CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Ex10-2
THIS
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (the "Agreement"
) is
made as of February 14 ,
2008, by
and between Vycor
Medical, Inc.,
a
Delaware corporation (the " Company
") and
Regent
Private Capital, LLC,
an
Oklahoma limited liability company ( "Regent
").
1.
Funding
Through Convertible Debentures
.
1.1
Issuance
of Debentures
.
(a)
The Company has authorized the issuance of two essentially identical
Convertible Debentures each in the original principal amount of $500,000 in
the
form of Exhibit
A
hereto
(the " Debentures
"), the
first of which will be issued upon receipt of funding from Regent on the date
hereof (the "Closing"), and the second of which will be issued on the earlier
of
(i) sixty (60) days from the Closing, or (ii) five (5) business days following
the effective date of the Registration Statement referred to in Section 6 .1
below. The Debentures will be secured pursuant to the terms of a security
agreement in the form of Exhibit
B
hereto
(the "Security Agreement").
(b)
Subject to the terms and conditions of this Agreement, and relying on the
representations and warranties contained herein. Regent agrees to provide the
funding to the Company pursuant to the Debentures.
1.2
Use
of
Proceeds
. In
accordance with the directions of the Company's board of directors, the Company
will use the proceeds from the issuance of the Debentures for (i) general
working capital, (ii) repayment of certain obligations that are listed on
Section 1.2 of the Disclosure Schedule (defined below), each of which obligation
has been specifically reviewed and approved by Regent prior to repayment
thereof, and (iii) payment of the legal and other expenses incurred by Regent
in
connection with the issuance of the Debentures (" Regent
Expenses
") as
set forth in Section 7.7 below. The Company shall not use the proceeds from
the
issuance of the Debentures for the purchase, repurchase or cancellation of
any
securities of the Company, or the payment of any prior obligations of the
Company or its directors, officers, shareholders or employees.
2.
Representations.
Warranties and Covenants of the Company
. The
Company hereby represents, warrants and covenant to Regent that, except as
set
forth on the Disclosure Schedule (the " Disclosure
Schedule
")
attached hereto as Exhibit
C
hereto,
the statements in the following subsections in this Section 2 are all true
and
complete. The section numbers in the Disclosure Schedule will correspond to
the
section numbers in this Agreement. Whenever a representation or warranty herein
is limited to the "knowledge" of the Company, knowledge shall mean the actual
conscious knowledge of the executive officers of the Company, or what such
executive officers should have known had such executive officers conducted
due
inquiry or investigation relating thereto, to the extent such inquiry or
investigation would have been conducted by a reasonably prudent person in their
capacity as an executive of the Company.
2.1
Organization,
Good Standing, Power and Qualification
. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to carry on its business as presently conducted and as proposed
to
be conducted. The Company is in good standing and is duly qualified to transact
business in each jurisdiction in which it does business, or in which the failure
to so qualify would have a material adverse effect on the Company's business,
financial condition or properties.
2.2
Power
. The
Company has all requisite corporate power and authority (i) to own and operate
its properties and assets and to carry on its business as presently conducted
and as proposed to be conducted; (ii) to execute and deliver this Agreement,
the
Debentures, the Security Agreement and any other ancillary agreement required
hereunder (collectively, the " Ancillary
Agreements
");
(iii) to issue the Debentures (and the common stock issuable upon conversion
thereof); and (iv) to carry out and perform the provisions of this Agreement
and
the Ancillary Agreements.
(1)
2.3
Authorization
. All
actions on the part of the Company, its officers, directors and shareholders
necessary for the authorization, execution, delivery of this Agreement and
the
Security Agreement, the performance of all obligations of the Company hereunder
and thereunder, and the authorization, issuance (or reservation of issuance),
sale and delivery of the Debentures (and the common stock issuable upon
conversion thereof) have been taken or will be taken prior to the Closing.
This
Agreement and the Ancillary Agreements, when executed and delivered by the
Company, will constitute valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except (i) as limited
by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of
general application affecting enforcement of creditors' rights generally; (ii)
as limited by the laws related to the availability of specific performance,
injunctive relief or other equitable remedies; and (iii) to the extent the
indemnification provisions contained in this Agreement may be limited by
applicable laws and principles of public policy.
2.4
Valid
Issuance of Debentures
. The
Debentures (including the common stock issuable upon conversion thereof), when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly authorized, validly issued,
fully paid and nonassessable, and will be free of restrictions on transfer
other
than restrictions on transfer under this Agreement and the Ancillary Agreements
and under applicable state and federal securities laws.
2.5
Capitalization
and Voting Rights
.
(a)
The authorized capital of the Company consists, or will consist
immediately prior to the Closing, of 100,000,000 shares of common stock, par
value $.001 per share, 18,551,284 shares of which have been issued and are
outstanding, and 10,000,000 shares of preferred stock, par value $.001 per
share, none of which are issued and outstanding. The relative rights, privileges
and preferences of capital stock are as stated in the Company's Certificate
of
Incorporation, a true and correct copy of which has been provided to Regent.
The
common stock issuable upon conversion of the Debentures on the date of issuance
represents approximately twenty-two and 22/100ths percent (22.22%) of the
outstanding common stock of the Company on an as-converted, fully-diluted basis,
calculated on a pre-money valuation of the Company at the date of issuance
of
$3,500,000.
(b)
The outstanding shares of common stock have been duly authorized and
validly issued, are fully paid and nonassessable, and were issued in accordance
with the registration provisions of the Securities Act of 1933, as amended
(the
" Securities
Act
"), and
any applicable state securities laws or pursuant to valid exemptions
therefrom.
(c)
Except as otherwise provided for in the Disclosure Schedule, there are no
outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of its
securities. Except as identified above, the Company has no equity purchase
plan,
option, warrant or other agreement or understanding granting rights to purchase
the Company's securities with any other person or entity. The Company is not
a
party or subject to any agreement or understanding, and there is no agreement
or
understanding between any persons that affects or relates to the voting or
giving of written consents with respect to any security or the voting by any
shareholder or director of the Company.
(2)
(d)
To
the Company's knowledge, the Company has not violated any applicable federal
or
state securities laws or regulations in connection with the offer, sale or
issuance of any of its equity securities or the offer, sale or issuance of
any
of its debt securities. There are no voting trusts, proxies or other agreements
or understandings among the Company's shareholders or equity owners or any
other
person with respect to the voting, transfer or registration of the Company's
equity securities or with respect to any other aspect of the Company's
affairs.
2.6
Subsidiaries.
The
Company does not currently own or control, directly or indirectly, any interest
in any other corporation, partnership, trust, joint venture, limited liability
company, association, or other business entity. The Company is not a participant
in any joint venture, partnership or similar arrangement.
2.7
Compliance
with Other Instruments
. The
Company is not in violation or default of any provision of its Certificate
of
Incorporation, Bylaws or its other charter documents or in any material respect
of any provision of any mortgage, indenture, agreement, instrument, regulation
or contract to which it is a party or by which it is bound or of any federal
or
state judgment, order, writ, decree, statute, rule or regulation applicable
to
the Company. The execution, delivery and performance by the Company of this
Agreement and the Ancillary Agreements, and the consummation of the transactions
contemplated hereby and thereby, will not result in any material violation
or be
in conflict with or constitute, with or without passage of time or giving of
notice, either a default under any such provision or an event that results
in
the creation of any lien, charge or encumbrance upon any assets of the Company
or the suspension, revocation, impairment, forfeiture or renewal of any material
permit, license, authorization or approval applicable to the Company, its
businesses or operations or any of its assets or properties.
2.8
Governmental
Consents, etc
. No
consent, approval, qualification, order or authorization of, or filing with,
any
federal, state or local governmental authority on the part of the Company is
required in connection with the Company's execution, delivery or performance
of
this Agreement, the Ancillary Agreements or the offer, sale or issuance of
the
Debentures (or the issuance of the common stock issuable upon conversion
thereof), except such filings as have been made prior to the Closing, or except
any notices of sale required to be filed with the Securities and Exchange
Commission under Regulation D of the Securities Act, or such post-Closing
filings as may be required under applicable state securities laws, which will
be
timely filed within the applicable periods therefor.
2.9
Agreements:
Action
. Except
with respect to (i) the outstanding Bridge Loan Debenture dated December 14,
2006 (as amended), in the original principal amount of $172,500 (" FCP
Debenture
") with
Fountainhead Capital Partners ("FCP"), (ii) the Warrant to Purchase 50.22
Membership Units of the Company (now 805,931 shares of the Company's common
stock) dated December 15, 2006 (the " FCP
Warrant
"),
(iii) the investment opportunity granted under the Option Agreement with FCP
dated December 14, 2006 (" FCP
Option
"), or
as specifically disclosed in the Disclosure Schedule:
(a)
There
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors, shareholders, affiliates or any affiliate
thereof.
(3)
(b)
There are no contracts, agreements, instruments, leases, commitments,
understandings, proposed transactions, judgments, orders, writs or decree to
which the Company is a party or by which it is bound that may involve (i)
obligations (contingent or otherwise) of, or payments to, the Company in excess
of $25,000; (ii) the granting of any rights affecting the development,
manufacture, licensing, marketing, sale or distribution of the Company's
products and services; (iii) the guarantee or indemnity of any indebtedness
of
any other person, firm or entity; (iv) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company; or (v) the
indemnification by the Company with respect to infringements of proprietary
rights.
(c)
The Company has not (i) declared or paid any dividend or distribution
upon or with respect to any class or series of its equity securities, (ii)
incurred any indebtedness from money borrowed or any other liabilities
individually in excess of $10,000 or, in the case of indebtedness and/or
liabilities individually less than $10,000, in excess of $25,000 in the
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed
of
any of its assets or rights except in the ordinary course of its
business.
(d)
For the purposes of subsections (b) and (c) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the minimum dollar amounts for each
subsection.
2.10
Obligations
to Related Parties
. Except
as identified on the Disclosure Schedule, no employee, officer, director,
shareholder or other equity owner of the Company or member of his, her or its
immediate family is indebted to the Company, nor is the Company indebted (or
committed to make loans or extend or guarantee credit) to any of them other
than
(i) for payment of salary for bona fide services rendered; (ii) reimbursement
for reasonable expenses incurred on behalf of the Company; and (iii) for other
standard employee benefits generally made available to all employees. No
employee, officer or director of the Company and, to the Company's a knowledge,
no shareholder of the Company or any of such shareholder's immediate family,
has
any direct or indirect ownership in any entity with which the Company is
affiliated or with which the Company has a business relationship, or any entity
that competes with the Company, except that employees, officers, directors
or
shareholders of the Company and members of their immediate family may own stock
in publicly traded companies that may compete with the Company. No employee,
officer, director or shareholder of the Company, or any member of their
immediate families, is, directly or indirectly, interested in any contract
with
the Company (other than contracts that relate to any such person's ownership
of
an equity interest in the Company). The Company has not granted rights or
licenses to any other entity or person to sell its products or services to
any
other person or entity and is not bound by any agreement that affects the
Company's exclusive rights to market or sell its products or
services.
2.11
Title
to Properties and Assets
. The
Company owns its assets free and clear of all mortgages, liens, claims, and
encumbrances other than (i) liens securing the FCP Debenture, (ii) liens for
current taxes not yet delinquent, (iii) for liens imposed by law and incurred
in
the ordinary course of business for obligations not past due to carriers,
warehousemen, laborers, materialmen and the like, (iv) for liens in respect
of
pledges or deposits under workers' compensation laws or similar legislation
or
(v) for minor defects in title, none of which, individually or in the aggregate,
materially interferes with the use of such property. With respect to the
property and assets it leases, the Company is in compliance with such leases,
each lease is in full force and effect and is enforceable in accordance with
its
terms, holds a valid leasehold interest free of any liens, claims, or
encumbrances, subject to clauses (i) – (v) above, and there exists no
default or other condition which, with the giving of notice, the passage of
time, or both, could become a default under any lease. There are no outstanding
options or rights of first refusal with respect to the purchase or use of any
of
the Company's real property, any portion thereof or interest
thereon.
(4)
2.12
Intellectual
Property
. The
Company owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
and proprietary rights and processes (collectively, " Intellectual
Property
")
necessary for its business as now conducted and as proposed to be conducted
without any infringement of the rights of others. The Disclosure Schedule
contains a complete list of the Company's patents, trademarks, copyrights and
domain names and pending patent, trademark and copyright applications. There
are
no outstanding options, licenses, or agreements of any kind relating to the
Company's Intellectual Property with the exception of agreements for the sale
or
license of the Company's products or services in the ordinary course of
business, nor is the Company bound by or a party to any options licenses or
agreements of any kind with respect to the Intellectual Property of any other
person or entity with the exception of shrink-wrap, click-wrap or similar widely
available commercial end-user licenses. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as presently proposed, would violate any of the Intellectual Property
of any other person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere
with
the Company's business as presently proposed to be conducted. It is not or
will
not be necessary for the Company to utilize any inventions of any of its
employees (or people they currently intend to hire) made prior to their
employment with the Company. The Company is not aware of any violation or
infringement by a third party of any of the Company's Intellectual
Property.
