EXHIBIT 10.69
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SUBSCRIPTION AGREEMENT AND INVESTOR QUESTIONNAIRE
This Subscription Agreement and Investor Questionnaire (the
"Agreement") is made and entered into as of the date set forth below by and
between the person or entity set forth on the signature page below (the
"Investor") and Performance Health Technologies, Inc. ("PHT").
RECITALS
WHEREAS, PHT has authorized the issuance and sale of PHT's equity units
up to an aggregate amount of $250,000 (the "Units"), in a private offering (the
"Offering") with each Unit, having a purchase price of $1,000, consisting of (i)
an unsecured convertible Note in the amount of $1,000 (collectively referred to
herein as the "Notes") and (ii) 6,000 warrants to purchase PHT common stock at
an exercise price of $0.50 per share (collectively referred to herein as the
"Warrants"); and
WHEREAS, the Investor desires to purchase Units on the terms set forth
herein;
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1. PURCHASE AND SALE OF NOTES
1.1 At the Closing (as defined below) the Investor shall purchase from
PHT and PHT shall sell to the Investor, subject to all of the terms and
conditions hereof, Units for the purchase price set forth on the signature page.
2. CLOSING
2.1 Date of Closing. The closing (the "Closing") of the purchase and
sale of the Units shall take place on any date subsequent to the date of this
Agreement up to and including May 31, 2006 as determined by PHT (the "Closing
Date").
2.2 Items to be Delivered by the Investor to PHT. The following shall
be delivered by the Investor to PHT on the Closing Date:
(a) this Agreement executed by the Investor;
(b) the Investor Questionnaire;
(c) the purchase price for the Units by wire transfer to the
account designated by PHT.
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2.3 Items to be Delivered to the Investor by PHT. The following shall
be delivered by PHT to the Investor on the Closing Date: the Notes and Warrants
included in the Units purchased by the Investor. A form of the Note is attached
hereto.
3. REPRESENTATIONS AND WARRANTIES OF PHT
PHT hereby represents and warrants to the Investor as follows:
3.1 Corporate Existence and Power. PHT is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. PHT has all corporate power and all material governmental permits
required to carry on its business as now conducted.
3.2 Corporate Authorization; Enforceability. The execution, delivery
and performance by PHT of this Agreement and the Notes are within PHT's
corporate powers and have been duly authorized by the Board of Directors of PHT
and no other corporate action on the part of PHT is necessary to authorize this
Agreement or issuance of the Notes. This Agreement has been, and the Notes will
be duly executed and delivered by PHT. This Agreement constitutes the valid and
binding agreement of PHT, enforceable against PHT in accordance with its terms,
except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general principles of
equity.
3.3 No Conflict. The execution, delivery and performance by PHT of this
Agreement, and the consummation of the transactions contemplated hereby,
including issuance of the Units, do not and will not at the Closing, (a) violate
any provision of law, statute, rule or regulation, or any ruling, writ,
injunction, order, judgment or decree of any court, administrative agency or
other governmental body applicable to PHT, or any of its properties or assets,
(b) conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, or result in the creation of any encumbrance upon any of the properties
or assets of PHT under any material contract to which PHT is a party or (c)
violate any organizational document of PHT.
3.4 Notes and Shares. The Notes and Warrants included in the Units and
common stock issuable upon conversion of the Notes (the "Conversion Shares") and
upon exercise of the Warrants (the "Warrant Shares" and together with the
Conversion Shares, the "Common Shares"), when issued and delivered in accordance
with the terms of this Agreement (and the terms of the Notes or Warrants, as the
case may be) will be duly authorized, validly issued, fully paid, non-assessable
and free and clear of any lien or other limitation or restriction.
3.5 Securities Matters. Subject to the accuracy of the representations
of the Investor set forth in Section 4.4 hereof the offer, sale and issuance of
the Notes as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act. PHT has complied and will comply with all
applicable state "blue sky" or securities laws in connection with the offer,
sale and issuance of the Notes and the Common Shares as contemplated by this
Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants to PHT as follows:
4.1 Organization and Good Standing; Power and Authority. Any Investor
that is a corporation (a) is a corporation duly organized, validly existing and
in good standing under the laws of its organization, and (b) has all requisite
corporate power and authority and all authorizations, licenses and material
permits necessary to own, lease and operate its properties, to carry on its
business as presently conducted and as proposed to be conducted and to enter
into and carry out the transactions contemplated by this Agreement.
4.2 Authorization of the Agreement. This Agreement constitutes a valid
and legally binding obligation of the Investor except to the extent that
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally or by general principles of equity.
4.3 No Conflict. The execution, delivery and performance by the
Investor of this Agreement and the consummation by the Investor of the
transactions contemplated hereby do not and will not at the Closing (a) violate
any provision of law, statute, rule or regulation, or any ruling, writ,
injunction, order, judgment or decree of any court, administrative agency or
other governmental body applicable to the Investor, or any of its properties or
assets, (b) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of time, or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any encumbrance upon any of
the properties or assets of the Investor under any material contract to which
the Investor is a party or (c) violate any organizational document of any
corporate Investor.
4.4 Investment Representation.
(a) The Investor has received and reviewed the following (the
"PHT Documents"):
1. Letter dated May 11, 2006, describing terms of the
Offering and certain risk factors.
2. Subscription Agreement.
(b) The Investor or Investor's designated representatives have
concluded a satisfactory due diligence investigation of PHT
and have had an opportunity to review the PHT Documents and
to have all of their questions related thereto
satisfactorily answered.
