EXHIBIT 10.19
INVESTMENT AGREEMENT
This
Investment Agreement (“Agreement”) dated as of
December 18,
2007,
is between ADVANCED BIOTHERAPY, INC., a Delaware corporation
(“Investor”),
and ORGANIC FARM MARKETING, LLC,
a
Wisconsin
limited liability company (the “Company”).
RECITALS
A.
The
Company has issued to Richard P. Kiphart
(“Kiphart”) a convertible note dated as of April
17, 2007, in the original principal amount of $1,000,000
(“April Convertible Note”), and an additional
convertible note dated as of June 14, 2007, in the original
principal amount of $625,000 (“June Convertible
Note”). The Company’s obligations under the April
Convertible Note and the June Convertible Note are secured by
a security interest in all of the Company’s personal
property and all proceeds and products thereof, pursuant to a
security agreement entered into by the Company in favor of
Kiphart (the “Kiphart Security
Agreement”).
B.
Concurrently
herewith at the request of the Company, the Investor will
arrange for The Northern Trust Company (“Bank”) of
Chicago, Illinois, to issue an irrevocable letter of credit
for the benefit of the Wisconsin Department of Agriculture,
Trade and Consumer Protection, the designee of the Company
(the “Letter of Credit”) as required by the State
of Wisconsin in order for the Company to distribute certain
dairy products. The Letter of Credit will be obtained on
behalf of the Company by the Investor pursuant to the terms of
this Agreement and the Reimbursement Agreement dated herewith,
as set forth in
Exhibit A hereto
(the “Reimbursement Agreement”). As collateral for
repayment of funds advanced under the Letter of Credit, the Bank
requires that the Investor enter into a pledge agreement
(“Pledge Agreement”) pursuant to which the Bank will be
granted a security interest in a certificate of deposit account
maintained by the Investor at the Bank.
C.
The
terms of payment of certain obligations by the Company to the
Investor under the Reimbursement Agreement will be evidenced
by a promissory note, as set forth in
Exhibit B hereto
(the “Promissory Note”).
D.
The
Company’s obligations under the Promissory Note and the
Reimbursement Agreement shall be secured by the
Company’s personal property and all proceeds and
products thereof pursuant to a security agreement as set forth
in
Exhibit C hereto
(the “Security Agreement”).
E.
The
Company also desires for the Investor to provide the Company
with a working capital loan in the aggregate principal amount
of $800,000 (“Working Capital Loan”), of which
$293,750 shall be used by the Company to redeem 23,850 Company
Units from CWBA-OFM, LLC.
F.
In
order to evidence the Working Capital Loan, the Company
desires to issue to Investor, subject to the terms and
conditions set forth herein, a convertible note of the Company
in the original principal amount of Eight Hundred Thousand
Dollars ($800,000.00) in the form of
Exhibit D hereto
(the “December Convertible Note”). The Company’s
obligations under the December Convertible Note also shall be
secured by the assets of the Company pursuant to the Security
Agreement.
G.
As
a condition to the Investor entering into the Pledge Agreement
and making the Working Capital Loan, the Investor requires
that the Company and Kiphart enter into an agreement in the
form of
Exhibit E hereto
(the “Intercreditor Agreement”) which provides, in
part, that the Promissory Note and the Investor’s security
interest shall be senior in priority to the April Convertible Note,
the June Convertible Note and the December Convertible Note, and
the December Convertible Note shall rank in the same
priority,
pari passu, with
the April Convertible Note and the June Convertible Note, and the
security interest held by Investor, except as otherwise provided
with respect to the Promissory Note, shall rank in the same
priority,
pari passu, with
the security interest granted by Company to Kiphart pursuant to the
Kiphart Security Agreement.
In
consideration of the foregoing recitals, and the mutual
representations, warranties and covenants contained
herein,
the parties hereto agree as follows:
ARTICLE
I
RECITALS
The
foregoing Recitals are incorporated by reference
herein.
ARTICLE
II
THE
CLOSING
2.1
Issuance of Promissory Note and December Convertible
Note .