2.13
Employees;
Employee Benefit Plans
. The
Company has complied in all material respects with all applicable state and
federal equal opportunity and other laws related to employment. To the Company's
knowledge, no employee of the Company is or will be in violation of any
judgment, decree, or order, or term of any employment contract, patent
disclosure agreement, or other contract or agreement relating to the
relationship of any such employee with the Company, or any other party because
of the nature of the business presently conducted or presently proposed to
be
conducted by the Company. The Company has no "Employee Benefit Plan" as defined
in the Employment Retirement Income Security Act of 1974, as amended. The
Company is not aware of any officer or key employee, or any group of key
employees, that intends to terminate their employment with the Company, nor
does
the Company have a present intention to terminate the employment of any of
them.
2.14
Litigation
. There
is no claim, action, suit, proceeding, arbitration, complaint, charge or
investigation pending or currently threatened against the Company or any
officer, director or key employee of the Company, nor is there any reasonable
basis therefore. Neither the Company nor any of its officers or directors,
is a
party or is named as subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality (in
the
case of officers or directors, such as would affect the Company). There is
no
action, suit, proceeding or investigation by the Company pending or which the
Company intends to initiate. The foregoing includes, without limitation, any
action, suit, proceeding or investigation pending or threatened involving the
prior employment of any of the Company's employees, their services provided
in
connection with the Company's business, or any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers.
2.15
Rights
of Registration
. Other
than as described in Section 6.1 herein, the Company has not obligated itself
to, is not under any current obligation to, and will not obligate itself to
register under the Securities Act any of its currently outstanding securities
or
any securities issuable upon exercise or conversion of its currently outstanding
securities.
(5)
2.16
Financial
Statements
. The
Company has delivered to Regent its audited financial statements as of December
31, 2006 and its unaudited financial statements as of September 30, 2007,
respectively (collectively, the " Financial
Statements
"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated. The Financial Statements fairly present in all material respects
the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein, subject in the case of the unaudited
Financial Statements to normal year-end audit adjustments, which are not
individually or in the aggregate expected to be material. Except as set forth
in
the Financial Statements, the Company has no liabilities or obligations,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to September 30, 2007 (ii) obligations under
contracts and commitments incurred in the ordinary course of business and (iii)
liabilities and obligations of a type or nature not required under generally
accepted accounting principles to be reflected in the Financial Statements,
which, in all such cases, individually and in the aggregate are not material
to
the financial condition or operating results of the Company. The Company is
not
a guarantor or indemnitor of any indebtedness of any other person, firm or
entity. The Company maintains and will continue to maintain a standard system
of
accounting established and administered in accordance with generally accepted
accounting principles. The Company has no liability to any of its equity owners
or to affiliates of such equity owners.
2.17
Brokers
or Finders
. Except
as otherwise provided in the Disclosure Schedule, the Company has not incurred,
and will not incur, directly or indirectly, as a result of any action taken
by
the Company, any liability for brokerage or finders' fees or agents' commissions
or any charges in connection with this Agreement, the Ancillary Agreements
or
the transactions contemplated hereby and thereby.
2.18
Changes
. Since
September 30, 2007 there has not been:
(a)
any change in the assets, liabilities, financial condition or operating
results of the Company from that reflected in the unaudited Financial Statements
dated September 30, 2007, except changes in the ordinary course of business
that
have not been, in the aggregate, material adverse;
(b)
any damage, destruction or loss, whether or not covered by
insurance;
(c)
any waiver or compromise by the Company of a valuable right or of a
material debt owed to it;
(d)
any satisfaction or discharge of any lien, claim, or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business that is not material to the Company's business, financial condition
or
properties;
(e)
any material change to a material contract or agreement by which the
Company or any of its assets is bound or subject;
(f)
any material change in any compensation arrangement or agreement with any
employee, officer, director or shareholder of the Company;
(6)
(g)
any resignation or termination of employment of any officer or key
employee of the Company, and the Company, to its knowledge, does not know of
the
impending resignation or termination of employment of any such officer or key
employee;
(h)
any mortgage, pledge, transfer of a security interest in, or lien,
created by the Company, with respect to any of its properties or assets, except
liens for taxes not yet due or payable;
(i)
any loans or guarantees made by the Company to or for the benefit of its
employees, officers, directors or equity owners, or any shareholders of their
immediate families, other man travel advances and other advances made in the
ordinary course of business;
(j)
any
declaration, setting aside or payment or other distribution in respect of any
of
the Company's securities, or any direct or indirect redemption, purchase, or
other acquisition of any of such securities by the Company;
(k)
any
sale, assignment or transfer of any of the Company's Intellectual
Property;
(1)
receipt of notice that there has been a loss of, or order cancellation by,
any
customer of the Company;
(m)
any
other event or condition of any character that would result in a material
adverse effect on the Company's business, financial condition or properties;
or
(n)
any
agreement or commitment by the Company to do any of the things described in
this
Section 2.18.
2.19
Tax
Returns. Payments and Elections
. The
Company has filed all tax returns and reports as required by law (including,
but
not limited to all Federal and state income tax returns, and all state sales
and
use tax returns). These returns and reports are true and correct in all material
respects. The Company has paid all taxes and other assessments due, except
those
contested by it in good faith and listed in the Disclosure Schedule. The
provision for taxes of the Company as shown in the Financial Statements is
adequate for taxes dues or accrued as of the date thereof The Company has not
made any elections pursuant to the Code (or other elections that related solely
to methods of accounting, depreciation or amortization) that would have a
material adverse effect on the Company's business, financial condition or
properties.
2.20
Insurance
. The
Disclosure Schedule in Section 2.20 lists all of the insurance policies and
fidelity bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, all of which policies are
currently in effect. The Company has furnished to Regent true and complete
copies of all insurance policies and fidelity bonds listed in the applicable
disclosure on the Schedule. There is no claim by the Company pending under
any
of such policies or bonds as to which coverage has been questioned, denied
or
disputed by the underwriters of such policies or bonds. The current and
historical limits of liability under such policies or bonds have not been
exhausted and/or are not impaired. There is no threatened termination of, or
premium increase with respect to, any of such policies or bonds, or any notice
that such policies or bonds are no longer in full force and effect or that
the
issuer thereof is no longer willing or able to perform its obligations
thereunder. None of the insurance policies or bonds listed in the Disclosure
Schedule will terminate or lapse by reason of the consummation of the
transactions contemplated by this Agreement
(7)
2.21
Proprietary
Information and Invention Assignment Agreements
. Each
current and former employee, consultant and officer of the Company has executed
a proprietary information and inventions assignment agreement in the form or
forms provided to Regent. No current or former employee has excluded works
or
inventions from his or her assignment of inventions pursuant to such employee's
agreement. The Company is not aware that any of its employees is in violation
thereof.
2.22
Permits
. The
Company has all franchises, permits, licenses and any similar authority
necessary for the conduct of its business as presently conducted by it, the
lack
of which would have a material adverse effect on the Company's business,
properties or financial condition, and the Company believes it can obtain,
without undue expense or burden, any similar authority for the expanded conduct
of its business as presently proposed to be expanded. The Company is not in
default in any respect under any of such franchises, permits, licenses or other
similar authority.
2.23
Environmental
and Safety Laws
. The
Company has complied in all material respects with all Environmental Laws.
The
Company has no Environmental Liabilities. No notice, notification, demand,
request for information, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation
or
review is pending or, to the Company's knowledge, threatened, by any
governmental or other entity with respect to any alleged violation by the
Company of any Environmental Law. There have been no environmental
investigations, studies, audits, tests, reviews or other analyses conducted
by
or for the Company, or to the Company's knowledge, relating to any property
or
facility now or previously owned or leased by the Company that have not been
delivered to Regent.
The
following terms, as used in this Section 2.23 have the following meanings;
"
Environmental
Law
" means
any and all federal, state, local and foreign statutes, laws (including common
or case law), regulations, ordinances, rules, judgments, judicial decisions,
orders, decrees, codes, plans, injunctions, or governmental restrictions
relating to the protection of human health or safety or the environment or
to
emissions, discharges or releases of any Hazardous Substance into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any Hazardous
Substance or the containment, removal or remediation thereof. " Environmental
Liabilities
" means
any and all liabilities arising in connection with or in any way relating to
the
past or present business of the Company, whether contingent or fixed, actual
or
potential, known or unknown, which (i) arise under or relate to matters governed
by Environmental Law or arise in connection with or relate to any matter
disclosed or required to be disclosed in the Disclosure Schedule as applicable
and (ii) arise from or relate in any way to actions occurring or conditions
existing before the Closing. " Hazardous
Substance
" means
any and all pollutants and contaminants, and any and all toxic, caustic,
radioactive or otherwise hazardous materials, substances or wastes that are
regulated under any Environmental Law, and includes, without limitation,
petroleum and its derivatives and by-products, and any other
hydrocarbons.
2.24
Product
Liability
. The
Company has no liability, whether known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or
due
or to become due (collectively, a " Liability
") (and
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against it giving rise to
any
Liability) arising out of any injury to individuals or property as a result
of
the ownership, possession or use of any product sold, leased or delivered by
the
Company.
2.25
Disclosure
. The
Company has provided to Regent all the information reasonably available to
it without undue expense that Regent has requested for deciding whether to
provide the funds related to the Debentures and all information that the Company
reasonably believes necessary to enable Regent to make such decision.
Neither this Agreement, the Ancillary Agreements, nor any other written
statements or certificates made or delivered in connection herewith, when taken
as a whole, contain any untrue statement of material fact or omits to state
a
material fact necessary to make the statements contained herein or therein
not
misleading in light of the circumstances under which they were
made.
(8)
3.
Representations,
Warranties and Covenants of Regent
. Regent
hereby represents, warrants and covenants to the Company as
follows:
3.1
Power:
Authorization
. Regent
has all requisite power and authority to execute and deliver this Agreement
and
the Ancillary Agreements to which it is a party. This Agreement and the
Ancillary Agreements to which it is a party, when executed and delivered by
Regent, will constitute valid and legally binding obligations of Regent,
enforceable in accordance with their respective terms, except (i) as limited
by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement
of
creditors' rights generally, and as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable remedies, or
(ii)
to the extent the indemnification provisions contained in this Agreement may
be
limited by applicable laws and principles of public policy.
3.2
Purchase
Entirely for Own Account
. This
Agreement is made with Regent in reliance upon Regent's representation
to the Company, which by Regent's execution of this Agreement, Regent
hereby confirms, that the Debentures (and the common stock issuable upon
conversion thereof), will be acquired for investment for Regent's own account,
not as a nominee or agent, and not with a view to the resale or distribution
of
any part thereof, and that Regent has no present intention of selling,
granting any participation in, or otherwise distributing the same.
3.3
Reliance
upon Regent's Representations
. Regent understands that the Debentures and the common stock acquired upon
conversion thereof not be registered under the Securities Act on the ground
that
the sale provided for in this Agreement and the issuance of the common stock
is
exempt from registration under the Securities Act pursuant to valid exemptions
thereof, and that the Company's reliance upon such exemption is predicated
on
Regent's representations set forth herein.
3.4
Disclosure
of Information
. Regent
has had an opportunity to ask questions of the Company regarding the terms
and
conditions of the issuance of the Debentures and the Company's business,
financial condition, properties and prospects and to obtain additional
information (to the extent the Company possessed such information or acquire
it
without unreasonable effort or expense) necessary to verify the accuracy of
any
information furnished to Regent or to which Regent had access. The foregoing,
however, does not limit or modify the representations, warranties and covenants
of the Company in Section 2 of this Agreement or the right by Regent to rely
thereon.
3.5
Accredited
Investor
. Regent
is an "accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
3.6
Restricted
Securities
. Regent
understands that the Debentures and the common stock issuable upon conversion
of
the Debentures, 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 federal
securities laws and applicable regulations the Debentures and the common stock
issuable upon conversion thereof may be resold without registration only in
certain circumstances. In this regard, Regent represents that it is aware of
the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of securities purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the Debentures and the common stock issuable upon
conversion thereof to availability of certain public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being effected through a
"broker's transaction" or in transactions with a "market maker" and the number
of shares being sold during any three-month period not exceeding specified
limitations.
(9)
3.7
Brokers
or Finders
. The
Company has not, and will not, incur, directly or indirectly, as a result of
any
action taken by Regent, any liability for brokerage or finders' fees or agents'
commissions or similar charges in connection with this Agreement or the
transactions contemplated hereby, other than the commitment and related fees
payable to Regent under this Agreement.
3.8
Legends
. Regent
understands that the Debentures and the common stock issued upon conversion
thereof, may bear one or all of the following legends:
(a)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH
TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT
SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(b)
Any legend required by the securities laws of any state to the extent
such laws are applicable to shares represented by the certificate so
legended.
4.
Conditions
to Closing of Regent
. The
obligations of Regent under Section 1 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against Regent if it does not consent
thereto:
4.1
Representations
and Warranties Correct
. The
representations and warranties of the Company contained in Section 2 shall
be
true and correct on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.
4.2
Covenants
. All
covenants, agreements and conditions contained in this Agreement to be performed
by the Company on or prior to the Closing shall have been performed or complied
with in all material respects.
4.3
Debt
. At
Closing, total liabilities of the Company shall not exceed $753,278 and shall
be
of the type satisfactory to Regent, in its sole discretion. Other than disclosed
in the Disclosure Schedule, the Company shall have no liabilities to the
Company's shareholders or equity owners or affiliates of such shareholders,
except as contemplated by this Agreement or the FCP Debenture.
