FORM OF NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT ("Agreement") is made as of _____________,
2006, by and among HEALTH PARTNERSHIP INC., a Colorado corporation, (the
"Company"), and the lenders (each individually a "Lender," and collectively the
"Lenders") named on the Schedule of Lenders attached hereto (the "Schedule of
Lenders"). Capitalized terms not otherwise defined in this Agreement shall have
the meanings ascribed to them in Section 1 below.
WHEREAS, each of the Lenders intends to provide certain Consideration to
the Company as described for each Lender on the Schedule of Lenders;
WHEREAS, the parties wish to provide for the sale and issuance of the
Notes in return for the provision by the Lenders of the Consideration to the
Company on the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS, the Company has obtained the written consent of the Xxxxxxx
Xxxxxx Family Trust u/a/d 11-11-99 in connection with the sale and issuance of
the Notes pursuant to that certain Note Purchase Agreement, dated October 31,
2005 by the Company and each lender named therein, a copy of which consent is
attached hereto as Exhibit A.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Definitions.
(a) "Consideration" shall mean the amount of money paid by each Lender
pursuant to this Agreement as shown on the Schedule of Lenders.
(b) "Conversion Shares" shall, for purposes of determining the type of
Equity Securities issuable upon conversion of the Notes, mean if the Notes are
converted to equity pursuant to Section 2.2 below, the Equity Securities issued
in the Next Equity Financing.
(c) "Conversion Price" shall mean with respect to a conversion pursuant to
Section 2.2 below, a price per share equal to seventy five percent (75%) of the
price paid per share for Equity Securities by the investors in the Next Equity
Financing.
(d) "Equity Securities" shall mean the Company's Common Stock or Preferred
Stock or any securities conferring the right to purchase the Company's Preferred
Stock or securities convertible into, or exchangeable for (with or without
additional consideration), the Company's Common Stock or Preferred Stock, except
any security granted, issued and/or sold by the Company to any director,
officer, employee or consultant of the Company in such capacity for the primary
purpose of soliciting or retaining their services.
(e) "Knowledge" shall mean the actual knowledge of any officer of the
Company.
(f) "Majority Note Holders" shall mean the holders of a majority in
interest of the aggregate principal amount of Notes.
(g) "Maturity Date" shall mean _____________, 2007.
(h) "Next Equity Financing" shall mean the next sale (or series of related
sales) by the Company of its Equity Securities following the date of this
Agreement from which the Company receives gross proceeds of not less than
$3,000,000 including the aggregate amount of debt securities converted into
Equity Securities upon conversion of the Notes pursuant to Section 2.2 below;
(i) "Notes" shall mean the one or more unsecured convertible promissory
notes issued to each Lender pursuant to Section 2.1 below, the form of which is
attached hereto as Exhibit B.
(j) "Securities" shall have the meaning set forth in Section 6.2 below.
2. Terms of the Notes.
2.1 Issuance of Notes. In return for the Consideration paid by each
Lender, the Company shall sell and issue to such Lender one or more unsecured
Notes in the aggregate amount of $1,000,000 (or such increased amount as
determined by the Company's board of directors). Each Note shall have a
principal balance equal to that portion of the Consideration paid by such Lender
for the Note, as set forth in the Schedule of Lenders. Each Note shall be
convertible into Conversion Shares pursuant to Section 2.2 below.
2.2 Right to Convert Notes/Next Equity Financing. The principal and unpaid
accrued interest of each Note shall automatically be converted into Conversion
Shares upon the closing of the Next Equity Financing. The number of Conversion
Shares to be issued upon such conversion shall be equal to the quotient obtained
by dividing the outstanding principal and unpaid accrued interest on a Note to
be converted, on the date of conversion, by the Conversion Price. At least five
(5) days prior to the closing of the Next Equity Financing, the Company shall
notify the holder of each Note in writing of the terms under which the Equity
Securities of the Company will be sold in such financing. The issuance of
Conversion Shares pursuant to the conversion of each Note shall be upon and
subject to the same terms and conditions applicable to the Equity Securities
sold in the Next Equity Financing. Upon the conversion of a Note into Conversion
Shares, in lieu of any fractional shares to which the holder of the Note would
otherwise be entitled, the Company shall pay the Note holder cash equal to such
fraction multiplied by the Conversion Price. The Company shall not be required
to issue or deliver the Conversion Shares until the Note holder has surrendered
the Note to the Company.