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(c) The Investor acknowledges that the Notes and Warrants
included in the Units (and Common Shares) are speculative
and involve a high degree of risk and the Investor
represents that it is able to sustain the loss of the entire
amount of its investment. (d) The Investor (or its members
and/or officers) has previously invested in unregistered
securities and has sufficient financial and investing
expertise to evaluate and understand the risks of the Notes
and Warrants included in the Units (and Common Shares).
(e) The Investor has received from PHT, and is relying on, no
representations or projections with respect to PHT's
business and prospects except as set forth in this Agreement
and the PHT Documents.
(f) The Investor is an "accredited investor" within the meaning
of Regulation D under the Securities Act.
(g) The Investor is acquiring the Notes and Warrants included in
the Units (and Common Shares) for investment purposes only
without intent to distribute the same, and acknowledges that
the Notes and Warrants included in the Units (and Common
Shares) have not been registered under the Securities Act
and applicable state securities laws, and accordingly,
constitute "restricted securities" for purposes of the
Securities Act and such state securities laws.
(h) The Investor acknowledges that it will not be able to
transfer the Notes and Warrants included in the Units (and
Common Shares) except upon compliance with the registration
requirements of the Securities Act and applicable state
securities laws or exemptions therefrom.
(i) The certificates and/or instruments evidencing the Notes and
Warrants included in the Units (and Common Shares) will
contain the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, OR AN EXEMPTION FROM REGISTRATION AND
OTHERWISE IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
ISSUER AND THE ORIGINAL OWNER OF THE SECURITIES, A COPY OF WHICH IS ON
FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER."
5. REGISTRATION RIGHTS
5.1 Registration of Common Shares.
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(a) Registration. PHT agrees to use its best efforts to file a
registration statement for registration under the Securities
Act of the Common Shares on or before the 90th day after the
last closing of the sale of Units and to use its best
efforts to have the registration statement declared
effective within 60 days of filing. The registration
requested pursuant to this Section 5.1(a) is referred to
herein as the "Registration".
(b) Restrictions on Registration. PHT will not be obligated to
effect a Registration within one hundred twenty (120) days
after the effective date of a registration statement in
which Common Shares of the Investor are included in a
registration statement pursuant to Section 5.2 hereof. PHT
may postpone for a period not exceeding ninety (90) days the
filing or the effectiveness of a registration statement for
a Registration if PHT provides Investor with written notice
that in PHT's good faith judgment such Registration might
have an adverse effect on any proposal or plan by PHT to
engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation,
tender offer, public offering or similar transaction,
provided that, in such event, PHT will use its best efforts
to effect a Registration as promptly as practicable
thereafter.
5.2 Participation in Registered Offerings. If PHT proposes or is
required to register any of its shares or other equity securities for public
sale for cash under the Securities Act (other than on Forms S-4 or S-8 or
similar registration forms), it will at each such time or times give written
notice to the Investor of its intention to do so. Upon the written request of
the Investor given within twenty (20) days after receipt of any such notice, PHT
shall use its best efforts to cause to be included in such registration any
Common Shares held by the Investor requested to be registered; provided, that if
the managing underwriter advises that less than all of the shares requested to
be registered should be offered for sale so as not materially and adversely to
affect the price or salability of such offering being registered by PHT, the
Investor (but not PHT to the extent it desires to include shares for its own
account) shall reduce the number of its Common Shares to be included in the
registration statement as required by the underwriter to the extent requisite of
all prospective sellers of the securities proposed to be registered (other than
PHT) on a pro rata basis according to the amounts of securities proposed to be
registered by all prospective sellers to permit the sale or other disposition
(in accordance with the intended method of disposition thereof as aforesaid) by
the prospective seller or sellers of the securities so registered. The
registration requested pursuant to this Section 5.2 is referred to herein as the
"Piggyback Registration".
5.3 Obligations of Investor. It shall be a condition precedent to the
obligation of PHT to register any Common Shares pursuant to this Section 5 that
the Investor shall furnish to PHT such information regarding the Common Shares
held and the intended method of disposition thereof and other information
concerning the Investor as PHT shall reasonably request and as shall be required
in connection with the registration statement to be filed by PHT. If after a
registration statement becomes effective PHT advises the Investor that PHT
considers it appropriate to amend or supplement the applicable registration
statement, the Investor shall
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suspend further sales of the Common Shares until PHT advises the Investor that
such registration statement has been amended or supplemented.
5.4 Registration Proceedings. Whenever PHT is required by the
provisions of this Section 5 to effect the registration of the Common Shares
under the Securities Act, PHT shall:
(i) Prepare and promptly file with the SEC a registration
statement with respect to such securities and use its best
efforts to cause such registration statement to become
effective within 60 days of filing and remain effective;
(ii) Prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus
contained therein as may be necessary to keep such
registration statement effective;
(iii) Furnish to the Investor and to the underwriters of the
securities being registered such reasonable number of copies
of the registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public
offering of such securities;
(iv) Use its best efforts to register or qualify the securities
covered by such registration statement under such state
securities or Blue Sky Laws of such jurisdictions as the
Investor may reasonably request within twenty (20) days
following the original filing of such registration
statement, except that PHT shall not for any purpose be
required to execute a general consent to service of process
or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(v) Notify the Investor, promptly after it shall receive notice
thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a
part of such registration statement has been filed;
(vi) Notify the Investor promptly of any request by the SEC for
the amending or supplementing of such registration statement
or prospectus or for additional information; and
(vii) Prepare and promptly file with the SEC and promptly notify
the Investor of the filing of such amendment or supplement
to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the
time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements
therein, in light of the circumstances in which they were
made,
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not misleading. Notwithstanding any provision herein to the
contrary, PHT shall not be required to amend, supplement, or
update a prospectus contained in any registration statement
if to do so would result in an unduly burdensome expense to
PHT.
