EXHIBIT A
THIS NOTE AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER EITHER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE BLUE SKY LAWS,
AND IS SUBJECT TO CERTAIN INVESTMENT REPRESENTATIONS. THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
UNDER THE ACT, AND THE APPLICABLE BLUE SKY LAWS OR AN EXEMPTION THEREFROM.
LIFERATE SYSTEMS, INC.
CONVERTIBLE SUBORDINATED NOTE
$2,250,000 MARCH 28, 1997
(PRINCIPAL AMOUNT) (DATE OF ISSUE)
FOR VALUE RECEIVED, LifeRate Systems, Inc., a corporation organized
under the laws of the State of Minnesota (the "COMPANY"), promises to pay to The
Atlanta Cardiology Group, P.C., a professional corporation organized under the
laws of the State of Georgia (the "HOLDER"), the principal amount of Two Million
Two Hundred Fifty Thousand U.S. Dollars ($2,250,000) on April 1, 2002, except to
the extent any portion of the principal amount of this Note is earlier converted
into Common Stock, no par value, of the Company ("COMMON STOCK") as provided in
Section 2, upon presentation and surrender of this Note. Interest shall accrue
on the outstanding principal amount of this Note from the date hereof at the
rate of 10% per annum, and shall be payable (i) at the rate of 5% per annum, on
such unpaid or unconverted principal amount, on each July 1, October 1, January
1 and April 1 hereafter, and (ii) the remaining accrued portion of interest
shall be payable on April 1, 2002; provided, however, that upon the conversion
of any portion of the principal amount hereof into Common Stock, all accrued
interest on such converted principal amount shall also be converted into Common
Stock. Interest shall be computed on the basis of a 365-day year commencing as
of the date of issue. This Note is the Note referred to in the Agreement, of
even date herewith, between the Company and the Holder (the "AGREEMENT"). This
Note may be prepaid at any time, in whole, without penalty, upon 90 days written
notice to the Holder; provided, however, that, in the event the Company gives
notice to the Holder of a proposed prepayment and the Holder thereafter
exercises its right to demand registration of the Conversion Shares (as defined
below) under the terms of Section 9.1 of the Agreement, then such prepayment
shall be delayed for up to an additional 120 days after the Company receives the
demand for registration under Section 9.1 of the Agreement in order to permit
such registration statement to become effective.
1. SUBORDINATION.
(a) SENIOR DEBT. This Note is unsecured in all respects. The Company
covenants and agrees, and the Holder by acceptance agrees, that this
Note is hereby expressly subordinated, to the extent and in the manner
hereinafter set forth, to the prior payment of all amounts due and
payable pursuant to indebtedness of the Company outstanding on the date
hereof or hereafter created, incurred, assumed or guaranteed by the
Company in connection with any working capital line from a bank
incurred in the ordinary course of business (collectively, "SENIOR
DEBT"), unless the instrument under which such debt is created,
incurred, assumed or guaranteed expressly provides that such debt is
not senior or superior in right of payment to this Note. No payment
shall be made on this Note unless all amounts then due and payable on
all Senior Debt have been paid in full or, if at the time of such
payment, there shall have occurred and be continuing any event of
default with respect to any Senior Debt permitting the holders thereof
to accelerate the maturity of such indebtedness. However, even if no
payment may be made hereunder because there exists an event of default
with respect to Senior Debt, an Event of Default hereunder shall still
be deemed to have occurred for purpose of any other remedies which the
Holder may have. The Company shall be obligated to pay the amounts due
pursuant to this Note when due, provided that the Company has paid all
amounts then due and payable with respect to all Senior Debt and there
is no continuing default with respect to any Senior Debt. Upon the
maturity of such Senior Debt, including by acceleration or otherwise,
or any distribution of the assets of the Company upon dissolution,
winding up, liquidation or reorganization of the Company, the holders
of such Senior Debt shall be entitled to receive payment in full before
the Holder is entitled to receive any payment. In the event of any
payment is made to the Holder in violation of this Section 1(a), the
payment made to the Holder shall be immediately paid over to the
holders of such Senior Debt.
