EXHIBIT 10.21
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF OR IN PAYMENT OF
INTEREST HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT PURSUANT TO (1) A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, IN EACH
CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR (2) UPON DELIVERY OF A LEGAL OPINION TO THE COMPANY, IN FORM
AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, THAT ANY SUCH TRANSACTION
IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
AMENDED AND RESTATED NOTE
Note No.
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$__________ U.S.D.
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FOR VALUE RECEIVED, PERFORMANCE HEALTH TECHNOLOGIES, INC., a Delaware
corporation (the "COMPANY"), promises to pay to the order of [INSERT NAME OF
LENDER] (whether one or more, "LENDER"), in lawful money of the United States of
America, in the manner and at the times provided hereinafter, (i) Principal (as
hereinafter defined); (ii) Interest (as hereinafter defined) and Default
Interest (as hereinafter defined), if any; and (iii) all other amounts due and
payable pursuant to and in accordance with the terms of this Note.
1. DEFINITIONS. In addition to the terms defined elsewhere in this Note, for
purposes of this Note, the following terms shall have the following meanings:
1.1 "COMMON STOCK" shall have the meaning in Section 6.1.
1.2 "DEFAULT INTEREST" shall mean interest computed at 12% per annum,
on (i) the Principal from and after such amount becomes due and payable (whether
by maturity, acceleration, or otherwise), and (ii) any and all other unpaid
amounts due pursuant to the terms and provisions of this Note (including, but
not limited to, accrued but unpaid Interest) from and after the respective dates
on which those amounts become due and payable, whether by maturity,
acceleration, or otherwise; in each case from and after any applicable grace
period has expired. Default Interest shall be computed for the actual number of
days elapsed, predicated on a year consisting of 360 days, and shall be payable
on demand. Notwithstanding anything to the contrary contained herein, for any
period in which Default Interest is accruing, Interest shall not accrue.
1.3 "FUNDAMENTAL CHANGE" shall mean (i) a sale or transfer of all or
substantially all of the assets of the Company in any transaction or series of
transactions (other than sales in the ordinary course of business); (ii) a
merger or consolidation in which the Company is not the survivor; or (iii) the
sale or exchange of all or substantially all of the outstanding shares of the
Common Stock (including by way of merger, consolidation, or other business
combination); or (iv) the consummation by the Company of a public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale by the Company of its Common Stock
under the Securities Act of 1933, as amended, with minimum gross proceeds to the
Company of $7,500,000.
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1.4 "INTEREST" shall mean interest computed at 10% per annum on the
Principal. Interest shall be computed on the actual number of days elapsed,
predicated on a year consisting of 360 days.
1.5 "MATURITY DATE" shall mean the earlier of (a) [INSERT DATE ONE YEAR
AFTER DATE OF NOTE]; or (b) the occurrence of a Fundamental Change.
1.6 "PRINCIPAL" shall mean $[INSERT AMOUNT OF LOAN, IN INCREMENTS OF
$1,000] or so much thereof as may from time to time be outstanding hereunder.
1.7 "PRIVATE PLACEMENT MEMORANDUM" shall mean the Company's
Confidential Private Placement Memorandum dated July, 2005, as such Memorandum
may be amended or supplemented, describing the Offering pursuant to which this
Note was issued by the Company.
2. BORROWING, PAYMENTS, MATURITY.
2.1 BORROWING. Subject to the terms of this Note, the Company has
borrowed and Lender has lent to the Company $[INSERT AMOUNT OF LOAN, IN
INCREMENTS OF $1,000].
2.2 INTEREST PAYMENTS. Interest shall accrue commencing on the date of
this Note. All accrued and unpaid Interest will be payable in arrears on the
Maturity Date. Interest shall be payable at the option of the Company in cash,
Common Stock, or a combination of cash and Common Stock. If the Company elects
to pay interest in Common Stock, upon each such payment the Company shall
deliver to the Holder a certificate representing the number of shares of Common
Stock equal to (i) the dollar amount of Interest so paid DIVIDED BY (ii) the
Conversion Price (as defined in Section 6.4). Default Interest shall be payable
in cash on demand.
