THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"). PURSUANT TO THE NOTE PURCHASE AGREEMENT, THIS NOTE HAS
BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF REGISTRATION OF THE RESALE THEREOF UNDER THE 1933 ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
OMNI MEDICAL HOLDINGS, INC.
SENIOR NOTE DUE 2006
No. SOF-1 $400,000
Colorado Springs, Colorado
October 26, 2005
FOR VALUE RECEIVED, OMNI MEDICAL HOLDINGS, INC., a Utah
corporation (hereinafter called the "Company"), hereby promises to pay to
SIGMA OPPORTUNITY FUND, LLC or registered assigns (the "Holder"), or order,
the sum of Four Hundred Thousand Dollars ($400,000), on the Maturity Date, and
to pay interest on the unpaid principal balance hereof at the Applicable Rate,
until the same becomes due and payable, whether at maturity or upon
acceleration or by repurchase in accordance with the terms hereof or
otherwise. Any amount, including, without limitation, principal of or
interest on this Note or the Repurchase Price, that is payable under this Note
and that is not paid when due shall bear interest at the Default Rate from the
due date thereof until the same is paid ("Default Interest"). Regular
interest shall be payable on the Maturity Date. Regular interest on this Note
shall be computed on the basis of a 360-day year of twelve 30-day months and
actual days elapsed. This Note may not be prepaid, redeemed or repurchased at
the option of the Company prior to the Maturity Date.
All payments of principal of and premium, if any, interest, and
other amounts on this Note shall be made in lawful money of the United States
of America. All payments shall be made by wire transfer of immediately
available funds to such account as the Holder may from time to time designate
by written notice in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day
which is not a Business Day, the same shall instead be due on the next
succeeding day which is a Business Day. Certain capitalized terms used in
this Note are defined in Article V.
The obligations of the Company under this Note shall rank in right
of payment senior to all obligations of the Company for indebtedness for
borrowed money or the purchase price of property. This Note is issued
pursuant to the Note Purchase Agreement and the Holder of this Note and this
Note are subject to the terms and entitled to the benefits of the Note
Purchase Agreement.
The following terms shall apply to this Note:
ARTICLE I
CERTAIN COVENANTS
So long as the Company shall have any obligation under this Note:
1.1 Limitations on Certain Indebtedness. The Company will not
itself, and will not permit any Subsidiary to, create, assume, incur, suffer
to exist or in any manner become liable in respect of, including, without
limitation, by reason of any business combination transaction (all of which
are referred to herein as "incurring"), any Indebtedness other than Permitted
Indebtedness.
1.2 Payment of Obligations. The Company will pay and discharge,
and will cause each Significant Subsidiary to pay and discharge, subject to
the terms and conditions of the Note Purchase Agreement, all their respective
material obligations and liabilities, except where the same may be contested
in good faith by appropriate proceedings and the Company shall have
established adequate reserves therefor on its books.
1.3 Maintenance of Property; Insurance. (a) The Company will
keep, and will cause each Significant Subsidiary to keep, all property which,
in the reasonable business judgment of the Company, is useful and necessary in
its business in good working order and condition, ordinary wear and tear
excepted.
(b) The Company will maintain, and will cause each Significant
Subsidiary to maintain, with financially sound and responsible insurance
companies, insurance, in at least such amounts and against such risks as is
reasonably adequate for the conduct of their respective businesses and the
value of their respective properties.
1.4 Conduct of Business and Maintenance of Existence. The
Company will continue, and will cause each Significant Subsidiary to continue,
to engage in business of the same general type as now conducted by the
Company, and will preserve, renew and keep in full force and effect, and will
cause each Significant Subsidiary to preserve, renew and keep in full force
and effect their respective corporate existence and their respective rights,
privileges and franchises necessary or desirable in the normal conduct of
business and such matter other than maintenance of the Company's corporate
existence, except where the failure to do so would not have a material adverse
effect on (i) the business, properties, operations, condition (financial or
other), results of operation or prospects of the Company and the Subsidiaries,
taken as a whole or, (ii) the ability of the Company to pay and perform its
obligations under the Transaction Documents.
1.5 Compliance with Laws. The Company will comply, and will
cause each Significant Subsidiary to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, decisions, orders and
requirements of governmental authorities and courts (including, without
limitation, environmental laws) except (i) where compliance therewith is
contested in good faith by appropriate proceedings or (ii) where non-
compliance therewith could not reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Company and the
Subsidiaries, taken as a whole.
1.6 Investment Company Act. The Company will not be or become
an open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
1.7 Limitations on Asset Sales, Liquidations, Etc.; Certain
Matters. The Company shall not
(a) sell, convey or otherwise dispose of all or substantially
all of the assets of the Company as an entirety or substantially as an
entirety in a single transaction or in a series of related transactions; or
(b) liquidate, dissolve or otherwise wind up the affairs of the
Company.