(b) RIGHT OF SUBROGATION. Following the final and indefeasible payment
in full in cash of all obligations under, relating to or in respect of
Senior Debt, the Holder shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of assets
made on such Senior Debt until the Note shall be paid in full; and for
the purposes of such subrogation, (i) no payments or distributions to
the holders of such Senior Debt of any cash, property or securities to
which the Holder would be entitled except for the provisions of this
Section 1(b), and no payment over pursuant to the provisions of this
Section 1(b) to the holders of such Senior Debt by the Holder, shall,
as among the Company, its creditors other than the holders of such
Senior Debt and the Holder, be deemed to be a payment by the Company to
or on account of such Senior Debt, and (ii) the Holder shall, in
addition to all rights with respect to the unpaid portion of the Note,
succeed to the rights of the holders of Senior Debt to the extent of
such payments and distributions, it being understood that the
provisions of this Section 1(b) are solely for the purpose of defining
the relative rights of the holders of such Senior Debt, on the one
hand, and the Holder, on the other hand.
(c) NO IMPAIRMENT OF RIGHTS AND OBLIGATIONS. Nothing contained in this
Section 1 (i) is intended to or shall impair, as between the Company
and the Holder, the obligations of the Company, which are absolute and
unconditional, to pay to the Holder all obligations under, relating to
or in respect of this Note as and when the same shall become due and
payable in accordance with its terms, or (ii) is intended to or shall
affect the relative rights of the Holder, on the one hand, and the
creditors of the Company other than the holders of Senior Debt, on the
other hand.
2. CONVERSION RIGHT. At the option of the Holder, a maximum of $2,000,000 of the
principal amount of this Note, together with all accrued interest on such amount
to the date of conversion, shall be convertible, at the office of the Company
(or at such other office or offices, if any, as the Board of Directors may
designate), into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100th of a share) of Common Stock of the Company, at
the Conversion Price (as defined below). The price at which shares of Common
Stock shall be delivered upon conversion of this Note (the "CONVERSION PRICE")
shall be $3.60 per share; provided, however, that such initial Conversion Price
shall be subject to adjustment from time to time in certain instances as
hereinafter provided in this Section 2. The following provisions shall govern
such right of conversion:
(a) CONVERSION MECHANICS. In order to convert this Note into shares of
Common Stock of the Company, the Holder shall surrender at the
Company's offices the certificate or certificates therefor, duly
endorsed to the Company or in blank, and give written notice to the
Company at such office that the Holder elects to convert this Note. The
principal amount of this Note, together with all accrued interest
hereon, shall be deemed to have been converted immediately prior to the
close of business on the day of the surrender of this Note for
conversion as herein provided, and the Holder shall be treated for all
purposes as the record holder of such shares of Common Stock at such
time. As promptly as practicable on or after the conversion date, but
no later than ten (10) business days after the conversion date, the
Company shall issue and deliver or cause to be issued and delivered to
the Holder a certificate or certificates for the number of shares of
Common Stock of the Company issuable upon such conversion.
(b) ANTI-DILUTION PROVISIONS; ADJUSTMENT OF CONVERSION PRICE.
(i) Except as provided in this Section 2, if and whenever the
Company shall issue or sell any shares of its Common Stock for
a consideration per share less than the Conversion Price then,
forthwith upon such issue or sale, the Conversion Price shall
be reduced to the price (calculated to the nearest cent)
determined by dividing (x) an amount equal to the sum of (1)
the number of shares of Common Stock outstanding immediately
prior to such issue or sale multiplied by the then existing
Conversion Price and (2) the consideration, if any, received
by the Company upon such issue or sale, by (y) an amount equal
to the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale and (2)
the number of shares of Common Stock thus issued or sold.
Solely for purposes of (x)(1) and (y)(1) above, the term
"Common Stock outstanding" shall include those shares of
Common Stock issuable upon conversion of this Note.
(ii) Notwithstanding any other provisions of this Section 2,
the Conversion Price shall not be adjusted in the case of
issuance by the Company of (A) shares of Common Stock issued
upon exercise of any warrants or options to purchase Common
Stock outstanding on the date hereof as listed on Schedule 1
hereto, (B) options to purchase shares of Common Stock of the
Company (including shares of Common Stock issued upon the
exercise thereof) granted or to be granted pursuant to the
Company's 1993 Stock Option Plan, as such plan is in effect on
the date hereof or as may be amended by the Board of
Directors, (C) shares of Common Stock issued upon conversion
of this Note, (D) shares of Common Stock issued in the
Company's private placement which is contemplated to be
commenced within 60 days hereafter and is expected to raise
approximately $5,000,000 or (E) up to 555,000 shares issuable
to Xxxxxxx X. Xxxxxxx, M.D. (or APF, LLC) under a certain
warrant to be issued by the Company on or about the date
hereof.