5.5 Expenses. With respect to the inclusion of the Common Shares in a
registration statement pursuant to this Section 5, all registration expenses,
fees, costs and expenses of and incidental to such registration, shall be borne
by PHT; provided, however, that Investor shall bear its own professional fees
and pro rata share of the underwriting discounts and commissions. The fees,
costs and expenses of registration to be borne by PHT shall include, without
limitation, all registration, filing, and printing expenses, fees and
disbursements of counsel and accountants for PHT, fees and disbursements of
counsel for the underwriter or underwriters of such securities (if PHT and/or
selling security holders are required to bear such fees and disbursements), and
all legal fees and disbursements and other expenses of complying with state
securities or Blue Sky laws of any jurisdiction in which the securities to be
offered are to be registered or qualified.
5.6 Indemnification of the Investor. Subject to the conditions set
forth below, in connection with any registration of the Common Shares pursuant
to this Section 5, PHT agrees to indemnify and hold harmless the Investor, any
underwriter for the offering and each of their officers and directors and agents
and each other person, if any, who controls Investor or their underwriter (each,
an "Investor Indemnified Party"), within the meaning of Section 15 of the
Securities Act, as follows:
(i) Against any and all loss, claim, damage and expense
whatsoever arising out of or based upon (including, but not
limited to, any and all expense whatsoever reasonably
incurred in investigating, preparing or defending any
litigation, commenced or threatened, or any claim whatsoever
based upon) any untrue or alleged untrue statement of a
material fact contained in any preliminary prospectus (if
used prior to the effective date of the registration
statement), the registration statement or the prospectus (as
from time to time amended and supplemented), or in any
application or other document executed by PHT or based upon
written information furnished by PHT filed in any
jurisdiction in order to qualify PHT's securities under the
securities laws thereof, or the omission or alleged omission
therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading,
or any other violation of applicable federal or state
statutory or regulatory requirements or limitations relating
to action or inaction by PHT in the course of preparing,
filing, or implementing such registered offering; provided,
however, that the indemnity agreement contained in this
section shall not apply to any loss, claim, damage,
liability or action arising out of or based upon any untrue
or alleged untrue statement or omission made in reliance
upon and in conformity with any information furnished in
writing to PHT by or on behalf of the Investor expressly for
use in connection therewith or arising out of any action or
inaction of the Investor;
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(ii) Subject to the proviso contained in Subsection (i) above,
against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount
paid in settlement of any litigation, commenced or
threatened, or of any claim whatsoever based upon any untrue
statement or omission (including, but not limited to, any
and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any such
litigation or claim) if such settlement is effected with the
written consent of PHT; and
(iii) In no case shall PHT be liable under this indemnity
agreement with respect to any claim made against any
Investor Indemnified Party unless PHT shall be notified, by
letter or by facsimile confirmed by letter, of any action
commenced against such Investor Indemnified Party, promptly
after such person shall have been served with the summons or
other legal process giving information as to the nature and
basis of the claim. The failure to so notify PHT, if
prejudicial in any material respect to PHT's ability to
defend such claim, shall relieve PHT from its liability to
the indemnified person under this Section 5.6, but only to
the extent that PHT was prejudiced. The failure to so notify
PHT shall not relieve PHT from any liability which it may
have otherwise than on account of this indemnity agreement.
PHT shall be entitled to participate at its own expense in
the defense of any suit brought to enforce any such claim,
but if PHT elects to assume the defense, such defense shall
be conducted by counsel chosen by it, provided such counsel
is reasonably satisfactory to the Investor Indemnified Party
in any suit so brought. In the event PHT elects to assume
the defense of any such suit and retain such counsel, the
Investor Indemnified Party in the suit shall, after the date
they are notified of such election, bear the fees and
expenses of any counsel thereafter retained by them, as well
as any other expenses thereafter incurred by them in
connection with the defense thereof; provided, however, that
if the Investor Indemnified Party reasonably believes that
there may be available to it any defense or counterclaim
different than those available to PHT or that representation
of the Investor Indemnified Party by counsel for PHT
presents a conflict of interest for such counsel, then the
Investor Indemnified Party shall be entitled to defend such
suit with counsel of its own choosing and PHT shall bear the
fees, expenses and other costs of such separate counsel.
5.7 Indemnification of PHT. The Investor agrees to indemnify and hold
harmless PHT, each underwriter for the offering, and each of their officers and
directors and agents and each other person, if any, who controls PHT and the
underwriter within the meaning of Section 15 of the Securities Act and any other
stockholder selling securities against any and all such losses, liabilities,
claims, damages and expenses as are indemnified against by PHT under Section 5.6
(i), (ii) and (iii) above; provided, however, that such indemnification by
Investor hereunder shall be limited to any losses, liabilities, claims, damages,
or expenses to the extent caused by any untrue statement of a material fact or
omission of a material fact (required to be
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stated therein or necessary to make statements therein not misleading), if any
made (or in settlement of any litigation effected with the written consent of
such Investors, alleged to have been made) in any preliminary prospectus, the
registration statement or prospectus or any amendment or supplement thereof or
in any application or other document in reliance upon, and in conformity with,
written information furnished in respect of such Investor by or on behalf of
such Investor expressly for use in any preliminary prospectus, the registration
statement or prospectus or any amendment or supplement thereof or in any such
application or other document or arising out of any action or inaction of such
Investor in implementing such registered offering. Notwithstanding the
foregoing, the indemnification obligation of Investor shall not exceed the
purchase price of the Units paid by Investor. In case any action shall be
brought against PHT, or any other person so indemnified, in respect of which
indemnity may be sought against any Investor, such Investor shall have the
rights and duties given to PHT, and each other person so indemnified shall have
the rights and duties given to Investor, by the provisions of Section 5.6. The
person indemnified agrees to notify the Investor promptly after the assertion of
any claim against the person indemnified in connection with the sale of
securities.
