seller.

 

 

21.       No Waiver. No failure or delay by Factor in exercising any of Factor's powers or rights hereunder, or under any present or future supplement hereto or under any other agreement between Factor and Seller shall operate as a waiver thereof; nor shall any single or partial exercise of any such power or right preclude other or further exercise thereof or the exercise of any other right or power. Factor's rights, remedies and benefits hereunder are cumulative and not exclusive of any rights, remedies or benefits which Factor may have. No waiver by Factor of any provision hereunder shall be deemed to extend to any other provision hereunder.

 

 

22.       Severability. Each and every provision, condition, covenant and representation contained in this Agreement is and shall be construed to be a separate and independent covenant and agreement. In the event any term or provision of this Agreement shall to any extent be declared illegal, contrary to law, invalid or unenforceable, the remainder of this Agreement shall not be affected thereby and this Agreement shall continue in full force and effect as though such term or provision had not been incorporated herein.

 

 

23. Miscellaneous.

 

 

(a)           This Agreement is deemed made and shall be governed, interpreted and construed in accordance with the laws of the State of Texas.

 

 

(b)           Factor's books and records shall be admissible in evidence without objection as conclusive evidence of the status of the obligations between Factor and Seller. Each statement, report, or accounting rendered or issued by Factor to Seller shall be deemed conclusively accurate and binding on Seller unless within thirty (30) days after the date of issuance Seller notifies Factor to the contrary by registered or certified mail, setting forth with specificity each reason why Seller believes such statement, report, or accounting or any portion thereof is inaccurate, what Seller believes to be correct amounts) therefor, and supplies detailed, written support for Sellers objection(s).  Seller's failure to receive any monthly statement shall not relieve it of the responsibility to request such statement and Seller's failure to do so shall nonetheless bind Seller to whatever Factor's records would have reported.

 

 

(c)           Any legal proceeding with respect to any controversy arising under, out of, or relating to, this Agreement, any amendment or supplement thereto or to any transactions in connection therewith whether asserted by way of claim, counterclaim, cross claim or otherwise shall be brought and litigated only in the State of Texas, Dallas County or in any county in which Factor has a business location, the selection of which shall be in the exclusive discretion of Factor.   Seller hereby waives and agrees not to assert, by way of motion, as a defense or otherwise, that any such proceeding, is brought in any inconvenient forum or that the venue thereof is improper.

 

 

10

 

 

(d)           Seller expressly authorizes Factor to access the systems of and/or communicate with any shipping or trucking company in order to obtain or verify tracking, shipment or delivery status of any merchandise regarding an Account.

 

 

(e)           Seller acknowledges mat there is no, and it will not seek or attempt to establish any, fiduciary relationship between Factor and Seller, and Seller waives any right to assert, now or in the future, the existence or creation of any fiduciary or joint venture relationship between Factor and Seller in any action or proceeding (whether by way of claim, counterclaim, cross claim or otherwise) for damages.

 

 

(f)           This Agreement is a complete and final agreement, reflects Seller's and Factor's mutual understanding, supersedes any prior agreement or understanding between the parties, and may not be modified or amended orally. But for the promises and representations expressly contained in this Agreement, no other promise or representation of any kind has been made to induce either party to execute mis Agreement. Furthermore, Seller and Factor acknowledge that if any such promise or representation has been made, neither has relied, nor shall either be entitled to rely, upon any such promise or representation in deciding to enter into this Agreement.

 

 

(g)           In the event Seller's principals, officers or directors form a new entity, whether corporate, partnership, limited liability company or otherwise, similar to that of Seller during the term of this Agreement or merge into any other entity (regardless of whether Seller is the surviving entity), such entity shall be deemed to have expressly assumed the obligations due Factor by Seller under this Agreement. Upon the formation of any such entity, Factor shall be deemed to have been granted an irrevocable power of attorney with authority to execute, on behalf of the newly formed successor business, a UCC financing statement or amendment and have it filed with the appropriate secretary of state or UCC filing office.  Factor shall be held-harmless and be relieved of any liability by Seller or such new entity as a result of Factor's filing any UCC financing statement or the resulting perfection of a lien in any of the successor entity's assets. In addition, Factor shall have the right to notify the successor entity's account debtors of Factor's lien rights, its right to collect all Accounts, and to notify any new lender who has perfected a lien in such successor entity's assets.

