THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE
SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION.
THIS NOTE IS RESTRICTED BY THE TERMS OF, AND IS SUBJECT TO
RESTRICTIONS ON TRANSFER AND RIGHTS OF SALE AS PROVIDED IN A LOAN
AGREEMENT BETWEEN THE COMPANY AND THE HOLDER HEREOF, OR ITS SUCCESSOR,
A COPY OF WHICH IS AVAILABLE FROM THE COMPANY
POSITRON CORPORATION
SECURED CONVERTIBLE PROMISSORY NOTE
$__________ Houston, Texas
________, 2004
POSITRON CORPORATION, a Texas corporation (the "Company"), the principal
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office of which is located at 0000 Xxxxxxx Xxxxx Xxxxx, #000, Xxxxxxx, Xxxxx
00000, for value received hereby promises to pay to IMAGIN Diagnostic Centres,
Inc., located at 0000 Xxxxx Xx., Xxxxx 000, Xxxxxxx, Xxxxxxx, Xxxxxx M4S 1XB, or
its registered assigns ("IMAGIN" or the "Holder"), the sum of
------
____________________________ ($_________), or such lesser amount as shall then
equal the outstanding principal amount hereof on the terms and conditions set
forth hereinafter. The principal hereof and any unpaid accrued interest hereon,
as set forth below, shall be due and payable on the earlier to occur of (i)
______, 2006 (two years from the date of this Note, the "Maturity Date") or (ii)
-------------
when declared due and payable by the Holder upon the occurrence of an Event of
Default (as defined below). Commencing on the Maturity Date, all principal and
accrued interest hereunder shall be payable upon demand. Payment for all
amounts due hereunder shall be made by mail to the registered address of the
Holder. All numbers expressed herein as "$" or "dollars" are in United States
dollars.
The following is a statement of the rights of the Holder of this Note and
the conditions to which this Note is subject, and to which the Holder hereof, by
the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless
-----------
the context otherwise requires, have the following meanings:
(a) "Business Day" shall mean a day other than Saturday,
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Sunday or a public holiday under the laws of the State of Texas.
-1-
(b) "Company" includes any corporation that shall succeed
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to or assume the obligations of the Company under this Note.
(c) "Holder," when the context refers to a holder of this
------
Note, shall mean any person who shall at the time be the registered holder of
this Note.
(d) "Loan Agreement" shall mean the Loan Agreement between
---------------
the Company and IMAGIN, dated as of May 21, 2004.
(e) "Operating Cash Flow" shall mean the sum of net income,
-------------------
depreciation, change in accruals and change in accounts payable, minus change in
accounts receivable, minus change in inventories.
(f) "Purchase Agreement" shall mean the Note Purchase
------------------
Agreement between the Company and IMAGIN, dated as of May 21, 2004.
(g) "Securities Act" shall mean the Securities Act of 1933,
--------------
as amended, including the rules promulgated thereunder by the Securities and
Exchange Commission.
(h) "Security Agreement" shall mean the Security Agreement
-------------------
between the Company and IMAGIN, dated as of May 21, 2004.
2. Interest. Simple interest shall accrue at the rate of ten
--------
percent (10%) per annum on the principal of this Note outstanding during the
period beginning the date of this Note and ending on the date that the principal
amount of this Note is repaid. Interest shall be calculated on the basis of a
365-day year for the actual number of days elapsed. Accrued interest shall be
payable in cash annually on the anniversary date of this note; provided however,
that in the event the accrued interest on this Note together with the aggregate
accrued interest on all outstanding notes issued pursuant to the Purchase
Agreement and pursuant to the Loan Agreement (such notes collectively being
hereinafter referred to as the "Imagin Notes") exceeds 50% of the Company's
------------
Operating Cash Flow during the twelve month period ending on the last completed
calendar quarter which preceded the interest payment date by at least 60 days
("50% of cash flow"), at the Company's option, the accrued interest shall be
-------------------
payable (i) in cash pro-rata among the Imagin Notes up to an aggregate amount
equal to 50% of cash flow, and (ii) by issuance to Holder of a new note
identical in form to this Note and in an amount equal to the accrued interest
not otherwise paid in cash. In the event that a payment date falls on a
non-Business Day, payment shall be made on the next Business Day, while taking
into account such extra days in calculating the accrued interest. In the event
of an earlier conversion, acceleration or payment of the Note, interest shall be
payable in cash on such date.