4.4
Assignment
of FCP Warrant and Option Rights
. FCP
shall have executed an Assignment of Rights in the Form of Exhibit
D
hereto,
pursuant to which FCP shall assign to Regent an undivided fifty percent (50%)
interest in (i) the FCP Warrant, and (ii) the FCP Option. If requested by Regent
(including a request made subsequent to Closing), the Company will re-execute
substitute and separate warrants and option agreements, pursuant to which each
of Regent and FCP will have stand-alone agreements with terms identical to
the
existing FCP Warrant and FCP Option (with the exception that each such
substitute agreement will cover 50% of the aggregate original
interests).
(10)
4.5
Additional
Investment by FCP — Intracreditor Agreement .
FCP
shall concurrently invest in the Company a minimum of $150,000 at the time
of
issuance of each Debenture to Regent, for a total additional investment of
at
least $300,000. Such investment by FCP shall be made on terms identical to
the
Debentures (other than as to amount) pursuant to documentation substantially
identical to the documentation being executed in connection with the Debentures;
provided, FCP shall have the right to secure another investor for up to $100,000
of FCP's additional $300,000 obligation.
4.6
Stock
Option Plan
. The
Company, with the approval of Regent, will establish a Stock Option Plan,
pursuant to which an amount not exceeding 10% of the Company's issued and
outstanding common stock (on a fully diluted basis) will be reserved for
issuance pursuant to either qualified or nonqualified options that may be
granted to employees, officers, directors and consultants of the
Company.
4.7
Satisfaction
of Due Diligence
. Regent
shall have been satisfied, in its sole discretion, with the results of its
due
diligence investigation related to the Company. Without limiting the generality
of the foregoing, Regent shall be satisfied that the Company's legal counsel
accounting firm and other necessary experts can accomplish the filing of the
Registration Statement in accordance with Section 6.1 hereof.
4.8
Debentures
and Security Agreement.
The
Debentures shall have been issued by the Company and the Company shall have
executed and delivered the Security Agreement and all other documents
contemplated by this Agreement.
4.9
Lock-Up Agreement . Each of Xxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxx and Sawmill
Trust shall have entered into a Lock-Up Agreement in the form of Exhibit
F
hereto,
pursuant to which such individuals shall have agreed to not sell or otherwise
transfer any shares of common stock in the Company held by them for a period
of
one year following Closing, and thereafter such individuals can sell up to
twenty-five percent (25%) of their common stock in the Company in each of the
succeeding two years following Closing, after which time the Lock-Up Agreement
will expire.
4.10
Material
Adverse Effect
. There
has occurred no fact, event or circumstance which has had, or would reasonably
be expected to have, a material adverse effect on the assets, liabilities,
financial condition or operating results of the Company, except changes in
the
ordinary course of business that have not been, in the aggregate, materially
adverse on the Company's business, financial condition or
properties.
5.
Conditions
to Closing of the Company
. The
obligations of the Company to Regent at the Closing are subject to the
fulfillment on or before the Closing of each of the following conditions by
Regent, unless otherwise waived:
5.1
Representations
and Warranties Correct
. The
representations and warranties of Regent contained in Section 3 shall be
true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of
Closing.
5.2
Qualifications
. All
authorizations, approvals or permits, if any, of any governmental authority
or
regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Debentures and underlying
shares of common stock pursuant to this Agreement shall be obtained and
effective as of the Closing.
(11)
6.
Post-Closing Covenants of the Company.
6.1
Registration
Statement
. Within
sixty (60) days from the date of this Agreement, the Company shall file a
registration statement on Form S-l, SB-2, or other applicable form
("Registration Statement"), with the Securities and Exchange Commission ("SEC"),
which Registration Statement shall register for sale all common stock which
may
be issuable upon conversion of the Debentures. The Company will thereafter
use
its commercially reasonable efforts to have such registration statement declared
effective by the SEC within one hundred eighty (180) days from the date hereof.
For purposes hereof, the Company will be deemed to be using its "commercially
reasonable efforts", provided it fully and appropriately responds to all
comments from the SEC within ten (10) business days of receipt thereof without
any undue hardship or unreasonable expenses, and diligently continues to seek
effectiveness of such registration statement. The Company shall take such action
to have the Registration Statement declared effective by the SEC within three
(3) business days following written confirmation from the SEC that it either
will not review the Registration Statement or that it has no further comment
on
the Registration Statement. For the avoidance of any doubt, that the Company
shall not be in breach of this Section 6.1 for any delay arising from (i) issues
raised by the SEC relating to Rule 415 of the Securities Act, as amended, or
to
the structure of the sale and resale of the shares, (ii) information required
from person or entities other than the Company, or (iii) issues resulting from
or relating to acts or omissions of persons or entities other than the
Company.
6.2
Protection
of Minority Rights
. So
long as either Debenture is outstanding or Regent or its affiliates shall
continue to own at least 10% of the outstanding voting equity securities of
the
Company, then without the prior approval of Regent or its affiliates, as
applicable, such approval not to be unreasonably withheld, the Company will
not
undertake any of the actions listed on Schedule
6.2
hereto.
6.3
Financial
Statements
. The
Company will deliver to Regent the following financial information: (i)
audited annual financial statements within 90 days of the close of each fiscal
year of the Company; (ii) unaudited monthly cash flow statements within 30
days
after the end of each month; (iii) quarterly financial statements within 45
days, of the end of each fiscal quarter of the Company; (iv) a proposed budget
for each fiscal year within 30 days prior to the beginning of each fiscal year
of the Company; and (v) such other financial information as Regent may
reasonably request.
7.
Miscellaneous
.
7.1
Survival
of Warranties
. The
representations, warranties and covenants of the Company and Regent
contained herein or made pursuant to this Agreement (i) shall survive the
execution and delivery of this Agreement and the Closing and shall not terminate
and (ii) shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of Regent.
7.2
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. 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.
7.3
Governing
Law
. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without regard to conflict of laws
rules.
7.4
Counterparts;
Facsimile
. This
Agreement may be executed and delivered by facsimile signature and 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.
(12)
7.5
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.
7.6
Notices
. All
notices and other communications given or made pursuant to this Agreement 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, and 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 their address as
set
forth on the signature page, or to such e-mail address, facsimile number or
address as subsequently modified by written notice given in accordance with
this
Section 6.6. If notice is given to Regent, a copy-shall also be sent to Johnson,
Jones, Domblaser, Xxxxxxx & Xxxxx, P.C., Attn: Xxxxxxx Domblaser, 00 Xxxx
Xxxxx Xxxxxx, Xxxxx 0000, Bank of America Center, Xxxxx, Xxxxxxxx 00000 and
if
notice is given to the Company, a copy shall also be given to Xxxxxxxx X. Xxx
Esq., Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, 00 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx,
XX
00000.
7.7
Fees
and Expenses
. At the
Closing, the Company shall pay up to $20,000 of the Regent Expenses, which
shall
consist of the reasonable fees and expenses of incurred by Regent in connection
with this transaction, including the reasonable fees and expenses of Johnson,
Jones, Domblaser, Xxxxxxx & Xxxxx, P.C., the counsel for
Regent.
7.8
Attorney's
Fees
. If any
action at law or in equity (including arbitration) is necessary to enforce
or
interpret the terms of any of this Agreement or the Ancillary Agreements, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party
may
be entitled.
7.9
Amendment
. Except
as expressly provided herein, neither this Agreement nor a term of this
Agreement may be amended, waived discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought. Any such amendment,
waiver, discharge or termination effected in accordance with this Section 7.9
shall be binding upon each holder of any securities purchased under this
Agreement at the time outstanding (including securities into which such
securities have been converted or exchanged or for which such securities have
been exercised), each future holder of all such securities and the
Company.
7.10
Severability
. If any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction (or arbitrator) to be illegal, unenforceable or void, the portions
of such provision, or such provision in its entirety, to the extent necessary,
shall be severed from this Agreement, and such court (arbitrator) will replace
such illegal, void or unenforceable provision with a valid and enforceable
provision that will achieve, to the extent possible, the same economic, business
and other purposes of the illegal, void, or unenforceable provision. The balance
of this Agreement shall be enforceable in accordance with its
terms.
(13)
7.11
Indemnification
.
(a)
The
Company, without limitation as to time, assumes liability for and agrees to
indemnify, defend and hold harmless Regent and its officers,
managers/directors, members, employees, agents and affiliates (collectively,
"
Indemnified
Persons
") from
and against, all losses, claims, damages, liabilities, obligations, fines,
penalties, judgments, settlements, costs, expenses and disbursements (including
reasonable attorneys' fees and expenses) (collectively, " Losses
") (i)
arising out of or related to any breach or inaccuracy of any representation
or
warranty of the Company contained in this Agreement, the Debentures, the
Security Agreement or any other agreement executed in connection herewith or
therewith (ii) any non-fulfillment or breach of any covenant or agreement of
the
Company contained in this Agreement, the Debentures, the Security Agreement
or
any other agreement executed in connection herewith or therewith, or (iii)
incurred in connection with any suit, action, proceeding, claim, investigation,
liability or obligation (an " Action
or Proceeding
")
against the Company or any Indemnified Person arising out of or in connection
with this Agreement and Ancillary Agreements, any other document or instrument
executed pursuant hereto, or the transactions contemplated herein or therein,
other than Losses resulting that are finally determined in such Action or
Proceeding to be primarily and directly a result of (1) the gross negligence
of
such Indemnified Person, (2) the intentional misconduct or knowing violation
of
applicable law by such Indemnified Person, or (3) a transaction from which
such
Indemnified Person received an improper personal benefit. The Company agrees
to
reimburse each Indemnified Person promptly for all such Losses as they are
incurred by such Indemnified Person. The obligations of the Company to each
Indemnified Person under this Section 7.11 will be separate and distinct
obligations and will survive any transfer of securities by Regent and the
expiration or termination of this Agreement. The Company and Regent intend
that
the Indemnified Persons be indemnified from liability for their own negligence
pursuant to this Section 7.11.
(b)
If and to the extent any portion of this Section 7.11 is unenforceable
for any reason, the Company agrees to make the maximum contribution to the
payment and satisfaction of any Loss for which indemnification is not provided
for in this Section 7.11.
(c)
Any indemnification obligations pursuant to this Section 7.11 shall be
paid by wire transfer, in immediately available funds, to an account designated
in writing by the Indemnified Person within fifteen (15) days after the
determination thereof. Any such indemnification payments shall include interest
at ten percent (10%) per annum calculated on the basis of the actual number
of
days elapsed over 360, from the date any such Loss is suffered or sustained
to
the date of payment. The amount of any Loss for which indemnification is
provided for in this Section 6.13 shall be net of any amounts actually recovered
by the indemnifying party under insurance policies with respect to such
Loss.
7.12
Entire
Agreement
. This
Agreement, the exhibits attached hereto and the Disclosure Schedule, and the
other documents delivered pursuant to this Agreement, including but not limited
to the Debentures constitute the full and entire understanding and agreement
between the parties with respect to the subject matter hereof, and supersede
all
prior agreements and understandings, whether written or oral, relating to such
subject written in any way, including that certain Term Sheet among the parties
hereto, and no party shall be liable or bound to any other party in any manner
by any warranties, representations or covenants except as specifically set
forth
herein or therein.
7.13
Dispute
Resolution
. Any
unresolved controversy or claim arising out of or relating to this Agreement,
except as (i) otherwise provided in this Agreement, or (ii) any such
controversies or claims arising out of either party's intellectual property
rights for which a provisional remedy or equitable relief is sought, shall
be
submitted to arbitration by one arbitrator mutually agreed upon by the parties,
and if no agreement can be reached within thirty (30) days after names of
potential arbitrators have been proposed by the American Arbitration Association
(the " AAA
"), then
by one arbitrator having reasonable experience in corporate finance transactions
of the type provided for in this Agreement and who is chosen by the AAA. The
arbitration shall take place in New York City, in accordance with the AAA rules
then in effect, and judgment upon any award rendered in such arbitration will
be
binding and may be entered in any court having jurisdiction thereof. There
shall
be limited discovery prior to the arbitration hearing as follows: (a) exchange
of witness lists and copies of documentary evidence and documents relating
to or
arising out of the issues to be arbitrated, (b) depositions of all party
witnesses and (c) such other depositions as may be allowed by the arbitrators
upon a showing of good cause. Depositions shall be conducted in accordance
with
the Oklahoma Code of Civil Procedure , the arbitrator shall be required to
provide in writing to the parties the basis for the award or order of such
arbitrator, and a court reporter shall record all hearings, with such record
constituting the official transcript of such proceedings. The prevailing party
shall be entitled to reasonable attorney's fees, costs, and necessary
disbursements in addition to any other relief to which such party may be
entitled. Each of the parties to this Agreement consents to personal
jurisdiction for any equitable action sought in the U.S. District Court for
the
Southern District of New York.
