Exhibit 10.58
LOAN CANCELLATION AND SETTLEMENT AGREEMENT
THIS LOAN CANCELLATION AND SETTLEMENT AGREEMENT (the "Agreement") is
effective the 7th day of February 2001 by and between Surgical Safety Products,
Inc. ("SSP"), Thomson Kernaghan & Co. Ltd. ("TK") and Mintmire & Associates
("M&A").
RECITALS
WHEREAS, SSP and TK entered into a Loan Agreement effective December 30,
1999, as amended, allowing for total loans in installments of $5,000,000 from TK
to SSP ("the Loan Agreement"); and
WHEREAS, under the Loan Agreement, TK made two (2) loan installments in the
amount of $650,000 each, each of which was supported by a convertible promissory
note, the first of which was effective December 30, 1999 (the "December PN") and
the second of which was effective March 31, 2000 (the "March PN"); and
WHEREAS, under the Loan Agreement, SSP granted certain Lender's warrants to
purchase up to 3,428,571 shares (the "Lender's Warrants") of SSP's common stock
and certain Agent's Warrants to purchase up to 1,142,857 shares (the "Agent's
Warrants") of SSP's common stock (collectively, the "TK Warrants'); and
WHEREAS, under the Loan Agreement, SSP registered a total of 20,038,097
shares of its Common Stock on Form S-3 with the Securities and Exchange
Commission that was declared effective April 11, 2000 (the "Registered Shares")
against the future conversion of all shares issuable if the total of all
installments were evidenced by convertible promissory notes in the total face
amount of $5,000,000 calculated at the floor conversion price of $0.375 (the
"Floor Price") and against the future exercise of all TK Warrants granted for
such total of all installments at the exercise price of $1.09375 per share; and
WHEREAS, under the Loan Agreement, TK, as escrow agent, originally was
delivered 2,700,000 shares of SSP restricted Common Stock against the eventual
conversion of notes and exercise of warrants and after all conversions as of the
effective date of this Agreement, TK is holding a certificate in escrow that
represents 1,365,464 shares of SSP's restricted common stock (the "Escrowed
Shares"); and
WHEREAS, as of the effective date of this Agreement, a principal balance of
$140,000 remained outstanding on the December PN plus accrued and unpaid
interest and a principal balance of $650,000 remained outstanding on the March
PN plus accrued and unpaid interest representing a total debt to TK from SSP of
$847,300 (the "Total Debt"); and
WHEREAS, SSP and TK wish M&A to perform certain duties regarding
cancellation of shares and holding shares in escrow; and
WHEREAS, SSP and TK wish to cancel the Loan Agreement and settle all
matters between them under the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual promises contained herein and
for other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties agree as follows.
(a) Each of the Recitals set forth above is incorporated herein by reference
and made part of this Agreement as if each such Recital were set out in
full herein.
(b) Subject to the full compliance with the terms and conditions contained
herein, the parties agree to cancel the Loan Agreement and to settle all
outstanding matters as of the effective date of this Agreement relative to
the Total Debt and the TK Warrants.
(c) Pursuant to the conversion notice dated February 7, 2001, TK agrees to
convert at the Floor Price per share the $140,000 remaining principal
balance on the December PN plus accrued and unpaid interest of $12,395 and
$90,000 of the remaining principal balance on the March PN plus accrued and
unpaid interest of $6,175, into 662,854 shares of Common Stock issuable
without restriction as part of the Registered Shares.
(d) Upon receipt of the shares set out in paragraph 3 above, TK agrees to send
the original December PN to M&A for full cancellation and to send the
original March PN for re- issuance in the face amount of $560,000.
(e) Interest on the outstanding principal on the March PN of $560,000 (the
"March Balance"), after the partial repayment of $90,000 of principal and
accrued but unpaid interest thereon through the conversion set forth in
paragraph 3 above, shall continue to accrue at the rate of eight percent
(8%) per annum until paid. All future interest shall be payable, at the
option of SSP, in cash or by delivery of Registered Shares at a conversion
price per share equal to the amount of accrued and unpaid interest as of
the conversion or repayment date divided by the five (5) day average
closing bid of SSP's Common Stock prior to such conversion or repayment.
(f) Subject to not exceeding ownership of 4.99% of the issued and outstanding
shares of SSP's Common Stock at any time, TK shall, as soon as possible,
convert the remaining March Balance into the Registered Shares at the
conversion price of $.375 per share for a total of 1,493,333 Registered
Shares. At the time of each conversion, TK shall return the original
promissory note and a conversion notice. In the event of partial conversion
of principal, SSP agrees to re-issue the promissory note for the
outstanding principal balance at that time after such conversion or
repayment.
(g) SSP may make repayment of all or any part of the March Balance at any time
in cash at 100% of face plus accrued interest payable in accordance with
paragraph 5 above.
(h) The TK Warrants were exercisable immediately for 20% of the number of
shares contained in such warrants and for an additional 1% of the number of
shares for each $25,000 of principal loaned under the Loan Agreement.
Accordingly, the parties agree that
(A) the Lender's Warrant is exercisable at the exercise price of $1.09375
per share into a total of 2,468,571 shares, that is 685,714 representing 20% of
3,428,571 and 1,782,857 representing 52% of 3,428,571 based upon total loans of
$1,300,000 divided by $25,000. The balance of 960,000 shares of such warrant are
hereby deemed to be null and void; and
(B) the Agent's Warrant is exercisable at the exercise price of $1.09375
per shares into a total of 822,857 shares, that is 228,571 representing 20% of
1,142,857 and 594,286 representing 52% of 1,142,857 based upon total loans of
$1,300,000 divided by $25,000. The balance of 320,000 shares of such warrant are
hereby deemed to be null and void.