1.8 Limitation on Certain Issuances. The Company shall not (A)
offer, sell or issue, or enter into any agreement, arrangement or
understanding to offer, sell or issue, any Common Stock Equivalent for which
the price at which the holder of such Common Stock Equivalent is entitled to
acquire shares of Common Stock varies based on the market or trading price of
the Common Stock, or (B) offer, sell or issue, or enter into any agreement,
arrangement or understanding to offer, sell or issue, any Common Stock or
Common Stock Equivalent on terms which provide for adjustment or repricing of
the purchase price or number of shares or other units of such Common Stock or
Common Stock Equivalents other than pursuant to customary anti-dilution
provisions; provided, however, that nothing in this Section 1.8 shall prohibit
the Company from issuing shares of Common Stock for cash for the account of
the Company (x) in an offering that is underwritten on a firm commitment basis
and registered with the SEC under the 1933 Act, or (y) an offering of Common
Stock that is a private investment in publicly-traded equity (commonly known
as a PIPE).
1.9 Limitations on Liens. The Company will not itself, and will
not permit any Subsidiary to, create, assume or suffer to exist any mortgage,
lien, pledge, security interest or other charge or encumbrance (including,
without limitation, the lien or retained security title of a conditional
vendor), all of which are referred to below as "liens", upon all or any part
of its property of any character, whether owned at the date hereof or
thereafter acquired, except:
(a) liens upon any property of any Subsidiary or Subsidiaries as
security for indebtedness owing by such Subsidiary to the Company;
(b) liens securing this Note;
(c) liens for taxes or assessments or governmental charges or
levies on its property if such taxes or assessments or charges or levies shall
not at the time be due and payable or if the amount, applicability, or
validity of any such tax, assessment, charge or levy shall currently be
contested in good faith by appropriate proceedings or necessary preliminary
steps are being taken to contest, compromise or settle the amount thereof or
to determine the applicability or validity thereof and if the Company or such
Subsidiary, as the case may be, shall have set aside on its books reserves
(segregated to the extent required by sound accounting practice) deemed by it
adequate with respect thereto; deposits or pledges to secure payment of
worker's compensation, unemployment insurance, old age pensions or other
social security; deposits or pledges to secure performance of bids, tenders,
contracts (other than contracts for the payment of money borrowed or credit
extended), leases, public or statutory obligations, surety or appeal bonds, or
other deposits or pledges for purposes of like general nature in the ordinary
course of business; mechanics', carriers', workers', repairmen's or other like
liens arising in the ordinary course of business securing obligations which
are not overdue for a period of 60 days, or which are in good faith being
contested or litigated, or deposits to obtain the release of such liens; liens
created by or resulting from any litigation or legal proceedings or
proceedings being contested in good faith by appropriate proceedings, provided
any execution levied thereon shall be stayed; leases made, or existing on
property acquired, in the ordinary course of business; landlords' liens under
leases to which the Company or any Subsidiary is a party; and zoning
restrictions, easements, licenses or restrictions on the use of real property
or minor irregularities in title thereto; provided that all such liens
described in this subsection (d) do not, in the aggregate, materially impair
the use of such property in the operations of the business of the Company or
any Subsidiary or the value of such property for the purpose of such business;
(d) liens existing on the Issuance Date and disclosed in the SEC
Reports; and
(e) liens upon raw materials, works in progress and finished
goods inventory and accounts receivable granted to a bank, finance company or
other institutional lender providing receivables and inventory financings.
1.10 Transactions with Affiliates. The Company will not pay, and
will not permit any Subsidiary, directly or indirectly, to pay, any funds to
or for the account of, make any investment (whether by acquisition of stock or
Indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any
Indebtedness, or otherwise) in, lease, sell, transfer or otherwise dispose of
any assets, tangible or intangible, to, or participate in, or effect any
transaction in connection with, any joint enterprise or other joint
arrangement with, any Affiliate of the Company, except, on terms to the
Company or such Subsidiary no less favorable than terms that could be obtained
by the Company or such Subsidiary from a Person that is not an Affiliate of
the Company, as determined in good faith by the Board of Directors.
1.11 Rule 144A Information Requirement. Within the period prior
to the expiration of the holding period applicable to sales hereof under Rule
144(k) under the 1933 Act (or any successor provision), the Company shall,
during any period in which it is not subject to Section 13 or 15(d) under the
1934 Act, make available to the Holder and any prospective purchaser of this
Note from the Holder, the information required pursuant to Rule 144A(d)(4)
under the 1933 Act upon the request of the Holder and it will take such
further action as the Holder may reasonably request, all to the extent
required from time to time to enable the Holder to sell this Note without
registration under the 1933 Act within the limitations of the exemption
provided by Rule 144A, as Rule 144A may be amended from time to time. Upon the
request of the Holder, the Company will deliver to the Holder a written
statement as to whether it has complied with such requirements.