Subject to the terms and conditions set forth here
in,
on the Closing Date, the Company shall issue to Investor, and
Investor shall acquire from the Company,
the Promissory Note and the December Convertible Note.
2.2
Closing .
The closing of the transactions contemplated by this Agreement (the
“Closing”) shall take place at the offices of the
Investor on December 18, 2007, or at such other
time and place as the parties hereto may agree and the conditions
set forth in Article III
have
been satisfied (the “Closing Date”). The Closing may be
accomplished by the delivery of signature pages by facsimile or
electronic mail, followed by delivery of original counterparts by
overnight courier.
2.3
Use of Proceeds at Closing .
On the Closing Date, the Company directs the Investor to wire the
sum of $293,750.00 (the “CWBA-OFM Payment”) of the
$800,000.00 Working Capital Loan directly to the escrow arranged by
counsel for CWBA-OFM LLC and the Company for the repurchase of
23,850 Units of the Company from CWBA-OFM, LLC, representing all of
its Units and interest in the Company. The amount of the CWBA-OFM
Payment shall be treated as part of the Working Capital Loan for
the benefit of the Company.
ARTICLE
III
CONDITIONS
TO CLOSING
The
obligation of Investor to consummate the transactions
described herein shall be subject
to the accuracy of all representations and warranties by the
Company contained herein and
in the documents delivered pursuant hereto and to the
performance by the Company of all the
terms and conditions on its part to be performed hereunder and
to the satisfaction of the following
conditions precedent on or prior to the Closing Date, any of
which may be waived by Investor
in Investor’s sole discretion.
3.1
Proceedings and Documents .
All proceedings to be taken prior to or on the Closing
Date in connection with the transactions contemplated
by
this Agreement shall have been
consummated, and all documents related
thereto
shall be reasonably satisfactory in form and
substance to Investor, and Investor shall have received copies of
all such documents which Investor
reasonably has requested in connection with said
transaction.
3.2
Organizational Documents .
A copy of the Company’s Articles of Organization
(including
all amendments), certified by the Department of Financial
Institutions of the State of Wisconsin, and a good standing
certificate for the Company
issued by the Department of Finan cial
Institutions of the State of Wisconsin dated not less than ten (10)
days prior to the Closing Date,
shall have been delivered to Investor.
3.3
Securities Law Matters; Investment Representations
.
Based in part on the rep resentations
and warranties of Investor set forth in Section 7.1, the Company
shall not be in violation of any provision of federal or state
securities laws applicable
to
any of the transactions contemplated by this
Agreement.
3.4
Board Resolutions: Operating Agreement .
The Investor shall have received a certificate
from the Company, dated the Closing Date and signed by the
president of the Company, certifying that (i) the resolutions of
the Board of Directors attached thereto approving the execution of
this Agreement, Promissory Note, the December Convertible Note and
all documents to be delivered pursuant hereto (the
“Related Documents”) and the consummation of the
transactions contemplated hereby and thereby,
and (ii) the copy of the Company’s Operating Agreement
dated as of February 23, 2007, as amended on April 17, 2007,
attached thereto (including all amendments, the “Operating
Agreement”), are each true, complete and correct and remain
unamended and in full force and effect as of
the Closing Date.
3.5
Reimbursement Agreement and Promissory Note .
The Investor shall have received the Reimbursement Agreement and
the Promissory Note, as set forth in
Exhibit A and
Exhibit B ,
respectively, duly executed
by the Company.
3.6
December Convertible Note .
The Investor shall have received the December Convertible Note, as
set forth in
Exhibit C hereto,
duly executed by the Company.
3.7
Security Agreement .
The Company shall have delivered to Investor a General
Business
Security Agreement, as set forth in
Exhibit D hereto,
duly executed by the Company,
pursuant to which the Company shall grant to Investor a security
interest in all of the Company’s
personal property and all proceeds and products thereof as security
for the Com pany’s
obligations under the Promissory Note, the Reimbursement Agreement,
and the December Convertible Note.
