POSITRON CORPORATION NOTE PURCHASE AGREEMENT
EXHIBIT
10.1
POSITRON
CORPORATION
THIS
NOTE
PURCHASE AGREEMENT (the "Agreement")
is
made as of June 27, 2005 by and between Positron Corporation, a Texas
corporation (the "Company"),
and
Solaris Opportunity Fund, L.P. ("Investor").
All
numbers expressed herein as "$" or "dollars" are in United States
dollars.
R
E C
I T A L S :
WHEREAS,
the Company desires to issue Secured Convertible Promissory Notes in the
aggregate principal amount of $400,000, subject to the terms and conditions
set
forth in this Agreement.
WHEREAS,
the Investor desires to purchase the Secured Convertible Promissory Notes,
subject to the terms and conditions set forth in this Agreement.
NOW,
THEREFORE, in consideration of the respective undertakings, covenants and
agreements of the parties set forth herein, the parties hereby agree as
follows:
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SECTION
1
|
PURCHASE
AND SALE OF THE NOTES.
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1.1 Issuance
of the Notes.
The
Company has authorized the issuance and sale to the Investor of, and, subject
to
and in reliance upon the representations, warranties, terms and conditions
of
this Agreement, the Investor the have agreed to purchase, the Company's Secured
Convertible Promissory Notes (individually, a "Note,"
and
collectively, the "Notes"),
in
the principal amount of $400,000. Each Note shall be substantially in the
form
set forth in Exhibit A
hereto.
1.2 Closing.
The
Company agrees to issue and sell to the Investor, and, subject to and in
reliance upon the representations, warranties, terms and conditions of this
Agreement, the Investor agrees to purchase, the Notes for the aggregate purchase
price of $400,000. Such purchase and sale shall take place (a) at the initial
closing (the "Closing") to be held at the offices of the Company on June
27,
2005, at 10:00 A.M. (the "Closing
Date"),
or on
such other dates and at such times as may be mutually agreed upon. At the
Closing, the Company will issue a Note, dated the Closing Date, payable to
the
order of Investor, in the principal amount of $400,000 in exchange for
cash.
1.3 Payments
and Endorsements.
Payments of principal, interest and premium, if any, on the Notes, shall
be made
directly by wire transfer or by checks duly mailed or delivered to the Investor
at address specified in the Notes without any presentment or notation of
payment, except that prior to any transfer of any Note, the holder of record
shall endorse on such Note a record of the date to which interest has been
paid
and all payments made on account of principal of such Note.
1.4 Payment
on Non-Business Days.
Whenever any payment to be made shall be due on a day which is not a Business
Day, such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest due.
1.5 Registration,
etc.
The
Company shall maintain at its principal office a register of the Notes and
shall
record therein the name and address of the registered holder of the Notes,
the
address to which notices are to be sent and the address to which payments
are to
be made as designated by the registered holder if other than the address
of the
holder, and the particulars of all transfers, exchanges and replacements
of the
Notes. No transfer of a Note shall be valid unless made on such register
for the
registered holder or his executors or administrators or his or their duly
appointed attorney, upon surrender therefor for exchange as hereinafter
provided, accompanied by an instrument in writing, in form and execution
reasonably satisfactory to the Company. Each Note issued hereunder, whether
originally or upon transfer, exchange or replacement of a Note or Notes,
shall
be registered on the date of execution thereof by the Company and shall be
dated
the date to which interest has been paid on such Note or Notes. The registered
holder of the Note shall be that Person in whose name the Note has been so
registered by the Company. A registered holder shall be deemed the owner
of a
Note for all purposes of this Agreement and, subject to the provisions hereof,
shall be entitled to the principal, premium, if any, and interest evidenced
by
such Note free from all equities or rights of set-off or counterclaim among
the
Company and the transferor of such registered holder or any previous registered
holder of such Note.
1.6 Limitations
on Transferability.
The
Investor covenants that in no event will it dispose of any Note or any shares
of
capital stock into which such Note is convertible unless and until Investor
shall have complied with Sections 4.7 and 4.8 hereof and (a) the
Investor shall have notified the Company of the proposed disposition and
shall
have furnished the Company with a statement of the circumstances surrounding
the
proposed disposition, and (b) if requested by the Company, the Investor
shall have furnished the Company with an opinion of counsel satisfactory
in form
and substance to the Company and the Company's counsel to the effect that
(x) such disposition will not require registration under the Securities
Act
and (y) appropriate action necessary for compliance with the Securities
Act
and any applicable state, local, or foreign law has been taken.
1.7 Replacement
of Notes.
Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note and, if requested in the case of any such loss,
theft
or destruction, upon delivery of an indemnity bond or other agreement or
security reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of such Note, the Company will
issue
a new Note, of like tenor and amount and dated the date to which interest
has
been paid, in lieu of such lost, stolen, destroyed or mutilated Note;
provided,
however,
if any
Note of which an Investor, its nominee, or any of its partners or affiliates
is
the registered holder is lost, stolen or destroyed, the affidavit of the
registered holder setting forth the circumstances with respect to such loss,
theft or destruction shall be accepted as satisfactory evidence thereof,
and no
indemnification bond or other security shall be required as a condition to
the
execution and delivery by the Company of a new Note in replacement of such
lost,
stolen or destroyed Note other
than
the
registered holder's written agreement to indemnify the Company.