1.12 Notice of Defaults. The Company shall notify the Holder
promptly, but in any event not later than five days after the Company becomes
aware of the fact, of any failure by the Company to comply with this Article
I.
1.13 Security Agreement. No later than 30 days after the date
hereof, the Company and its Subsidiaries shall execute and deliver to the
Holder a Security Agreement, in form, scope and substance reasonably
satisfactory to the Holder, granting a security interest in all of the assets
of the Company and the Subsidiaries to secure the obligations of the Company
under this Note. The Company and its Subsidiaries shall use its best efforts
to obtain any necessary consents to the granting of such security interest to
the Holder.
ARTICLE II
EVENTS OF DEFAULT
2.1 If any of the following events of default (each, an "Event
of Default") shall occur:
(a) Failure to Pay Principal, Interest, Etc. The Company fails
(1) to pay the principal, or the Repurchase Price hereof when due,
whether at maturity, upon acceleration or otherwise, as applicable, or
(2) to pay any installment of interest hereon when due and, in the case
of this clause (2) of this Section 2.1(a) only, such failure continues
for a period of ten Business Days after the due date thereof; or
(b) Breach of Certain Covenants. The Company fails to comply
with Section 1.1, 1.7 or 1.8; or
(c) Breach of Other Covenants. The Company fails to comply in
any material respect with any other provision of Article I of this Note
(other than Section 1.1, 1.7 or 1.8) or breaches any other material
covenant or other material term or condition of this Note or any of the
other Transaction Documents (other than as specifically provided in
clauses (a) and (b) of this Section 2.1), and such breach continues for
a period of 15 days after written notice thereof to the Company from the
Holder; or
(d) Breach of Representations and Warranties. Any
representation or warranty of the Company made herein or in any
agreement, statement or certificate given in writing pursuant hereto (or
pursuant to any Transaction Documents) shall be false or misleading in
any material respect when made; or
(e) Certain Voluntary Proceedings. The Company or any
Subsidiary shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or shall make
a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due or shall admit in writing
its inability generally to pay its debts as they become due; or
(f) Certain Involuntary Proceedings. An involuntary case or
other proceeding shall be commenced against the Company or any
Subsidiary seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of
60 consecutive days; or
(g) Judgments and Governmental Actions. Any court of competent
jurisdiction or any governmental authority shall enter one or more
judgments against the Company or any Subsidiary or any of their
respective properties or other assets, or find the Company or any
Subsidiary liable for any damages or past due unpaid liabilities,
including in respect of any unpaid taxes, including federal or state
income, sales, use or other taxes, in an aggregate amount in excess of
$50,000; or
(h) Default Under Other Agreements. (a) The Company or any
Subsidiary shall (i) default in any payment with respect to any
Indebtedness for borrowed money (other than this Note) which
Indebtedness has an outstanding principal amount in excess of $75,000
individually or in the aggregate for all such Indebtedness, beyond the
period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created or (ii) default in the observance or
performance of any agreement, covenant or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition
is to cause, or to permit the holder or holders of such Indebtedness (or
a trustee or agent on behalf of such holder or holders) to cause, any
such Indebtedness to become due prior to its stated maturity and such
default or event shall continue beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness
was created (after giving effect to any consent or waiver obtained and
then in effect thereunder) and such default shall continue for five days
(or to such earlier date as the holder of any other Indebtedness shall
declare the same due and payable by reason of such default; or (b) any
Indebtedness of the Company or any Subsidiary which has an outstanding
principal amount in excess of the $75,000 individually or in the
aggregate for all such Indebtedness shall, in accordance with its terms,
be declared to be due and payable, or required to be prepaid other than
by a regularly scheduled or required payment prior to the stated
maturity thereof; or
(i) Failure to Provide Security Interest. The Company or any
Subsidiary does not provide the Holder with a perfected security
interest in the assets of the Company or any Subsidiary to secure the
obligations of the Company under the Note within 30 days after the date
of this Note;
then,
(1) upon the occurrence and during the continuation of any Event
of Default specified in clause (a), (b), or (d) of this Section 2.1, at
the option of the Holder, and upon the occurrence of any Event of
Default specified in clause (e), (f) or (i) of this Section 2.1: (X)
the Company shall pay to the Holder an amount equal to the outstanding
principal amount of this Note plus accrued and unpaid interest on such
principal amount to the date of payment plus accrued and unpaid Default
Interest, if any, thereon at the rate provided in this Note to the date
of payment, (Y) all other amounts payable hereunder or under any of the
other Transaction Documents shall immediately become due and payable,
all without demand, presentment or notice, all of which hereby are
expressly waived, together with all costs, including, without
limitation, reasonable legal fees and expenses of collection, and (Z)
the Holder shall be entitled to exercise all other rights and remedies
available at law or in equity; and
(2) upon the occurrence and during the continuation of any Event
of Default specified in clause (c), (g) or (h) of this Section 2.1: (A)
if any Event of Default continues during the period of 30 consecutive
days following the occurrence of such Event of Default, then thereafter
so long as any Event of Default is continuing, at the option of the
Holder (i) the Company shall pay to the Holder an amount equal to the
outstanding principal amount of this Note plus accrued and unpaid
interest on such principal amount to the date of payment plus accrued
and unpaid Default Interest, if any, thereon at the rate provided in
this Note to the date of payment, and (ii) all other amounts payable
hereunder shall immediately become due and payable, all without demand,
presentment or notice, all of which hereby are expressly waived,
together with all costs, including, without limitation, reasonable legal
fees and expenses, of collection, and (B) the Holder shall be entitled
to exercise all rights and remedies available at law or in equity other
than those set forth in the immediately preceding clause (A).