5.8 Contribution. If the indemnification provided for in Sections 5.6
and 5.7 above are unavailable or insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of the
indemnified party, on one hand, and such indemnifying party, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, or liabilities (or actions in respect thereof). The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnified party, on one hand, or such indemnifying party, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No person who has
committed fraudulent misrepresentation (within the meaning of the Securities
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this Section shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
5.9 Assignment of Registration Rights. The right to have PHT register
Common Shares pursuant to this Agreement shall be automatically assignable to
any transferee of all or any portion of the Notes, Warrants or Common Shares if:
(a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to PHT within a
reasonable time after such assignment, (b) PHT is, within a reasonable time
after such transfer or assignment, furnished with written notice of (i) the name
and address of such transferee or assignee, and (ii) the securities with respect
to which such registration rights are being transferred or assigned, (c)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state
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securities laws and, (d) at or before the time PHT receives the written notice
contemplated by clause (b) of this sentence, the transferee or assignee agrees
in writing with PHT to be bound by all of the provisions contained herein (the
foregoing a "Permitted Transferee").
6. MISCELLANEOUS
6.1 Definitions.
"Business Day" means a day that is not a Saturday, Sunday or a day on
which commercial banking institutions located in New York City, New York are
authorized or required to close.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
6.2 Confidentiality.
(a) The Investor agrees to keep confidential any and all
non-public information delivered or made available to the
Investor by PHT except for disclosures, as necessary, made
by the Investor to the Investor's officers, directors,
employees, agents, counsel and accountants each of whom
shall be notified by the Investor of this confidentiality
covenant and for whom the Investor shall be liable in the
event of any breach of this covenant by any such individual
or individuals; provided, however, that nothing herein shall
prevent the Investor from disclosing such information (i)
upon the order of any court or administrative agency, (ii)
upon the request or demand of any regulatory agency or
authority having jurisdiction over the Investor, (iii) which
has been publicly disclosed or (iv) to any of its members
provided that any such members agree in writing (with a copy
provided to PHT) to be bound by confidentiality provisions
in form and substance substantially as are contained herein.
In the event of a mandatory disclosure as described in
clause (i) and/or (ii) of the preceding sentence, the
Investor shall promptly notify PHT in writing of any
applicable order, request or demand for such information,
cooperate with PHT if and to the extent that PHT elects to
seek an appropriate protective order or other relief from
such order, request, or demand, and disclose only the
minimal amount of information ultimately required to be
disclosed. No Investor shall use for its own benefit, nor
permit any other person to use for such person's benefit,
any of PHT's non-public information including, without
limitation, in connection with the purchase and/or sale of
PHT's securities.
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(b) PHT shall in no event disclose non-public information to the
Investor, advisors to or representatives of the Investor
unless prior to disclosure of such information PHT marks
such information as "Non-Public Information - Confidential"
and provides the Investor, such advisors and representatives
with the opportunity to accept or refuse to accept such
non-public information for review. PHT may, as a condition
to disclosing any non-public information hereunder, require
the Investor's advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to
PHT and the Investor.
(c) Nothing herein shall require PHT to disclose non-public
information to the Investor or its advisors or
representatives, and PHT represents that it does not
disseminate non-public information to any Investors who
purchase stock in PHT in a public offering, to money
managers or to securities analysts.
6.3 Costs and Expenses. PHT and the Investor shall bear their own costs
and expenses in connection with this transaction.
6.4 No Payment of Dividends. PHT shall not pay any cash dividends on
its Common Stock so long as any of the Notes are outstanding.
6.5 Survival. All agreements, covenants, representations and warranties
made by PHT or by the Investor herein shall survive the execution and delivery
of this Agreement.
6.6 Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
PHT, or the Investor under this Agreement shall be in writing and facsimiled,
mailed or delivered to each party at the facsimile number or its address as
provided below (or to such other facsimile number or address as the recipient of
any notice shall have notified the other in writing). All such notices and
communications shall be effective (a) when sent by Federal Express or other
overnight service of recognized standing, on the Business Day following the
deposit with such service; (b) when mailed, by registered or certified mail,
first class postage prepaid and addressed as aforesaid through the United States
Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d)
when facsimiled, upon confirmation of receipt to the following:
Performance Health Technologies, Inc.
000 Xxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Attn.: Xxxxxx Xxxxxxxx, President and CEO
Fax: (000) 000-0000
To the Investor at the Address Set Forth on the Investor Questionnaire.
6.7 Nonwaiver. No failure or delay on any party in exercising any right
hereunder shall operate as a waiver thereof or of any other right nor shall any
single or partial exercise of any such right preclude any other further exercise
thereof or of any other right.
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6.8 Amendments and Waivers. This Agreement may not be amended or
modified, nor may any of its terms be waived, except by written instruments
signed by all of the parties. Such waiver or consent under any provision hereof
shall be effective only in the specific instances for the purpose for which
given.