(14)
7.14
No
Commitment for Additional Financing
. The
Company acknowledges and agrees that other than as contemplated by this
Agreement, the Debentures or the Security Agreement, Regent has not made
any representation, undertaking, commitment or agreement to provide or assist
the Company in obtaining any financing, investment or other assistance, other
than the purchase of the Debentures and the provision of funds pursuant to
the
Debentures subject to the conditions set forth herein. In addition, the Company
acknowledges and agrees that (i) no statements, whether written or oral, made
by Regent or its representatives on or after the date of this Agreement
shall create an obligation, commitment or agreement to provide or assist the
Company in obtaining any financing or investment, (ii) the Company shall not
rely on any such statement by Regent or its representatives and (iii) an
obligation, commitment or agreement to provide or assist the Company in
obtaining any financing or investment may only be created by a written
agreement, signed by Regent and the Company, setting forth the terms and
conditions of such financing or investment and stating that the parties intend
for such writing to be a binding obligation or agreement. Regent shall have
the right, in its sole and absolute discretion, to refuse or decline to
participate in any other financing of or investment in the Company, and shall
have no obligation to assist or cooperate with the Company in obtaining any
financing, investment or other assistance.
IN
WITNESS WHEREOF, the parties have executed this Convertible Debenture Purchase
Agreement as of the date first written above.
Signatures
appear on following page
(15)
|
COMPANY
|
|||
|
VYCOR
MEDICAL, INC.
|
|||
|
/s/
Xxxxxxx X. Xxxxxx
|
By:
|
Xxxxxxx
Xxxxxxxx
|
|
|
Xxxxxxx
X. Xxxxxx
|
Name:
|
Xxxxxxx
Xxxxxxxx
|
|
|
President
|
Title:
|
CEO
|
|
|
Address:
|
|
00
Xxxxxxx Xxxxx, Xxxxx 000
|
|
Xxxxxxx,
Xxx Xxxx 00000
|
|
REGENT
|
|
REGENT
PRIVATE CAPITAL, LLC
|
|
By:
|
/s/
Xxxxxxxx Field
|
|
Xxxxxxxx
Field, Managing Director
|
(16)
EXHIBIT
A
FORM
OF DEBENTURE
THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND IS BEING
OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF
THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD OR TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE
SECURITIES ACT OR SUCH OTHER LAWS.
6%
CONVERTIBLE DEBENTURE
|
No.
1
|
US$500,000
|
VYCOR
MEDICAL, INC.
SENIOR
CONVERTIBLE DEBENTURE
DUE
FEBRUARY 15, 2008
FOR
VALUE
RECEIVED, Vycor
Medical, Inc.
(the
"Company") promises to pay to Regent
Private Capital, LLC,
or any
other registered holder(s) hereof and its or their authorized successors
and
permitted assigns (" Holder"), the aggregate principal face amount of US$500,000
on or before February 15, 2009 ("Maturity Date"), together with interest
thereon
at six percent (6%) per annum. The Holder shall have the sole option to extend
the Maturity Date for a period of six months. Accrued interest shall be paid
to
the person in whose name this Debenture is registered on the records of the
Company regarding registration and transfers of the Debenture ("Debenture
Register"); provided, however, that the Company's obligation to a transferee
of
this Debenture arises only if such transfer, sale or other disposition is
made
in accordance with the terms hereof and duly entered in the Debenture Register.
The principal amount of this Debenture is payable at the address last appearing
on the Debenture Register of the Company as designated in writing by the
Holder
hereof from time to time. The Holder's address initially provided to the
Company
is as set forth in Section 16(b) below. The Company may, at its option, elect
to
pay accrued interest under this Debenture, by issuing to the Holder shares
of
common stock in the Company with a value equal to such accrued interest.
In such
event, the value of the common stock issued in lieu of payment of accrued
interest will be mutually agreed upon by the Company and the Holder prior
to the
Company having the right to make payment in such fashion. The Company will
pay
the outstanding principal and accrued interest due upon this Debenture before
or
on the Maturity Date, less any amounts required by law to be deducted or
withheld, to the Holder of this Debenture by check if paid more than 10 days
prior to the Maturity Date or by wire transfer and addressed to such Holder
at
the last address appearing on the Debenture Register. The forwarding of such
check or wire transfer shall constitute a payment of outstanding principal
hereunder and shall satisfy and discharge the liability for principal on
this
Debenture to the extent of the sum represented by such check or wire
transfer.
1
This
Debenture is one of a series of two Convertible Debentures, each in the original
principal amount of $500,000, to be issued pursuant to the Convertible Debenture
Purchase Agreement dated February 15, 2008 ("Purchase Agreement"), and secured
pursuant to the terms of a Security Agreement of even date with the Purchase
Agreement ("Security Agreement").
This
Debenture is subject to the following additional provisions:
1.
Issuance.
The
Debenture may be exchanged for an equal aggregate principal amount of Debentures
of different authorized denominations, as requested by the Holders surrendering
the same, but not less than U.S. $50,000 each. No service charge will be
made
for such registration or transfer or exchange, except that Holder shall pay
any
tax or other governmental charges payable in connection therewith. The Company
shall be entitled to withhold from all payments any amounts required to be
withheld under the applicable laws.
2.
Loss,
Theft, Destruction of Debenture .
Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Debenture and, in the case of any such loss, theft
or
destruction, upon receipt of indemnity or security reasonably satisfactory
to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Debenture, the Company shall make, issue and deliver,
in
lieu of such lost, stolen, destroyed or mutilated Debenture, a new Debenture
of
like tenor and unpaid principal amount dated as of the date hereof (which
shall
accrue interest from the most recent interest payment date on which an interest
payment was made in full).
3.
Transfer.
This
Debenture may be transferred or exchanged only in compliance with the Securities
Act of 1933, as amended (the "Act") and applicable state securities laws.
Prior
to due presentment for transfer of this Debenture, the Company and any agent
of
the Company may treat the person in whose name this Debenture is duly registered
on the Company's Debenture Register as the Holder hereof for all other purposes,
whether or not this Debenture be overdue, and neither the Company nor any
such
agent shall be affected or bound by notice to the contrary. Any Holder of
this
Debenture, electing to exercise the right of conversion set forth in Section
4(a) hereof, in addition to the requirements set forth in Section 4(a), and
any
prospective transferee of this Debenture, are also required to give the Company
written confirmation that the Debenture is being converted ("Notice of
Conversion") in the form annexed hereto as Exhibit I. The date of receipt
(including receipt by telecopy) of such Notice of Conversion shall be the
Conversion Date.
2
4.
Conversion
The
Holder is entitled, at its option, to convert all or any amount of the principal
face amount of this Debenture then outstanding into shares of common stock
of
the Company at a Conversion Price of $.01230 per share, subject to adjustment
as
provided herein. If the number of resultant Conversion Shares would as a
matter
of law or pursuant to regulatory authority require the Company to seek member
approval of such issuance, the Company has, prior to the issuance hereof,
taken
the necessary steps to obtain such approval. Such conversion shall be
effectuated, by the Company delivering the Conversion Shares to the Holder
within 30 days of receipt by the Company of the Notice of Conversion. Once
the
Holder has received such Conversion Shares, the Holder shall surrender the
Debenture (or portion thereof) to be converted to the Company, executed by the
Holder of this Debenture evidencing such Holder's intention to convert this
Debenture or a specified portion hereof, and accompanied by proper assignment
hereof in blank. If the Company shall fail to deliver the Conversion Shares
to
the Holder within such 30 day period, the Conversion Price shall be
automatically reduced by twenty-five percent (25%), and shall be reduced
an
additional ten percent (10%) for each additional 30 day period (or portion
thereof) thereafter. In the event of a partial conversion of the Debenture,
the
Company will immediately issue a replacement Debenture covering the unconverted
portion.
To
the
fullest extent permitted by law, the Holder shall be entitled to exercise
its
conversion privilege notwithstanding the commencement of any case under the
Bankruptcy Code. In the event the Company is a debtor under the Bankruptcy
Code,
the Company hereby waives to the fullest extent permitted any rights to relief
it may have under 11 U.S.C. § 362 in respect of the Holder's conversion
privilege. The Company hereby waives to the fullest extent permitted any
rights
to relief it may have under 11 U.S.C. § 362 in respect of the conversion of this
Debenture. The Company agrees, without cost or expense to the Holder, to
take or
consent to any and all action necessary to effectuate relief under 11 U.S.C.
§
362.
No
fractional shares or scrip representing fractional shares shall be delivered
upon conversion of this Debenture. Instead of any fractional Conversion Shares
which otherwise would be delivered upon conversion of this Debenture, the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction multiplied by the Conversion Price on the date
of
Conversion. No cash payment of less than $1.00 shall be required to be given
unless specifically requested by the Holder.
5.
Priority;
Security.
The
obligation evidenced by this Debenture shall be senior to all other obligations
of the Company other than obligations specifically approved by the Holder;
provided that the obligation evidenced by this Debenture shall be of equal
priority for all purposes with that certain Bridge Loan Debenture dated June
21,
2007, in the original principal amount of $172,500 held by Fountainhead Capital
Partners Limited (the "FCP Debenture"). The obligation evidenced by this
Debenture is secured by a first priority security interest (and equal in
priority to the first priority security interest securing the FCP Debenture),
in
all of the assets of the Company other than liens specifically approved by
the
Holder. As a condition to funding this Debenture, the Holder has the right
to
require the holder of the FCP Debenture to execute an intracreditor or similar
written agreement pursuant to which such holder acknowledges that the security
interests of such holder and the Holder hereunder shall be equal, and in
the
event of a default under either the FCP Debenture or this Debenture, such
debenture holders, as secured parties, will share, pari passu, with respect
to
the proceeds from any foreclosure of collateral securing such
indebtedness.
6.
Anti-dilution
Adjustments .
The
number of shares issuable upon conversion of this Debenture and the Conversion
Price shall be subject to adjustment as follows:
3
(a)
In case the Company shall (i) pay a dividend or make a distribution on
its common stock in additional shares or other securities, (ii) subdivide
its
outstanding common stock into a greater number of shares, (iii) combine its
outstanding shares into a smaller number of shares or (iv) issue, by
reclassification of its shares, any other securities of the Company (including
any such reclassification in connection with a consolidation or merger in
which
the Company is the continuing entity), the number of share issuable upon
conversion of this Debenture immediately prior thereto shall be adjusted
so that
the Holder shall be entitled to receive the kind and number of Conversion
Shares, and other securities of the Company which such Holder would have
owned
or would have been entitled to receive immediately after the happening of
any of
the events described above, had the Debenture been converted immediately
prior
to the happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this subsection 6(a) shall become effective
immediately after the effective date of such event.
(b)
In case the Company shall issue rights, options, warrants or convertible
securities to holders of its shares, for no
consideration,
containing the right to subscribe for or purchase shares of common stock,
the
number of Conversion Shares thereafter issuable upon the conversion of this
Debenture shall be determined by multiplying the number of Conversion Shares
theretofore issuable upon conversion of this Debenture by a fraction, of
which
the numerator shall be the number of shares outstanding immediately prior
to the
issuance of such rights, options, warrants or convertible securities plus
the
number of additional shares offered for subscription or purchase, and of
which
the denominator shall be the number of shares outstanding immediately prior
to
the issuance of such rights, options, warrants or convertible securities.
Such
adjustment shall be made whenever such rights, options, warrants or convertible
securities are issued, and shall become effective immediately upon issuance
of
such rights, options, warrants or convertible securities. In the event of
such
adjustment, corresponding adjustments shall be made to the Conversion
Price.
(c)
In case the Company shall distribute to holders of its common shares
evidences of its indebtedness or assets (excluding cash dividends or
distributions out of current earnings made in the ordinary course of business
consistent with past practices), then in each case the number of Conversion
Shares thereafter issuable upon the conversion of this Debenture shall be
determined by multiplying the number of Conversion Shares theretofore issuable
upon conversion of this Debenture by a fraction, of which the numerator shall
be
the then Market Price (as defined below) on the date of such distribution,
and
of which the denominator shall be such Market Price on such date minus the
then
fair value (determined as provided in subsection 6(f) below) of the portion
of
the assets or evidences of indebtedness so distributed applicable to one
share.
Such adjustment shall be made whenever any such distribution is made and
shall
become effective on the date of distribution. In the event of any such
adjustment, the number of Conversion Shares shall also be adjusted and shall
be
that number determined by multiplying the number of shares issuable upon
exercise before the adjustment by a fraction, the numerator of which shall
be
the Conversion Price in effect immediately before the adjustment and the
denominator of which shall be the Conversion Price as so adjusted.
4
(d)
If
the Company shall at any time while this Debenture is outstanding issue shares
(including additional shares deemed to be issued upon conversion of any
convertible security, but excluding shares issued as a dividend or distribution
or upon a stock split or combination which is otherwise provided for in Section
6(a) above, or upon the issuance of options or warrants for no
consideration
which is
otherwise provided for in Section 6(b) above) either without consideration,
or
for a consideration per share less than the Conversion Price in effect on
the
date of and immediately prior to such issue, then and in such event, the
Conversion Price shall be reduced by a full ratchet anti-dilution adjustment
to
such lesser price (calculated to the nearest cent).
For
purposes of this Section 6(d), the consideration received by the Company
for the
issue of any additional shares shall be computed as follows:
(A)
Cash and Property. Such consideration shall:
(1)
insofar as it consists of cash, be computed at the aggregate of cash
received by the Company, excluding amounts paid or payable for accrued interest
or accrued dividends;
(2)
insofar as it consists of property other than cash, be computed at the
fair market value thereof at the time of such issue, as determined in good
faith
by the Company's managers or governing board; and
(3)
in the event additional shares are issued together with other securities
or other assets of the Company for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(1) and (2) above, as determined in good faith by the Company's board of
directors.