ARTICLE III
REPURCHASE UPON A REPURCHASE EVENT
3.1 Repurchase Right Upon Repurchase Event. If a Repurchase
Event occurs, in addition to any other right of the Holder, the Holder shall
have the right, at the Holder's option, to require the Company to repurchase
all of this Note, or any portion hereof on the repurchase date that is five
Business Days after the date of the Holder Notice delivered with respect to
such Repurchase Event. The Holder shall have the right to require the Company
to repurchase all or any such portion of this Note if a Repurchase Event
occurs at any time while any portion of the principal amount of this Note is
outstanding at a price equal to the Repurchase Price.
3.2 Notices; Method of Exercising Repurchase Rights, Etc. (a)
On or before the fifth Business Day after the occurrence of a Repurchase
Event, the Company shall give to the Holder a Company Notice of the occurrence
of the Repurchase Event and of the repurchase right set forth herein arising
as a result thereof. Such Company Notice shall set forth:
(i) the date by which the repurchase right must be exercised,
and
(ii) a description of the procedure (set forth in this
Section 3.2) which the Holder must follow to exercise the repurchase
right.
No failure of the Company to give a Company Notice or defect therein shall
limit the Holder's right to exercise the repurchase right or affect the
validity of the proceedings for the repurchase of this Note or portion hereof.
(b) To exercise the repurchase right, the Holder shall deliver
to the Company on or before the 30th day after a Company Notice (or if no such
Company Notice has been given, within 40 days after the Holder first learns of
the Repurchase Event) (i) a Holder Notice setting forth the name of the Holder
and the principal amount of this Note to be repurchased, and (ii) this Note,
duly endorsed for transfer to the Company of the portion of the outstanding
principal amount of this Note to be repurchased. A Holder Notice may be
revoked by the Holder at any time prior to the time the Company pays the
applicable Repurchase Price to the Holder.
(c) If the Holder shall have given a Holder Notice, then on the
date which is five Business Days after the date such Holder Notice is given
(or such later date as the Holder surrenders this Note) the Company shall make
payment in immediately available funds of the applicable Repurchase Price to
such account as specified by the Holder in writing to the Company at least one
Business Day prior to the applicable repurchase date.
3.3 Other. A Holder Notice given by the Holder shall be deemed
for all purposes to be in proper form unless the Company notifies the Holder
within three Business Days after such Holder Notice has been given (which
notice shall specify all defects in such Holder Notice), and any Holder Notice
containing any such defect shall nonetheless be effective on the date given if
the Holder promptly undertakes to correct all such defects. No such claim of
defect shall limit or delay performance of the Company's obligation to
repurchase any portion of this Note, the repurchase of which is not in
dispute.
ARTICLE IV
CONVERSION
4.1 Conversion Into Future Financing. (a) The Holder may convert all
or any part of the principal and accrued interest on this Note into the
securities issued in a Future Financing; provided that any partial conversion
shall be in an amount at least equal to the minimum subscription allowable
pursuant to the terms of the Future Financing. This Note may be converted
into the number and type of securities as could be purchased in the Future
Financing for a purchase price equal to the principal amount and accrued
interest, including Default Interest, if any, on this Note being converted.
As a condition to the conversion of the Note into a Future Financing led by
Sigma Opportunity Fund, LLC, the Holder shall surrender one-third of the
Warrants issued pursuant to the Note Purchase Agreement.
(b) On or before the fifth Business Day after consummation of
the Future Financing, the Company shall provide written notice thereof to the
Holder, which notice shall set forth in reasonable detail the terms of the
Future Financing. To exercise its conversion right, the Holder shall provide
written notice to the Company within thirty Business Days after receipt of
such notice from the Company of the principal and accrued interest it wishes
to convert. In the event that the Company fails to deliver notice of the
consummation of the Future Financing, the Holder shall have the right to
convert this Note pursuant to this section by notice to the Company no later
than thirty days after it learns of the consummation of the Future Financing
and all material terms thereof.