2.3 MATURITY. All outstanding and unpaid Principal and Interest shall
be due and payable on the Maturity Date, unless otherwise specified herein or
unless accelerated in accordance with the terms or provisions hereof.
2.4 INTEREST RATE. Notwithstanding any provision to the contrary
contained in this Note or in any of the other documents or instruments referred
to in this Note, if at any time or times the interest and any sums considered
for such purpose to be interest, payable under or by reason of this Note or any
such other documents or instruments, should exceed the maximum which, by the
laws of the State having jurisdiction, may be charged with respect to the loan
evidenced hereby, given the nature and all of the pertinent circumstances of
such loan, then all such sums in excess of such maximum shall be deemed not to
be interest, but rather to be payments on account of Principal, and without
further agreement of the parties shall be so applied without regard to any other
provision of this Note; PROVIDED, HOWEVER, that Lender may elect instead that no
sums shall be payable in excess of such maximum, whereupon this Note and such
other documents and instruments shall be deemed amended accordingly without
further action by any party.
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3. COVENANTS.
3.1 NEGATIVE PLEDGE. The Company shall not grant a security interest
in, pledge, or mortgage any of its assets except the Company may grant or incur
liens, security interests, pledges, mortgages, and other encumbrances, voluntary
or involuntary, covering its assets so long as the loans, borrowings, or other
obligations secured thereby do not exceed $500,000 in the aggregate.
3.2 VETO RIGHT WITH RESPECT TO CERTAIN ACTIONS. Before the Company
shall amend its Certificate of Incorporation (other than a certificate setting
forth the designations and preferences with respect to any Preferred Stock) or
Bylaws or merge with any other company and following such merger the Company
will be the survivor, the Company will give notice of such action to the Lender.
The notice will contain a summary of the action to be taken, the date on which
the action will be taken (the "Effective Date"), which Effective Date will not
be sooner than thirty (30) days following the date the notice is given, a
statement that the proposed action will be taken unless there is a Convertible
Note Veto (as defined below), the United States address where a Convertible Note
Veto must be sent, and such other information as the Company shall deem
appropriate. If, prior to the Effective Date, the Company shall receive a
Convertible Note Veto, the Company will not take the action described in the
notice. A Convertible Note Veto shall be deemed to occur if, prior to the
Effective Date of the action, the Company shall receive in writing an objection
(which objection will be effective upon either actual receipt by the Company or
the refusal of the Company to accept delivery) to the action from holders of
Eligible Convertible Notes (as hereinafter defined) representing 66-2/3% of the
principal of all Eligible Convertible Notes then outstanding. The Eligible
Convertible Notes shall mean the Convertible Notes issued by the Company
pursuant to the Private Placement Memorandum provided the Company has sold a
minimum of $450,000 in principal of Convertible Notes pursuant to the Private
Placement Memorandum, other than Convertible Notes held by any officer or
director of the Company or any person or entity whom an officer or director of
the Company possesses, directly or indirectly, the power to direct, or cause the
direction of, the management or policy of the person or entity, whether through
the ownership of voting securities, by contract, or otherwise.
