30. Relevant portions of the various agreements: 1. Convertible Note: Page 1 of Exhibit D, the last paragraph states "[[Jor value received, the Company [Arrayit] hereby promises to pay to the order of Iconic Holdings, LLC or its registered assigns or successors-in-interest ("Holder") the Principal Sum of $540,535.91 (the "Principal Sum") and to pay "guaranteed" interest on the principal balance hereof at an amount equivalent to 10% of the Principal Sum, to the extent such Principal Sum and "guaranteed" interest and any other interest, fees, liquidated damages and/or items due to Holder herein have been repaid OR converted into the Company's Common Stock ... " Thus, the conversion is discretionary and Rene Schena Declaration ISO Ex Parte Application For TRO and OSC re: Preliminary Injunction the Convertible Note contemplates Arrayit's ability to repay any outstanding amounts with money.
Section 1.00(a) confirms that Iconic has the right to convert at its option. Arrayit contends the Convertible Note has been satisfied and the Iconic's current attempt to convert shares is unlawful and should be precluded.
ii. Security Agreement: Exhibit E, page 2, Section 2 entitled "Grant of Security Interest" states "[a]s collateral security for the prompt and complete payment when due of the Arrayit Obligation [the amount owed under the Convertible Note] the Debtor [Arrayit] hereby grants to the Secured Party [Iconic] a security interest in Six Million Six Hundred Thousand (6,600,000) Shares of common stock of Avant Diagnostics, Inc that were issued in the Debtor's name on March 2,2015. (the "Collateral").
iii. Subordination Agreement:
1. Exhibit F, page 2, Section 2 states that " ... Subordinating Creditor [Iconic] does hereby fully and unconditionally subordinate: (i) any right to payment or distribution by or on behalf of the Credit Parties [to include Arrayit], directly or indirectly, of assets of the Credit Parties of any kind or character for or on account of the Subordinated Debt; and (ii) any and all security interests, liens, charges, encumbrances or other interests that Subordinating Creditor may have or obtain at any time in any assets or property of Credit Parties to secure the Subordinated Debt (the "Subordinating Creditor Liens") to the prior payment in full of the Senior Debt, and to TCA's Security Interest in the Collateral, and Subordinating Creditor agrees that until such time as the Senior Debt has been Discharged, any and all Subordinating Creditor Liens shall be junior and subordinate to TCA's Security Interest, and TCA's Security Interest shall be first, senior and prior to each of the Subordinating Creditor Liens." This Section means that the reserve shares currently in Iconic's name, which it refuses to release, are contractually obligated to TCA. Iconic has the sole and exclusive ability to release the 1.4 billion reserve shares pursuant to the Irrevocable Transfer Agent Instructions attached as Exhibit G. Iconic's refusal to release the 1.4 billion Arrayit reserve shares is a breach of the Subordination Agreement.
2. Exhibit F, page 6, Section 9(h) entitled "No Increase in Subordinating Creditor Debt states "Subordinating Creditor and Credit Parties hereby represent and Rene Schena Declaration ISO Ex Parte Application For TRO and OSC re: Preliminary Injunction warrant that the maximum amount of debt currently permitted under the Subordinated Debt existing as ofthe date hereof, or the documents or instruments evidencing same, is $540,535.91 in principal amount, plus accrued and unpaid interest thereon, together with costs of collecting same (collectively, the "Maximum Limit"). In this regard, Subordinating Creditor and Credit Parties hereby covenant and agree that the Subordinated Debt shall never exceed the Maximum Limit unless first approved in writing by TeA, which approval may be withheld or conditioned on TCA's sole and absolute discretion." Iconic's current request to convert shares totals well in excess of$540,535.91 and fails to take into account amounts made from selling the Collateral. Iconic has not requested TCA's written approval to go over the Maximum Limit, and therefore does not have written approval to go over the TCA Limit, in breach of the Subordination Agreement.