(B)
Options, Rights and Convertible Securities. The consideration per unit
received by the Company for additional shares deemed to have been issued
pursuant to options, warrants, rights or other convertible securities (other
than when issued for no consideration as provided for in Section 6(a) above),
shall be determined by dividing
(1)
the total amount, if any, received or receivable by the Company as
consideration for the issue of such options, rights, warrants or other
convertible securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without
regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such options,
rights,
warrants or the conversion or exchange of such convertible securities,
by
(2)
the maximum number of shares (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such options, rights,
warrants or the conversion or exchange of such convertible
securities.
5
(e)
Whenever the number of Conversion Shares issuable upon the conversion of
this Debenture is adjusted as provided in this Section 6, the Conversion
Price
shall be adjusted by multiplying such Conversion Price immediately prior
to such
adjustment by a fraction, the numerator of which shall be the number of
Conversion Shares issuable upon the conversion of this Debenture immediately
prior to such adjustment, and the denominator of which shall be the number
of
Conversion Shares issuable immediately thereafter.
(f)
For the purpose of this Section 6, the term " shares
" shall
mean (i) the common stock of the Company at the time of conversion, on a
fully
diluted basis. In the event that at any time, as a result of an adjustment
made
pursuant to this Section 6, a Debenture holder shall be entitled to convert
such
Debenture into any securities of the Company other than common stock, (i)
if the
Debenture holder's right to convert is on any other basis than that available
to
all holders of the Company's common stock, the Company shall obtain an opinion
of a reputable investment banking firm valuing such other securities and
(ii)
thereafter the number of such other securities so purchasable upon conversion
of
a Debenture and the Conversion Price of such securities shall be subject
to
adjustment from time to time in a manner and on terms as nearly equivalent
as
practicable to the provisions with respect to the shares contained in this
Section 6.
(g)
Upon the expiration of any rights, options, warrants or conversion
privileges, if such shall not have been exercised, the number of Conversion
Shares issuable upon conversion of the Debenture and the Conversion Price,
to
the extent the Debenture has not then been converted, shall, upon such
expiration, be readjusted and shall thereafter be such number and such price
as
they would have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) on the basis of (A) the
fact
that the only shares issued in respect of such rights, options, warrants
or
conversion privileges were the shares, if any, actually issued or sold upon
the
exercise of such rights, options, warrants or conversion privileges, and
(B) the
fact that such shares, if any, were issued or sold for the consideration
actually received by the Company upon such exercise plus the consideration,
if
any, actually received by the Company for the issuance, sale or grant of
all
such rights, options, warrants or conversion privileges whether or not
exercised; provided, however, that no such readjustment shall have the effect
of
decreasing the numbers of Conversion Shares issuable upon conversion of the
Debenture or increasing the Conversion Price by an amount in excess of the
amount of the adjustment made in respect of the issuance, sale or grant of
such
rights, options, warrants or conversion privileges.
(h)
Upon any adjustment of the Conversion Price and the number of Conversion
Shares issuable upon conversion of the Debenture, then and in each such case,
the Company shall give written notice thereof, by first-class mail, postage
prepaid, addressed to the Holder as shown on the books of the Company, which
notice shall state the Conversion Price resulting from such adjustment and
the
increase or decrease, if any, in the number of shares issuable at such price
upon the conversion of the Debenture, setting forth in reasonable detail
the
method of calculation and the facts upon which such calculation is
based.
6
7.
Merger,
Reorganization or Consolidation .
In any
case in which a transaction would result in a complete liquidation of the
Company or a merger, reorganization, or consolidation of the Company with
any
other unrelated corporation or other entity in which the Company is not the
surviving corporation or the Company becomes a wholly-owned subsidiary of
another unrelated corporation or other entity (all such transactions being
referred to herein as a "Reorganization"), the surviving corporation or other
entity shall be required to assume the Debenture or to issue a substitute
Debenture in place thereof which substitute Debenture shall provide for terms
at
least as favorable to the Holder as contained in this Debenture and shall
provide the Holder the right to acquire the kind and amount of common stock
and
other securities and property which the Holder would have owned or been entitled
to receive had the Debenture been converted immediately prior to such
Reorganization.
8.
No
Impairment.
No
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of this Debenture
at
the time, place, and rate, and in the form, herein prescribed.
9.
Waiver
of Demand/Presentment.
The
Company hereby expressly waives demand and presentment for payment, notice
of
non-payment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, and diligence in taking any action
to
collect amounts called for hereunder and shall be directly and primarily
liable
for the payment of all sums owing and to be owing hereto.
10.
Cost
and Fees.
The
Company agrees to pay all costs and expenses, including reasonable attorneys'
fees, which may be incurred by the Holder in collecting any amount due under
this Debenture.
11.
Events
of Default.
If one
or more of the following described "Events of Default" shall occur and continue
for 30 days, unless a different time frame is noted below:
(a)
The Company shall default in the payment of principal or interest on this
Debenture, and such failure shall continue for a period of five (5) days;
or
(b)
The Company shall fail to perform or observe, in any material respect,
any other covenant, term, provision, condition, agreement or obligation of
the
Company under this Debenture and such failure shall continue uncured for
a
period of thirty (30) days after notice from the Holder of such failure;
or
(c)
The Company shall (1) become insolvent; (2) admit in writing its
inability to pay its debts generally as they mature; (3) make an assignment
for
the benefit of creditors or commence proceedings for its dissolution; (4)
apply
for or consent to the appointment of a trustee, liquidator or receiver for
its
or for a substantial part of its property or business; (5) file a petition
for
bankruptcy relief, consent to the filing of such petition or have filed against
it an involuntary petition for bankruptcy relief, all under federal or state
laws as applicable; or
7
(d)
A trustee, liquidator or receiver shall be appointed for the Company or
for a substantial part of its property or business without its consent and
shall
not be discharged within thirty (30) days after such appointment;
or
(e)
Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the
whole
or any substantial portion of the properties or assets of the Company;
or
(f)
Any money judgment, writ or warrant of attachment, or similar process, in
excess of One Hundred Thousand ($100,000) Dollars in the aggregate shall
be
entered or filed against the Company or any of its properties or other assets
and shall remain unpaid, unvacated, unbonded or unstayed for a period of
fifteen
(15) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
(g)
Bankruptcy, reorganization, insolvency or liquidation proceedings, or
other proceedings for relief under any bankruptcy law or any law for the
relief
of debtors shall be instituted voluntarily by or involuntarily against the
Company; or
(h)
The Company shall not deliver to the Holder the shares pursuant to
paragraph 4 herein within 30 days of receipt of Notice of Conversion;
or
(i)
any of the representations or warranties made by the Company herein, in
the Purchase Agreement or the Security Agreement or in any certificate or
financial or other written statements heretofore or hereafter furnished by
or on
behalf of the Company in connection with the execution and delivery of this
Debenture, the Purchase Agreement or the Security Agreement shall be false
or
misleading in a material respect on the Closing Date; or
(j)
the
Company shall fail in any one of the following respects: (A) to file, within
sixty (60) days from the date hereof, a registration statement on Form S-l
or
SB-2,(or other applicable form ("Registration Statement"), with the Securities
and Exchange Commission ("SEC"), which Registration Statement shall register
for
sale all Conversion Shares which may be issuable upon conversion of this
Debenture; (B) to use its commercially reasonable efforts to have such
Registration Statement declared effective by the SEC within one hundred eighty
(180) days from the date hereof (and for purposes hereof, the Company will
be
deemed to be using its "commercially reasonable efforts" without any undue
hardship or unreasonable expenses, provided it fully and appropriately responds
to all comments from the SEC within ten (10) business days of receipt thereof,
and diligently continues to seek effectiveness of such registration statement);
or (C) to take such action to have the Registration Statement declared effective
by the SEC within three (3) business days following written confirmation
from
the SEC that it either will not review the Registration Statement or that
it has
no further comment on the Registration Statement; or
(k)
If
the Company is then a "reporting company" it shall fail to make the required
filings or statements with the Securities Exchange Commission by the appropriate
deadlines.
8
Then,
or
at any time thereafter, unless cured, and in each and every such case, unless
such Event of Default shall have been waived in writing by the Holder (which
waiver shall not be deemed to be a waiver of any subsequent default) at the
option of the Holder and in the Holder's sole discretion, the Holder may
consider this Debenture immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of
acceleration), all of which are hereby expressly waived, anything herein
or in
any note or other instruments contained to the contrary notwithstanding,
and the
Holder may immediately, and without expiration of any period of grace, enforce
any and all of the Holder's rights and remedies provided herein or any other
rights or remedies afforded by law. Upon an Event of Default, interest shall
accrue on all amounts outstanding under this Debenture at the rate of 12%
per
annum, until such Event of Default is cured or the principal and all accrued
interest under this Debenture is paid in full.
12.
Priority .
This
Debenture represents a prioritized obligation of the Company. However, no
recourse shall be had for the payment of the principal of this Debenture,
or for
any claim based hereon, or otherwise in respect hereof, against any
incorporator, unitholder, officer or director, as such, past, present or
future,
of the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment
or
penalty or otherwise, all such liability being by the acceptance hereof and
as
part of the consideration for the issue hereof, expressly waived and
released.
13.
Severability.
In case
any provision of this Debenture is held by a court of competent jurisdiction
to
be excessive in scope or otherwise invalid or unenforceable, such provision
shall be adjusted rather than voided, if possible, so that it is enforceable
to
the maximum extent possible, and the validity and enforceability of the
remaining provisions of this Debenture will not in any way be affected or
impaired thereby.
14.
Entire
Agreement .
This
Debenture, the Purchase Agreement, the Security Agreement and the agreements
referred to in this Debenture constitute the full and entire understanding
and
agreement between the Company and the Holder with respect to the subject
hereof.
Neither this Debenture nor any term hereof may be amended, waived, discharged
or
terminated other than by a written instrument signed by the Company and the
Holder.
15.
Governing
Law.
This
Debenture shall be governed by and construed in accordance with the laws
of New
York applicable to contracts made and wholly to be performed within the State
of
New York and shall be binding upon the successors and assigns of each party
hereto. The Holder and the Company hereby mutually waive trial by jury and
consent to exclusive jurisdiction and venue in the courts of the State of
New
York. At Holder's election, any dispute between the parties may be arbitrated
rather than litigated in the courts, before the American Arbitration Association
in New York City and pursuant to its rules. Upon demand made by the Holder
to
the Company, the Company agrees to submit to and participate in such
arbitration. This Agreement may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Agreement shall be effective
as
an original.
9
16.
Miscellaneous .
(a)
Notice
of Certain Events
. In the
case of the occurrence of a Reorganization described in Section 7 of this
Debenture, the Company shall cause to be mailed to the Holder of this Debenture
at its last address as it appears in the Company's security registry, at
least
twenty (20) days prior to the applicable record, effective or expiration
date
hereinafter specified (or, if such twenty (20) days' notice is not possible,
at
the earliest possible date prior to any such record, effective or expiration
date), a notice thereof, including, if applicable, a statement of the date
on
which such Reorganization is expected to become effective, and the date as
of
which it is expected that holders of record of the shares will be entitled
to
exchange their shares for securities, cash or other property deliverable
upon
such Reorganization.
(b)
Transmittal
of Notices
. Except
as may be otherwise provided herein, any notice or other communication or
delivery required or permitted hereunder shall be in writing and shall be
delivered personally, or sent by telecopier machine or by a nationally
recognized overnight courier service, and shall be deemed given when so
delivered personally, or by telecopier machine or overnight courier service
as
follows:
|
(1)
|
If
to the Holder, to:
|
|
|
|
|
Regent
Private Capital, LLC
|
|
|
152
Xxxx 00 xx Xxxxxx, 0 xx Xxxxx
|
|
|
Xxx
Xxxx, Xxx Xxxx 00000
|
|
|
Telephone:
000-000-0000
|
|
|
Facsimile:
000-000-0000
|
|
|
|
|
|
|
With
a copy to:
|
|
|
|
|
Xxxxxxx
X. Xxxxxxxxxx, Esq.
|
|
|
Johnson,
Jones, Xxxxxxxxxx, Xxxxxxx & Xxxxx
|
|
|
00
X. Xxxxx Xxxxxx, Xxxxx 0000
|
|
|
Xxxxx,
Xxxxxxxx 00000
|
|
|
Telephone:
000-000-0000
|
|
|
Facsimile:
000-000-0000
|
|
|
|
|
|
(2)
|
If
to the Holder, to:
|
|
|
|
|
Vycor
Medical, Inc.
|
|
|
00
Xxxxxxx Xxxxx, Xxxxx 000
|
|
|
Xxxxxxx,
Xxx Xxxx 00000
|
|
|
Telephone:
000-000-0000
|
|
|
Facsimile:
000-000-0000
|
10
|
With
a copy to:
|
|
|
|
Xxxxxxxx
X. Xxx Esq.
|
|
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
|
|
00
Xxxxxxxx, 00xx Xxxxx
|
|
Xxx
Xxxx, XX 00000
|
|
Phone
000-000-0000
|
|
Fax
000-000-0000
|
Each
of
the Holder or the Company may change the foregoing address by notice given
pursuant to this Section 16(b).