3. Closing. The initial closing (the "First Closing") of the purchase of
the Notes in the amounts set forth opposite each Lender's name on the Schedule
of Lenders shall take place at the offices of the Company at 12:00 p.m., on
____________, 2006, or at such other time and place as the Company and Lenders
purchasing the aggregate principal amount of the Notes to be sold at the First
Closing agree upon orally or in writing. Any subsequent closing of the purchase
of the Notes (a "Subsequent Closing") in the amounts set forth opposite each
Lender's name on the Schedule of Lenders shall take place at such locations and
at such times as shall be mutually agreed upon orally or in writing by the
Company and Lenders purchasing the aggregate principal amount of the Notes to be
sold at such Subsequent Closing. At each Closing, each Lender shall deliver the
Consideration to the Company and the Company shall deliver to each Lender one or
more executed Notes in return for the respective Consideration provided to the
Company.
4. Use of Consideration. Notwithstanding anything to the contrary herein,
there shall be no minimum aggregate principal amount of the Notes which must be
sold by the Company to any one or more Lenders before the Company can the
proceeds of respective Consideration provided to the Company at the First
Closing or any Subsequent Closing of the purchase of any Notes.
5. Representations and Warranties of the Company. In connection with the
transactions provided for herein, the Company hereby represents and warrants to
the Lenders that:
5.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado and has all requisite corporate power and
authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on its
business or properties.
5.2 Authorization. All corporate action has been taken on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery and (except for the authorization and
issuance of any Conversion Shares issuable in connection with Section 2.2
hereof) performance, of this Agreement and the Notes. Except as may be limited
by applicable bankruptcy, insolvency, reorganization, or similar laws relating
to or affecting the enforcement of creditors' rights, the Company has taken all
corporate action required to make all of the obligations of the Company
reflected in the provisions of this Agreement and the Notes the valid and
enforceable obligations they purport to be.
5.3 Compliance with Other Instruments. Neither the authorization,
execution and delivery of this Agreement or the Notes, nor the issuance and
delivery of the Notes, will constitute or result in a default or violation of
any law or regulation applicable to the Company or any term or provision of the
Company's current Articles or Bylaws or any material agreement or instrument by
which it is bound or to which its properties or assets are subject.
5.4 Valid Issuance. The Conversion Shares to be issued, sold and delivered
upon conversion of the Notes will be, when issued in accordance with the terms
of this Agreement and the Notes, duly and validly issued, fully paid and
nonassessable and, based in part upon the representations and warranties of the
Lenders in this Agreement, will be issued in compliance with all applicable
federal and state securities laws.
5.5 No Violation. The Company is not in violation of any order of any
court, arbitrator or governmental body, material laws, ordinances or
governmental rules or regulations (domestic or foreign) to which it is subject,
or with respect to any material loan agreement, debt instrument or contract with
a supplier or customer of the Company or other agreement to which it is a party
and has not failed to obtain or apply for any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of its property or
to the conduct of its business.
5.6 No Litigation. There are no suits or proceedings pending or, to the
Knowledge of the Company, threatened in any court or before any regulatory
commission, board or other governmental administrative agency against or
affecting the Company which if determined adversely to the Company could result
in a material adverse effect on the Company's business as presently conducted or
its ability to perform its obligations hereunder or under the Notes.
5.7 Arms' Length Transactions. The transactions evidenced by this
Agreement and the Notes and the other documents and instruments delivered in
connection herewith or therewith (a) are the result of arms' length negotiations
among the parties hereto, (b) are made on commercially reasonable terms and (c)
are undertaken by the Company without any intent to hinder, delay or defraud any
entity to which the Company is or may become indebted.
6. Representations and Warranties of the Lenders. In connection with the
transactions provided for herein, each Lender hereby represents and warrants to
the Company that:
6.1 Authorization. This Agreement constitutes such Lender's valid and
legally binding obligation, enforceable in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization, or
similar laws relating to or affecting the enforcement of creditors' rights and
(ii) laws relating to the availability of specific performance, injunctive
relief or other equitable remedies. Each Lender represents that the execution,
delivery and performance of this Agreement has been duly authorized and approved
by such Lender.
6.2 Purchase Entirely for Own Account. Each Lender acknowledges that this
Agreement is made with Lender in reliance upon such Lender's representation to
the Company that the Notes, the Conversion Shares, and any Common Stock issuable
upon conversion of the Conversion Shares (collectively, the "Securities") will
be acquired for investment for Lender's own account, as principal and not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and that such Lender has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, each Lender further represents that such Lender does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to the Securities.
6.3 Disclosure of Information. Each Lender acknowledges that it has
received all the information, documents and materials it considers necessary or
appropriate for deciding whether to acquire the Notes. Each Lender confirms that
it has made such further investigation of the Company as was deemed appropriate
to evaluate the merits and risks of this investment. Each Lender further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Notes.