ARTICLE V
DEFINITIONS
5.1 Certain Defined Terms. (a) All the agreements or
instruments herein defined shall mean such agreements or instruments as the
same may from time to time be supplemented or amended or the terms thereof
waived or modified to the extent permitted by, and in accordance with, the
terms thereof and of this Note.
(b) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" means, with respect to any Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject Person. For
purposes of this definition, "control" (including, with correlative meaning,
the terms "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"AMEX" means the American Stock Exchange, Inc.
"Applicable Rate" means 5 percent per annum or, if an Event of
Default shall occur, then so long as any Event of Default shall continue, 12
percent per annum (or in either case such lesser rate as shall be the highest
rate permitted by applicable law).
"Board of Directors" means the Board of Directors of the Company.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors, or duly authorized committee thereof (to the extent
permitted by applicable law), and to be in full force and effect on the date
of such certification, and delivered to the Holder.
"Business Day" means any day other than a Saturday, Sunday or a
day on which commercial banks in The City of New York are authorized or
required by law or executive order to remain closed.
"Common Stock" means the Common Stock, par value $.001 per share,
or any shares of capital stock of the Company into which such shares shall be
changed or reclassified after the Issuance Date.
"Common Stock Equivalent" means any warrant, option, subscription
or purchase right with respect to shares of Common Stock, any security
convertible into, exchangeable for, or otherwise entitling the holder thereof
to acquire, shares of Common Stock or any warrant, option, subscription or
purchase right with respect to any such convertible, exchangeable or other
security.
"Company" shall have the meaning provided in the first paragraph
of this Note.
"Company Certificate" means a certificate of the Company signed by
an Officer.
"Company Notice" means a Company Notice in the form attached
hereto as Exhibit A.
"Default Interest" shall have the meaning provided in the first
paragraph of this Note.
"Default Rate" means 12 percent per annum.
"Eligible Bank" means a corporation organized or existing under
the laws of the United States or any other state, having combined capital and
surplus of at least $100 million and subject to supervision by federal or
state authority and which has a branch located in New York, New York.
"Event of Default" shall have the meaning provided in Section 2.1.
"Fundamental Change" means
(a) Any consolidation or merger of the Company or any Subsidiary
with or into another entity (other than a merger or consolidation of a
Subsidiary into the Company or a wholly-owned Subsidiary) where the
stockholders of the Company immediately prior to such transaction do not
collectively own at least 51% of the outstanding voting securities of
the surviving corporation of such consolidation or merger immediately
following such transaction; or the sale of all or substantially all of
the assets of the Company and the Subsidiaries in a single transaction
or a series of related transactions; or
(b) The occurrence of any transaction or event in connection
with which all or substantially all the Common Stock shall be exchanged
for, converted into, acquired for or constitute the right to receive
consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all
common stock which is (or will, upon consummation of or immediately
following such transaction or event, will be) listed on a national
securities exchange or approved for quotation on Nasdaq or any similar
United States system of automated dissemination of transaction reporting
of securities prices; or
(c) The acquisition by a Person or entity or group of Persons or
entities acting in concert as a partnership, limited partnership,
syndicate or group, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases or otherwise, of
beneficial ownership of securities of the Company representing 25% or
more of the(i) combined voting power of the outstanding voting
securities of the Company ordinarily (and apart from rights accruing in
special circumstances) having the right to vote in the election of
directors or (ii) fully diluted shares of Common Stock.
"Future Financing" means a private placement financing, or series
of related private placement financings, by the Company after the Closing Date
pursuant to which gross proceeds of at least $750,000 are raised.
"Generally Accepted Accounting Principles" for any Person means
the generally accepted accounting principles and practices applied by such
Person from time to time in the preparation of its audited financial
statements.
"Holder" shall have the meaning provided in the first paragraph of
this Note.
"Holder Notice" means a Holder Notice in the form attached hereto
as Exhibit B.
"Indebtedness" as used in reference to any Person means all
indebtedness of such Person for borrowed money, the deferred purchase price of
property, goods and services and obligations under leases which are required
to be capitalized in accordance with Generally Accepted Accounting Principles
and shall include all such indebtedness guaranteed in any manner by such
Person or in effect guaranteed by such Person through a contingent agreement
to purchase and all indebtedness for the payment or purchase of which such
Person has contingently agreed to advance or supply funds and all indebtedness
secured by mortgage or other lien upon property owned by such Person, although
such Person has not assumed or become liable for the payment of such
indebtedness, and, for all purposes hereof, such indebtedness shall be treated
as though it has been assumed by such Person.
"Interest Payment Date" means the Maturity Date.
"Issuance Date" means October 26, 2005.