(c)
Attorneys'
Fees.
Should
any party hereto employ an attorney for the purpose of enforcing or construing
this Debenture, or any judgment based on this Debenture, in any legal proceeding
whatsoever, including insolvency, bankruptcy, arbitration, declaratory relief
or
other litigation, the prevailing party shall be entitled to receive from
the
other party or parties thereto reimbursement for all reasonable attorneys'
fees
and all reasonable costs, including but not limited to service of process,
filing fees, court and court reporter costs, investigative costs, expert
witness
fees, and the cost of any bonds, whether taxable or not, and that such
reimbursement shall be included in any judgment or final order issued in
that
proceeding. The "prevailing party" means the party determined by the court
to
most nearly prevail and not necessarily the one in whose favor a judgment
is
rendered.
IN
WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by
an officer thereunto duly authorized.
Dated:
______________ , 2008
|
VYCOR
MEDICAL, INC.
|
|
|
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
11
EXHIBIT
I
NOTICE
OF CONVERSION
(To
be
executed by the Registered Holder in order to Convert the
Debenture)
The
undersigned hereby irrevocably elects to convert $_________ of the above
Debenture No. _________ into shares of common stock of Vycor Medical,
Inc. according to the conditions set forth in such Debenture, as of the date
written below. If shares are to be issued in the name of a person other than
the
undersigned, the undersigned will pay all transfer and other taxes and charges
payable with respect thereto.
Date
of
Conversion
_________________
Applicable
Conversion Price
_________________
Signature
__________________________________
[Print
Name of Holder and Title of Signer]
Address:
__________________________________
__________________________________
SSN
or
EIN:
Shares
are to be registered in the following name:
|
Name:
|
|
|
Address:
|
|
|
Tel:
|
|
|
Fax:
|
|
|
SSN
or EIN:
|
Shares
are to be sent or delivered to the following account:
Account
Name:
Address:
12
EXHIBIT
B
FORM
OF SECURITY AGREEMENT
SECURITY
AGREEMENT
For
valuable consideration, the receipt and sufficiency of which are acknowledged,
VYCOR
MEDICAL, INC.,
("Pledgor"), enters into this Security Agreement ("Agreement") and grants
to
REGENT
PRIVATE CAPITAL, LLC
("Secured Party") a security interest in the Collateral to secure the
Obligations of Pledgor to Secured Party. Pledgor agrees with Secured Party
as
follows:
ARTICLE
I - SECURITY
INTEREST
1.01
Pledge
of Collateral
.
Pledgor grants to Secured Party a security interest in, and agrees and
acknowledges that Secured Party has and shall continue to have a security
interest in, the following described property, to-wit:
All
inventory of Pledgor, now owned, and all accessories, parts and equipment
now or
hereafter attached thereto or used in connection therewith;
All
accounts of Pledgor, including contract rights and accounts receivable, now
existing or hereafter arising;
All
general intangibles of Pledgor, now existing or hereafter arising;
All
instruments, documents of title, policies and certificates of insurance,
securities, chattel paper, deposits, cash or other property owned by Pledgor
or
in which Pledgor has an interest which are now or may hereafter be in possession
of Secured Party;
All
equipment of Pledgor, now owned;
All
proceeds and products of the foregoing; and
All
inventory, accounts, general intangibles, equipment, chattel paper, securities
and instruments acquired with the proceeds of the foregoing and products
of the
foregoing.
(collectively
the "Collateral"). Pledgor agrees to execute all stock powers, endorse
instruments, or execute additional pledge agreements or other documents required
by the Secured Party in order to effectively grant to Secured Party the security
interest in the Collateral.
1.02
Obligations
Secured
. The
Collateral secures the payment of all debts, obligations and liabilities
of
every kind and character of Pledgor now or hereafter existing in favor of
Secured Party ("Obligations"), including, but not limited to, all amounts
that
may be outstanding with respect to two essentially identical Convertible
Debentures, each in the original principal amount of $500,000 issued or to
be
issued by Pledgor to Secured Party (the "Debentures"), and all Pledgor's
representations, warranties, covenants and obligations set forth in that
certain
Debenture Purchase Agreement of even date herewith between Pledgor and Secured
Party ("Purchase Agreement").
1
ARTICLE
II - WARRANTIES
AND COVENANTS OF PLEDGOR
Pledgor
warrants, covenants and agrees that:
2.01
Title
to Collateral
.
Pledgor is the owner of the Collateral, free of any adverse claim, security
interest, restriction or encumbrance, except for the security interest granted
hereby and as set forth in Section 2.02 below. Pledgor will defend the
Collateral against all claims and demands of all persons at any time claiming
the same or any interest therein.
2.02
Priority;
Security
. The
security interest in the Collateral shall be senior to all other obligations
of
the Pledgor other than obligations specifically approved by Secured Party;
provided that the security interest in the Collateral evidenced by this
Agreement shall be of equal priority for all purposes with that certain Bridge
Loan Debenture dated December 14, 2006 (as amended, to extend the maturity
date
thereof), in the original principal amount of $172,500 held by Fountainhead
Capital Partners Limited.
2.03
Filings .
Pledgor
authorizes the Secured Party to file, in jurisdictions where this authorization
will be given effect, a Financing Statement signed only by the Secured Party
covering the Collateral; and at the request of Secured Party, Pledgor will
join
the Secured Party in executing one or more Financing Statements pursuant
to the
Uniform Commercial Code, in form satisfactory to the Secured Party, and will
pay
the cost of filing the same or filing or recording this Agreement in all
public
offices wherever filing or recording is reasonably necessary or desirable.
.
2.04
Conveyance
of Collateral
.
Pledgor will not sell or offer to sell or otherwise transfer or encumber
the
Collateral or any interest therein without the prior written consent of the
Secured Party.
2.05
Encumbrances
.
Pledgor will keep the Collateral free from any and all adverse liens, security
interest and encumbrances.
2.06
Expenses
.
Pledgor will pay to Secured Party all reasonable expenses including attorneys'
fees and legal expenses, incurred or paid by Secured Party in exercising
or
protecting its interest in the Collateral, and its rights and remedies under
this Agreement. Pledgor agrees to pay interest on preservation and collection
expenses incurred by Secured Party at the maximum rate permitted by applicable
law from the date of incurrence by Secured Party until the date paid by
Pledgor.
2.07
Representations
as to Pledgor
. The
execution, delivery and performance of this Agreement and the consummation
of
the transactions contemplated herein will not conflict with or cause a material
breach of any agreement, indebtedness, indenture or other instrument to which
Pledgor is a party. There are no actions, suits or proceedings pending or
threatened against Pledgor which, if adversely decided, would have a material
adverse effect upon Pledgor.
ARTICLE
III - GENERAL
COVENANTS
3.01
Effect
of Other Action
. The
security interest granted in this Agreement shall in no way be affected by
any
indulgence(s), extension(s), change(s) in the form, evidence, maturity, rate,
amount or interest or otherwise of any of the Obligations secured hereby,
nor
shall any release of, or failure to perfect the security interest or lien
in,
any security for or of any of the parties liable for the payment of any of
the
Obligations, in any manner affect or impair this pledge, and the same shall
continue in full force and effect in accordance with the terms until all
of the
Obligations have been paid to Secured Party.
2
3.02
Other
Properties
. Any
and all securities and other properties of Pledgor heretofore, now or hereafter
delivered to Secured Party, or in Secured Patty's possession, shall also
secure
all of the Obligations and shall be held and construed to be a part of the
Collateral to the same extent as if fully described in this
Agreement.
ARTICLE
IV - EVENTS
OF DEFAULT
It
shall
constitute an Event of Default under this Agreement upon the happening of
any of
the following events or conditions:
4.01
Payment
of Obligations
.
Default in the payment or performance of any liability or obligation of Pledgor
to Secured Party, including not by way of limitation default in the payment
of
any of the Obligations when due, a default under the Debentures, or a default
under the Purchase Agreement.
4.02
Execution
. The
levy of any attachment, execution, garnishment or other process against Pledgor
or any of the Collateral in connection with any tax lien, debt, judgment,
assessment or obligation of Pledgor.
4.03
Termination;
Insolvency
.
Dissolution, termination of existence, insolvency or business failure of
Pledgor
or the initiation of any bankruptcy proceeding by, or the appointment of
a
receiver or other legal representative for any part of the property of Pledgor,
or assignment for the benefit of creditors by Pledgor.
4.04
Other
Covenants
.
Default in the performance of any covenant or agreement of Pledgor to Secured
Party whether under this Agreement or otherwise, or if any warranty or covenant
in Article II or Article III of this Agreement is or shall become untrue
in any
material respect, or Pledgor fails to comply therewith in any material
manner.
4.05
Other
Obligations
. The
occurrence of any event which under the terms of any evidence of indebtedness,
indenture, loan agreement, security agreement or similar instrument permits
the
acceleration of maturity of any Obligations of Pledgor to Secured
Party.
ARTICLE
V - REMEDIES
5.01
Sale
. In the
event of the default in the payment or performance of any of the Obligations
when due, or upon the happening of any of the Events of Default specified
in
this Agreement, and at any time thereafter, at the option of the Secured
Party,
any and all of the Obligations shall become due and payable and the Secured
Party shall have and may exercise with reference to the Collateral any and
all
of the rights and remedies of a Secured Party under the Uniform Commercial
Code
then in effect in the State of New York and as otherwise granted in this
Agreement or under any other applicable law or under any other loan document
or
agreement executed by Pledgor, (all of which rights and remedies shall be
cumulative), including without limitation the right and power to sell, at
public
or private sale(s), or otherwise dispose of or utilize the Collateral and
any
part(s) of the Collateral in any manner authorized or permitted under this
Agreement or under the Uniform Commercial Code after default under this
Agreement, and to apply the proceeds thereof toward payment of any costs,
attorneys' fees and legal expenses incurred by the Secured Party and toward
payment of the Obligations. Except as expressly provided herein, and to the
extent permitted by law, Pledgor waives any notice of sale or other disposition
of the Collateral and any other rights or remedies of Pledgor or formalities
prescribed by law relative to sale or disposition of the Collateral or exercise
of any other right or remedy of Secured Party existing after default under
this
Agreement; and to the extent any notice is required and cannot be waived,
Pledgor agrees that if such notice is mailed, postage prepaid, to Pledgor
at the
address of Pledgor according to the records of Secured Party at least 5 days
before the time of the sale or disposition, the notice shall be deemed
reasonable and shall fully satisfy any requirement for giving of
notice.
3
5.02
Pledgor's
Compliance with Laws
.
Pledgor agrees to cooperate fully with Secured Party in order to permit Secured
Party to sell, at foreclosure or other private sale, the
Collateral.
ARTICLE
VI - MISCELLANEOUS
6.01
Demand,
Compromise
.
Secured Party may, at its option, when the Obligations become due, demand,
xxx
for, collect or make any compromise or settlement it deems desirable with
reference to the Collateral. The Secured Party shall not be obligated to
take
any steps necessary to preserve any rights in the Collateral against prior
parties, which Pledgor hereby is assumed to do.
6.02
No
Implied Waiver
. No
delay or omission on the part of Secured Party in exercising any rights shall
operate as a waiver of any right. A waiver on any one or more occasions shall
not be construed as a bar to or waiver of any right or remedy on any future
occasion.
6.03
Usury
. It is
the intention of the Pledgor and Secured Party to comply with applicable
usury
law. It is agreed that notwithstanding any provision to the contrary in this
Agreement, or in any of the documents evidencing the Obligations or otherwise
relating thereto, no provision shall require the payment or permit the
collection of interest in excess of the maximum amount permitted by controlling
usury laws.
6.04
Successors
and Assigns
. All
rights of Secured Party hereunder shall inure to the benefit of its successors
and assigns; and all obligations of Pledgor shall bind its successors and
assigns.
6.05
Remedies
Cumulative
. The
rights and remedies of Secured Party hereunder are cumulative, and the exercise
of any one or more of the remedies provided in this Agreement shall not be
construed as a waiver of any of the other remedies of Secured
Party.
6.06
Termination
. The
security interest granted to Secured Party by this Agreement and all the
terms
and provisions of this Agreement shall be deemed a continuing security interest
and shall continue in full force and effect, and all the terms and provisions
of
this Agreement shall remain effective among the parties, until (i) complete
payment and satisfaction by Pledgor of all of the Obligations and (ii) the
written release of the security interest created by this Agreement by Secured
Party.
6.7
Other
Agreements
. This
Security Agreement and the security interest granted in this Agreement are
in
addition to, and not in substitution, novation or discharge of, any and all
prior or contemporaneous security agreements and security interests in favor
of
Secured Party or assigned to Secured Party by others. All rights, powers
and
remedies of Secured Party in all security agreements are
cumulative.
6.08
Interpretation
. Any
provision of this Agreement found to be invalid under the laws of the State
of
Oklahoma, or any other state having jurisdiction or other applicable law,
shall
be invalid only with respect to the offending provision.
4
6.09
Governing
Law; Terms
. This
Agreement shall be governed by and construed in accordance with the laws
of the
State of New York. Unless otherwise defined herein, terms defined in Article
9
of the Uniform Commercial Code in the State of New York are used herein as
therein defined.