 

 

(h) Seller acknowledges that Factor may obtain financing from a bank or other financial institution and in connection herewith: (a) consents to Factor's granting such financial institution a security interest in all of it's rights under Agreement, the documents executed in connection therewith and all collateral thereunder: and (b) agrees that Such financial institution shall be a beneficiary of all its representations, warranties and covenants in this Agreement and may exercise any power of attorney given by Seller to Factor under this Agreement or otherwise.

 

 

(i) Seller and Factor hereby irrevocably waive any right either may have to a trial by jury in respect of any litigation directly or indirectly at any time arising out of, under or in connection with this Agreement or any transaction contemplated hereby or associated herewith. Seller irrevocably waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any such litigation any special, exemplary, punitive or consequential damages, or damages other than, or in addition to, actual damages. Seller certifies that no party hereto nor any representative or agent or counsel for any party hereto has represented, expressly or otherwise, or implied that such party would not, in the event of litigation, seek to enforce the foregoing waivers. Seller acknowledges that Factor has been induced to enter into this Agreement and the transactions contemplated hereby, in part, as a result of the mutual waivers and certifications contained in this paragraph.

 

 

11

 

24.       Paragraph Headings. The paragraph headings contained in this Agreement are for convenience only and shall in no way enlarge or limit the scope of meaning of the paragraphs hereof.

 

 

25.      Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were upon the same instrument.   Signatures may be affixed manually or digitally and delivery of an executed counterpart of the signature pages to this Agreement by facsimile or by electronic means shall be effective as delivery of a manually executed counterpart of this Agreement, and any party delivering such an executed counterpart of this Agreement or facsimile or electronic means to any other party shall thereafter also promptly deliver a manually executed counterpart of this Agreement to such other party, provided that the failure to deliver such manually executed counterpart shall not affect the validity, enforceability or binding effect of this Agreement.

 

 

SELLER

 

This counterpart constitutes an original counterpart for purposes of perfection of a security interest.

 

 

STATE OF CA                                                 COUNTY OF ___________________________

 

The foregoing  instrument   was    acknowledged    before   me  this ____ day of ____________________, by  ____________________ of

___________________ , on behalf of the Corporation. He is personally known to me or who provided___________________________ as identification.

 

 

SEE ATTACHED 

NOTARY CERTIFICATE

 

___________________________

Notary Public

 

 

 

  

12

  

 

		
Liquid

Capital

FINANCING SUCCESS

 

Discount Rate Schedule 

 

Schedule 1

 

 

	
a.

	
Initial Rate

	
3%

 

	
b.

	
Initial Rate Period

	
30 Days

 

	
c.

	
Further Rate

	
1 /10 of 1 %

 

	
d.

	
Further Rate Period

	
Day(s)

 

	
c.

	
Maximum Amount

	
1.800,000 Dollars

 

	
f.

	
Minimum Charge Per Invoice

	
  

 

	
g.

	
Per Invoice Fee

	  

 

Temporarily, until a cash reserve to cover payments to growers 

accumulates, the advance rate will be up to 90% of the face value 

of invoices.ex10-2.htm

Exhibit 10.02

LOAN AGREEMENT

 

This LOAN AGREEMENT (this “Agreement”), is executed as of November 16, 2010, by and between ORGANIC ALLIANCE, INC., a Nevada corporation (the “Company”), and THEOREM CAPITAL, LLC, a California limited liability company (the “Lender”).