3. Events of Default. If any of the events specified in this
-------------------
Section 3 shall occur (herein individually referred to as an "Event of
--------
Default"), the Holder of the Note may, so long as such condition exists, declare
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the entire principal and unpaid accrued interest hereon immediately due and
payable, by notice in writing to the Company:
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(a) The Company shall default in the payment of any part of
the principal or accrued and unpaid interest on this Note after it shall become
due and payable, whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise; or
(b) The institution by the Company of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to institution of
bankruptcy or insolvency proceedings against it or the filing by it of a
petition or answer or consent seeking reorganization or release under the
federal Bankruptcy Act, or any other applicable federal or state law, or the
consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official of the
Company, or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the taking of corporate action by
the Company in furtherance of any such action; or
(c) If, within sixty (60) days after the commencement of an
action against the Company, without the consent or acquiescence of the Company
(and service of process in connection therewith on the Company) seeking any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such action shall
not have been resolved in favor of the Company or all orders or proceedings
thereunder affecting the operations or the business of the Company stayed, or if
the stay of any such order or proceeding shall thereafter be set aside, or if,
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) Any material breach by the Company of any
representation, warranty or covenant contained in the Loan Agreement or this
Note.
(e) As of January 1, 2005, the Company shall not have
obtained stockholder approval to amend its Articles of Incorporation to increase
the number of shares of its authorized Common Stock to account for the
conversion of Series D Preferred Stock issuable upon conversion of this Note.
In the case of an Event of Default pursuant to (b) or (c) above, all amounts
shall automatically, without notice, become immediately due and payable and
collectible by Holder pursuant to applicable law.
4. Conversion.
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4.1 Conversion. The principal amount of this Note, or any portion thereof
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may be converted by the Holder at any time prior to Maturity into the number of
fully paid shares of the Company's Series D Preferred Stock as is determined by
dividing the unpaid principal under the Note by the Conversion Price (as
hereinafter defined) in effect at the time of conversion. Accrued but unpaid
interest shall be payable in cash at the time of conversion.
-3-
4.2 Conversion Price. The Conversion Price (the "Conversion Price")
-----------------
applicable per share of Series D Preferred Stock shall initially be equal to
$1.00, subject to adjustment from time to time in accordance with Section 4.3
below.
4.3 Adjustments to the Conversion Price. The Conversion Price shall be
---------------------------------------
subject to adjustment from time to time as follows:
4.3.1 Adjustment Upon Stock Dividends, Subdivisions or Splits.
-----------------------------------------------------------
If, at any time, the number of shares of Series D Preferred Stock outstanding is
increased by a stock dividend payable in shares of Series D Preferred Stock or
by a subdivision or split-up of shares of Series D Preferred Stock, then,
following the record date for the determination of holders of Series D Preferred
Stock entitled to receive such stock dividend, or to be affected by such
subdivision or split-up, the Conversion Price shall be appropriately decreased
so that the number of shares of Series D Preferred Stock issuable on conversion
of Note shall be increased in proportion to such increase in outstanding shares.
4.3.2 Adjustment Upon Combinations. If, at any time, the number
------------------------------
of shares of Series D Preferred Stock outstanding is decreased by a combination
of the outstanding shares of Series D Preferred Stock into a smaller number of
shares of Series D Preferred Stock, then, following the record date to determine
shares affected by such combination, the Conversion Price shall be appropriately
increased so that the number of shares of Series D Preferred Stock issuable on
conversion of the Note shall be decreased in proportion to such decrease in
outstanding shares.