(iii) No adjustment of the Conversion Price, however, shall be
made in an amount less than 1% of the Conversion Price in
effect on the date of such adjustment, but any such lesser
adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which,
together with any such adjustment so carried forward, shall be
an amount equal to or greater than 1% of the Conversion Price
then in effect.
(iv) For the purposes of this Section 2, the following
provisions (1) to (4), inclusive, shall also be applicable:
(1) In case at any time the Company shall grant
(whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, (a)
Common Stock or (b) any obligations or any shares of
stock or other securities of the Company which are
convertible into, or exchangeable for, Common Stock
(any of such obligations or shares of stock or other
securities being hereinafter called "Convertible
Securities") whether or not such rights or options or
the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the
exercise of such rights or options or upon conversion
or exchange of such Convertible Securities
(determined by dividing (x) the total amount, if any,
received or receivable by the Company as
consideration for the granting of such rights or
options, plus the minimum aggregate amount of
additional consideration payable to the Company upon
the exercise of such rights or options, plus, in the
case of such Convertible Securities, the minimum
aggregate amount of additional consideration, if any,
payable upon the issue of such Convertible Securities
and upon the conversion or exchange thereof, by (y)
the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options
or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of
such rights or options) shall be less than the
Anti-dilution Trigger Price, then the total maximum
number of shares of Common Stock issuable upon the
exercise of such rights or options or upon conversion
or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of
such rights or options shall (as of the date of
granting of such rights or options) be deemed to have
been issued for such price per share. Except as
provided in Section 2(e) below, no further
adjustments of the Conversion Price shall be made
upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such rights
or options or upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible
Securities.
(2) In case the Company shall issue or sell (whether
directly or by assumption in a merger or otherwise)
any Convertible Securities, whether or not the rights
to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange
(determined by dividing (x) the total amount received
or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus
the minimum aggregate amount of additional
consideration, if any, payable to the Company upon
the conversion or exchange thereof, by (y) the total
maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such
Convertible Securities) shall be less than the
Anti-dilution Trigger Price, then the total maximum
number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be
outstanding and to have been issued for such price
per share, provided that (a) except as provided in
Section 2(e) below, no further adjustments of the
Conversion Price shall be made upon the actual issue
of such Common Stock upon conversion or exchange of
such Convertible Securities, and (b) if any such
issue or sale of such Convertible Securities is made
upon exercise of any rights to subscribe for or to
purchase or any option to purchase any such
Convertible Securities for which adjustments of the
Conversion Price have been or are to be made pursuant
to other provisions of this Section 2(b), no further
adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(3) In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any
such Common Stock or Convertible Securities shall be
issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by
the Company therefor, without deducting therefrom any
expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in
connection therewith. In case any shares of Common
Stock or Convertible Securities or any rights or
options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the
consideration other than cash received by the Company
shall be deemed to be the fair value of such
consideration as determined by the Board of Directors
of the Company, without deducting therefrom any
expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in
connection therewith. In case any shares of Common
Stock or Convertible Securities or any rights or
options to purchase such Common Stock or Convertible
Securities shall be issued in connection with any
merger or consolidation in which the Company is the
surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value as
determined by the Board of Directors of the Company
of such portion of the assets and business of the
non-surviving corporation or corporations as such
Board shall determine to be attributable to such
Common Stock, Convertible Securities, rights or
options, as the case may be. In the event of any
consolidation or merger of the Company in which the
Company is not the surviving corporation or in the
event of any sale of all or substantially all of the
assets of the Company for stock or other securities
of any other corporation, the Company shall be deemed
to have issued a number of shares of its Common Stock
for stock or securities of the other corporation
computed on the basis of the actual exchange ratio on
which the transaction was predicated and for a
consideration equal to the fair market value on the
date of such transaction of such stock or securities
of the other corporation, and if any such calculation
results in adjustment of the Conversion Price, the
determination of the number of shares of Common Stock
issuable upon conversion immediately prior to such
merger, conversion or sale, for purposes of Section
2(f) below, shall be made after giving effect to such
adjustment of the Conversion Price.