-2-
1.8 Conversion
of Note.
All or
any portion of the principal amounts of the Notes, may be converted at the
option of the Investor, into shares of Series F Preferred Stock (as
defined
herein) at a conversion price and on such terms as are provided in the
Notes.
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SECTION
2
|
DEFINITIONS.
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For
purposes of this Agreement the following terms shall have the following
meanings:
2.1 "Articles"
shall
mean the Company's Articles of Incorporation, as amended, as of the First
Closing, and including the Series A Statement, Series C Statement,
Series D Statement, Series E Statement and Series F
Statement
thereto.
2.2 "Business
Day"
shall
mean a day other than Saturday, Sunday or a public holiday under the laws
of the
State of Texas.
2.3 "Commission"
shall
mean the Securities and Exchange Commission.
2.4 "Common
Stock"
shall
mean the Common Stock of the Company, par value $0.01 per share.
2.5 "GAAP"
shall
mean United States generally accepted accounting principles.
2.6 "Intellectual
Property"
shall
mean patents, patent applications, trademarks, service marks, mask works,
trade
names, copyrights, trade secrets, information, proprietary rights and
processes.
2.7 "Material
Adverse Event"
shall
mean any change, event or effect that is materially adverse to the general
affairs, business, operations, assets, condition (financial or otherwise)
or
results of operations of the Company and its subsidiaries taken as a whole;
provided, however, that the following shall not be taken into account in
determining a "Material
Adverse Event":
(a) any adverse change, event or effect that is directly attributable
to
conditions affecting the United States economy generally unless such conditions
adversely affect the Company in a materially disproportionate manner, and
(b) any adverse change, event or effect that is directly attributable
to
conditions affecting the Company's industry generally, unless such conditions
adversely affect the Company in a materially disproportionate manner.
2.8 "Person"
shall
mean an individual, corporation, partnership, joint venture, limited liability
company, trust, or unincorporated organization, or a government or any agency
or
political subdivision thereof, or any other entity or business
form.
2.9 "Preferred
Stock"
shall
mean the Company's Series A Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and
Series F
Preferred Stock.
2.10 "Registration
Rights Agreement"
shall
mean the Registration Rights Agreement dated as of the First Closing by and
between the Company and the Investor in the form attached hereto as Exhibit B.
-3-
2.11 "Schedule of
Exceptions"
shall
mean the schedule of exceptions to the representations and warranties of
the
Company in Section 3. The Schedule of Exceptions is attached
as
Schedule
1
hereto.
2.12 "Securities
Act"
shall
mean the Securities Act of 1933, as amended and the rules and regulations
of the
Commission promulgated thereunder.
2.13 "Security
Agreement"
shall
mean the Security Agreement dated as of the First Closing by and between
the
Company and the Investor in the Form attached hereto as Exhibit C.
2.14 "Series
A Preferred Stock"
shall
mean the Series A Preferred Stock of the Company, par value $1.00
per
share.
2.15 "Series
A Statement"
shall
mean the Statement of Designation Establishing Series A 8% Cumulative
Convertible Redeemable Preferred Stock of Position Corporation, filed with
the
Texas Secretary of State on February 29, 1996.
2.16 "Series
C Preferred Stock"
shall
mean the Series C Preferred Stock of the Company, par value $1.00
per
share.
2.17 "Series
C Statement"
shall
mean the Statement of Designation Establishing Series C Preferred
Stock of
Positron Corporation, filed with the Texas Secretary of State on May 21,
2004.
2.18 "Series
D Preferred Stock"
shall
mean the Series D Preferred Stock of the Company, par value $1.00
per
share.
2.19 "Series
D Statement"
shall
mean the Statement of Designation Establishing Series D Preferred
Stock of
Positron Corporation, filed with the Texas Secretary of State on May 21,
2004.
2.20 "Series
E Preferred Stock"
shall
mean the Series E Preferred Stock of the Company, par value $1.00
per
share.
2.21 "Series
E Statement"
shall
mean the Statement of Designation Establishing Series E Preferred
Stock of
Positron Corporation, to be filed with the Texas Secretary of State following
the Closing.
2.22 "Series
F
Preferred Stock" shall mean the Series F Preferred Stock of the
Company, par value $1.00 per share.
2.23 "Series
F
Preferred Statement" shall mean the Statement of Designation
Establishing Series F Preferred Stock of Positron Corporation, to be filed
with
the Texas Secretary of State following the closing.
2.24 "Subsidiary"
shall
mean any corporation, partnership or other entity, more than 50% of whose
equity
interests (measured by virtue of voting rights) in the aggregate is owned
by the
Company.
2.25 "Transactional
Agreements"
shall
mean this Agreement, the Notes, the Security Agreement, and the Registration
Rights Agreement.
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SECTION
3
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
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The
Company hereby represents and warrants to the Investor that:
-4-
3.1 Corporate
Organization and Authority.