6.9 Assignments. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
6.10 Partial Invalidity. If at any time any provision of this Agreement
is or becomes illegal, invalid or unenforceable in any respect under the law of
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
6.11 Headings. Headings in this Agreement are for convenience of
reference only and are not part of the substance hereof or thereof.
6.12 Entire Agreement. This Agreement constitutes and contains the
entire agreement of the parties hereto and supersedes any and all prior
agreements, negotiations, correspondence, understandings and communications
among the parties, whether written or oral, respecting the subject matter
hereof.
6.13 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without reference to
conflicts of law rules.
6.14 Jurisdiction. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be brought in the
courts of the State of New York located in the County of New York and the
federal courts of the United States of America located in such State and County.
Each of the parties (a) consents to the exclusive jurisdiction of such courts
(and of the appropriate appellate courts therefrom) in any such suit, action or
proceeding, (b) irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum, (c) will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (d)
will not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any other court. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 6.6 will be deemed effective service of process on such party.
6.15 JURY TRIAL. EACH PARTY HERETO, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY
ISSUE.
12
6.16 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth below.
IF INVESTOR IS AN INDIVIDUAL:
__________________________________ ____________________________________
Signature of Investor Print Name of Investor
$________________ of Units to be Purchased Under this Agreement
Date:______________________, 2006
IF INVESTOR IS AN ENTITY:
___________________________________
Print Name of Entity
_________________________________ ___________________________________
Signature of Officer, Print Name of Officer,
Trustee or Partner, as applicable Trustee or Partner, as applicable
$________________ of Units to be Purchased Under this Agreement
Date:______________________, 2006
ACCEPTED:
Date:_____________________, 2006 PERFORMANCE HEALTH TECHNOLOGIES, INC.
By: ________________________________
Name:
Title:
13
A. INDIVIDUALS (IF INVESTOR IS AN INDIVIDUAL, COMPLETE THIS PART A)
1. Name of Investor(s)(1)_________________________________________________
_______________________________________________________________________
Address (including Zip Code)___________________________________________
_______________________________________________________________________
Telephone No. (____)________________________
Telecopy No. (____)________________________
2. Indicate type of ownership subscribed for:
____ Individual
____ Joint Tenants with Rights of Survivorship
____ Tenant in Common
____ Tenants by the Entirety
3. Social Security Number(s)_______________________________
4. Each Investor must initial at least one of the following statements:
____ (a) Investor certifies that he/she is a director or executive
officer of PHT.
____ (b) Investor certifies that he/she is a natural person whose
individual net worth, or joint net worth with his/her
spouse, at the time of his/her Loan to PHT exceed
$1,000,000 (inclusive of the value of his/her home, home
furnishings and automobiles).
____ (c) Investor certifies that he/she is a natural person who has
an individual income(2) in excess of $200,000 in each of
the two most recent years or joint income with his/her
spouse in excess of $300,000 in each of those years, and
has a reasonable expectation of reaching the same income
level in the current year.
-----------------
(1) If there is more than one Investor other than husband and wife, a
separate Investor Questionnaire must be completed for each such
Investor and attached to this Investor Questionnaire. If Investors are
husband and wife, please include both names, be certain to complete
item 2 and include both social security numbers (indicating to which
individual each social security number belongs) in item 3.
(2) In determining income, a Investor should add to his or her adjusted
gross income any amounts attributable to tax-exempt income received,
losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to XXX or Xxxxx
retirement plans, alimony payments and any amount by which income from
long-term capital gains has been reduced in arriving at adjusted gross
income.
14
B. ENTITIES (IF INVESTOR IS AN ENTITY, COMPLETE THIS PART B)
1. Name of Investor_______________________________________________________
_______________________________________________________________________
Address (including Zip Code)___________________________________________
_______________________________________________________________________
Telephone No. (____)________________________
Telecopy No. (____)________________________
2. Indicate type of entity:
____ Corporation ____ Trust ____ Limited Partnership
____ General Partnership ____ XXX ____ Pension Plan or Trust
Other: __________________________________
3. Date of formation or incorporation: _______________________________
4. State of formation or incorporation: ______________________________
5. Indicate whether Investor was organized for the specific purpose of
acquiring Common Stock of PHT.
Yes ____ No ____
6. Indicate the individual(s) authorized to execute documents on behalf of
the Entity
Investor in connection with this investment:
Name: __________________________________
Title: __________________________________
Taxpayer Identification Number: __________________________________
7. Each Investor must initial at least one of the following statements:
____ (a) Investor certifies that it is a bank as defined in Section
3(a)(2) of the Securities Act of 1933, as amended (the
"Act"), or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Act,
whether acting in its individual or fiduciary capacity.
____ (b) Investor certifies that it is an insurance company as
defined in Section 2(13) of the Act.
____ (c) Investor certifies that it is a broker/dealer registered
pursuant to the Securities Exchange Act of 1934, as
amended.
15
____ (d) Investor certifies that it is an investment company
registered under the Investment Company Act of 1940, as
amended, or business development company as defined in
Section 2(a)(48) of such Act.
____ (e) Investor certifies that it is a Small Business Investment
Company licensed by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
____ (f) Investor certifies that it is an employee benefit plan
within the meaning of Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and
either (i) the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance
company or registered investment adviser, (ii) the
employee benefit plan has total assets in excess of
$5,000,000, or (iii) if a self-directed plan, investment
decisions are made solely by persons that are "accredited
investors" as defined in Rule 501(a) of Regulation D
promulgated under the Act.