(4) In case the Company shall take a record of the
holders of its Common Stock for the purpose of
entitling them (a) to receive a dividend or other
distribution payable in Common Stock or in
Convertible Securities, or in any rights or options
to purchase any Common Stock or Convertible
Securities, or (b) to subscribe for or purchase
Common Stock or Convertible Securities, then the date
of such record shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such
dividend or the making of such other distribution or
the date of the granting of such rights of
subscription or purchase, as the case may be.
(c) In case the Company shall (i) declare a dividend upon the Common
Stock payable in Common Stock (other than a dividend declared to effect
a subdivision of the outstanding shares of Common Stock, as described
in Section 2(d) below) or Convertible Securities, or in any rights or
options to purchase any Common Stock or Convertible Securities, or (ii)
declare any other dividend or make any other distribution upon the
Common Stock payable otherwise than out of earnings or earned surplus,
then thereafter the Holder upon the conversion hereof will be entitled
to receive the number of shares of Common Stock into which this Note
would have been converted, and, in addition and without payment
therefor, each dividend described in clause (i) above and each dividend
or distribution described in clause (ii) above which such holder would
have received by way of dividends or distributions if continuously
since the Holder became the record holder of this Note the Holder (x)
had been the record holder of the number of shares of Common Stock then
received, and (y) had retained all dividends or distributions in stock
or securities (including Common Stock or Convertible Securities, or in
any rights or options to purchase any Common Stock or Convertible
Securities) payable in respect of such Common Stock or in respect of
any stock or securities paid as dividends or distributions and
originating directly or indirectly from such Common Stock. For the
purposes of the foregoing a dividend or distribution other than in cash
shall be considered payable out of earnings or earned surplus only to
the extent that such earnings or surplus are charged an amount equal to
the fair value of such dividend or distribution as determined by the
Board of Directors of the Company.
(d) In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number
of shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(e) If (i) the purchase price provided for in any right or option
referred to in clause (1) of Section 2(b)(iv), or (ii) the additional
consideration, if any, payable upon the conversion or exchange of
Convertible Securities referred to in clause (1) or clause (2) of
Section 2(b)(iv), or (iii) the rate at which any Convertible Securities
referred to in clause (1) or clause (2) of Section 2(b)(iv) are
convertible into or exchangeable for Common Stock, shall change at any
time (other than under or by reason of provisions designed to protect
against dilution), the Conversion Price then in effect hereunder shall
forthwith be increased or decreased to such Conversion Price as would
have obtained had the adjustments made upon the issuance of such
rights, options or Convertible Securities been made upon the basis of
(a) the issuance of the number of shares of Common Stock theretofore
actually delivered upon the exercise of such options or rights or upon
the conversion or exchange of such Convertible Securities, and the
total consideration received therefor, and (b) the issuance at the time
of such change of any such options, rights, or Convertible Securities
then still outstanding for the consideration, if any, received by the
Company therefor and to be received on the basis of such changed price;
and on the expiration of any such option or right or the termination of
any such right to convert or exchange such Convertible Securities, the
Conversion Price then in effect hereunder shall forthwith be increased
to such Conversion Price as would have obtained had the adjustments
made upon the issuance of such rights or options or Convertible
Securities been made upon the basis of the issuance of the shares of
Common Stock theretofore actually delivered (and the total
consideration received therefor) upon the exercise of such rights or
options or upon the conversion or exchange of such Convertible
Securities. If the purchase price provided for in any right or option
referred to in clause (1) of Section 2(b)(iv), or the rate at which any
Convertible Securities referred to in clause (1) or clause (2) of
Section 2(b)(iv) are convertible into or exchangeable for Common Stock,
shall decrease at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in case of
the delivery of Common Stock upon the exercise of any such right or
option or upon conversion or exchange of any such Convertible Security,
the Conversion Price then in effect hereunder shall forthwith be
decreased to such Conversion Price as would have obtained had the
adjustments made upon the issuance of such right, option or Convertible
Security been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as
aforesaid.