6.4 Investment Experience. Each Lender is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Notes. If other than an individual,
each Lender also represents it has not been organized solely for the purpose of
acquiring the Notes.
6.5 Accredited Investor. Each Lender is an "accredited investor" within
the meaning of Rule 501 of Regulation D of the Securities Act of 1933, as
presently in effect (the "Securities Act").
6.6 Restricted Securities. Each Lender understands that the Securities are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may not be resold except through a valid registration statement
or pursuant to a valid exemption from the registration requirements under the
Securities Act and applicable state securities laws. Each Lender represents that
it is familiar with Rule 144 of the Securities Act, and understands the resale
limitations imposed thereby and by the Securities Act and applicable state
securities laws.
6.7 Further Limitations on Disposition. Without in any way limiting the
representations and warranties set forth above, each Lender further agrees not
to make any disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of the Company to be bound
by this Section 6 and:
(a) There is then in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) Lender has notified the Company of the proposed disposition and
has furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition and (ii) if reasonably requested by the
Company, Lender shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act.
(c) All transferees agree in writing to be subject to the terms hereof,
and any other agreements to which such Securities may be subject, to the same
extent as if they were Lenders hereunder.
6.8 Legends. It is understood that the certificates evidencing the
Securities, or any other securities issued in respect of the Securities upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall bear the legends required by applicable law as well as such
agreements to which such Securities may be subject, including, without
limitation, legends relating to restrictions on transfer under federal and state
securities laws and legends required under applicable state securities laws, as
well as the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR REGISTERED UNDER ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED,
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B) AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT, OR (C) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH OF CASES (A) THROUGH (C)
IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES."
7. Defaults and Remedies.
7.1 Events of Default. The following events shall be considered Events of
Default with respect to each Note:
(a) The Company shall default in the payment of any part of the principal
or unpaid accrued interest on any Note for more than thirty (30) days after the
Maturity Date or at a date fixed by acceleration or otherwise;
(b) The Company shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition for bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, dissolution or similar relief under any present or future statute,
law or regulation, or shall file any answer admitting the material allegations
of a petition filed against the Company in any such proceeding, or shall seek or
consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of the Company, or of all or any substantial part of the properties
of the Company, or the Company or its respective directors or majority
stockholders shall take any action looking to the dissolution or liquidation of
the Company;
(c) Within sixty (60) days after the commencement of any proceeding
against the Company seeking any bankruptcy reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed, or within sixty (60) days after the appointment without the
consent or acquiescence of the Company of any trustee, receiver or liquidator of
the Company or of all or any substantial part of the properties of the Company,
such appointment shall not have been vacated; or
(d) The Company shall fail to observe or perform any other obligation to
be observed or performed by it under this Agreement or the Notes within 30
(thirty) days after written notice from the Majority Note Holders to perform or
observe the obligation, or any representation or warranty made by the Company
hereunder or thereunder shall be false in any material respect as of the date
made and such representation or warranty is not cured, if susceptible to cure,
within 30 (thirty) days after the Company's Knowledge of such failure.
7.2 Remedies. Upon the occurrence of an Event of Default under Section 7.1
hereof, at the option and upon the declaration of the holder of a Note, the
entire unpaid principal and accrued and unpaid interest on such Note, and all
other amounts owing under this Agreement shall, without presentment, demand,
protest, or notice of any kind, all of which are hereby expressly waived, be
forthwith due and payable, and such holder may, immediately and without
expiration of any period of grace, enforce payment of all amounts due and owing
under such Note and exercise any and all other remedies granted to it at law, in
equity or otherwise; provided, however, that if any Event of Default occurs
under Sections 7.1(b) or 7.1(c), all unpaid principal and accrued and unpaid
interest on such Note, and all other amounts owing under this Agreement, shall
automatically become immediately due and payable.
8. Miscellaneous.
8.1 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties, provided, however,
that the Company may not assign its obligations under this Agreement without the
written consent of the Majority Note Holders (which shall not be unreasonably
withheld), and no Lender may, without the written consent of the Company (which
shall not be unreasonably withheld), assign all or any portion of a Note to any
person or entity. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.
8.2 Governing Law. This Agreement and the Notes shall be governed by and
construed under the laws of the State of Illinois as applied to agreements among
Illinois residents, made and to be performed entirely within the State of
Illinois.
8.3 Counterparts. This Agreement, and any of the other agreements,
documents and instruments contemplated hereby, 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. Delivery of an executed
signature page to this Agreement, and any of the other Agreements, documents and
instruments contemplated hereby, by facsimile transmission shall be effective as
delivery of a manually signed counterpart hereof or thereof.