____ (g) Investor certifies that it is a private business
development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940, as amended.
____ (h) Investor certifies that it is a corporation, partnership,
a Massachusetts or similar business trust or other trust
(if the trust's purchase of securities is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of
Regulation D under the Act) or other organization
described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, not formed for the specific
purpose of acquiring the Common Stock, with total assets
in excess of $5,000,000.
____ (i) Investor certifies that it is an entity in which all of
the equity owners are "accredited investors" as defined in
Rule 501(a) of Regulation D promulgated under the Act.
____ (j) None of the statements in clauses (a) through (i) are
applicable to the Entity Investor and the Entity Investor
is otherwise not an "accredited investor" as defined in
Rule 501(a) of Regulation D promulgated under the Act.
8. Investor agrees to provide, upon request by PHT, the following
information:
(A) Corporations will provide the articles of incorporation, by-laws
and corporate resolution authorizing the Loan and authorizing the
person(s) signing this Investor Questionnaire. All the documents
must be certified by the Secretary or Assistant
16
Secretary of the corporation as being true and correct copies
thereof and in full force and effect.
(B) Partnerships and limited liability companies will provide a copy
of the partnership agreement, articles of organization, and/or
operating agreement showing the date of formation and giving
evidence of the authority of the person(s) signing this Investor
Questionnaire.
(C) Trusts will provide a copy of the trust agreement showing the date
of formation and giving evidence of the authority of the person(s)
signing this Investor Questionnaire.
C. ACKNOWLEDGEMENTS AND REPRESENTATIONS TO BE MADE BY ALL INVESTORS (EVERY
INVESTOR MUST COMPLETE THIS PART C)
Investor understands that PHT will be relying on the accuracy and
completeness of the representations made above as well as Investor's responses
to the questions contained in this Investor Questionnaire. Investor understands
that a false representation may constitute a violation of law, and that any
person who suffers damage as a result of a false representation may have a claim
for damages as a result of such false representation.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. However, Investor agrees that PHT may present this Investor
Questionnaire to such parties as PHT deems appropriate if called upon to
establish that the Loan is exempt from registration under the Securities Act of
1933, as amended, or meets the requirements of applicable state securities law.
Investor represents and warrants to PHT as follows (each Investor must
initial all of the following):
____ (a) The representations and the answers to the questions in
this Investor Questionnaire are complete and correct and
may be relied upon by PHT and its counsel.
____ (b) Investor has full power and authority to make the Loan to
PHT.
____ (c) The Loan and this Investor Questionnaire have been duly
and validly authorized, executed, and delivered by
Investor and constitute the valid, binding, and
enforceable agreement of Investor.
____ (d) Investor has reviewed this Questionnaire, including, but
not limited to the information set forth on pages 1-2, the
Cover Letter accompanying this Subscription Agreement, the
Note and has received all information Investor has deemed
relevant and has had all of Investor's questions answered
with respect to the Loan and PHT and has made such
independent investigation into PHT as Investor has deemed
necessary.
17
____ (e) The Loan is made solely for the account of Investor with a
view to and for investment and not with a view to or for
distribution, assignment, participation, or resale.
Investor has no contract, undertaking, agreement, or
arrangement with any person to sell, transfer, or pledge
the Note, the Loan, or any interest therein. There are
substantial restrictions on the transferability of the
Note. There will be no public market for the Note and
Investor must bear the economic risk involved in the Loan
and the Common Stock for an indefinite term.
____ (f) Investor acknowledges there is a substantial economic risk
with respect to the repayment of the Loan or any interest
therein and that Investor has such knowledge and
experience in financial and business matters that Investor
is able to evaluate the risks and merits of the Loan and
is making an informed decision to make the Loan.
____ (g) Investor did not learn about the Loan through any
advertisement, article, notice, or other communication
published in any newspaper, magazine, or similar media or
broadcast over television, radio, or the internet or at
any seminar or meeting to which Investor was invited by a
general solicitation or advertising.
____ (h) Investor hereby agrees to indemnify PHT and its officers,
directors, shareholders, agents, and employees and to hold
each of such entities and persons harmless from and
against any and all liabilities, loss, damages, costs, or
expenses (including reasonable attorneys' fees) to which
they, or any of them, may be put or which they, or any of
them, may incur by reason of any breach of the
representations and warranties made by Investor in this
Investor Questionnaire.
____ (i) Investor will notify PHT immediately of any material
change in any representation made above or any statement
made herein that occurs prior to the closing of the Loan.
_____ (j) WAIVER OF NORTH COAST SECURITIES CORPORATION LIABILITY. In
order to induce North Coast to make the introduction of
the subscriber to the Company, the undersigned does hereby
IRREVOCABLY AND UNCONDITIONALLY RELEASE, REMISE, AND
FOREVER DISCHARGE North Coast Securities Corporation and
its affilates and each of their respective shareholders,
officers, directors, "controlling persons", employees,
registered representatives, independent contractors,
heirs, executors, administrators, successors in interest
and assigns from and against any and all agreements,
promises, liabilities, claims and demands of any kind
whatsoever, at law or in equity, whether known or unknown,
suspected or unsuspected, fixed or contingent, apparent or
concealed (collectively a "Claim"), which the undersigned,
the
18
undersigned's heirs, executors, administrators, successors
or assigns ever had, now have or hereafter can, shall or
may have for, upon, or by reason of any matter, cause of
thing whatsoever existing, arising or occurring, directly
or indirectly out of the undersigned's investment.