(f) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its
assets to another corporation shall be effected in such a way that
holders of Common Stock shall be entitled to receive stock, securities
or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby the
Holder of this Note shall thereafter have the right to receive upon the
basis and upon the terms and conditions specified herein and in lieu of
the shares of the Common Stock of the Company immediately theretofore
receivable upon the conversion of this Note, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore
receivable upon the conversion of this Note had such reorganization,
reclassification, consolidation, merger or sale not taken place, plus
all dividends unpaid and accumulated or accrued thereon to the date of
such reorganization, reclassification, consolidation, merger or sale,
and in any such case appropriate provision shall be made with respect
to the rights and interests of the Holder of this Note to the end that
the provisions hereof (including without limitation provisions for
adjustments of the Conversion Price and of the number of shares
receivable upon the conversion of the this Note) shall thereafter be
applicable, as nearly as may be in relation to any shares of stock,
securities or assets thereafter receivable upon the conversion of this
Note. The Company shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof the successor
corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume by written instrument executed and mailed to the Holder of this
Note, at the last addresses of such holders appearing on the books of
the Company, the obligation to deliver to the Holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, the Holder may be entitled to receive.
(g) Upon any adjustment of the Conversion Price, then and in each case
the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder of this Note, which shall
state the Conversion Price resulting from such adjustment and the
increase or decrease, if any, in the number of shares receivable at
such price upon the conversion of this Note, setting forth in
reasonable detail the method of calculation and the facts upon which
such calculation is based, and which notice shall be certified by a
nationally recognized firm of independent auditors (which may be the
Company's independent auditors).
(h) In case at any time:
(i) the Company shall declare any cash dividend on its Common
Stock;
(ii) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular
cash dividends) to the holders of its Common Stock;
(iii) the Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock
of any class or other rights;
(iv) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with, or sales of all
or substantially all of its assets to, another corporation; or
(v) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give
written notice, by first-class mail, postage prepaid, addressed to the
Holder at the addresses of such holders as shown on the books of the
Company, of the date on which (a) the books of the Company shall close
or a record shall be taken for such dividend, distribution or
subscription rights, or (b) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up
shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding up,
as the case may be. Such written notice shall be given at least twenty
(20) days prior to the action in question and not less than twenty (20)
days prior to the record date or the date on which the Company's
transfer books are closed in respect thereto.
(i) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this Section 2(i) are
not strictly applicable or if strictly applicable would not fairly
protect the rights of the Holder in accordance with the essential
intent and principles of such provisions, then the Board of Directors
shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect
such rights as aforesaid.
(j) As used in this Section 2 the term "Common Stock" shall mean and
include the Company's presently authorized Common Stock and shall also
include any capital stock of any class of the Company hereafter
authorized which shall not be limited to a fixed sum or percentage in
respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Company;
provided that the shares receivable pursuant to conversion of this Note
shall include shares designated as Common Stock of the Company as of
the date of issuance of this Note, or, in case of any reclassification
of the outstanding shares thereof, the stock, securities or assets
provided for in Section 2(f) above.
(k) No fractional shares of Common Stock shall be issued upon
conversion pursuant to this Section 2, but, instead of any fraction of
a share which would otherwise be issuable, the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the same
fraction of the market price per share of Common Stock as of the close
of business on the day of conversion. "Market price" shall mean if the
Common Stock is traded on a securities exchange or the NASDAQ National
Market, the closing price of the Common Stock on such exchange or the
NASDAQ National Market, or, if the Common Stock is otherwise traded in
the over-the-counter market, the closing bid price, in each case
averaged over a period of twenty (20) consecutive business days prior
to the date as of which "market price" is being determined. If at any
time the Common Stock is not traded on an exchange or the NASDAQ
National Market, or otherwise traded in the over-the-counter market,
the "market price" shall be deemed to be the higher of (i) the book
value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors
of the Company as of the last day of any month ending within sixty (60)
days preceding the date as of which the determination is to be made, or
(ii) the fair value thereof determined in good faith by the Board of
Directors of the Company as of a date which is within fifteen (15) days
of the date as of which the determination is to be made.