8.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
8.5 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient, if not so confirmed, then on the next business day, (iii) five (5)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the respective
parties at the following addresses (or at such other addresses as shall be
specified by notice given in accordance with this Section 8.5):
If to the Company:
HEALTH PARTNERSHIP INC.
0000 X. Xxxxxxxx
Xxxxx 0X
Xxxxxxx, Xxxxxxxx 00000
--------------------
Attention: Xxx Xxxxxxxxx
If to Lenders:
At the respective addresses shown on the Schedule of
Lenders.
8.6 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. Lender agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which Lender or any of its officers, partners, employees or
representatives is responsible. The Company agrees to indemnify and hold
harmless Lender from any liability for any commission or compensation in the
nature of a finder's fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
8.7 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled. The Company shall pay all
costs and expenses that it incurs with respect to the negotiation, execution,
delivery and performance of this Agreement.
8.8 Entire Agreement; Amendments and Waivers. This Agreement and the Notes
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. The Company's agreements with each of the Lenders are
separate agreements, and the sales of the Notes to each of the Lenders are
separate sales. Nonetheless, any term of this Agreement or the Notes may be
amended and the observance of any term of this Agreement or the Notes may be
waived (either generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the Majority Note
Holders. Any waiver or amendment effected in accordance with this Section shall
be binding upon each party to this Agreement and any holder of any Note
purchased under this Agreement at the time outstanding and each future holder of
all such Notes.
8.9 Effect of Amendment or Waiver. Each Lender acknowledges that by the
operation of Section 8.8 hereof, the Majority Note Holders will have the right
and power to diminish or eliminate all rights of such Lender under this
Agreement and each Note issued to such Lender.
8.10 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
8.11 Purchase Agreement. Each Lender understands and agrees that the
conversion of the Notes into Conversion Shares may require such Lender's
execution of certain agreements in the form agreed to by investors in the Next
Equity Financing relating to the purchase and sale of such securities as well as
registration, co-sale, rights of first refusal, rights of first offer and voting
rights, if any, relating to such securities.
8.12 Exculpation Among Lenders. Each Lender acknowledges that it is not
relying upon any person, firm, corporation or stockholder, other than the
Company and its officers and directors in their capacities as such, in making
its investment or decision to invest in the Company. Each Lender agrees that no
other Lender nor the respective controlling persons, officers, directors,
partners, agents, stockholders or employees of any other Lender shall be liable
for any action heretofore or hereafter taken or omitted to be taken by any of
them in connection with the purchase and sale of the Securities.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEALTH PARTNERSHIP INC.
By:
--------------------------------
Name:
------------------------------
Title:
LENDERS:
-----------------------------------
Print Name:
------------------------
Amount:
Address:
SCHEDULE OF LENDERS
Total Principal Balance of
Lender Consideration Promissory Note
Lenders' Addresses:
EXHIBIT A
CONSENT
The undersigned acknowledges and agrees as follows:
1. Health Partnership Inc. (the "Company") proposes to sale and issue one
or more unsecured convertible promissory notes in the aggregate amount of
$1,000,000 which, at the sole discretion of the Company's Board of Directors,
may be increased to an aggregate amount of $[_______] to certain lenders to
provide consideration to the Company (collectively, the "Contemplated
Transactions").
2. Pursuant to Section 7.13 of that certain Note Purchase Agreement dated
October 31, 2005 by the Company and the lenders named on the Schedule of Lenders
attached thereto (the "Note Purchase Agreement"), until the later of the
Maturity Date or repayment of the Note (each as defined in the Note Purchase
Agreement), the Company shall not take any action regarding, among others, the
issuance of debt of more than $100,000 or Equity Securities (as defined in the
Note Purchase Agreement) in any amount, without the express written consent of
Xxxxxx Xxxxxx, or, in the event of his death or incapacity, the trustee of the
Xxxxxxx Xxxxxx Family Trust u/a/d 11-11-99.
3. The undersigned hereby consents to the Contemplated Transactions upon
the terms stated herein and all such further agreements, instruments,
certificates, documents and other amendments related thereto or deemed necessary
by the Company in order to carry out the Contemplated Transactions.
4. This Consent is binding upon the successors and assigns of the
undersigned.
5. This Consent is governed by and construed in accordance with the laws
of the State of Illinois, without regard to choice or conflict of laws
principles.