"Market Price" with respect to any security on any day shall mean
the closing price of such security on such day on the Nasdaq, the NYSE or the
AMEX, as applicable, or, if such security is not listed or admitted to trading
on the Nasdaq, the NYSE or the AMEX, on the principal national securities
exchange or quotation system on which such security is quoted or listed or
admitted to trading, in any such case as reported by Bloomberg, L.P. (or if
such source ceases to be available, comparable source selected by the Holder
and acceptable to the Company in its reasonable judgment) or, if not quoted or
listed or admitted to trading on any national securities exchange or quotation
system, the closing price of such security on the over-the-counter market on
the day in question, as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if not so
available, in such manner as furnished by any NYSE member firm selected from
time to time by the Board of Directors for that purpose, or a price determined
in good faith by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution.
"Maturity Date" means April 26, 2006.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"Next Financing" means the next private placement financing, or
series of related private placement financings, by the Company after the
Closing Date pursuant to which gross proceeds of at least $750,000 are raised.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Note" means this instrument as originally executed, or if later
amended or supplemented in accordance with its terms, then as so amended or
supplemented.
"Note Purchase Agreement" means the Note Purchase Agreement, dated
as of October 26, 2005, by and between the Company and the original Holder of
this Note.
"NYSE" means the New York Stock Exchange, Inc.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President or the Chief Financial Officer of the Company.
"Permitted Indebtedness" means
(1) Indebtedness outstanding on the Issuance Date prior to
issuance of this Note and disclosed in the SEC Reports; and
(2) Indebtedness evidenced by the Note;
(3) Indebtedness incurred after the Issuance Date which is
unsecured, subordinated to the Notes as to payment on terms approved in
advance of such incurrence by a majority in interest of the Holders of
the Notes, based upon the outstanding principal amounts thereof, as
evidenced by the written approval of such Holders given prior to the
incurrence of such Indebtedness, and for which no payment of principal
of such Indebtedness is scheduled to be due prior to the date that is
six months after the latest scheduled Maturity Date;
(4) endorsements for collection or deposit in the ordinary
course of business; and
(5) in the case of any Subsidiary, Indebtedness owed by such
Subsidiary to the Company;
so long as at the time of incurrence of such Indebtedness no Event of Default
has occurred and is continuing or would result from such incurrence and no
event which, with notice or passage of time, or both, would become an Event of
Default has occurred and is continuing or would result from such incurrence
and so long as in the case of such Indebtedness referred to in the preceding
clauses (2) thru (4), inclusive, such Indebtedness shall have been approved by
the Board of Directors prior to the incurrence thereof.
"Person" means any natural person, corporation, partnership,
limited liability company, trust, incorporated organization, unincorporated
association or similar entity or any government, governmental agency or
political subdivision.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Registration Statement" means the Registration Statement required
to be filed by the Company with the SEC pursuant to Section 8(a)(1) of the
Note Purchase Agreement.
"Repurchase Event" means the occurrence of any one or more of the
following events:
(a) Any Fundamental Change;
(b) The consummation of the Next Financing;
(c) The occurrence of any Event of Default specified in Article
II of this Note; or
"Repurchase Price" means with respect to any repurchase pursuant
to Sections 3.1 and 3.2 an amount in cash equal to the sum of (1) 100% of the
outstanding principal amount of this Note plus (2) accrued and unpaid interest
on such principal amount to the date of such repurchase plus (3) accrued and
unpaid Default Interest, if any, thereon at the rate provided in this Note to
the date of such repurchase.
"Rule 144A" means Rule 144A as promulgated under the 1933 Act or
any successor rule thereto.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement is
first declared effective by the SEC.
"SEC Reports" shall have the meaning provided in the Note Purchase
Agreement.
"Significant Subsidiary" shall have the meaning provided in
Regulation S-X of the SEC, except that a Subsidiary shall not be a Significant
Subsidiary only if such Subsidiary, when consolidated for financial reporting
purposes with all other Subsidiaries which are not Significant Subsidiaries,
would not constitute a Significant Subsidiary.
"Subsidiary" means any corporation or other entity of which a
majority of the capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned by
the Company.
"Trading Day" means at any time a day on which any of a national
securities exchange, Nasdaq, the OTC Bulletin Board or such other securities
market as at such time constitutes the principal securities market for the
Common Stock is open for general trading of securities.
"Transaction Documents" means this Note, the Note Purchase
Agreement, and the Warrants and the other agreements, instruments and
documents contemplated hereby and thereby.
"Transfer Agent" means Interwest Transfer Co., or its successor as
transfer agent and registrar for the Common Stock.