3. RESTRICTIONS ON TRANSFERABILITY. This Note shall be a "restricted security"
as defined in the rules under the Securities Act of 1933, as amended (the
"ACT"). This Note may be transferred only in accordance with (i) applicable law,
and only on the same basis as a restricted security would be transferable
thereunder, (ii) any transfer restrictions applicable to shares of the Company's
capital stock generally, and (iii) the conditions set forth in this Section. The
Holder, by acceptance hereof, agrees to give written notice to the Company at
least ten (10) days before transferring this Note, of such Xxxxxx's intent to do
so, describing briefly the manner of the proposed transfer. Promptly upon
receiving such written notice, the Company shall present copies thereof to
counsel for the Company. If, in the opinion of counsel for the Company, the
proposed transfer or conversion may be effected without violation of the
applicable federal and state securities laws, such holder shall be entitled to
transfer this Note in the manner contemplated in the above-referenced notice to
the Company; provided, that an appropriate legend may be endorsed on this Note
respecting restrictions on transfer thereof necessary or advisable in the
opinion of counsel and satisfactory in form and substance to the Company to
prevent further transfers that would be in violation of the securities laws or
adversely affect the exemptions relied upon by the Company. To such effect, the
Company may request that the intended transferee execute an investment and
representation letter satisfactory in form and substance to the Company. Upon
transfer of this Note, the transferee, by acceptance of this Note, agrees to be
bound by the provisions, terms, conditions and limitations of this Note and the
investment and representation letter, if any, required by the Company. If (i) no
opinion of counsel referred to in this Section 3 has been provided to the
Company, or (ii) in the opinion of such counsel the proposed transfer,
conversion or disposition of this Note described in the holder's written notice
given pursuant to this Section 3 may not be effected without registration or
without adversely affecting the exemptions relied upon by the Company or without
violating the terms of this Section 3, the Holder will restrict transfer,
conversion or disposition of this Note accordingly.
4. REPLACEMENT OF NOTE. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of this Note and in the case of any
such loss, theft or destruction, upon delivery of a bond of indemnity
satisfactory to the Company if requested by the Company, or in the case of any
such mutilation, upon surrender and cancellation of such Note, the Company shall
issue a new Note identical in form to the lost, stolen, destroyed or mutilated
Note.
5. EVENTS OF DEFAULT. Each of the following events shall be an Event of Default
("EVENT OF DEFAULT") for purposes of this Note:
(a) PAYMENT OF INTEREST DEFAULT. The Company fails to pay when due any
installment of interest on this Note within thirty (30) days of the due
date;
(b) PAYMENT OF PRINCIPAL DEFAULT. The Company fails to pay any
principal within five (5) days of when due;
(c) NOTE TERMS. The Company defaults in the due and punctual
performance or observance of any material terms contained in this Note
(other than payment defaults which are covered by subparagraphs (a) and
(b) above), and such default continues for a period of thirty (30) days
after receipt of the notice to the Company from the Holder specifying
in reasonable detail the default to be cured, except that any such
default by the Company will not result in an Event of Default hereunder
if waived by the Holder;
(d) REPRESENTATIONS. If any representation or warranty made by or on
behalf of the Company in this Note or in any certificate, report or
other instrument delivered under or pursuant to any term hereof or
thereof shall prove to have been untrue or incorrect in any material
respect as of the date of this Note or if any report, certificate,
financial statement or financial schedule or other instrument prepared
or purported to be prepared by the Company or any executive officer of
the Company furnished or delivered under or pursuant to this Note after
the date hereof shall prove to be untrue or incorrect in any material
respect as of the date it was made, furnished or delivered, and in any
such case the untrue statement remains unremedied for a period of
thirty (30) days after written notice is given to the Company by ACG;
(e) INSOLVENCY MATTERS. The Company makes an assignment for the benefit
of creditors, or admits in writing its inability to pay its debts as
they become due, or files a voluntary petition in bankruptcy, or is
adjudicated a bankrupt or insolvent, or files any petition or answer
seeking for itself an reorganization arrangement composition
readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, or files any answer
admitting the material allegations of a petition filed against the
Company for any such relief, or seeks or consents to or acquiesces in
the appointment of any trustee, receiver or liquidator of the Company
or all or any substantial part of the properties of the Company; or
(f) DEFAULT ON CONVERSION. The Company shall fail to deliver the
appropriate number of shares of Common Stock upon conversion of this
Note by the Holder.
6. REMEDIES ON DEFAULT. Upon the occurrence of an Event of Default, the Holder
shall have the option to declare the principal amount hereof and all accrued but
unpaid interest thereon, to be immediately due and payable upon written notice
to the Company.