The
Company:
3.1.1 is
a
corporation duly organized, validly existing, authorized to exercise all
its
corporate powers, rights and privileges, and in good standing in the State
of
Texas;
3.1.2 has
the
corporate power and corporate authority to own and operate its properties
and to
carry on its business as now conducted and as proposed to be
conducted;
3.1.3 has
made
available to the Investor or their counsel a copy of the minute books of
the
Company, and said copies are true, correct, and complete and contain all
amendments and all minutes of meetings and actions taken by the shareholders
and
directors of the Company through the date of this Agreement.
3.2 Subsidiaries.
The
Company does not presently own, have any equity interest or investment in,
or
control, directly or indirectly, any other corporation, partnership or entity.
The Company is not a participant in any joint venture or
partnership.
3.3 SEC
Filings; Financial Statements.
The
Company has filed (i) its Annual Report on Form 10-K for the
fiscal
year ended December 31, 2004 (the "Company
Current 10-K"),
and
(ii) its Quarterly Reports on Form 10-Q for the fiscal quarter ended
March 31, 2005, (the "Company
Current 10-Q"
and,
together with the Company Current 10-K and the "Company
SEC Reports"),
all
of which complied when filed in all material respects with all applicable
requirements of the Securities Act and the Exchange Act of 1934, as amended.
The
audited financial statements and unaudited interim financial statements
of the Company included or incorporated by reference in such Company SEC
Reports
were prepared in accordance with GAAP applied on a consistent basis during
the
periods involved (except as may be indicated in the notes thereto) and present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Company at the respective dates and for
the
respective periods indicated (and in the case of all such financial statements
that are interim financial statements, contain all adjustments so to present
fairly). Except to the extent that information contained in any Company SEC
Report was revised or superseded by a later filed report, none of the Company
SEC Reports contained any untrue statement of a material fact or omitted
to
state any 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.
3.4 Corporate
Power.
The
Company will have at the Closing Date all requisite legal and corporate power
and authority to execute and deliver the Transactional Agreements, to sell
and
issue the Notes hereunder, to issue the Series E Preferred Stock upon
conversion of the Notes, to issue the Common Stock issuable upon conversion
of
the Series E Preferred Stock (subject to stockholder approval as set
forth
in Section 7.1 hereof), and to carry out and perform its obligations
under
the terms of the Transactional Agreements.
3.5 Authorization.
All
corporate action on the part of the Company, its officers, directors, and
stockholders necessary for the authorization, execution, delivery, and
performance of all obligations under the Transactional Agreements, and for
the
authorization, issuance, and delivery of the Notes, of the Series E
Preferred Stock issuable upon conversion of the Notes (subject to filing
the
Series E Statement immediately following the Closing), and of the Common
Stock
(subject to stockholder approval as set forth in Section 7.1 hereof)
issuable upon conversion of the Series E Preferred Stock has been
taken.
The Transactional Agreements constitute legally binding and valid obligations
of
the Company enforceable in accordance with their respective terms, except
to the
extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors' rights and laws concerning
equitable remedies.
-5-
3.6 Validity
of Shares.
Upon
the filing of the Series E Statement, the Series E Preferred Stock
issuable
upon conversion of the Notes will be duly and validly reserved and, assuming
such Series E Preferred Stock is issued in accordance with the Articles
and
the terms of this Agreement, will be duly and validly issued (including,
without
limitation, issued in compliance with applicable federal and state securities
laws) and non-assessable and will be free of any liens or encumbrances other
than any liens or encumbrances created by or imposed thereon under this
Agreement, the Notes, or the Registration Rights Agreement. Subject to
stockholder approval, as set forth in Section 7.1 hereof, the Common
Stock
issuable upon conversion of the Series E Preferred Stock has been
duly and
validly reserved and, assuming such Common Stock is issued in accordance
with
the Articles, will be duly and validly issued (including, without limitation,
issued in compliance with applicable federal and state securities laws) and
non-assessable and will be free of any liens or encumbrances other than any
liens or encumbrances created by or imposed thereon by the holders; provided,
however, that the Series E Preferred Stock (and the Common Stock issuable
upon conversion thereof) shall be subject to restrictions on transfer under
state and/or federal securities laws. Except as set forth in the Articles
and
the Notes, the Series E Preferred Stock issuable upon conversion of
the
Notes and the Common Stock issuable upon conversion of the Series E
Preferred Stock are not subject to any preemptive or other similar statutory
or
contractual rights and will not conflict with any provisions of any agreement
or
instrument to which the Company is a party or by which it is bound.
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SECTION
4
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REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR.
|
The
Investor represents and warrants to the Company as follows:
4.1 Authorization.
When
executed and delivered by the Investor, and assuming execution and delivery
by
the Company, the Transactional Agreements will each constitute a valid
obligation of the Investor, enforceable in accordance with its terms, except
to
the extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors' rights and laws concerning
equitable remedies.
4.2 Brokers
and Finders.
The
Investor has not retained any investment banker, broker, or finder in connection
with the transactions contemplated by this Agreement.