 

WHEREAS, the Company currently still owes (i) Parker Booth $228,794.10 under a Promissory Note issued by the Company on August 13, 2010, and (ii) Michael J. Rosenthal $55,902.28 under a Promissory Note issued by the Company on August 13, 2010 (the foregoing two Promissory Notes are herein referred to as the “Promissory Notes”); and

 

WHEREAS, following the loan transaction contemplated by this Agreement, the Company intends to effect a reorganization (the “Reorganization”) in which it will amend its Articles of Incorporation to increase the number of shares of common stock the Company is authorized to issue to two billion shares; and

 

WHEREAS, following the Reorganization, the Company intends to effect a reverse stock split (currently anticipated to be a 1-for-20 reverse stock split) (the “Reverse Split”); and

 

WHEREAS, the Company desires to obtain a $500,000 loan in order repay approximately $372,000 of outstanding accounts payable to certain of the Company’s suppliers, and to fund its short-term working capital requirements; and

 

WHEREAS, the Lender is willing to provide such financing on terms and conditions as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Lender, intending to be legally bound, agree as follows:

 

1.           Definitions

 

1.1           Defined terms.  Certain capitalized terms used in this Agreement shall have the specific meanings defined below:

 

“Business Day” shall mean a day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required by the laws of the State of California to close.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” shall mean the common stock of the Company.

 

“Default Rate” shall mean the lower of (a) the highest rate permitted by law, or (b) 21.00% per annum.

 

  

  

  

“Escrow Agreement” shall mean that certain Agreement, dated as of the Loan Closing Date, between the Lender, the Company and Ottone Leach Olsen & Ray LLP, as escrow holder, the form of which is attached hereto as Exhibit C.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Five-Year Warrant” shall mean the common stock purchase warrant, substantially in the form attached hereto as Exhibit D-2, issued by the Company to the Lender on the Loan Closing Date in accordance with Section 7.1 below.

 

“Interest Rate” shall mean the lower of (a) the highest rate permitted by law, or (b) 15.00% per annum.

 

“Liquid Agreement” shall mean the agreement between the Company and its lender, Liquid Capital Exchange, Inc.

 

“Loan Closing Date” has the meaning set forth in Section 2.6.

 

“Second Amendments” shall mean the Second Amendment To The Settlement Agreement to be entered into by the Company and all of the parties to the Settlement Agreements as a condition to the release of funds under the Escrow Agreement.

 

 “Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Settlement Agreements” shall mean the Settlement Agreements entered into in September 2010 by the Company and the following thirteen suppliers, brokers and vendors: Steve Almquist Sales and Beverages, Dan Andrew Farms, Inc., Fresh Network, Full Circle Sales, Inc., Giumarra Agricom International, LLC, Growers Express, LLC, Mesa Packing, Peri & Sons Farms, Inc., Potandon Produce, LLC., Quebec Distributing Co., Inc., Steinbeck Country Produce, Inc., Strebin Farms – LA. Inc and Tri-Fresh LLC.

 

“Three-Year Warrant” shall mean the common stock purchase warrant, substantially in the form attached hereto as Exhibit D-1, issued by the Company to the Lender issued by the Company to the Lender on the Loan Closing Date in accordance with Section 7.1 below.

 

“Warrants” shall collectively mean the Three-Year Warrant and the Five-Year Warrant.

 

2.           The Loan

 

2.1           Loan.  According to the terms and subject to the conditions of this Agreement, the Lender shall make a loan to the Company on the Loan Closing Date in the amount of $500,000 (the “Loan”).  The Loan shall be evidenced by a promissory note in the form attached hereto as Exhibit A (“Note”), duly executed on behalf of the Company and dated as of the Loan Closing Date.

 

2.2           Interest.  The Loan shall bear interest (“Interest”) from the date of payment by the Lender until the Maturity Date (as defined below) at the Interest Rate.  Interest shall accrue for the first 180 days following the Loan Closing Date.  Thereafter, Interest shall be payable by the Company on a monthly basis in arrears on the first Business Day of the month.

 

  

2

  

2.3           Prepayment of the Loan.  The Company may from time to time prepay all or any portion of the Loan without premium or penalty of any type.  Once any portion of the Loan has been repaid, the funds may not be re-borrowed.

 

2.4           Maturity Date.  Unless the Loan is earlier accelerated pursuant to the terms hereof, the Loan and all accrued Interest thereon shall be due and payable in full 18 months from the Loan Closing Date (the “Maturity Date”).

 

2.5           Principal and Interest Payments.  No payments shall be due and payable under the Loan during the first 180 days following the Loan Closing Date.  After the 180th day following the Loan Closing Date, the Company shall make twelve (12) monthly payments of principal and interest on a monthly basis, payable in arrears, in accordance with the payment schedule attached hereto as Exhibit B.