Xxxxxxx Xxxxxx Family Trust u/a/d 11-11-99
By:
-------------------------------
Xxxxxx Xxxxxx, Trustee
Date:
EXHIBIT B
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR REGISTERED UNDER ANY STATE SECURITIES LAWS. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B) AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT, OR (C) AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH
OF CASES (A) THROUGH (C) IN ACCORDANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.
CONVERTIBLE PROMISSORY NOTE
$ __________ __, 2006
FOR VALUE RECEIVED, HEALTH PARTNERSHIP INC., a Colorado corporation (the
"Company"), hereby promises to pay to the order of [_________________(the
"Lender"), the principal sum of __________________ ($__________), together with
interest thereon from the date of this Convertible Promissory Note (the "Note").
Interest shall accrue at a rate of seven percent (7%) per annum, compounded
annually. Unless earlier converted into Conversion Shares pursuant to Section
2.2 of that certain Note Purchase Agreement dated _________ __, 2006 among the
Company, Lender and certain other investors (the "Purchase Agreement"), the
principal and accrued interest shall be due and payable by the Company on the
Maturity Date.
This Note is one of the Notes issued pursuant to the Purchase Agreement,
and capitalized terms not defined herein shall have the meaning set forth in the
Purchase Agreement.
1. Payment. All payments shall be made in lawful money of the United
States of America at the principal office of the Company, or at such other place
as the holder hereof may from time to time designate in writing to the Company.
Payment shall be credited first to Costs (as defined below), if any, then to
accrued interest due and payable and any remainder applied to principal.
Prepayment of principal, together with accrued interest, may be made at anytime
without the consent of Lender. In connection with the delivery, acceptance,
performance or enforcement of this Note, the Company hereby waives demand,
notice, presentment, protest, notice of dishonor and other notice of any kind,
and asserts to extensions of the time of payment, release, surrender or
substitution of security, or forbearance or other indulgence, without notice.
The Company agrees to pay all amounts under this Note without offset, deduction,
claim, counterclaim, defense or recoupment, all of which are hereby waived.
2. Conversion of the Notes. This Note shall be convertible into Conversion
Shares in accordance with the terms of Section 2.2 of the Purchase Agreement. As
promptly as practicable after the conversion of this Note, the Company at its
expense shall issue and deliver to the holder of this Note, upon surrender of
this Note, a certificate or certificates for the number of full Conversion
Shares issuable upon such conversion.
3. Amendments and Waivers; Resolutions of Dispute; Notice. The amendment
or waiver of any term of this Note, the resolution of any controversy or claim
arising out of or relating to this Note and the provision of notice shall be
conducted pursuant to the terms of the Purchase Agreement.
4. Successors and Assigns. This Note applies to, inures to the benefit of,
and binds the successors and assigns of the parties hereto; provided, however,
that the Company may not assign its obligations under this Note without the
written consent of the Majority Note Holders and the Lender may not, without the
written consent of the Company (which shall not be unreasonably withheld),
assign all or any portion of this Note to any person or entity. Any transfer of
this Note may be effected only pursuant to the Purchase Agreement and by
surrender of this Note to the Company and reissuance of a new note to the
transferee. The Lender and any subsequent holder of this Note receives this Note
subject to the foregoing terms and conditions, and agrees to comply with the
foregoing terms and conditions for the benefit of the Company and any other
Lenders.
5. Officers and Directors not Liable. In no event shall any officer or
director of the Company be liable for any amounts due and payable pursuant to
this Note.
6. Expenses. The Company and hereby agrees, subject only to any limitation
imposed by applicable law, to pay all expenses, including reasonable attorneys'
fees and legal expenses, incurred by the holder of this Note ("Costs") in
endeavoring to collect any amounts payable hereunder which are not paid when
due, whether by declaration or otherwise. The Company agrees that any delay on
the part of the holder in exercising any rights hereunder will not operate as a
waiver of such rights. The holder of this Note shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies,
and no waiver of any kind shall be valid unless in writing and signed by the
party or parties waiving such rights or remedies.
7. Governing Law. This Note shall be governed by and construed under the
laws of the State of Illinois as applied to other instruments made by Illinois
residents to be performed entirely within the State of Illinois.
8. Approval. The Company hereby represents that its board of directors, in
the exercise of its fiduciary duty, has approved the Company's execution of this
Note based upon a reasonable belief that the principal provided hereunder is
appropriate for the Company after reasonable inquiry concerning the Company's
financing objectives and financial situation. In addition, the Company hereby
represents that it intends to use the principal of this Note primarily for the
operations of its business, and not for any personal, family or household
purpose.
IN WITNESS WHEREOF, the Company has executed this Note on the day and year
first above written.
HEALTH PARTNERSHIP INC.
By:
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Name:
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Title:
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