4.3 Investment.
This
Agreement is made with the Investor in reliance upon the Investor's
representation to the Company, which by the Investor's execution of this
Agreement the Investor hereby confirms, that the Notes (including capital
stock
issuable upon conversion thereunder) to be received by the Investor will
be
acquired for investment for the Investor's own account, not as a nominee
or
agent, and not with a view to the sale or distribution of any part thereof,
and
that the Investor has no present intention of selling, granting any
participation in, or otherwise distributing any of the Notes (including capital
stock issuable upon conversion thereunder). By executing this Agreement,
the
Investor further represents that it has no contract, undertaking, agreement,
or
arrangement with any person to sell, transfer, or grant participation to
such
person or to any third person, with respect to any of the Notes (including
capital stock issuable upon conversion thereunder).
-6-
4.4 No
Public Market.
The
Investor understands that no public market now exists for the Series E
Preferred Stock and that the Company has given no assurances that a public
market will ever exist for the Series E Preferred Stock. The investor
understands that the Company's Common Stock is currently quoted by the Nasdaq
OTC Bulletin Board and that although the Company will use its best efforts
to
obtain listing on the Nasdaq SmallCap Market and Toronto Street Exchange,
no
assurance can be given that the Company's securities will be approved for
listing on such exchanges.
4.5 Experience.
The
Investor represents that: (a) it has such knowledge and experience
in
financial and business matters as to be capable of evaluating the merits
and
risks of its prospective investment in the Notes; (b) it believes
it has
received all the information it has requested from the Company and considers
necessary or appropriate for deciding whether to obtain the Notes; (c) it
has had the opportunity to discuss the Company's business, management, and
financial affairs with the Company's management; (d) it understands the economic
implications of the transactions contemplated by this Agreement and confronting
the Company; (e) it has had the full opportunity to seek advice of counsel
and
any other appropriate advice with respect to the transactions contemplated
by
this Agreement; (f) it has the ability to bear the economic risks
of its
prospective investment; and (g) it is able, without materially impairing
its financial condition, to hold the Notes for an indefinite period of time
and
to suffer a complete loss on its investment.
4.6 Accredited
Investor.
The
Investor presently qualifies and will as of the Closing qualify as an
"accredited investor" within the meaning of Regulation D of the rules and
regulations promulgated under the Securities Act.
4.7 Limitations
on Transferability.
The
Investor covenants that in no event will it dispose of the Notes (other than
pursuant to Rule 144 promulgated by Securities and Exchange Commission under
the
Securities Act ("Rule
144")
or any
similar or analogous rule) unless and until (a) the Investor shall
have
notified the Company of the proposed disposition and shall have furnished
the
Company with a statement of the circumstances surrounding the proposed
disposition, and (b) if requested by the Company, the Investor shall
have
furnished the Company with an opinion of counsel satisfactory in form and
substance to the Company and the Company's counsel to the effect that
(x) such disposition will not require registration under the Securities
Act
and (y) appropriate action necessary for compliance with the Securities
Act
and any applicable state, local, or foreign law has been taken. Notwithstanding
the limitations set forth in the foregoing sentence, if the Investor is a
partnership or limited liability company it may transfer Notes (or portions
thereof) to its constituent partners or a retired partner of such partnership
who retires after the date hereof, or its constituent members or retired
members
of such limited liability company who retires after the date hereof, as the
case
may be, or to the estate of any such partner, member or retired partner or
member or transfer by gift, will, or intestate succession to any such partner's
or member's spouse or lineal descendants or ancestors without the necessity
of
registration or opinion of counsel if the transferee agrees in writing to
be
subject to the terms of this Agreement to the same extent if such transferee
were an Investor; provided, however, that Investor hereby covenants not to
effect such transfer if such transfer either would invalidate the securities
laws exemptions pursuant to which the Notes were originally offered and sold
or
would itself require registration and/or qualification under the Securities
Act
or applicable state securities laws. Each Note transferred as above provided
shall bear the appropriate restrictive legend set forth in Section 5
below,
except that such Note shall not bear such legend if the transfer was made
in
compliance with subsection (k) of Rule 144 or if the opinion of counsel
referred to above is to the further effect that such legend is not required
in
order to establish compliance with any provisions of the Securities
Act.
-7-
4.8 Ownership
Change Under Section 382 of the Internal Revenue Code; Special Restrictions
Upon
Transfer.
4.8.1 Special
Restrictions Upon Transfer.
The
following restrictions shall apply to the transfer of shares of Common Stock,
issuable directly or indirectly upon the conversion of any Note.
4.8.2 Definitions.
For
purposes of this Section 4.8 the following terms shall have the following
meanings:
"Board"
means
the Company's Board of Directors.
"Common
Stock"
shall
mean the Common Stock of the Company, par value $0.01 per share.
"Section
382"
means
Section 382 of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Special
Board Approval"
shall
mean the approval by the Board of Directors of the Company acting in accordance
with applicable law.
4.8.3 Purported
Transfers Not Effective.