IF INVESTOR IS AN INDIVIDUAL:
____________________________________ ____________________________________
Signature of Investor Print Name of Investor
____________________________________ ____________________________________
Signature of Spouse, if applicable Print Name of Spouse, if applicable
Date:____________
IF INVESTOR IS AN ENTITY:
____________________________________ ____________________________________
Signature of Officer, Print Name of Officer,
Trustee or Partner, as applicable Trustee, or Partner, as applicable
Date:____________
PHT HEREBY ACCEPTS THE LOAN FROM
INVESTOR AS OF ______________, 2006
Performance Health Technologies, Inc.
By:_______________________________
Xxxxxx Xxxxxxxx
19
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT.
[FORM OF] CONVERTIBLE NOTE
Boulder, Colorado
May _____, 2006 $________
FOR VALUE RECEIVED, PERFORMANCE HEALTH TECHNOLOGIES, INC., a Delaware
corporation (hereinafter called the "Borrower"), hereby promises to pay to the
order of _________________or registered assigns (the "Holder") the sum of
_________, on __________ ___, 2006 (such date, the "Maturity Date"), and to pay
interest on the unpaid principal balance hereof at the rate of ten percent (10%)
per annum from the date of this Note (the "Issue Date") until the same becomes
due and payable, whether at maturity or upon acceleration or by prepayment or
otherwise. Interest shall commence accruing on the Issue Date, shall be computed
on the basis of a 365-day year and the actual number of days elapsed and shall
be payable in cash on the Maturity Date or at the time of conversion of the
principal to which such interest relates in accordance with Article I below
All payments due hereunder shall be made at such address as the Holder
shall hereafter give to the Borrower by written notice made in accordance with
the provisions of this Note.
Whenever any amount expressed to be due by the terms of this Note is
due on any day which is not a business day, the same shall instead be due on the
next succeeding day which is a business day and, in the case of any interest
payment date which is not the date on which this Note is paid in full, the
extension of the due date thereof shall not be taken into account for purposes
of determining the amount of interest due on such date. As used in this Note,
the term "business day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in the city of New York, New York are authorized
or required by law or executive order to remain closed. Each capitalized term
used herein, and not otherwise defined, shall have the meaning ascribed thereto
in that certain Subscription Agreement and the Borrower to which this Note
relates, as amended from time to time, pursuant to which the Holder subscribed
to purchase this Note (the "Subscription Agreement").
This Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Borrower and will not impose
personal liability upon the Holder thereof.
The following terms shall apply to this Note:
20
1. CONVERSION RIGHTS
The Holder shall have the following conversion rights with respect to
this Note (the "Conversion Rights"):
A. Conversion. The Holder is entitled, at its option, to convert, and
sell on the same day, at any time and from time to time commencing on the date
hereof until the Maturity Date, all or any part of the principal amount of the
Note plus accrued interest, into shares (the "Conversion Shares") of the
Borrower's Common Stock, at the price per share equal to the lesser of (i) $0.30
(the "Conversion Price") or (ii) 70% of the average of the closing bid price for
the Borrower's Common Stock for the 20 days preceding the Conversion Notice, as
reported by the exchange on which the Company's Common Stock is then traded. No
fraction of shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share. To convert this Note, the Holder hereof shall deliver written
notice thereof, substantially in the form of Exhibit "A" to this Note, with
appropriate insertions (the "Conversion Notice"), to the Borrower at its address
as set forth herein. The date upon which the conversion shall be effective (the
"Conversion Date") shall be deemed to be the date set forth in the Conversion
Notice.
B. Reservation of Common Stock. The Borrower shall reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Note, such number of shares of
Common Stock as shall from time to time be sufficient to effect such conversion,
based upon the Conversion Price. If at any time the Borrower does not have a
sufficient number of Conversion Shares authorized and available, then the
Borrower shall call and hold a special meeting of its stockholders within thirty
(30) days of that time for the sole purpose of increasing the number of
authorized shares of Common Stock.
2. EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of Default")
shall occur:
A. Failure to Pay Principal or Interest. The Borrower fails to pay the
principal hereof or interest thereon when due on this Note, whether at maturity,
upon acceleration or otherwise;
B. Conversion and the Shares. The Borrower fails to issue shares of
Common Stock to the Holder (or announces or threatens that it will not honor its
obligation to do so) upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Note, or fails to transfer or cause
its transfer agent to transfer (electronically or in certificated form) any
certificate for shares of Common Stock issued to the Holder upon conversion of
or otherwise pursuant to this Note as and when required by this Note, and any
such failure shall continue uncured (or any announcement, statement or threat
not to honor its obligations shall not be rescinded in writing) for ten (10)
days after the Borrower shall have been notified thereof in writing by the
Holder;
C. Receiver or Trustee. The Borrower or any subsidiary of the Borrower
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a
21
receiver or trustee for it or for a substantial part of its property or
business, or such a receiver or trustee shall otherwise be appointed;
D. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower or any
subsidiary of the Borrower which remains unvacated, unbonded or unstayed for a
period of thirty (30) days; then, upon the occurrence and during the
continuation of any Event of Default specified in Section 2.A or B, at the
option of the Holders of a majority of the aggregate principal amount of the
outstanding Notes exercisable through the delivery of written notice to the
Borrower by such Holders (the "Default Notice"), and upon the occurrence of an
Event of Default specified in Section 2.C or D, the Notes shall become
immediately due and payable and the Borrower shall deliver to the Holder, in
full satisfaction of its obligations hereunder, shares of Common Stock of the
Borrower in an amount equal to the then outstanding principal amount of this
Note for purposes of determining the lowest applicable Conversion Price,
multiplied by (b) the highest Closing Price for the Common Stock during the
period beginning on the date of first occurrence of the Event of Default and
ending one day prior to the Mandatory Prepayment Date (the "Default Amount") and
all other amounts payable hereunder shall immediately become due and payable,
all without demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation, legal fees and
expenses, of collection, and the Holder shall be entitled to exercise all other
rights and remedies available at law or in equity. If the Borrower fails to pay
the Default Amount within five (5) business days of written notice that such
amount is due and payable, then the Holder shall have the right at any time, so
long as the Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower, upon written
notice, to immediately issue, in lieu of the Default Amount, the number of
shares of Common Stock of the Borrower equal to the Default Amount divided by
the Conversion Price then in effect.