(i) The Escrowed Shares shall be sent to M&A for cancellation as TK
acknowledges that such shares distort the number of issued and outstanding
shares since they are without any voting rights.
(j) TK agrees to the triangular reverse merger of SSP's wholly owned
subsidiary, OIX, Inc., with Emagisoft Technologies Inc. ("Emagisoft") on
the terms SSP has negotiated.
(k) Provided there is no default on the repayment of the March PN and the
proposed reverse merger with Emagisoft is concluded by May 15, 2001, unless
such date is extended by TK in writing, TK for a period of one (1) year
commencing on the effective date, shall not sell, directly or indirectly,
for itself, its agents, officers, directors, employees, subsidiaries,
affiliates or any company or entity controlled by or controlled it, more
than twenty-five percent (25%) of the volume in SSP's shares on any trading
day.
(l) In the context of this settlement and the revised terms contained herein
and further, in consideration for the cancellation of the Loan agreement,
SSP agrees
(A)To issue bonus shares as follows:
(I) in connection with the $140,000 balance due on the December PN prior
to this Agreement plus accrued and unpaid interest in the amount of
$12,395, to issue an additional 682,108 shares of its restricted
common stock effective for holding period purposes on December 30,
1999; and
(II) in connection with the $650,000 balance due on the March PN prior to
this Agreement plus accrued and unpaid interest in the amount of
$44,592, to issue an additional 3,109,487 shares of its restricted
common stock effective for holding period purposes on March 31, 2000,
which shares shall be issued pro rata to the amount of the March
Balance converted at any time
(collectively, the "Bonus Shares"); and
(B)To issue bonus warrants as follows:
(I) additional warrants to the Lender for exercise into 380,000 shares of
SSP's restricted common stock exercisable at any time on or before the
second anniversary of this Agreement at an exercise price per share
equal to $0.1846;
(II) additional warrants to the Agent for exercise into 380,000 shares of
SSP's restricted common stock exercisable at any time on or before the
second anniversary of this Agreement at an exercise price per share
equal to $0.1846
(collectively, the "Bonus Warrants").
(m) The Bonus Shares attributable to the conversion of the $140,000 balance of
the December PN under the terms of this Agreement (682,108 shares) and the
pro rata shares of the Bonus Shares attributable to the partial conversion
of $90,000 of the March PN under the terms of this Agreement (430,540
shares) shall be delivered to and held in escrow by M&A. At the time of
each subsequent conversion of all or a part of the March Balance, the pro
rata share of the Bonus Shares attributable to such conversion of the March
PN shall be delivered to and held in escrow by M&A. All Bonus Shares will
be delivered to TK after the March PN is completely converted or repaid,
and then delivered to TK in such amounts as to maintain TK's share
ownership at no more than 4.99% of the total issued and outstanding shares
of SSP's Common Stock at that time.
(n) TK shall make blocks of SSP stock it holds or to which it is entitled upon
conversion of the March Balance and/or under paragraph 12 above available
at a ten percent (10%) discount to market as may be requested by SSP from
time to time.
(o) TK shall have the option to propose an independent third party to serve on
SSP's Board commencing immediately and continuing until such time as its
share ownership, calculated as if all of the March Balance were converted
into 1,493,333 shares, plus, should SSP elect to pay interest in the form
of shares, the number of shares to pay interest in accordance with
paragraph 5 above, all of the Lender's Warrants were exercised for a total
of 2,468,571 shares, all of the Agent's Warrants are exercised for a total
of 822,857 shares, all of the Bonus Shares for a total of 3,791,595 shares
were delivered and all of the Bonus Warrants for a total of 760,000 shares
were exercised, is less than five percent (5%).
(p) It is understood and agreed by the parties that of the Registered Shares
the following have been or will be issued under this Agreement and that any
and all of the balance of the 20,038,097 Registered Shares shall be not be
issued and shall be null and void:
Received under conversion for 04/28/00 182,453
Received under conversion for 06/09/00 331,010
Received under conversion for 07/11/00 111,155
Received under conversion for 10/24/00 709,918
To be received under the paragraph 3 conversion 662,854
To be received when entire March Balance of Principal is converted 1,493,333
Exercisable under the Lender's Warrant 2,468,571
Exercisable under the Agent's Warrant 822,857
Subtotal 6,782,151
and, in the event SSP elects to pay additional interest in shares as
provided in paragraph 5 above, such additional number as required to cover
such interest at the time of conversion or repayment.
(q) TK agrees to consider any and all reasonable proposals made to SSP from
broker/dealers to amend, vary or modify the lock-up provision set forth in
paragraph 11 above, if necessary to effectuate future funding for SSP.
(r) All reasonable costs of effecting this Agreement, except for costs
associated with the delivery of December PN to SSP for cancellation,
delivery of the March PN to SSP for conversion or cancellation, the return
of the Escrowed Shares to M&A for cancellation, the delivery of the TK
Warrants or Bonus Warrants to SSP for exercise, but including legal fees,
shall be for the account of SSP.
IN WITNESS WHEREOF, the parties hereto have set their hand and seal
effective on the date first above written.
Surgical Safety Products Inc.
By:/s/ G. Xxxxxxx Xxxx
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G. Xxxxxxx Xxxx, President
Thomson Kernaghan & Co., Ltd.
By:/s/ Xxxxxxx Xxxxxx
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FOR PURPOSES OF PARAGRAPHS
4, 9 AND 13 ONLY
Mintmire & Associates
By: Xxxxxxxx Xxxxxx
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