 

2.6           Closing.  The closing of the Loan hereunder (the “Closing”) shall take place at 10:00 A.M. local time on the first (1st) Business Day following the date that this Agreement is executed and delivered, or such other date as the parties may mutually determine (the “Loan Closing Date”).

 

3.           Conditions Precedent to the Loan; Funding

 

3.1           Conditions on the Loan Closing Date.  The obligation of the Lender to make the Loan pursuant to Section 2.1 shall be subject to the satisfaction or waiver on or before the Loan Closing Date of the conditions set forth in this Section.  If the conditions set forth in this Section are not met or waived on or prior to the Loan Closing Date, the Lender shall have no obligation to make the Loan.

 

(a)           The Company shall have duly executed and delivered to the Lender the Note representing the Loan.

 

(b)           The Company shall have delivered to the Lender the Escrow Agreement, executed by Ottone Leach Olsen & Ray LLP and by the Company.

 

(c)           The Lender shall have received the fully executed original Three-Year Warrant and the Five-Year Warrant.

 

(d)           Each of Parker Booth and Michael J. Rosenthal shall have executed and delivered a Subordination and Exchange Agreement, the form of which is attached hereto as Exhibit E, pursuant to which they shall agree to (i) subordinate the repayment by the Company of their Promissory Notes to the repayment in full of the Note, and (ii) exchange the remaining outstanding balance of the Promissory Notes for shares of Common Stock, which shares of Common Stock shall be valued at the price paid by third party investors for Common Stock (or the Common Stock equivalent price) in the sale of securities by the Company in a bona fide financing transaction following the Closing Date (other than the sale of shares upon the exercise or conversion of options, warrants or similar instruments outstanding as of the Closing Date).

 

  

3

  

(e)           The Lender shall have received such other documents, certificates, or other materials as it reasonably requests from the Company with respect to the transaction contemplated by Agreement, the Note, and the Warrants.

 

3.2           Funding.  Conditioned upon the satisfaction or waiver of the conditions set forth in Section 3.1 above, the Lender shall, on the Loan Closing Date, deliver to the escrow holder under the Escrow Agreement, $500,000, less the amount of the Lender’s attorney’s fees payable by the Company under Section 8.7 below.

 

4.           Representations and Warranties

 

4.1           Due Incorporation and Good Standing.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, with full and adequate power to carry on and conduct its business as presently conducted, and is duly licensed or qualified in all foreign jurisdictions wherein the failure to be so qualified or licensed would have a material adverse effect on the business of the Company.

 

4.2           Due Authorization.  The Company has full right, power and authority to (i) enter into this Agreement, the Escrow Agreement, and Subordination and Exchange Agreement, (ii) make the borrowings hereunder and execute and deliver the Note as provided herein, and (iii) perform all of its duties and obligations under this Agreement, the Escrow Agreement, the Subordination and Exchange Agreement, the Note, and the Warrants.  The execution and delivery of this Agreement, the Note, and the Warrants will not, nor will the observance or performance of any of the matters and things herein or therein set forth, violate or contravene any provision of law or the Company’s bylaws or certificate of incorporation.  All necessary and appropriate corporate action on the part of the Company has been taken to authorize the execution and delivery of this Agreement, the Note and the Warrants.  Concurrently with the execution of this Agreement, the Company will deliver to the Lender a copy of the minutes of the meeting of the Company’s Board of Directors (or its unanimous written consent) authorizing the Company to enter into this Agreement, the Note and the Warrants, to make the borrowings as provided herein, and to perform all of its duties and obligations under this Agreement, the Note and the Warrants.

 

4.3           Enforceability.  The Company has duly executed and delivered this Agreement, and at the Closing the Company will have duly executed and delivered the Note, Escrow Agreement, Subordination and Exchange Agreement, and the Warrants.  This Agreement is, and on the Loan Closing Date each of the Note and the Warrants will be, the legal, valid and binding obligations of the Company, enforceable against it in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ right and to the availability of the remedy of specific performance.