3.8
Intercreditor Agreements .
The Company and Kiphart shall have entered into and delivered to
the Investor the Intercreditor Agreement in the form of
Exhibit E.
3.9
Third-Party Consents .
The Company shall have received any and all consents from third
parties necessary or appropriate to enter into this Agreement and
consummate the transactions contemplated herein.
3.10
Amendment to Operating Agreement .
The Company and its members shall have delivered to the Investor a
duly executed amendment to the Operating Agreement
(“Amendment to Operating Agreement”), as set forth
in
Exhibit F hereto,
pursuant
to which the Investor shall not be bound by any Transfer
Value
(as defined in the Operating Agreement) to which it has not agreed
expressly in writing, and such Amendment also shall set forth the
matters described in Section 5.8 hereof.
3.11
Company Units Certificate .
The Company shall have delivered to Investor a certificate
representing 5,000 Company Units.
3.12
Bank Letter of Credit .
The Bank shall have committed, satisfactorily to Investor, to issue
the irrevocable Letter of Credit referred to in Recital B
above.
3.13
Joinder Agreement .
As a condition to the Investor receiving 5,000 Company Units
pursuant to the Reimbursement Agreement, the Company and the
Investor shall execute and deliver a Joinder Agreement, in form and
substance mutually acceptable to the Company and the Investor,
pursuant to which the Investor agrees to be bound by the terms and
conditions of the Operating Agreement as in effect on the date
hereof, and any amendments thereto to which Investor has consented
to in writing.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES
In
order to induce Investor to execute this Agreement, the
Company represents and warrants, as of the date hereof and as
of the Closing Date to, and covenants with, the Investor as
follows:
4.1
Existence and Rights .
The Company is a limited liability company, duly organ
ized
and existing under the laws of the State of Wisconsin. The Company
has all power, author ity
and rights to own its properties and to carry on its business. The
Company has the authority to
enter into and perform this Agreement and the Related Documents and
to issue the December Convertible Note and
the Units to be issued thereunder.
4.2
Agreement Authorized .
Neither the execution and delivery by the Company of
this
Agreement, the Promissory Note, the December Convertible Note and
the Related Documents nor the performance by the Company of any of
its obligations hereunder and thereunder is in contravention of, or
in conflict with, any
law or regulation or any term or provision of the Company’s
Articles of Organization or Operating Agreement. All actions and
all necessary approvals and consents for the due exe
cution
and delivery of this Agreement, the
Promissory Note, the
December Convertible Note and the Related Documents by the Company,
including the authorization and issuance of the Promissory
Note, the December Convertible Note and
any Units to be issued
thereunder have been duly and validly obtained or taken. No right
of the Company is impaired
or infringed upon by its execution and/or performance of this
Agreement, the Promissory Note, the December Convertible
Note and
the Related Documents. This Agreement, the
Promissory Note, the
December Convertible Note and the Related
Documents constitute the legal, valid and binding obligation of the
Company enforce able
against the Company in accordance with their respective terms,
subject only to bankruptcy, insolvency
and other laws which limit or qualify the rights of creditors
generally, and to the availability of specific performance,
injunctive relief or other equitable remedies.
4.3
Capitalization .
Prior to the issuance of the December Convertible Note, the
following
constitute all of the members and holders of Company Units, of
which there are an aggregate 68,850 Units issued and
outstanding:
Chad
Pawlak, Sr.
45,000
Units
CWBA-OFM,
LLC
23,850
Units
Except
for the April Convertible Note and the June Convertible Note
and except as set forth in
Schedule 4.3 attached
hereto, there are no presently existing options, calls, conversion
rights, appreciation rights, phantom units, warrants or other
rights to acquire Units in the Company or rights that appreciate in
accordance with the value of the equity or earnings of the Company.
Except as set forth in the
Operating Agreement, the Company has
no obligation to redeem or retire any of the Company’s Units.