4.3.3 Adjustment Upon Reclassifications, Reorganizations,
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Consolidations or Mergers. If, at any time when the Note is issued and
---------------------------
outstanding, there shall be any merger, consolidation, share exchange,
recapitalization, reorganization, business combination, or other similar event,
as a result of which shares of Series D Preferred Stock shall be changed into
the same or a different number of shares of another class or classes of stock or
securities of the Company or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Company then the
Holder shall thereafter have the right to receive upon conversion of the Note,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Series D Preferred Stock immediately theretofore issuable upon
conversion, such stock, securities, cash or other assets which the Holder of
would have been entitled to receive in such transaction had the Note been
converted in full immediately prior to such transaction (without regard to any
limitations on conversion contained herein), and in any such case appropriate
provisions shall be made with respect to the rights and interests of the Holder
to the end that the provisions hereof (including, without limitation, provisions
for adjustment of the applicable Conversion Price and of the number of shares of
Series D Preferred Stock issuable upon conversion of the Note) shall thereafter
be applicable, as nearly as may be practicable in relation to any securities or
assets thereafter deliverable upon the conversion of the Note. The above
provisions shall similarly apply to successive mergers, consolidations, share
exchanges, recapitalizations, reorganizations, business combinations or other
similar events or sales of assets.
4.3.4 Deferral in Certain Circumstances. In any case in which the
---------------------------------
provisions of this Section 4.3 shall require that an adjustment shall become
effective immediately after a
-4-
record date of an event, the Company may defer until the occurrence of such
event issuing to the Holder of the Note, converted after such record date and
before the occurrence of such event, the shares of capital stock issuable upon
such conversion by reason of the adjustment required by such event and issuing
to such Holder only the shares of capital stock issuable upon such conversion
before giving effect to such adjustments; provided, however, that the Company
shall deliver to such Holder an appropriate instrument or due bills evidencing
such holder's right to receive such additional shares.
4.3.5 Notice of Adjustment of Conversion Price. Whenever the
---------------------------------------------
Conversion Price is adjusted as herein provided: (i) the Company shall compute
the adjusted Conversion Price in accordance with this Section 4.3 and shall
prepare a certificate signed by the Chief Financial Officer of the Company
setting forth the adjusted Conversion Price and showing in reasonable detail the
facts upon which such adjustment is based, and such certificate shall forthwith
be filed at each office or agency maintained for such purpose of conversion of
the Note; and (ii) a notice stating that the Conversion Price has been adjusted
and setting forth the adjusted Conversion Price shall forthwith be prepared by
the Company, and as soon as practicable after it is prepared, such notice shall
be mailed by the Company at its expense to the Holder at the Holder's last
addresses as it shall appear in the Company's records.
4.4 Conversion Procedure.
---------------------
4.4.1 Notice of Conversion. In order to convert this Note (in
----------------------
whole or in part) into full shares of Series D Preferred Stock, the Holder shall
surrender the Note, duly endorsed, by either overnight courier or by hand, to
the principal office of the Company, and shall give written notice (the
"Conversion Notice") by facsimile (with the original of such notice forwarded
------------------
with the foregoing courier) to the Company at such office that the Company
elects to convert the amount specified therein, which such notice and election
shall be irrevocable by the Holder; provided however, that the Company shall not
be obligated to issue certificates evidencing the shares of the Series D
Preferred Stock issuable upon such conversion unless either the Note evidencing
the principal amount is delivered to the Company as provided above, or the
Holder notifies the Company that such Note(s) have been lost, stolen or
destroyed and promptly executes an agreement reasonably satisfactory to the
Company to indemnify the Company from any loss incurred by its connection with
such Note(s).