3.3 PREEMPTIVE RIGHTS WITH RESPECT TO PREFERRED STOCK. The Company
hereby grants to the Lender the right to purchase a pro rata portion of any
Preferred Stock issued by the Company at any time while any portion of the
Principal is outstanding. For purposes of this Section 3.3, Lender's pro rata
portion of any Preferred Stock will be that portion of the Preferred Stock to be
issued (rounded to a whole number) multiplied by a fraction the numerator of
which is the Principal then outstanding and the denominator of which will be the
principal then outstanding of all Convertible Notes (including this Note) issued
by the Company pursuant to the July 2005 Private Placement Memorandum and also
including the principal then outstanding of all Convertible Notes issued by the
Company pursuant to the Company's October 2003 Private Placement Memorandum and
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the Company's February 2005 Private Placement Memorandum. In the event the
Company intends to issue Preferred Stock, it shall give Lender written notice of
such intention, describing the Preferred Stock to be issued, the price thereof,
the number of shares of Preferred Stock that the Lender will be eligible to
purchase under this Section 3.3, the general terms upon which the Company
proposes to effect such issuance, and the United States address where Lender
must send notice of Lender's election to purchase all or part of its Pro Rata
Share of the Preferred Stock. The Lender shall have 30 days from the date of any
such notice to agree to purchase all or part of its Pro Rata Share of the
Preferred Stock for the price and upon the general terms and conditions
specified in the Company's notice by giving written notice to the Company
stating the number of shares of Preferred Stock to be so purchased, which notice
will be effective only if actually received by the Company in such 30-day period
or if the Company refuses to accept delivery of the notice in such 30-day
period. In the event the Lender fails to exercise the foregoing purchase right
with respect to any Preferred stock within such 30-day period, the Company may
thereafter sell any or all of such Preferred Stock not agreed to be purchased by
the Lender at the same price and upon substantially the same terms as those
specified in the notice given to the Lender.
4. PREPAYMENT.
4.1 RIGHT OF PREPAYMENT. This Note may be prepaid, in whole or in part,
at any time by the Company without premium or penalty. Any prepayment pursuant
to this Section 4 shall be accompanied by payment of any Interest (which may be
paid in cash, Common Stock, or a combination of cash and Common Stock as
provided in Section 2.2) and Default Interest, if any, accrued and unpaid
through the date of such prepayment.
4.2 PROCEDURE FOR PREPAYMENT. In the event the Company elects to prepay
all or a portion of this Note, the Company shall mail a notice of prepayment
(the "Prepayment Notice") to Lender, certified mail, return receipt requested,
not later than the 30th day before the date fixed for prepayment (the
"Prepayment Date"), at Lender's address as shall appear on the Company's books.
The Prepayment Notice shall specify (i) the amount of this Note to be prepaid,
(ii) the Prepayment Date, (iii) the place where this Note shall be delivered,
and (iv) that the right to convert this Note pursuant to Section 5 shall
terminate at 5:00 p.m. (Colorado time) on the business day immediately preceding
the Prepayment Date. Any right to convert this Note into Common Stock with
respect to the amount to be prepaid shall terminate at 5:00 p.m. (Colorado time)
on the business day immediately preceding the Prepayment Date. On and after the
Prepayment Date, Lender shall have no further rights under this Note except to
receive, upon surrender of this Note, the amount of the prepayment and if the
prepayment does not pay in full all Principal, Interest, and Default Interest a
new Note for the balance not converted. From and after the Prepayment Date, the
Company shall, at the place specified in the Prepayment Notice, upon
presentation and surrender to the Company by or on behalf of Lender deliver or
cause to be delivered to or upon the written order of Lender a sum in cash equal
to the prepayment amount for this Note so presented and surrendered and if the
prepayment does not pay in full all Principal, Interest, and Default Interest a
new Note for the balance not converted.
4.3 REGISTRATION UPON CONVERSION. In the event Lender elects to convert
all or any portion of this Note pursuant to Section 5 after Lender receives the
Prepayment Notice, Lender shall have the registration rights provided in the
Registration Rights Agreement dated ________________, 2005 by the Company.
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5. CONVERSION.
5.1 RIGHT TO CONVERT. At any time commencing on the earlier of (i)
[INSERT DATE NINE MONTHS AFTER FIRST CLOSING OF OFFERING] or (ii) one day after
the first closing of the next equity offering of the Company and from time to
time thereafter, Lender may, elect to receive shares of Common Stock in lieu of
payment of that portion of Principal, Interest, and Default Interest specified
in such notice.