"Warrants" means Common Stock Purchase Warrants of the Company
issued to the original Holder of this Note pursuant to the Note Purchase
Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Failure or Indulgency Not Waiver. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privileges. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
6.2 Notices. Except as otherwise specifically provided herein,
any notice herein required or permitted to be given shall be in writing and
may be personally served, sent by telephone line facsimile transmission or
delivered by courier or sent by United States mail and shall be deemed to have
been given upon receipt if personally served, sent by telephone line facsimile
transmission or sent by courier or three days after being deposited in the
facilities of the United States Postal Service, certified, with postage pre-
paid and properly addressed, if sent by mail. For the purposes hereof, the
address and facsimile line transmission number of the Holder shall be as
furnished by the Holder for such purpose and shown on the records of the
Company; and the address of the Company shall be 0000 Xxxx Xxxxx Xxxxx, Xxxxx
000, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000, Attention: Chief Executive Officer
(telephone line facsimile transmission number (000) 000-0000). The Holder or
the Company may change its address for notice by service of written notice to
the other as herein provided.
6.3 Amendment, Waiver, Etc. Neither this Note nor any terms
hereof may be changed, waived, discharged or terminated unless such change,
waiver, discharge or termination is in writing signed by the Company and the
Holder of this Note.
6.4 Assignability. This Note shall be binding upon the Company
and its successors, and shall inure to the benefit of and be binding upon the
Holder and its successors and permitted assigns. The Company may not assign
its rights or obligations under this Note.
6.5 Certain Expenses. The Company shall pay on demand all
expenses incurred by the Holder, including reasonable attorneys' fees and
expenses, as a consequence of, or in connection with (x) any amendment or
waiver of this Note or any other Transaction Document, (y) any default or
breach of any of the Company's obligations set forth in the Transaction
Documents and (z) the enforcement or restructuring of any right of, including
the collection of any payments due, the Holder under the Transaction
Documents, including any action or proceeding relating to such enforcement or
any order, injunction or other process seeking to restrain the Company from
paying any amount due the Holder.
6.6 Governing Law. This Note shall be governed by the internal
laws of the State of New York, without regard to the principles of conflict of
laws.
6.7 Transfer of Note and Noteholder Payment Amount. This Note
has not been and is not being registered under the provisions of the 1933 Act
or any state securities laws and this Note may not be transferred unless the
Holder shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that
this Note may be sold or transferred without registration under the 1933 Act.
Prior to any such transfer, such transferee shall have represented in writing
to the Company that such transferee has requested and received from the
Company all information relating to the business, properties, operations,
condition (financial or other), results of operations or prospects of the
Company and the Subsidiaries deemed relevant by such transferee; that such
transferee has been afforded the opportunity to ask questions of the Company
concerning the foregoing and has had the opportunity to obtain and review the
reports and other information concerning the Company which at the time of such
transfer have been filed by the Company with the SEC pursuant to the 1934 Act.
If such transfer is intended to assign the rights and obligations under 5(a),
5(b), 8, 9 and 10 of the Note Purchase Agreement, such transfer shall
otherwise be made in compliance with Article V of the Note Purchase Agreement.
The Holder may not transfer a portion of this Note to any Person if such
transfer would result in an increase in the aggregate number of registered
holders of this Note of more than two such holders without the prior written
consent of the Company, which consent will not be unreasonably withheld. Any
instrument issued upon any such transfer of a portion of this Note which
results in such increase of one holder shall bear a legend that the holder
thereof shall not be entitled to transfer such instrument in a manner which
would further increase the aggregate number of registered holders of this Note
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; provided, however, that any remaining right of the
Holder to transfer all or a portion of this Note may be transferred to the
transferee by agreement between the Holder and the transferee.
6.8 Enforceable Obligation. The Company represents and warrants
that at the time of the original issuance of this Note it received the full
purchase price payable pursuant to the Note Purchase Agreement in an amount at
least equal to the original principal amount of this Note, and that this Note
is an enforceable obligation of the Company which is not subject to any
offset, reduction, counterclaim or disallowance of any sort.
6.9 Note Register; Replacement of Notes. The Company shall
maintain a register showing the name, address and telephone line facsimile
number of the Holders. The Company shall also maintain a facility for the
registration of transfers of this Note and at which this Note may be
surrendered for split up into instruments of smaller denominations or for
combination into instruments of larger denominations. Upon receipt by the
Company of evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of this Note and (a) in the case of
loss, theft or destruction, of indemnity from the Holder reasonably
satisfactory in form to the Company (and without the requirement to post any
bond or other security) or (b) in the case of mutilation, upon surrender and
cancellation of this Note, the Company will execute and deliver to the Holder
a new Note of like tenor without charge to the Holder.