Unless
such transfer shall have been preceded by Special Board Approval, any purported
transfer of Common Stock into which any Note is directly or indirectly
convertible in excess of the number of shares that can be transferred without
increasing the transferee's ownership interest percentage above 4.5% is not
effective to transfer ownership of such excess shares (the "Prohibited
Shares")
from
the transferor (the "Initial
Transferor")
to the
purported acquiror (the "Purported
Acquiror").
For
this purpose a transferee's ownership interest percentage shall be calculated
pursuant to Section 382. By way of explanation, a transferees ownership interest
is generally the sum of the transferee's direct ownership interest percentage
as
calculated pursuant to Section 382 and the transferee's indirect ownership
interest as calculated pursuant to Section 382, with adjustments made to
include
ownership interests that, under ordinary circumstances, are not included
in
measuring ownership interests. In the event a Initial Transferor seeks a
Special
Board Approval, to the extent that the transaction reflected in the proposed
request for a Special Board Approval does not result in an "ownership shift"
in
excess of 40% and does not result in an "ownership change" as those terms
are
used in Section 382, the approval of the Board will not be unreasonably
withheld. Moreover, to the extent that the proceeds of any "ownership shift"
of
up to 40% results directly or indirectly in the receipt of cash by the Company,
the transaction will be presumed to be in the interest of the Company unless
it
results in an "ownership change".
-8-
4.8.4 Transfer
to Agent of Prohibited Shares; Sale by Agent; Payment of
Proceeds.
On
demand by the Company (which demand must be made within 30 days of the time
Company learns of the transfer of Prohibited Shares), a Purported Acquiror
must
transfer any certificate or other evidence of ownership of the Prohibited
Shares
within the Purported Acquiror's possession or control, together with any
dividends or other distributions that were received by the Purported Acquiror
from Company with respect to the Prohibited Shares ("Prohibited
Distributions"),
to an
agent designated by Company (the "Agent").
The
Agent will sell the Prohibited Shares in an arms-length transaction (over
a
public exchange, if reasonable possible), and the Purported Acquiror will
receive an amount of sales proceeds not in excess of the price paid or
consideration surrendered by the Purported Acquiror for the Prohibited Shares
(or the fair market value of the Prohibited Shares at the time of an attempted
transfer to the Purported Acquiror by gift, inheritance, or a similar transfer).
If the Purported Acquiror has resold the Prohibited Shares prior to receiving
the Company's demand to surrender the Prohibited Shares to the Agent, the
Purported Acquiror shall be deemed to have sold the Prohibited Shares as
agent
for the Initial Transferor and shall be required to transfer to the Agent
any
Prohibited Distributions and the proceeds of such sale, except to the extent
that the Agent grants written permission to the Purported Acquiror to retain
a
portion of such sales proceeds not exceeding the amount that the Purported
Acquiror would have received from the Agent if the Agent rather than the
Purported Acquiror had resold the Prohibited Shares. If the Initial Transferor
can be identified, the Agent will pay to the Initial Transferor any sales
proceeds in excess of those due to the Purported Acquiror, together with
any
amounts received by the Agent from the Purported Acquiror that are attributable
to Prohibited Distributions. If the Initial Transferor cannot be identified
within 90 days, the Agent may pay any amounts due to the Initial Transferor
into
a court or governmental agency, if applicable law permits, and otherwise
must
transfer such amounts to a charity designated by Company. In no event shall
amounts due to the Initial Transferor pursuant to Article inure to the benefit
of Company or the Agent, but such amounts may be used to cover expenses incurred
by Agent in attempting to identify the initial Transferor. If the Purported
Acquiror fails to surrender the Prohibited Shares within the next 30 business
days from demand by Company, then the Company will institute legal proceedings
to compel the surrender.
4.8.5 Legend.
The
Investor understands and agrees that each certificate held by the Investor
representing the Notes, and Series F Preferred Stock and the Common
Stock
issuable upon conversion thereof, or any other securities issued in respect
of
the Notes, and Series F Preferred Stock and Common Stock issuable
upon
conversion thereof upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall bear the following legend ((in
addition to any legend required by this Agreement, the other Agreements or
under
applicable state securities laws):
"THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF, AND
ARE
SUBJECT TO RESTRICTIONS ON TRANSFER AND RIGHTS OF SALE AS PROVIDED IN A NOTE
PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE HOLDER HEREOF, OR ITS SUCCESSOR,
A COPY OF WHICH IS AVAILABLE FROM THE COMPANY."
-9-
|
SECTION
5
|
CONDITIONS
OF INVESTOR'S OBLIGATIONS AT
CLOSING.
|
The
obligations of the Investor under Section 1 of this Agreement are
subject
to the fulfillment at or before each of the Closings of the following
conditions, any of which may be waived in writing by such Investor:
5.1 Representations
and Warranties.
The
representations and warranties of the Company contained in Section 3
shall
be true in all respects on and as of the Closing with the same effect as
if made
on and as of the Closing.
5.2 Performance.
The
Company shall have performed or fulfilled in all material respects all
agreements, obligations, and conditions contained herein required to be
performed or fulfilled by the Company before the Closing.