6.10
General
Rules of Construction
. The
parties have participated jointly in negotiating and drafting this Agreement.
If
a question concerning intent or interpretations arises, no presumption or
burden
of proof shall arise favoring or disfavoring any party by virtue of
authorship.
6.11
Captions
.
Captions in this Agreement are solely for the purposes of identification
and
shall not in any manner alter or vary the interpretation or construction
of this
Agreement.
AGREED
AND EXECUTED effective February ____, 2008.
|
PLEDGOR:
|
|
|
|
|
|
VYCOR
MEDICAL, INC.
|
|
|
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
SECURED
PARTY:
|
|
REGENT
PRIVATE CAPITAL, LLC
|
|
By:
|
|
|
Name:
Xxxxxxxx Field
|
|
|
Title:
Managing Director
|
|
5
EXHIBIT
C
DISCLOSURE
SCHEDULE
DISCLOSURE
SCHEDULE
Section
1.2
Below
is
a list of outstanding loans (applicable interest) that is authorized and
scheduled for repayment out of proceeds from the issuance the
Debentures
|
Lender/Payee
|
|
Principal Payable (excluding
interest)
|
|
Date of Payment
|
|
|
|
Fountainhead
Capital Partners
|
|
$
|
172,000
|
|
February,
2009
|
|
|
Optimus
Services
|
|
$
|
50,000
|
|
April 30, 2008 (proposed date)
|
|
|
Optimus
Services
|
|
$
|
50,00
|
|
June
30, 2008 (proposed date)
|
|
|
GC
Advisors
|
$
|
17,000
|
June
30, 2008
|
|||
Attached
is a list of accounts payable, all of which are reflected in the attached
budgets for 2008 and 2009, which will be paid during the period of
February-June, 2008 as approved for payment as and when they come
due.
|
|
Payee
|
Amount
|
|||||
|
February,
2008
|
CT Corp. |
$
|
1,122.00
|
||||
|
|
Hunton |
$
|
9,697.90
|
||||
|
|
MediMark |
$
|
1,750.00
|
||||
|
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Online Ontime |
$
|
848.45
|
||||
|
|
Xxxxxxxx Xxxx |
$
|
5,000.00
|
||||
|
|
Lacey |
$
|
35,000.00
|
||||
| TUV |
$
|
700.00
|
|||||
|
|
Lazer Aptheker |
$
|
800.00
|
||||
|
|
|
||||||
|
March,
2008
|
Lacey |
$
|
39,000,00
|
||||
|
|
Xxxxxxxx Xxxx |
$
|
5,000.00
|
||||
|
|
TUV |
$
|
5,000.00
|
||||
|
|
Intertek |
$
|
1,019.08
|
||||
|
|
|
|
|||||
|
April,
2008
|
Lacey |
$
|
43,000.00
|
||||
|
|
Xxxxxxxx Xxxx |
$
|
5,000.00
|
||||
|
|
TUV |
$
|
1,011.91
|
||||
|
|
Lazer Aptheker |
$
|
167.32
|
||||
|
|
|
|
|||||
|
May,
2008
|
Lacey |
$
|
41,500.00
|
||||
|
|
Xxxxxxxx Xxxx |
$
|
3,500.00
|
||||
|
|
|
|
|||||
|
June,
2008
|
Lacey |
$
|
41,500.00
|
||||
|
|
Xxxxxxxx Xxxx |
$
|
2,500.00
|
||||
1
The
attached 2008 and 2009 monthly budget forecasts (which are identical to the
2008
and 2009 budgets previously provided and approved by Regent) are also hereby
approved and any payments thereunder authorized.
Section
2.5(c)/Section 2.9
Below
is
a list of outstanding options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of its securities, none of which has any anti-dilution rights or
if
there were, such rights have been waived in writing, and all obligations
arising
under such agreements will be subordinate to the obligations owed to Regent
under this Agreement, in the event of a default hereunder or under the Debenture
or Security Agreement:
| (i) |
The
outstanding Bridge Loan Debenture dated December 14, 2006 in the
original
principal amount of $172,500 with Fountainhead Capital Partners
("FCP"),
may be converted into approximately 1,876,300 shares of common
stock.
|
| (ii) |
The
Warrant to Purchase 50.22 Membership Units of the Company (now
805,931
shares of the Company's common stock) dated December 15, 2006 at
$.0975
per share.
|
| (iii) |
The
investment opportunity granted under the Option Agreement with
FCP dated
December 14, 2006 granting an option to invest up to $1,850,000
within 3
years from December 14, 2006 in exchange for up to 5,182,012 shares
of
common stock and warrants to convert to 2,870,315 shares of common
stock.
|
| (iv) |
Xx.
Xxxxxx X. Xxxxxx entered into a consulting agreement w ith Company
on
January 10, 2006. Pursuant to the consulting agreement, in consideration
for acting as our consultant, Dr. Kornel received options to acquire
240,720 shares of the Company's common stock at a price of $.25
per share.
The term of the agreement is for three
years.
|
| (v) |
Dr.
Xxxxx Xxxxxx entered into an amended and restated consulting agreement
with the Company on December 11, 2006. Pursuant to the agreement,
Xx.
Xxxxxx agreed to provide us certain consulting services, which
include the
role of our Chief Medical Advisor, assistance in the analysis,
preparation, submission, publication and presentation of scientific
data
in relation to our research efforts ands ales and marketing efforts.
In
consideration of such consulting services, Xx. Xxxxxx received
options to
acquire 320,960 shares of the Company's common stock at a price
of $.25
per share. The agreement will terminate April 15,
2009.
|
2
| (vi) |
Xx.
Xxxxxx X'Xxxxxx entered into a consulting agreement with the Company
on
January 18, 2008. Pursuant to the consulting agreement, Xx. X'Xxxxxx
shall
provide consulting or advisory services on an as needed basis,
to guide us
in making important strategic decisions and to evaluate our strategic
plans and decisions, research and/or development activities and
results,
competitive positions and/or other scientific and/or technical
issues. In
consideration for providing such services, Dr. Or'Rourke was granted
an
option to purchase 50,000 shares of the Company's common stock
at $.50 per
share.
|
| (vii) |
GC
Advisors LLC is the holder of two warrants to purchase 192,576
shares of
common stock of the Company each for an purchase price of $.135
per share.
One warrant expires on January 9, 2009 and the other on January
9,
210.
|
| (viii) |
Xxxxxx
Xxxxxxxxx is a holder of a warrant to purchase up to 4,000 shares
of the
Company's common stock at $.50 per share. The warrant is valid
from
November 6, 2007 for a period of three
years.
|
| (ix) |
Xxxxxx
Xxxxxx is a holder of a warrant to purchase up to 160,480 shares
of the
Company's common stock at $.24 per share. The warrant is valid
from
September 1, 2007 for a period of five
years.
|
| (x) |
Xxx
Xxxxxx is a holder of a warrant to purchase up to 160,480 shares
of the
Company's common stock at $.24 per share. The warrant is valid
from
September 1, 2007 for a period of five
years.
|
| (xi) |
Each
of Xxxxxxx Xxxxxxxx and Xxxxxxx Xxxxxx entered into a stock option
agreement with the Company dated February 15, 2008. Pursuant to
the said
stock option agreements, each of Xxxxxxx Xxxxxxxx and Xxxxxxx Xxxxxx
was
granted an option to purchase 500,000 shares of common stock of
the
Company at an exercise price of $.135 per share. The option shall
vest 33
1/3% on each of the first, second and third anniversary of the
grant and
shall expire February 12, 2018.
|
| (xii) |
Guaranty
dated November 17, 2005 between The Sawmill Trust and Xxxxxxx Xxxxxx
as
Guarantors and Xxxxxxx Xxxxxxxx, as Beneficiary, guaranteeing an
advance
of $30,000.
|
| (xiii) |
Guaranty
dated November 17, 2005 between the Sawmill Trust and Xxxxxxx Xxxxxx
as
Guarantors and Xxxxxxx Xxxxxxxx, as Beneficiary, guaranteeing an
advance
of $14,000.
|
Section
2.10
Please
refer to the disclosures for Section 1.2, which is incorporated in its entirety
herein.
3
Section
2.12
Below
is
a list of the Company's patents, trademarks, copyrights and domain names
and
pending patent, trademark and copyright applications.
Patent
Applications
|
Filing date
|
|
Application No.
|
|
Country
|
|
Title
|
|
Status
|
|
22-Jun-2005
|
|
60/692,959
|
|
US -
provisional
|
|
Surgical
Access Instruments For Use With Spinal Or Orthopedic Surgery
(Cervical)
|
|
Converted
to PCT
|
|
22-Jun-2006
|
|
PCT/US06/
24243
|
|
PCT
|
|
Surgical
Access Instruments For Use With Spinal Or Orthopedic Surgery
(Cervical)
|
|
Entered
National Phase
|
|
22-Jun-2005
|
|
11/155,175
|
|
US
-
utility
|
|
Surgical
Access Instruments for use with Delicate Tissues (Brain)
|
|
Pending
|
|
27-Nov-2006
|
|
PCT/US06/
61246
|
|
PCT
|
|
Surgical
Access Instruments for use with Delicate Tissues (Brain)
|
|
Pending
-National Phase Entry on May 27, 2009
|
|
22-Jun-2006
|
|
|
|
Canada
|
|
Surgical
Access Instruments for use with spinal or orthopedic surgery
.
|
|
Pending
|
|
22-Jun-2006
|
|
06785312.7
|
|
Europe
|
|
Surgical
Access Instruments for use with spinal or orthopedic
surgery
|
|
Pending
|
|
22-Jun-2006
|
|
|
|
India
|
|
Surgical
Access Instruments for use with spinal or orthopedic
surgery
|
|
Pending
|
|
22-Jun-2006
|
|
|
|
Israel
|
|
Surgical
Access Instruments for use with spinal or orthopedic
surgery
|
|
Pending
|
|
22-Jun-2006
|
|
|
|
Japan
|
|
Surgical
Access Instruments for use with spinal or orthopedic
surgery.
|
|
Pending
|
|
20-Dec-2007
|
|
11/993,280
|
|
US
|
|
Surgical
Access Instruments for use with spinal or orthopedic
surgery
|
|
Pending
|
Trademarks
VYCOR
MEDICAL and VYCOR SAFESITE are both pending with the USPTO. Before they are
registered a Statement of Use needs to be filed.
Section
2.17
The
Company has entered into the broker agreements listed below. All potential
payments due under the listed broker agreements have been included in the
2008
and/or 2009 budgets attached hereto:
4
GC
Advisors, LLC dated July 6, 2006, as amended and restated on September 20,
2006
and on November 27, 2006, which was terminated by email correspondence dated
January 25,2008.
Fee
Agreement with GC Advisors, LLC (d/b/a Oak Street Advisors and RES Holding
dated
November 16, 2006.
Engagement
Letter with Xxxxxx and Durieu dated September 11, 2007, which has been settled
and released pursuant to a Settlement and Release of Claims dated November
12,
2007.
Financial
Advisory Agreement with the Concordia Financial Group dated January 18,
2008.
Section
2.20
D&O
Policy for Company with Philadelphia Insurance Companies, with a policy period
from 6/5/07 to 6/5/08, policy no. PHS246271.
5
EXHIBIT
D
FORM
OF ASS IGNMENT OF RIGHTS
Assignment
of Rights
Under
Warrant and
Under
Option Agreement
This
Assignment ("Assignment") is made and entered into by and among Fountainhead
Capital Partners Limited
("Assignor") and Regent
Private Capital, LLC
("Assignee"), and, solely for the purpose of evidencing its consent to the
assignments provided below, Vycor
Medical, Inc.
("Vycor")
WHEREAS,
Assignor is a party to (i) an Option Agreement with Vycor Medical, LLC, the
predecessor in interest to Vycor, dated December 14, 2006 ("Option Agreement"),
and (ii) a Warrant to Purchase Membership Units of Vycor Medical, LLC dated
December 15, 2006 ("Warrant"), and
WHEREAS,
in accordance with the agreement of Assignee to provide certain additional
funds
to Vycor pursuant to a Convertible Debenture Purchase Agreement ("Purchase
Agreement") dated of even date herewith by and between Assignee and Vycor,
one
of the conditions to the closing of the funding contemplated thereby is the
assignment by Assignor to Assignee of the contractual rights more fully
described herein, and
WHEREAS,
as a current investor in Vycor, Assignor will receive substantial benefit from
the provision of additional funds by Assignee pursuant to the Purchase
Agreement, and Assignor desires to convey to Assignee the contractual rights
described herein;
NOW,
THEREFORE, for and in consideration of the mutual covenants contained herein,
and other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and confessed, Assignor and Assignee hereby agree as
follows:
1.
Assignment
.
Effective as of the date hereof, Assignor hereby assigns and transfers to
Assignee, and Assignee hereby acquires from Assignor, an undivided fifty percent
(50%) interest in Assignor's right, title and interest in and to the Option
Agreement and the Warrant.
By
reason
of this Assignment, Assignor is assigning to Assignee the rights under the
Warrant to acquire fifty-percent (50%) of the underlying securities issuable
upon exercise of the Warrant (originally, 50.22 units of limited liability
company interest, now adjusted to reflect 805,931 shares of common stock as
a
result of the conversion of Vycor from a limited liability company to a
corporation).