6.10 Payment of Note on Repurchase; Deposit of Repurchase Price,
Etc. (a) If this Note or any portion of this Note is to be or repurchased as
provided in Sections 3.1 and 3.2 and any notice required in connection
therewith shall have been given as provided therein and the Company shall have
otherwise complied with the requirements of this Note with respect thereto,
then this Note or the portion of this Note to be so or repurchased and with
respect to which any such notice has been given shall become due and payable
on the date stated in such notice at the applicable Repurchase Price. On and
after the repurchase date so stated in such notice, provided that the Company
shall have deposited with an Eligible Bank on or prior to such repurchase
date, an amount sufficient to pay the applicable Repurchase Price, interest on
this Note or the portion of this Note to be so repurchased shall cease to
accrue, and this Note or such portion hereof shall be deemed not to be
outstanding and shall not be entitled to any benefit with respect to principal
of or interest on the portion to be so repurchased except to receive payment
of the applicable Repurchase Price. On presentation and surrender of this
Note or such portion hereof, this Note or the specified portion hereof shall
be paid and repurchased at the applicable Repurchase Price. If a portion of
this Note is to be repurchased, upon surrender of this Note to the Company in
accordance with the terms hereof, the Company shall execute and deliver to the
Holder without service charge, a new Note or Notes, having the same date
hereof and containing identical terms and conditions, in such denomination or
denominations as requested by the Holder in aggregate principal amount equal
to, and in exchange for, the unrepurchased portion of the principal amount of
this Note so surrendered.
(b) Upon the payment in full of all amounts payable by the
Company under this Note or the deposit thereof as provided in Section 6.10(a),
thereafter the obligations of the Company under this Note shall be as set
forth in this Article VI, and, in the case of such deposit, to pay the
Repurchase Price, as the case may be, from the funds so deposited. Upon such
payment or deposit, any Event of Default which occurred prior to such payment
or deposit by reason of one or more provisions of this Note with which the
Company thereafter is no longer obligated to comply, then shall no longer
exist.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Company has caused this Note to be signed
in its name by its duly authorized officer as of the day and in the year first
above written.
OMNI MEDICAL HOLDINGS, INC.
By:
Name:
Title:
ASSIGNMENT
For value received _________________________ hereby sell(s),
assign(s) and transfer(s) unto _________________________ (Please insert social
security or other Taxpayer Identification Number of assignee:
______________________________) the within Note, and hereby irrevocably
constitutes and appoints _________________________ attorney to transfer the
said Note on the books of Omni Medical Holdings, Inc., a Utah corporation (the
"Company"), with full power of substitution in the premises.
In connection with any transfer of the Note within the period
prior to the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the 1933 Act (or any successor provision) (other than
any transfer pursuant to a registration statement that has been declared
effective under the 1933 Act), the undersigned confirms that such Note is
being transferred:
[ ] To the Company or a subsidiary thereof; or
[ ] To a QIB pursuant to and in compliance with Rule 144A; or
[ ] To an "accredited investor" pursuant to and in compliance
with the 1933 Act; or
[ ] Pursuant to and in compliance with Rule 144 under the 1933
Act;
and unless the box below is checked, the undersigned confirms that, to the
knowledge of the undersigned, such Note is not being transferred to an
"affiliate" of the Company as defined in Rule 144 under the 1933 Act (an
"Affiliate").
[ ] The transferee is an Affiliate of the Company.
Capitalized terms used in this Assignment and not defined in this
Assignment shall have the respective meanings provided in the Note.
Dated: NAME:
Signature(s)
Exhibit A
OMNI MEDICAL HOLDINGS, INC.
COMPANY NOTICE
(Section 3.2(a) of Senior Note)
TO:
(Name of Holder)
(1) A Repurchase Event described in the Senior Note (the "Note")
of Omni Medical Holdings, Inc., a Utah corporation (the "Company"), occurred
on , 200 . As a result of such Repurchase Event, the
Holder is
entitled to exercise its repurchase rights pursuant to Section 3.2 of the
Note.
(2) The Holder's repurchase right must be exercised on or before
, 200 .
(3) At or before the date set forth in the preceding paragraph
(2), the Holder must deliver to the Company:
(a) a Holder Notice, in the form attached as Exhibit B to the
Note; and
(b) the Note, duly endorsed for transfer to the Company of the
portion of the principal amount to be repurchased.
(4) Capitalized terms used herein and not otherwise defined
herein have the respective meanings provided in the Note.
Date _________________________ OMNI MEDICAL HOLDINGS, INC.
By:
Title:
Exhibit B
OMNI MEDICAL HOLDINGS, INC.
HOLDER NOTICE
(Section 3.2(b) of Senior Note)
TO: OMNI MEDICAL HOLDINGS, INC.
(1) Pursuant to the terms of the Senior Note (the "Note"), the
undersigned Holder hereby elects to exercise its right to require repurchase
by the Company pursuant to Sections 3.2(a) and 3.2(b) of $
of the
Note, equal to the sum of $ principal amount of the Note,
$ of accrued and unpaid interest on such principal amount
and $ of
Default Interest on such interest at the Repurchase Price provided in the
Note.
(2) Capitalized terms used herein and not otherwise defined
herein have the respective meanings provided in the Note.
Date: NAME OF XXXXXX:
By
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