5.3 Qualifications.
All
authorizations, approvals, or permits, if any, of any governmental authority
or
regulatory body of the United States or any state that are required in
connection with the lawful issuance and sale of the Notes pursuant to this
Agreement shall be duly obtained effective as of the Closing.
5.4 Compliance
Certificate.
Upon
request by the Investor the Company shall deliver to the Investor a certificate
dated as of the Closing, signed by the Company's Secretary, certifying as
to
(a) the Company's Articles, (b) the Company's Bylaws, (c) the
resolutions adopted by, and other consents and approvals of, the Company's
Board
of Directors and stockholders in connection with the Transactional Agreements
and the transactions contemplated hereby and thereby, and (d) the
names of
the officers of the Company authorized to sign the Transactional Agreements
and
the other documents or certificates to be delivered pursuant to this Agreement
by the Company, or any of its officers, together with the true signatures
of
such officers. Upon request by the Investor, the Company shall deliver to
the
Investor a certificate dated as of the Closing, signed by the Company's
President, certifying that the conditions set forth in Sections 5.1,
5.2
and 5.3 have been satisfied.
5.5 Notes.
The
Company shall have executed and delivered to Investor the original
Notes.
5.6 Security
Agreement.
The
Company shall have executed and delivered to Investor the Security
Agreement.
5.7 Registration
Rights Agreement.
The
Company shall have executed and delivered to Investor the Registration Rights
Agreement.
|
SECTION
6
|
CONDITIONS
OF THE COMPANY'S OBLIGATIONS AT
CLOSING.
|
The
obligations of the Company under Section 1 of this Agreement are subject
to
the fulfillment at or before the Closing of the following conditions, any
of
which may be waived in writing by the Company:
-10-
6.1 Representations
and Warranties.
The
representations and warranties of the Investor contained in Section 4
shall
be true in all respects on and as of the Closing with the same effect as
though
said representations and warranties had been made on and as of the
Closing.
6.2 Blue
Sky Compliance.
The
Company shall have complied with the securities laws of the State of Texas
and
any other applicable states as necessary to offer and sell the Notes to the
Investor.
6.3 Legal
Matters.
All
material matters of a legal nature which pertain to the Transactional Agreements
and the transactions contemplated hereby and thereby shall have been reasonably
approved by counsel to the Company.
6.4 Registration
Rights Agreement.
Investor shall have executed and delivered to the Company the Registration
Rights Agreement.
6.5 Security
Agreement.
Investor shall have executed and delivered to the Company the Security
Agreement.
|
SECTION
7
|
POST-CLOSING
COVENANTS OF THE COMPANY.
|
7.1 Stockholder
Approval.
The
Company shall use reasonable efforts to obtain all required stockholder approval
of the transactions contemplated by the Transactional Agreements, including
amending the Articles to increase the number of shares of authorized Common
Stock to account for conversion of the Series E Preferred Stock and
all
other series of Preferred Stock.
7.2 Securities
Laws Compliance.
Within
15 days after the Closing the Company shall make any filings necessary under
the
securities or blue sky laws of any applicable jurisdiction.
7.3 Private
Offering.
The
Company agrees that neither the Company nor anyone acting on its behalf will
offer the Notes or any similar securities for issuance or sale to, or solicit
any offer to acquire any of the same from, anyone or take any other action
so as
to make the issuance and sale of the Notes subject to the registration
requirements of Section 5 of the Securities Act.
7.4 Properties,
Business, Insurance.
The
Company shall maintain, and cause each of its subsidiaries to maintain, as
to
their respective properties and business, insurance against such casualties
and
contingencies and of such types and in such amounts as is customary for
companies similarly situated, of similar size, scope and financial condition,
which insurance shall be deemed by the Company to be sufficient.
7.5 Restrictive
Agreements Prohibited.
Neither
the Company nor any of its subsidiaries shall become a party to any agreement
which by its terms restricts the Company's performance of the Transactional
Agreements or the Articles.
7.6 Use
of
Proceeds.
The
Company agrees to use the proceeds from the sale of the Notes for (i) payment
of
expenses related to the transactions contemplated by the Transactional
Agreements, (ii) payment of outstanding accounts payable, and (iii) current
operating expenses.
-11-
7.7 Material
Changes and Litigation.
The
Company shall promptly notify the Investor of any Material Adverse Event
and of
any litigation or governmental proceeding or investigation brought or, to
the
Company's knowledge, threatened in writing against the Company, officer,
director, key employee or principal stockholder of the Company which, if
adversely determined, would result in a Material Adverse Event.
7.8 Punctual
Payment.
The
Company shall pay the principal of, premium, if any, and interest on the
Notes
at the times and place and in the manner provided in the Notes and
herein.
7.9 Preservation
of Corporate Existence.
The
Company shall preserve and maintain its corporate existence and all rights,
franchises and privileges in the jurisdiction of its organization, and qualify
and remain qualified as a foreign corporation in each jurisdiction in which
such
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties, except where the failure to qualify would
not constitute a Material Adverse Event. The Company shall preserve and maintain
all licenses and other rights to use patents, processes, licenses, trademarks,
trade names, inventions, intellectual property rights or copyrights owned
or
possessed by it, and material to the conduct of its business.