 

4.4           Capitalization.  All of the Company’s authorized and outstanding equity securities (including securities convertible into equity securities, and options and warrants exercisable for the purchase of equity securities) as of the date hereof are identified on Schedule A attached hereto.  Other than as set forth on Schedule A, as of the date hereof there are no outstanding shares of capital stock or any options, warrants or other preemptive rights, rights of first refusal or similar rights to purchase equity securities of the Company.

 

  

4

  

4.5           Compliance with Laws.  The nature and transaction of the Company’s business and operations and the use of its properties and assets do not, and during the term of this Agreement shall not, violate or conflict with in any material respect any applicable law, statute, ordinance, rule, regulation or order of any kind or nature.

 

4.6           Absence of Conflicts.  The execution, delivery and performance by the Company of this Agreement, the Note, and the Warrants, and the transactions contemplated hereby and thereby, do not constitute a breach or default, or require consents under, any agreement, permit, contract or other instrument to which the Company is a party, or by which the Company is bound or to which any of the assets of the Company is subject, or any judgment, order, writ, decree, authorization, license, rule, regulation, or statute to which the Company is subject, except to the extent waived under the Second Amendments.

 

4.7           Litigation and Taxes.  There is no litigation or governmental proceeding pending, or to the knowledge of the Company, threatened, against the Company.  The Company has duly filed all applicable income or other tax returns and has paid all material income or other taxes when due.  There is no controversy or objection pending, or to the knowledge of the Company, threatened in respect of any tax returns of the Company.

 

4.8           Financial Statements; SEC Reports.  The financial statements of the Company included in the reports the Company has filed with the Commission under the Securities Act and the Exchange Act of 1934, as amended, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as the Company was required by law to file such reports) (the foregoing materials being collectively referred to herein as the “SEC Reports”), have been prepared in accordance with GAAP applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

4.9           Company Knowledge and Experience.  The Company (together with its accountants, legal counsel and other representatives with whom it has consulted in connection with this Agreement) has such knowledge, experience and access to professional advice in financial and business matters, including loans like the Loan, to be capable of evaluating the risks and merits of receiving the Loan pursuant to this Agreement, and the Company has obtained such professional third-party advice concerning the Loan and the transactions contemplated hereby as it has desired and deemed prudent.

 

  

5

  

4.10           Representations and Warranties by the Lender.   The Lender represents and warrants to the Company as follows:

 

4.10.1 The Lender is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act.  Except as provided in Section 8.1, the Note and the Warrants (collectively, the “Securities”) will be acquired for investment for the Lender’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the federal or state securities laws, and the Lender has no present intention of selling, granting any participation in, or otherwise distributing the same.

 

4.10.2 The Lender acknowledges that (a) it has received and reviewed the SEC Reports, (b) it has received or has had full access to all the information the Lender considers necessary or appropriate to make an informed decision with respect to the purchase of the Securities pursuant to this Agreement, and (iii) it has had an opportunity to ask questions and receive answers from the Company regarding the Company’s financial performance and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Lender or to which the Lender had access.

 

5.           Covenants

 

5.1           Negative Covenants of the Company.  The Company covenants and agrees that from the Loan Closing Date until the Note has been repaid in full (including all Interest thereon), without the consent of the Lender, the Company will not:

 

5.1.1           create, incur, assume or suffer to exist, without the Lender’s prior written consent, which consent the Lender may withhold in its sole and absolute discretion, any secured indebtedness for borrowed money that is in any way senior or superior to the Note (other than indebtedness arising from or related to the Liquid Agreement);

 

5.1.2           merge or consolidate with or into any other corporation after which the holders of the Company’s voting securities immediately prior to such transaction own less than fifty (50%) percent of the voting power of the surviving entity in the transaction, or sell or otherwise convey 50% or more of its assets (other than the sale of accounts receivable pursuant to the Liquid Agreement, or sales of inventory in the ordinary course of business);

 

5.1.3           engage in any business that is not substantially similar or related to the business conducted by the Company on the Loan Closing Date;

 

5.1.4           declare, set aside or pay any dividend or other distribution on any of its capital stock;

 

5.1.5           engage in any material transaction with any Affiliate (as such term is defined in Rule 501(b) of the Securities Act) on terms less favorable to the Company than could reasonably be obtained from an unrelated party;

 