By
reason
of this Assignment, Assignor is assigning to Assignee an undivided fifty percent
(50%) interest in its rights under the Option Agreement, pursuant to which
Vycor
has granted Assignor the rights to make future investments in Vycor in
accordance with the terms thereof.
Assignor
represents and warrants to Assignee that, apart from Assignor's rights under
the
Bridge Loan Debenture dated December 14, 2006 (as amended, to extend the
maturity date thereof) in the original principal amount of $172,500, Assignor
and the Security Agreement between Vycor and Assignor dated December 14, 2006,
has no other rights to acquire any rights or interests in Vycor other than
as
contemplated in the Option Agreement and Warrant.
1
2.
Consent
of Vycor
. By its
execution of this Agreement in the space indicated below, Vycor hereby consents
to the assignment evidenced hereby.
3.
Substitute
Documents
. To
avoid confusion in the future regarding the specific rights of Assignor and
Assignee, Vycor further agrees to provide to each of Assignor and Assignee,
upon
proper transmittal by Assignor of the original Warrant and Option Agreement
to
Vycor, with separate Warrants and Option Agreements, containing the same terms
and conditions, but otherwise reflecting the reduced (i.e. half) interest of
each of Assignor and Assignee with respect to the rights that will be held
by
each subsequent to this Assignment.
4.
Further
Actions
.
Assignor covenants and agrees to warrant and defend the sale, transfer,
assignment, conveyance, grant and delivery of the portion of its interest in
the
Warrant and the Option Agreement evidenced hereby against all persons
whomsoever, to take all steps reasonably necessary to establish the record
of
Assignee's interest therein and, at the request of Assignee or Vycor, to execute
and deliver further instruments of transfer and assignment and take such other
action as Assignee or Vycor may reasonably request to more effectively transfer
and assign to and vest in Assignee the interests intended to be conveyed
hereby.
EXECUTED
on this 15th day of February, 2008.
Signatures
and Consent Appear on Following Page
2
|
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Fountainhead
Capital Partners Limited
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By:
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Name:
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Title:
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Director
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By:
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Name:
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Title:
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Director
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Regent
Private Capital LLC
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By:
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Name:
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Xxxxxxxx
Field
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Title:
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Managing
Director
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Any and all necessary consents to the assignment evidenced hereby are given
as
of the date set forth above. The undersigned officer has full authority and
power to execute this Assignment on behalf of Vycor Medical, Inc.
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VYCOR:
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Vycor
Medical, Inc.
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By:
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Name:
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Title:
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3
EXHIBIT
E
FORM
OF INTRACREDITOR CONFIRMATION AND AGREEMENT
INTRACREDITOR
CONFIRMATION AND AGREEMENT
THIS
INTRACREDITOR CONFIRMATION AND AGREEMENT ("Confirmation") is made and effective
this 15th day of February, 2008, by and between Fountainhead
Capital Partners Limited
("Fountainhead") and Regent
Private Capital, LLC
("Regent")
WHEREAS,
Fountainhead has previously made a certain investment of funds in Vycor Medical
Inc. ("Vycor") as evidenced by (i) that certain Bridge Loan Debenture dated
December 14, 2006 (as amended, to extend the maturity date thereof), in the
original principal amount of $172,500 (" FCP
Debenture
"); (ii)
that certain Warrant to Purchase 50.22 Membership Units of the Company (now
805,931 shares of the Company's common stock) dated December 15, 2006 (the
"
FCP
Warrant
"); and
(iii) that certain Option Agreement with FCP dated December 14, 2006 ("
FCP
Option
");
and,
WHEREAS,
the FCP Debenture is secured by a security interest in certain collateral,
in
favor of Fountainhead created and granted by a Security Agreement between Vycor
and Fountainhead dated December 14, 2006 ("Security Agreement"), and certain
financing statements that may have been filed in connection therewith
(collectively, with the Security Agreement, the "Security Documents");
and
WHEREAS,
Fountainhead has agreed to make available to Vycor up to an additional $300,000,
which amount will also be secured by the Security Agreement and the Security
Documents; and,
WHEREAS,
Regent has now agreed, pursuant to the terms of a certain Convertible Debenture
Purchase Agreement dated of even date herewith ("Purchase Agreement") to provide
an additional $1,000,000 of funding to Vycor, to be evidenced by two essentially
identical Convertible Debentures each in the original principal amount of
$500,000 ("Regent Debentures"); and
WHEREAS,
to satisfy Regent's requirement that the Regent Debentures be secured by a
first
priority security interest in Vycor's assets, Fountainhead desires to confirm
and evidence its agreement to subordinate the security interest in Vycor's
assets from its existing first priority security interest, to a security
interest equal to and pari passu with the security interest granted to Regent
as
a part of the transactions contemplated by the Purchase Agreement;
and
NOW,
THEREFORE, in consideration of the premises, the parties hereby agree, confirm
and certifies as follows:
1.
Liens
of Fountainhead of Equal Priority with Regent Security Interest
.
Fountainhead hereby confirms that Fountainhead's security interests and liens
in
and upon the assets of Vycor granted pursuant to the Security Agreement or
otherwise, are and shall hereafter be and remain of equal seniority and
priority, and be treated for all purposes on a pari passu basis, with the
security interests and liens in and upon the assets of Vycor granted to Regent
pursuant to the transactions contemplated by the Purchase
Agreement.
2.
Liens
of Regent of Equal Priority with Fountainhead's Security
Interest
. Regent
hereby confirms that Regent's security interests and liens in and upon the
assets of Vycor granted pursuant to the Purchase Agreement, the Regent
Debentures and the Security Agreement between Regent and Vycor dated of even
date with the first issued Regent Debenture or otherwise, are and shall
hereafter be and remain of equal seniority and priority, and be treated for
all
purposes on a pari passu basis, with the security interests and liens in and
upon the assets of Vycor granted to Fountainhead pursuant to the Security
Agreement and the transactions contemplated by the FCP Debenture.
1
3.
Remedies
.
Notwithstanding the confirmation regarding the priorities provided herein,
nothing herein shall be deemed to affect the rights of either Fountainhead
or
Regent under their respective agreements with Vycor as such rights may relate
to
their abilities to declare a default by Vycor or seek remedies against Vycor
for
such default; provided that in such event, either Fountainhead or Regent, as
the
case may be, shall notify the other, at the address indicated next to their
respective signatures, and in the event either such party forecloses on any
collateral of Vycor and/or sells, leases, transfers, or otherwise disposes
of
any such collateral, all proceeds thereof (net of all reasonable expenses
incurred in connection with the marshalling and sale of such collateral) shall
be shared equally between Fountainhead and Regent.
4.
Extent
of Priorities
. The
priorities specified herein shall remain in full force and effect, regardless
of
whether either Fountainhead or Regent rescinds, amends, waives any provision
of,
terminates or reforms, by litigation or otherwise, any of the documents
evidencing the respective advance of funds to Vycor. No delay or waiver on
the
part of either Fountainhead or Regent in exercising any right, power or
privilege granted under any of their agreements with Vycor shall have any effect
on the equal priorities specified herein.
5.
Amendment
of Financing Statements
. If
requested by Regent, Fountainhead agrees to file amended financing statements
in
each jurisdiction where a current financing statement perfecting its security
interest in Vycor's assets is currently filed, to reflect the equal priorities
of this Agreement.
6.
Term
. This
Confirmation will be for a term beginning on the effective date hereof and
continuing through the payment and performance in full of all of Vycor's
obligations to each of Regent and Fountainhead.
7.
Amendment
. This
Confirmation shall not be amended except in writing by Fountainhead and
Regent.
8.
Successors
and Assigns
. This
Confirmation shall be binding the parties hereto and their respective successors
and assigns.
IN
WITNESS WHEREOF, this Confirmation has been duly authorized and executed by
each
party as of the date first above written.
Signatures
on following page
2
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REGENT
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REGENT
PRIVATE CAPITAL, LLC
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By:
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Xxxxxxxx
Field, Managing Director
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Address:
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152
West 00 xx
Xxxxxx, 0 xx
Floor
New
York, New York 10019
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FOUNTAINHEAD
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FOUNTAINHEAD
CAPITAL PARTNERS LIMITED
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By:
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Name:
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Title:
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Director
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By:
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Name:
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Title:
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Director
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Address:
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Xxxxxxx
Xxxxx
Xxx
Xxxxxx, Xx. Xxxxxx
Xxxxxx
XX0 0XX
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3
EXHIBIT
F
FORM
OF LO CKUP AGREEMENT
LOCK-UP
AGREEMENT
February
______ , 2008
Regent
Private Capital, LLC
152
West
00 xx
Xxxxxx,
0 xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Ladies
and Gentlemen:
The
undersigned understands that Regent Private Capital, LLC ("Regent") proposes
to
enter into a Convertible Debenture Purchase Agreement ("Purchase Agreement")
with Vycor Medical, Inc. (the "Company") providing for the investment by Regent
of $1,000,000 pursuant to two essentially identical $500,000 principal amount
Convertible Debentures (the "Debentures").
In
consideration of the agreement by Regent to make the investment in the Company
evidenced by the Debentures, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned agrees
that he, she or it will not, directly or indirectly, sell, offer to sell,
contract to sell, grant any option for the sale of, grant any security interest
in, pledge, hypothecate, or otherwise sell or dispose of any of the common
stock, or any options or warrants to purchase any common stock, or any
securities convertible into or exchangeable for common stock, or any interest
in
such securities or rights, owned directly by the undersigned or with respect
to
which the undersigned has the power of disposition, in any such case whether
now
owned or hereafter acquired, other than (i) as a bona fide gift or gifts,
provided that the undersigned provides prior written notice of such gift or
gifts to Regent and the donee or donees thereof agree to be bound by the
restrictions set forth herein, (ii) intra-family transfers or transfers for
estate planning purposes, provided that the undersigned provides prior written
notice of such transfer or bequest, and such transferee or beneficiary agrees
to
be bound by the terms hereof, (iii) in the sale or exchange of the undersigned's
stock in connection with a merger of the Company with a third party, the sale
of
all or substantially all of the Company's assets to a third party or the sale
or
exchange of the undersigned's shares pursuant to a bona fide third party tender
offer, any of which has been approved by Regent, (iv) with the prior written
consent of Regent (which consent can be withheld in Regent's sole discretion),
or (v) as otherwise allowed in accordance with the following
schedule:
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Percent of Securities That May be Transferred
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From
Closing through the first anniversary of Closing
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0
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%
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First
anniversary of Closing to second anniversary of Closing
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25
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%
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Second
anniversary of Closing to third anniversary of Closing
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25
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%
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Regent
Private Capital, LLC
February
______ , 2008
Page
2
After
the
third anniversary of the Closing, this Lock-Up Agreement and all restrictions
on
transfer imposed hereby shall terminate.
The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of any
of
the common stock held by the undersigned except in compliance with the foregoing
restrictions. Regent may in its sole discretion without notice, release all
or
any portion of the securities subject to this Lock-Up Agreement or any similar
agreement executed by any other security holder, and if Regent releases any
securities of any other security holder, securities of the undersigned shall
not
by virtue thereof be entitled to a release from this Lock-Up
Agreement.
In
the
event that the undersigned owns no common stock of the Company at the date
hereof but prior to the termination of this Lock-Up Agreement has the right
to
acquire common stock of the Company pursuant to options or warrants, and if
the
undersigned exercises such options or warrants while this Lock-Up Agreement
is
effective, he, she or it agrees that the common stock purchased on such exercise
of options or warrants will be subject to the terms of this Lock-Up Agreement
for the remaining portion thereof, as if commenced on the date of
Closing.
The
undersigned understands that the Company and Regent will undertake the
transactions contemplated by the Purchase Agreement in reliance upon this
Lock-Up Agreement.
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Very
truly yours,
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By:
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Print Name:
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SCHEDULE
6.2
ACTIONS
PROHIBITED WITHOUT MINORITY APPROVAL
SCHEDULE
6.2
ACTIONS
PROHIBITED WITHOUT MINORITY APPROVAL
(a)
Sell, exchange or otherwise transfer all or substantially all of the
Company's assets.
(b)
Cause the Company to merge or consolidate with or into another limited
liability company, corporation, partnership, limited partnership or other
entity.
(c)
Issue any additional equity interests in the Company, except for equity
issued pursuant to the conversion of the Debentures, the FCP Debenture, the
FCP
Option or the FCP Warrants, or otherwise cause an exchange, reclassification
or
cancellation of any equity securities of the Company, or change any rights,
preferences or privileges or restructuring thereof, or the creation of a new
class of securities which ranks senior to the existing common
stock.
(d)
Borrow money or otherwise obligate the Company on any form of
indebtedness or guaranty in excess of $10,000 not in the ordinary course of
business;
(e)
Adopt, execute or accept any agreement on behalf of the Company which is
not terminable at will and which over its normal course, would obligate the
Company to make payments of cash and/or property having an aggregate value
in
excess of $100,000 other
than
in
accordance with a budget approved by Regent.
(f)
Enter into any transaction with an affiliate of any stockholder, member
of the Board of Directors, or officer of the Company;
(g)
As soon as reasonably practical the Company shall cause its Board of
Directors to appoint a compensation committee which shall consist of a majority
of independent directors (as defined in Rule 303A.02 of he New York Stock
Exchange rules applicable to listed companies).