7.10 Compliance
with Laws.
The
Company shall comply, and cause each Subsidiary to comply, with all applicable
laws, rules, regulations and orders of any governmental authority, noncompliance
with which could materially adversely affect its business or condition,
financial or other.
7.11 Keeping
of Records and Books of Account.
The
Company shall keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied, reflecting
all material financial transactions of the Company and in which, for each
fiscal
year, are proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
7.12 Compliance
with ERISA.
The
Company shall comply with all minimum funding requirements applicable to
any
pension or other employee benefit or employee contribution plans which are
subject to ERISA or to the Code, and comply in all material respects with
the
provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. The Company will not permit any event
or
condition to exist which could permit any such plan to be terminated under
circumstances which would cause the lien provided for in Section 4068
of
ERISA to attach to the assets of the Company.
7.13 Foreign
Corrupt Practices Act.
The
Company shall comply and cause each officer, director, partner, employee
and
agent of the Company, each Subsidiary to comply, at all times with the
prohibitions on certain acts and practices set forth in the Foreign Corrupt
Practices Act of 1977, and any rules or regulations promulgated
thereunder.
7.14 Exchange
Relisting.
The
Company shall use its best efforts to obtain listing of its Common Stock
on the
Nasdaq SmallCap Market and the Toronto Stock Exchange.
7.15 Negative
Covenants.
Without
limiting any other covenants and provisions hereof, the Company covenants
and
agrees that, as long as any of the Notes remains outstanding, it will comply
with and observe the following covenants and provisions, and will cause each
Subsidiary to comply with and observe such of the following covenants and
provisions as are applicable to such Subsidiary, and will not, without the
prior
written consent of the holder of the Notes:
-12-
7.15.1 Distributions.
Except
as required by the Notes and the Articles, declare or pay any dividends,
purchase, redeem, retire, or otherwise acquire for value any of its capital
stock (or rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its stockholders as such, or make any
distribution of assets to its stockholders as such, or permit any Subsidiary
to
do any of the foregoing (such transactions being hereinafter referred to
as
"Distributions"),
except that the Subsidiaries may declare and make payment of cash and stock
dividends, return capital and make distributions of assets to the Company;
and,
except
that
nothing herein contained shall prevent the Company from effecting a stock
split
or declaring or paying any dividend consisting of shares of any class of
capital
stock pro rata to the holders of shares of such class of capital
stock.
7.15.2 Extraordinary
Corporate Transactions.
Take
any corporate action, enter into any agreement to take such action, or obligate
itself to take any such action, if such action would: (i) provide
for the
voluntary liquidation, dissolution or winding up of the Company; (ii) enter
into any transaction that expressly prohibits or limits the Company's right
to
perform its obligations under this Agreement or the Notes; or
(iii) transfer, sell or license any material amount of its assets
other
than in the ordinary course of business or other than obsolete equipment
or
unsaleable inventory.
7.15.3 Dealings
with Affiliates.
Except
for transactions involving the Company and Investor, enter or permit any
Subsidiary to enter into any transaction with any holder of five percent
(5%) or
more of any class of capital stock of the Company, or any member of their
families or any corporation or other entity in which anyone or more of such
stockholders or members of their immediate families, directly or indirectly
holds five percent (5%) or more of any class of capital stock or other ownership
interest, except in the ordinary course of business and on terms not less
favorable to the Company or any Subsidiary than it would obtain in a transaction
between unrelated parties.
7.15.4 Change
in Nature of Business.
Make
any material change in the nature of the Company's business as carried on
at the
date hereof, without the prior approval of its Board of Directors.
7.16 Articles.
The
Company shall file the Series F Statement with the Secretary of State
of
the State of Texas and deliver to the Investor a certified copy of the
Series F Statement.
|
SECTION
8
|
MISCELLANEOUS.
|
8.1 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Texas, excluding those laws that direct the application of the
laws
of another jurisdiction.
8.2 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
-13-
8.3 Headings.
The
headings of the sections of this Agreement are for convenience and shall
not by
themselves determine the interpretation of this Agreement.
8.4 Notices.
Any
notice required or permitted hereunder shall be given in writing and shall
be
conclusively deemed effectively given upon personal delivery or delivery
by
courier, or on the first business day after transmission if sent by confirmed
facsimile transmission or electronic mail transmission, or five days after
deposit in the United States mail, by registered or certified mail, postage
prepaid, addressed (i) if to the Company, as set forth below the Company's
name on the signature page of this Agreement, and (ii) if to an Investor,
at such Investor's address as set forth on the Signature page of this Agreement,
or at such other address as the Company or such Investor may designate by
10
days' advance written notice to the other parties hereto.
8.5 Survival
of Warranties.
The
warranties and representations of the parties contained in or made pursuant
to
this Agreement shall survive for two years after the execution and delivery
of
this Agreement and the First Closing; provided, however, that such
representations and warranties need only be accurate as of the date of such
execution and delivery and as of the Closing.
8.6 Amendments,
Waivers and Consent.