7. AFFIRMATIVE COVENANTS. The Company agrees that until this Note is paid in
full, or converted, the Company will:
(a) CORPORATE EXISTENCE. Preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and franchises;
(b) FINANCIAL STATEMENTS. Deliver to the Holder hereof:
(i) as soon as practicable, but in any event within fifty (50)
days after the close of each fiscal quarter, unaudited balance
sheets of the Company of the end of such fiscal quarter,
together with the related statements of operations and cash
flow for such fiscal quarter, and in comparative form figures
for the corresponding fiscal quarter of the previous fiscal
year, subject to year-end adjustments;
(ii) as soon as practicable, but in any event within ninety
five (95) days after the end of each fiscal year, an audited
balance sheet of the Company, as of the end of such fiscal
year, together with the related statements of operations,
stockholders' equity and cash flow for such fiscal year,
setting forth in comparative form figures for the previous
fiscal year; and
(iii) promptly upon transmission thereof, copies of all
publicly available reports, proxy statements, registration
statements and notifications filed by it with the Securities
and Exchange Commission or furnished to stockholders of the
Company or to any securities exchange.
8. NEGATIVE COVENANT. The Company agrees that until this Note is paid in full,
or converted, the Company will not create or assume, or permit to exist, any
mortgage, lien or encumbrance on, pledge of, or other security interest
("Liens") in any intellectual property (including, without limitation, patents,
trademarks, copyrights, trade secrets, proprietary information and rights,
technology and know-how) of the Company; provided, however, that the provisions
of this Section 8 shall not prevent or restrict the creation, assumption or
existence of any of the following:
(i) Liens for taxes not yet due or which are being actively
contested in good faith by appropriate proceedings and for
which adequate reserves have been established;
(ii) Liens existing on such property at the time of its
acquisition, provided that (1) no such Lien shall extend to or
cover any other property of the Company, and (2) the principal
amount of the indebtedness secured by any such Lien shall not
exceed the lesser of the fair market value or the cost of the
property so held or acquired at the time of acquisition; and
(iii) other Liens incidental to the conduct of the Company's
business or the ownership of its intellectual property which
were not incurred in connection with the borrowing of money or
the obtaining of advances or credit, and which do not in the
aggregate materially detract from the value of its
intellectual property or materially impair the use thereof in
the operation of its business.
9. GENERAL.
(a) MODIFICATION AND WAIVER. No purported amendment, modification or
waiver of any provision hereof shall be binding unless set forth in a
written document signed by the Company and the Holder (in the case of
amendments or modifications) or by the party to be charged thereby (in
the case of waivers). Any waiver shall be limited to the provision
hereof in the circumstances or events specifically made subject
thereto, and shall not be deemed a waiver of any other term hereof or
of the same circumstance or event upon any reoccurrence thereof.
(b) NOTICES. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be deemed
to have been given, when received, if personally delivered or delivered
by telex, telegram or telecopy, or five (5) days after depositing in
the U.S. Mail for delivery by first class mail, postage prepaid and
addressed as provided below:
If to the Holder: The Atlanta Cardiology Group, P.C.
0000 Xxxxxxxxx
Xxxxxxxx Xxxx N.E.
Atlanta, GA 30342
Attention: President
or at such other address as Holder may
specify by written notice to the Company,
or
If to the Company: LifeRate Systems, Inc.
0000 Xxxxx Xxxxxxxxx
Xxxxx, XX 00000
Attention: President
or at such other address as the Company may
specify by written notice to the Holder.
(c) SUCCESSORS AND ASSIGNS. All the terms and provisions of this Note
shall be binding upon and inure to the benefit of and be enforceable by
the respective successors and assigns of the Company and the Holder;
provided, however, that the Holder may assign all, but not less than
all, of its interest in this Note upon the prior written consent of the
Company, which consent shall not be unreasonably withheld; provided
further that, subject to compliance with the provisions of Section 3,
the Holder may assign all of its rights in the Note to a newly created
entity the majority of whose shareholders or equity holders are current
shareholders of the Holder.
(d) APPLICABLE LAW. The laws of the State of Minnesota shall govern the
validity of this Note, the construction of its terms and the
interpretation of the rights and duties of the Company and the Holder
(e) WAIVER OF DEMAND PRESENTMENT AND NOTICE OF DISHONOR. The
undersigned hereby waives demand, presentment, protest, notice of
protest and notice of dishonor.
(f) PAYMENT. Upon payment in full or conversion of this Note, or
conversion, together with payment (or conversion) of any accrued but
yet unpaid interest hereon, this Note will terminate and be of no
further force or effect.
IN WITNESS WHEREOF, the Company has caused this Note to be signed by
its duly authorized officer as of the Date of Issue.
LIFERATE SYSTEMS, INC.
By:____________________________________
Its: Chief Executive Officer