4.4.2 Delivery of Stock Certificates Upon receipt of such
---------------------------------
Conversion Notice, the Company shall immediately verify the Holder's calculation
of the conversion rate and shall use its best efforts to cause its transfer
agent to issue and deliver as promptly as practical to the Company of such
Note(s), or after receipt of such agreement and indemnification, to such Holder
of Note(s) at the address of the Holder, or to its designee, a certificate or
certificates for the number of shares of Series D Preferred Stock to which the
Holder shall be entitled, together with a Note or Notes for the principal amount
of Notes not submitted for conversion. The issuance of such certificates upon
conversion of this Note shall be made without charge to the Holder of this Note
for any issuance tax in respect thereof or other cost incurred by the Company in
connection with such conversion and the related issuance of the Series D
Preferred Stock. Upon the conversion of this Note, the Company shall take all
such actions as are necessary in order to insure that the Series D Preferred
Stock issuable with respect to such conversion shall be validly issued and fully
paid.
-5-
4.4.3 Effect of Conversion The date on which the Conversion
----------------------
Notice is given shall be deemed to be the date the Company received by facsimile
the Conversion Notice, and the person or persons entitled to receive the shares
of Series D Preferred Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Series D
Preferred Stock on such date. No fractional shares of Series D Preferred Stock
shall be issued upon conversion of this Note. In lieu of the Company issuing
any fractional shares to the Holder upon the conversion of this Note, the
Company shall pay to the Holder the amount of outstanding principal that is not
converted because its conversion would require fractional shares, such payment
to be in the form as provided below. Upon conversion of this Note, the Company
shall be forever released from all of its obligations and liabilities under this
Note, except that the Company shall be obligated to pay the Holder, within ten
(10) days after the date of such conversion, any interest accrued and unpaid or
unconverted to and including the date of such conversion, and no more.
4.5 Notices of Record Date, etc. In the event of:
-------------------------------
4.5.1 Any taking by the Company of a record of the holders of any
class of securities of the Company for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend
payable out of earned surplus at the same rate as that of the last such cash
dividend theretofore paid) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right; or
4.5.2 Any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to any other
person or any consolidation or merger involving the Company; or
4.5.3 Any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to the holder of this Note at least five (5) days prior to
the earliest date specified therein, a notice specifying:
4.5.3.1 The date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right; and
4.5.3.2 The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding-up is expected to become effective and the record date for determining
shareholders entitled to vote thereon.
4.6 Notice of Prepayment. The Company shall mail to the holder of this
Note at least sixty (60) days prior to repayment of any principal due hereunder.
4.7 Reservation of Stock Issuable Upon Conversion The Company shall,
prior to conversion of this Note into Series D Preferred Stock, reserve and keep
available out of its authorized but unissued shares of Series D Preferred Stock
solely for the purpose of effecting the
-6-
conversion of the Note such number of its shares of Series D Preferred Stock as
shall from time to time be sufficient to effect the conversion of the Note. The
Company shall at all times reserve and keep available out of its authorized but
unissued Common Stock, such number of its duly authorized Common Stock as shall
be sufficient to effect the conversion of the Series D Preferred Stock into
Common Stock in accordance with its Articles. If at any relevant time the
number of authorized but unissued shares of Series D Preferred Stock (and shares
of Common Stock for issuance on conversion of such Series D Preferred Stock)
shall not be sufficient to effect the conversion of the entire outstanding
principal amount of this Note, in addition to such other remedies as shall be
available to the holder of this Note, the Company will use its reasonable
efforts to forthwith take such corporate action as may be necessary to increase
its authorized but unissued shares of Series D Preferred Stock (and shares of
its Common Stock for issuance on conversion of such Series D Preferred Stock) to
such number of shares as shall be sufficient for such purposes.
5. Assignment. Subject to the restrictions on transfer described in
----------
Section 8 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
6. Waiver and Amendment. Any provision of this Note may be amended,
--------------------
waived or modified (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), upon the written consent of the Company and of the Holder.
7. Waiver of Notice. The Company hereby waives notice, presentment,
----------------
demand, protest and notice of dishonor.