3. GRANT OF SECURITY INTEREST
The repayment of this obligation shall be secured by the grant of a
security interest in certain Advance Notices that may be issued from time to
time by the Borrower to Cornell Capital Partners, LP pursuant to a certain
Standby Equity Distribution Agreement dated January 23, 2006. The parties agree
and acknowledge that the Standby Equity Distribution Agreement has been entered
into for Ten Million Dollars ($10,000,000), however, the Borrower cannot request
funds from Cornell Capital Partners under the Standby Equity Distribution
Agreement until such time as the Borrower has an effective registration
statement covering the shares that may be issued pursuant to the Standby Equity
Distribution Agreement. Within five (5) days of the effectiveness of the Standby
Equity Distribution Agreement the Borrower will perfect the Borrower's security
interest in this regard.
4. MISCELLANEOUS
A. Failure or Indulgence Not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further
22
exercise thereof or of any other right, power or privileges. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
B. Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or sent by
United States mail and shall be deemed to have been given upon receipt if
personally served (which shall include telephone line facsimile transmission) or
sent by courier or three (3) days after being deposited in the United States
mail, certified, with postage pre-paid and properly addressed, if sent by mail.
For the purposes hereof, the address of the Holder shall be as shown on the
records of the Borrower; and the address of the Borrower shall be 0000 Xxxxxxx
Xxxxx, 0xx Xxxxx, Xxxxxxx, XX 00000 facsimile number: (000) 000-0000. Both the
Holder and the Borrower may change the address for service by service of written
notice to the other as herein provided.
C. Amendments. This Note and any provision hereof may only be amended
by an instrument in writing signed by the Borrower and the Holder. The term
"Note" and all reference thereto, as used throughout this instrument, shall mean
this instrument as originally executed, or if later amended or supplemented,
then as so amended or supplemented.
D. Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Each transferee of this Note must be an "accredited
investor" (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything
in this Note to the contrary, this Note may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement, subject
to all applicable federal and state securities laws.
E. Governing Law. THIS NOTE SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS NOTE, THE AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT
SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS'
FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.
23
F. Denominations. At the request of the Holder, upon surrender of this
Note, the Borrower shall promptly issue new Notes in the aggregate outstanding
principal amount hereof, in the form hereof, in such denominations of at least
$1,000 as the Holder shall request.
G. No Preemptive Rights. Except as provided herein no Holder of this Note shall
be entitled to rights to subscribe for, purchase or receive any part of any new
or additional shares of any class, whether now or hereinafter authorized, or of
bonds or Notes, or other evidences of indebtedness convertible into or
exchangeable for shares of any class, but all such new or additional shares of
any class, or any bond, Notes or other evidences of indebtedness convertible
into or exchangeable for shares, may be issued and disposed of by the Board of
Directors on such terms and for such consideration (to the extent permitted by
law), and to such person or persons as the Board of Directors in their absolute
discretion may deem advisable.
H. Mandatory Redemption. If the Borrower is to receive gross financing
proceeds of more than $2 Million at any time prior to the conversion or Maturity
Date of this Loan, then Borrower shall give at least ten (10) days notice to
Holder and Holder may, at its option, elect to require the Borrower to pay the
entire principal and interest due under this Note out of the proceeds of such
financing.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer.
PERFORMANCE HEALTH TECHNOLOGIES, INC.
By: ______________________________
Name:
Title:
24
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Notes)
The undersigned hereby irrevocably elects to convert $__________
principal amount of the Note (defined below) into shares of common stock, par
value $.01 per share ("Common Stock"), of Performance Health Technologies, Inc.,
a Delaware corporation (the "Borrower") according to the conditions of the
convertible Notes of the Borrower dated as of May ___, 2006 (the "Notes"), as of
the date written below. If securities are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates. No fee will
be charged to the Holder for any conversion, except for transfer taxes, if any.
A copy of each Note is attached hereto (or evidence of loss, theft or
destruction thereof).
The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable to the undersigned upon conversion of
the Notes shall be made pursuant to registration of the securities under the
Securities Act of 1933, as amended (the "ACT"), or pursuant to an exemption from
registration under the Act.
Date of Conversion:__________________________
Applicable Conversion Price:_________________
Number of Shares of Common Stock to be Issued Pursuant to
Conversion of the Notes:______________
Signature:___________________________________
Name:________________________________________
Address:_____________________________________
The Borrower shall issue and deliver shares of Common Stock to an
overnight courier not later than three (3) business days following receipt of
the original Note(s) to be converted, and shall make any applicable payments
pursuant to the Notes for the number of business days such issuance and delivery
is late.
25