5.1.6           repay any portion of the Promissory Notes except as permitted under the Subordination and Exchange Agreement;

 

  

6

  

5.1.7           amend its Articles of Incorporation or Bylaws in any manner that adversely affects the rights associated with this Agreement, the Common Stock issuable upon the exercise of the Warrants, or the Warrants; or

 

5.1.8           voluntarily prepay in whole or in part, or modify, any indebtedness for borrowed money outstanding on the Loan Closing Date, prior to the repayment of the Note in full, other than indebtedness arising from the Liquid Agreement and payment made pursuant to that certain demand note, dated November 3, 2010, in the principal amount of $38,261,64, issued by the Company and bearing interest at 5% per annum (the “Outstanding Note”).

 

The Company will give notice to the Lender of any default under any provisions of this Agreement within three Business Days after the discovery by the Company of such default.

 

5.2           Affirmative Covenants of the Company.  The Company covenants and agrees that, from the Loan Closing Date until the earlier of the Maturity Date or the date final payment of the Note is made (and, in any event, during such time as any portion of the Loan or any Interest thereon is outstanding), the Company shall:

 

5.2.1           comply with all of the Company’s obligations under the Settlement Agreements (as amended by the Second Amendments);

 

5.2.2           operate its business only in the ordinary course, and conduct all transactions with third parties, including affiliates of the Company, on an arm’s length basis;

 

5.2.3           cause to be done all things reasonably necessary to maintain, preserve and renew its corporate existence and all material licenses, authorizations and permits necessary to the conduct of its businesses;

 

5.2.4           comply with the Subordination and Exchange Agreement; and

 

5.2.5           comply in all material respects with all applicable laws, rules and regulations of all governmental authorities, the violation of which could reasonably be expected to have a material adverse effect on its business, properties or prospects.

 

6.           Default

 

6.1           Events of Default.  The occurrence of any of the following events (each, an “Event of Default”), not cured in the applicable cure period, if any, shall constitute an Event of Default of the Company:

 

6.1.1           a breach of any representation, warranty, covenant or other provision of this Agreement, the Note or the Warrants, which, if capable of being cured, is not cured within five calendar days following the earlier of (i) notice thereof to the Company and (ii) the Company becoming aware of such breach;

 

6.1.2           the failure to make when due any payment described in this Agreement or the Note whether on or after the Maturity Date, by acceleration or otherwise;

 

  

7

  

6.1.3           the failure of the Company to complete the Reorganization within 60 days after the Loan Closing Date;

 

6.1.4           the failure by the Company to receive, on a cumulative basis during the period commencing on the Loan Closing Date and ending on June 30, 2011, a total of $1,000,000 or more of funding from the sale of the Company’s common stock or preferred stock (the “Financing”) (in the event that the Company has not raised at least an aggregate of $1,000,000 of equity funding by June 30, 2011, an Event of Default may be declared by the Lender during the 60-day thereafter commencing on July 1, 2011);

 

6.1.5           the Company breaches the terms of any Settlement Agreement (as amended by the Second Amendments);

 

6.1.6           the Company uses the proceeds of the Loan in a manner other than as set forth in Section 5.2.1;

 

6.1.7           the failure by the Company to recognize, in accordance with GAAP, on a cumulative basis during the period commencing on the Loan Closing Date and ending on the 60th day thereafter, a total of $1,000,000 or more of revenues (in the event that the Company has not received $1,000,000 of revenues by the 60th day following the Loan Closing Date, an Event of Default may be declared by the Lender within 60 days thereafter);

 

6.1.8           the occurrence and continuance of an Event of Default under, and as defined in, the Liquid Agreement; or

 

6.1.9           (i) the application for the appointment of a receiver or custodian for the Company or the property of the Company and same is not dismissed within 90 days of the making of such application, (ii) the entry of an order for relief or the filing of a petition by or against the Company under the provisions of any bankruptcy or insolvency law and same is not dismissed within 90 days of such filing, (iii) any assignment for the benefit of creditors by or against the Company, or (iv) the Company becomes insolvent.