8. Transfer of this Note or Securities Issuable on Conversion
-----------------------------------------------------------------
Hereof. The offer, sale or other disposition of this Note or securities into
which such Note may be converted, shall be subject to the restrictions on
transfer set forth in Section 7.11 of the Loan Agreement. Holder understands
and agrees that each certificate held by Holder representing Series D Preferred
Stock and Common Stock issuable upon conversion of this Note, or any other
securities issued in respect of this Note 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 under applicable federal or 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 LOAN AGREEMENT BETWEEN THE COMPANY AND THE
HOLDER HEREOF, OR ITS SUCCESSOR, A COPY OF WHICH IS AVAILABLE FROM THE
COMPANY."
9. Notices. Any notice, request or other communication required or
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permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if sent by nationally recognized courier
service or mailed by registered or certified mail, postage prepaid, to the
respective addresses of the parties as set forth herein or if sent by facsimile
to the respective facsimile numbers of the parties set forth herein. Any party
hereto may by notice so given change its address for future notice hereunder.
Notice shall
-7-
conclusively be deemed to have been given and received when personally delivered
or three (3) Business Days after deposited in the mail or one Business Day after
sent by courier or upon confirmation of facsimile delivery in the manner set
forth above.
10. Loss, Theft or Destruction of Note. Upon receipt by the Company
-----------------------------------
of evidence reasonably satisfactory to it of the loss, theft or destruction of
this Note and of indemnity or security reasonably satisfactory to it, the
Company will make and deliver a new Note which shall carry the same rights to
interest (unpaid and to accrue) carried by this Note, stating that such Note is
issued in replacement of this Note, making reference to the original date of
issuance of this Note, (and any successors hereto) and dated as of such
cancellation, in lieu of this Note.
11. Usury Disclosure. Regardless of any provision contained in this
-----------------
Note, it is expressly stipulated and agreed that the intent of the Holder and
the Company is to comply at all times with all usury and other laws relating to
this Note. If the laws of the State of Texas would now or hereafter render
usurious, or are revised, repealed or judicially interpreted as to render
usurious, the indebtedness evidenced by this Note, or if any prepayment by the
Company results in the Company's having paid any interest in excess of that
permitted by law, then it is the Holder's and the Company's express intent that
all excess amounts theretofore collected by the Holder be credited to the
principal balance of this Note (or, if this Note has been paid in full, refunded
to the Company), and the provisions of this Note immediately be deemed reformed
the amounts therefor collectible hereunder reduced, without the necessity of
execution of any new document, so as to comply with the then applicable law, but
so as to permit the recovery of the fullest amount otherwise called for
hereunder.
12. No Shareholder Rights. Nothing contained in this Note shall be
-----------------------
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a shareholder in respect of meetings of
shareholders for the election of directors of the Company or any other matters
or any rights whatsoever as a shareholder of the Company.
13. Impairment of Rights. The Company shall not amend or otherwise
----------------------
modify the terms of the Series D Preferred Stock without the written consent of
the Holder.
14. Security. This Note is secured pursuant to the terms of the
--------
Security Agreement.
15. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Texas, excluding that body of law
relating to conflict of laws.
16. Heading; References. All headings used herein are used for
--------------------
convenience only and shall not be used to construe or interpret this Note.
Except as otherwise indicated, all references herein to Sections refer to
Sections hereof.
-8-
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the
date first set forth above.
COMPANY: POSITRON CORPORATION, a Texas corporation
By:
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Xxxx X. Xxxxxx, President
Address: 0000 Xxxxxxx Xxxxx Xxxxx, #000
Xxxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
-9-
NOTICE OF CONVERSION
--------------------
(To Be Signed Only Upon Conversion of Note)
TO POSITRON CORPORATION
The undersigned, the holder of the foregoing Note, hereby surrenders such
Note for conversion into ___ shares of Series D Preferred Stock of POSITRON
CORPORATION, to the extent of ________________________ dollars ($____________)
unpaid principal amount of such Note, and requests that the certificates for
such shares be issued in the name of, and delivered to,
_________________________________________, whose address is
__________________________________________________.
Dated: ________________________.
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(Signature must conform in all respects to name of
holder as specified on the face of the Note)
Address
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