All of the Units issued under the December Convertible Note will,
when issued, be duly authorized, validly issued and fully paid
and nonassessable
and free and clear of all liens and restrictions other than as
provided in the Operat ing
Agreement. There are no agreements, whether written or oral, with
respect to the voting, transfer or sale of the Company’s
Units except the Operating Agreement and this
Agreement.
4.4
Subsidiaries, Other Investments .
The Company has
no
subsidiaries or other investments
in any other business or corporation other than Grass Point Farms,
LLC, of which the
Company owns ninety-five percent (95%) of the outstanding
membership interests.
4.5
Litigation .
Except as disclosed in
Schedule 4.5 attached
hereto, there is no litigation or other legal, governmental
or regulatory proceeding pending or, to the Company’s
knowledge, threatened against or affecting the Company, and it is
not subject to any order, writ, jurisdiction, decree or demand of
any court or other governmental or regulatory authority
.
4.6
Intellectual Property .
Schedule 4.6 attached
hereto contains a correct and complete list
all
of the following:
(a)
patents
and patent applications;
(b)
registered
trademarks, registered
trade
names and applications therefor;
(c)
unregistered
trademarks
and trade names;
(d)
copyrights;
and
(e)
licenses
and franchises
currently
used or employed or proposed to be used or employed by the
Company (hereinafter referred
to as the “Intellectual Property”). The Company is
the sole owner of all of the Intellectual Property listed
on
Schedule 4.6 ,
and has not licensed any other parties to use any of such
Intellectual Property. To the Company’s knowledge, there are
no interference, opposition or cancellation
proceedings pending or threatened against the Company or the
Intellectual Property. To
the knowledge of the Company, the use of the Intellectual Property
or of any trade secrets, secret processes, inventions, processes or
formulas used or employed by the Company does not
infringe
upon the rights of any third party. No claim, suit or action
against the Company is pending or, to the Company’s
knowledge, threatened alleging that the Company is
infringing upon
the intellectual property rights of others.
4.7
No Undisclosed Liabilities; Financial Statements
.
The Company has delivered to Investor
an unaudited balance sheet dated December 31, 2006 and
October 31
,
2007, respectively (collectively, “Balance Sheets”),
and an unaudited
profit and loss statement for the calendar year 2006 and the ten
month period ended October 31,
2007. Except as reflected on the Balance S
heets
or as
described
in
Schedule 4.7 attached
hereto,
the Company has no obligations or liabilities, fixed or contingent,
of any nature whatsoever, except for those not required to be set
forth on the balance sheets in accordance with generally accepted
accounting principles. Except as described in
Schedule 4.7 ,
the foregoing
financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied and
present fairly, in all material respects, the financial
condition of the Company in accordance with generally accepted
accounting principles. Except
as set forth on
Schedule 4.7 ,
the Company has operated in the normal course and there
have
been no material adverse changes in the Company’s financial
condition, properties or prospects
since December 31, 2006.
4.8
Business Plan .
Except as described in
Schedule 4.8 attached
hereto, the information presented to Investor in the [October,
2006] Business Plan of the Company does not contain any material
misstatements of fact, and the discussions therein of the plans and
prospects for the Company were,
and remain, generally accurate in all material
respects.
4.9
Compliance with Other Instruments; Laws, Etc
. Except as disclosed in this Agreement or in a schedule to this
Agreement, the Company is not in
violation
of its Articles of Organization or Operating Agreement. The Company
is not in violation of any applicable law, statute or regulation of
any federal, state, municipal or other governmental or
quasi-governmental agency, board, bureau or body relating to the
conduct of its business and maintenance, ownership or operation of
its properties, or in violation or default with respect to any
order, license,
regulation or demand of any governmental agency, or in default
under any indenture, mortgage, lease, agreement or other instrument
under which the Company is obligated, except to the extent such
violation or default would not have a material adverse effect on
the Company. The
Company holds all licenses, permits, waivers, approvals and other
authorizations of, by or from all governmental authorities as
necessary for the conduct of its business and is conducting
its
business substantially in accordance with the terms and provisions
of such permits and author izations
and is not in default thereunder. Neither the execution nor the
delivery of this Agree me
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