 

6.2           Effect of Default.  Upon the occurrence and during the continuance of any Event of Default that is not cured within any applicable cure period, (a) the exercise price of the Five-Year Warrant shall automatically be reduced to $0.01 per share (and the exercise price shall remain at $0.01 per share, notwithstanding the Reverse Stock Split), and (b) the Lender may elect, by written notice delivered to the Company, to take any or all of the following actions:  (i) declare this Agreement terminated and the outstanding amounts under the Note to be forthwith due and payable, whereupon the entire unpaid Loan, together with accrued and unpaid Interest thereon, and all other cash obligations then due hereunder, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Company, anything contained herein or in the Note to the contrary notwithstanding, and/or (ii) exercise any and all other remedies provided hereunder or available at law or in equity upon the occurrence and continuation of an Event of Default.  In addition, during the occurrence of any Event of Default, the Company shall not pay make any payment on any other outstanding indebtedness for borrowed money of the Company (other than indebtedness, if any, of the Company to which the Lender has agreed in writing may be paid).

 

  

8

  

7.           Warrants

 

7.1           Issuance of Warrants.  In connection with the funding of the Loan, on the Loan Closing Date the Company shall issue the Warrants to the Lender.  Each Warrant shall entitle the Lender to purchase a number of shares of Common Stock equal to 10% of the sum of all shares, on a fully diluted, converted and exercised basis, listed on the updated Schedule A capitalization table that is delivered on the Loan Closing Date as part of the officers’ certificate described in Section 3.1(e).   The Warrants shall have the following provisions:

 

7.1.1           Three-Year Warrant.   The Three-Year Warrant shall be exercisable during the three-year period following the Loan Closing Date at an exercise price of $0.01 per share, which exercise price shall not be increased as a result of the Reverse Stock Split.

 

7.1.2           Five-Year Warrant.  The Five-Year Warrant shall be exercisable during the five-year period following the closing of a Financing at an exercise price equal to the price at which the Company issues shares in the Financing.  If an Event of Default occurs, the exercise price of the Five-Year Warrant shall automatically decrease to, and thereafter remain at $0.01 per share (which exercise price shall not be increased or affected by the Reverse Stock Split).

 

7.2           Registration Rights.  The Lender shall have the registration rights provided in Section 3 of the Warrant, “Registration Rights,” consisting of one demand registration right, and unlimited piggy-back registration rights.

 

7.3           Net Issue Exercise.  If the Lender exercises a Warrant on a Net Issue Exercise basis as provided therein, then at the Lender’s request, the Company will cause to be delivered to the Company’s transfer agent an opinion of counsel that the holding period under Rule 144 with respect to any Warrant Shares (as defined in the Warrant) issued to the Lender as a result of such Net Issue Exercise commenced as of the date of issuance of the Warrant, provided that the provisions of Rule 144 in effect at the time of such exercise support such an opinion.

 

8.           Miscellaneous

 

8.1           Successors and Assigns; Participations.  Subject to the exceptions specifically set forth in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators, heirs, successors and assigns of the parties.  This Agreement may be assigned solely by the Lender.  Furthermore, although this Agreement, the Note and the Warrants name the Lender as the holder thereof and/or the lender thereunder, the Lender is authorized to sell participation interests in the Loan to one or more other persons or entities provided that such sale or transfer is in compliance with all securities laws.  The Company agrees that:  (a) each holder of a participation interest will be entitled to rely on the terms of this Agreement, the Note and the Warrants as if such holder had been named as an original party hereto and thereto; provided, however, for purpose of clarity, only the Lender is entitled to exercise the rights pursuant to Section 6.2; and (b) the Lender is authorized to provide all information furnished by the Company to the Lender pursuant hereto to each holder of a participation interest, subject to the same restrictions and confidentiality obligations to which the Lender is subject.

 

  

9

  

8.2           Titles and Subtitles.  The titles and subtitles of the Sections of this Agreement are used for convenience only and shall not be considered in construing or interpreting this agreement.

 

8.3           Notices.  Any notice, request or other communication required or permitted hereunder shall be in writing and shall be delivered personally or by facsimile (receipt confirmed electronically) or shall be sent by a reputable express delivery service or by certified mail, postage prepaid with return receipt requested, addressed as follows:

 

	
if to the Company, to:

 

ORGANIC ALLIANCE, INC.