Any
provision in this Agreement or the Notes to the contrary notwithstanding,
changes in or additions to this Agreement may be made, and compliance with
any
covenant or provision herein or therein set forth may be omitted or waived,
if
the Company shall obtain consent thereto in writing from the holder of the
Notes; provided
that no
such consent shall be effective to reduce or to postpone the date fixed for
the
payment of the principal (including any required redemption) or interest
payable
on the Notes, without the consent of the holder thereof. Any waiver or consent
may be given subject to satisfaction of conditions stated therein and any
waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given. Written notice of any waiver or consent effected
under
this subsection shall promptly be delivered by the Company to any holder
who did
not execute the same. No failure or delay on the part of the Investor, or
any
other holder of the Notes in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder. The remedies
herein provided are cumulative and not exclusive of any remedies provided
by
law.
8.7 Finders'
Fees.
The
Company and the Investor will indemnify the other against all liabilities
incurred by the indemnifying party with respect to claims related to investment
banking or finders' fees in connection with the transactions contemplated
by
this Agreement, arising out of arrangements between the party asserting such
claims and the indemnifying party, and all costs and expenses (including
reasonable fees of counsel) of investigating and defending such
claims.
8.8 Expenses.
The
Company and the Investor will bear their respective legal and other fees
and
expenses with respect to this Agreement and the transactions contemplated
hereby.
-14-
8.9 Confidentiality.
Each
party hereto agrees that, except with the prior written permission of the
Company, it shall at all times keep confidential and not divulge or furnish
or
make accessible to anyone any confidential information concerning or relating
to
the business or financial affairs of the Company to which such party has
become
privy by reason of this Agreement, discussions or negotiations relating to
this
Agreement or the exhibits to this Agreement, provided that an Investor may
disclose confidential information if (i) the information is publicly
known
through publication or otherwise through no wrongful act of the Investor;
(ii) the information is received from a third party who rightfully
discloses it to the Investor without restriction on its subsequent disclosure;
(iii) the information is disclosed pursuant to the lawful requirement
of a
governmental agency or by order of court of competent jurisdiction, provided
that in such event, Investor will provide prior written notice of such proposed
disclosure to the Company; or (iv) the information is reasonably required
to be disclosed in order for the Investor or their transferee to market an
interest in the capital stock of the Company, provided that in such instance
the
person to whom the information is provided shall be required to hold such
information in confidence.
8.10 Further
Assurances.
From
and after the date of this Agreement, upon the request of the Investor, the
Company and each Subsidiary shall execute and deliver such instruments,
documents and other writings as may be necessary or desirable to confirm
and
carry out and to effectuate fully the intent and purposes of this Agreement
and
the Notes.
8.11 Jury
Waiver.
THE
COMPANY AND THE INVESTOR AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR
SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT
OR ANY OF THE OTHER TRANSACTIONAL AGREEMENTS, ANY RELATED INSTRUMENTS, ANY
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM,
OR
(B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH
A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED; PROVIDED, HOWEVER, THAT THE
FOREGOING SHALL NOT PRECLUDE ANY PARTY OR ITS SUCCESSORS FROM ASSERTING ANY
COUNTERCLAIM WHICH WOULD OTHERWISE BE BARRED OR FORFEITED. EXCEPT AS STATED
IN
THE PRECEDING SENTENCE, THE PROVISIONS OF THIS SECTION SHALL BE SUBJECT TO
NO
EXCEPTIONS. NEITHER THE COMPANY NOR ANY OF THE INVESTOR HAS AGREED WITH OR
REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS SECTION WILL NOT BE
FULLY
ENFORCED IN ALL INSTANCES.
8.12 Entire
Agreement; Successors and Assigns.
This
Agreement (and the exhibits hereto) constitutes the entire contract between
the
Company and the Investor relative to the subject matter hereof. Any prior
and
contemporaneous agreement, discussion, understanding or correspondence between
the Company and the Investor regarding the purchase of the Notes is superseded
by this Agreement. 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. All subsequent transferees or assigns
of
the Notes shall be deemed a party to this Agreement and bound by the obligations
imposed upon Investor herein.
-15-
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
-16-
IN
WITNESS WHEREOF, the parties hereto have executed this Note Purchase Agreement
as of the date first above written.
| COMPANY: | POSITRON CORPORATION | |
| |
|
|
| By: | /s/ Xxxx X. Xxxxxx | |
|
Xxxx X. Xxxxxx, President |
||
|
Address: 0000
Xxxxxxx Xxxxx Xxxxx, #000,
Xxxxxxx,
Xxxxx
00000
|
||
| INVESTOR: | SOLARIS OPPORTUNITY FUND, L.P. | |
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxxx | |
|
Name: Xxxxxxx X. Xxxxxx |
||
| Its: Managing Director | ||
|
Address: 000
Xxxxxxxx Xxxxx
Xxx
Xxxxx,
Xxxxxxxx 00000
|
||
-17-
SCHEDULES
AND EXHIBITS
| Schedule 1 | Schedule of Exceptions |
| Exhibit A | Secured Convertible Promissory Note |
| Exhibit B | Registration Rights Agreement |
| Exhibit C | Security Agreement |
-18-