401 Monterey Street, Suite 202

Salinas, CA 93901

Attn:   Parker Booth

Facsimile:

 

	
with a copy (which shall not constitute notice) to:

 

Breslow & Walker, LLP

100 Jericho Quadrangle, Suite 230

Jericho, New York 11753

Facsimile: (516) 822-6544

Attn:  Len Breslow

	
if to the Lender, to:

 

THEOREM CAPITAL, LLC

10880 Wilshire Blvd., Suite 950

Los Angeles, CA 90024

Attn:           Anshuman (Andy) Dube

Fax:           (310) 500-2151

	
with a copy to:

 

TroyGould PC

1801 Century Park East, Suite 1600

Los Angeles, CA 90067

Facsimile: (310) 789-1426

Attention: Istvan Benko

 

Either party hereto may change the above specified recipient or mailing address by notice to the other party given in the manner herein prescribed.  All notices shall be deemed given on the day when actually delivered as provided above (if delivered personally or by facsimile, provided that any such facsimile is received during regular business hours at the recipient’s location) or on the day shown on the return receipt (if delivered by mail or delivery service).

 

  

10

  

8.4           Governing Law.  This Agreement shall be governed by and construed in accordance with the domestic laws of the State of California without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.

 

8.5           Waiver and Amendment.  Any term of this Agreement may be amended, waived or modified with the written consent of the Company and the Lender.

 

8.6           Remedies.  No delay or omission by the Lender in exercising any of its rights, remedies, powers or privileges hereunder or at law or in equity and no course of dealing between the Lender and the undersigned or any other person shall be deemed a waiver by the Lender of any such rights, remedies, powers or privileges, even if such delay or omission is continuous or repeated, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise thereof by the Lender or the exercise of any other right, remedy, power or privilege by the Lender.  The rights and remedies of the Lender described herein shall be cumulative and not restrictive of any other rights or remedies available under any other instrument, at law or in equity.

 

8.7           Expenses.  The Company shall pay all customary costs and expenses incurred by the Lender in connection with the negotiation and preparation of the documents contemplated by this Agreement and the Loan closing (including the Lender’s reasonable attorneys’ fees).

 

8.8           Integration.  This Agreement, along with the Note and the Warrants, constitutes the complete and exclusive agreement between the Company and the Lender with respect to the subject matter herein and replaces and supersedes any and all other prior written and oral agreements or statements by such parties hereto relating to such subject matter, including, without limitation, that certain letter dated October 14, 2010.

 

8.9           Prevailing Party.  If either party hereto brings any legal suit, action or proceeding against the other party arising out of, relating to, or concerning the interpretation or the enforcement of rights and duties hereunder or any transaction related hereto (collectively, an “Action”), the losing party shall pay to the prevailing party a reasonable sum for attorneys’ fees and shall reimburse all costs (whether or not such costs are otherwise recoverable under the provisions of the California Code of Civil Procedure or other statutory law of California or any other jurisdiction) incurred in connection with the prosecution or defense of such Action and/or enforcement of any judgment, order, ruling or award granted therein, all of which shall be deemed to have accrued on the commencement of such Action and shall be paid whether or not such Action is prosecuted to a judgment, order, ruling or award.

 

  

11

  

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed in its name on the date first set forth above.

 

 

	  	
ORGANIC ALLIANCE, INC.

 

 

By:                                                             

Parker Booth

Chief Executive Officer

 

 

	  	
THEOREM CAPITAL, LLC

 

 

By:                                                                                                                        

Anshuman (Andy) Dube

Manager

 

 

  

12

  

SCHEDULE A

CAPITALIZATION OF THE COMPANY

 

See attached.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Schedule A-1

  

 

EXHIBIT A

PROMISSORY NOTE

 

See attached.

 

 

 

 

 

 

 

 

  

Exh A-1

  

EXHIBIT B

PAYMENT SCHEDULE

 

See attached.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Exh B-1

  

EXHIBIT C

 ESCROW AGREEMENT

 

See attached.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Exh C-1

  

EXHIBIT D

COMMON STOCK PURCHASE WARRANT

 

See attached.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Exh C-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00186-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00186-of-00352.parquet"}]]