5.2 PROCEDURE. In order to make such election, Lender shall deliver to
the Company this Note and a written notice, in substantially the form of the
Conversion Notice attached hereto, of Lender's election to convert this Note,
which notice shall specify the amount of Principal, Interest, and Default
Interest to be converted and shall be effective only upon actual receipt by the
Company or upon the Company's refusal to accept delivery of the notice. Upon
such election, the Company shall issue to Lender (a) a certificate representing
the number of shares of Common Stock equal to (i) the dollar amount of
Principal, Interest, and Default Interest that Lender so elects to convert,
DIVIDED BY (ii) the Conversion Price (as defined in Section 6.4) and (b) if only
a portion of the Principal, Interest, and Default Interest shall be converted, a
new Note evidencing the Principal not converted, which new Note shall in all
other respects be identical with this Note, together with appropriate notation
about accrued and unpaid Interest or Default Interest; PROVIDED, HOWEVER, that
such issuance does not violate any federal or state securities laws or
regulation. Upon the issuance of such Common Stock, amounts owing by the Company
to Lender (including, without limitation, Principal, Interest and Default
Interest) that are not converted shall remain outstanding in accordance with the
terms of this Note. Such certificate and, if applicable, such replacement Note
shall be deemed to have been issued, and Lender shall be deemed for all purposes
to have become holders of record as of the date the aforementioned notice is
received by the Company or the Company refuses to accept delivery of the notice.
The Company shall pay all expenses, payable in connection with the preparation,
issuance and delivery of Share certificates and new Notes.
5.3 FULLY PAID; FRACTIONAL SHARES. All Common Stock issued upon the
conversion of this Note shall be validly issued, fully paid and nonassessable
and the Company shall at all times reserve and keep available out of its
authorized shares of Common Stock a sufficient number of Shares for the purpose
of issuance upon the conversion of this Note. The Company shall not be required
to issue fractions of Shares upon conversion of this Note. If any fraction of a
Share would, but for this Section 5.3, be issuable upon any conversion of this
Note, in lieu of such fractional Share the Company, shall pay to Lender the
amount of Principal, Interest, or Default Interest that would result in such
fractional share.
6. COMMON STOCK.
6.1 COMMON STOCK. As used in this Note, "Common Stock" shall mean the
Company's Common Stock, par value $.01 per share, subject to adjustment as
provided in Section 6.5.
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6.2 RESTRICTIONS. Lender understands that Common Stock issued or
to-be-issued hereunder (the "SECURITIES") will be issued without registration
pursuant to the Securities Act of 1933, as amended (the "1933 Act") and without
registration pursuant to any state securities laws, in each case in reliance
upon an exemption from the registration requirements of the Act and such state
securities laws. As a result, Lender understands that any document or
certificate evidencing any of the Securities may contain a restrictive legend
substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ACQUIRED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR OTHER APPLICABLE STATE SECURITIES
LAWS. NO TRANSFER OR SALE OF THESE SECURITIES OR ANY INTEREST
THEREIN MAY BE MADE EXCEPT UNDER AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT AND SAID STATE SECURITIES LAWS
COVERING SAID SECURITIES UNLESS THE ISSUER HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER OR
SALE DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR SAID
STATE SECURITIES LAWS.
Lender further agrees that if any transfer or distribution of any Securities is
proposed to be made otherwise than pursuant to registration under the 1933 Act
and applicable state securities laws, such action shall be taken only after
submission to the Company of an opinion of counsel, reasonably satisfactory in
form and substance to the Company's counsel, to the effect that the proposed
transfer or distribution will not be in violation of the Act or of applicable
state securities laws.
6.3 NO RIGHTS AS STOCKHOLDER. This Note does not entitle Lender to any
rights whatsoever as a stockholder of the Company. PROVIDED, HOWEVER, Lender
shall have the same rights to review the books and records of the Company as
would a stockholder of the Company under the General Corporation Law of the
State of Delaware.
6.4 CONVERSION PRICE. For purposes of converting Principal, Interest,
or Default Interest into Common Stock pursuant to Section 5.1 and payment of
Interest in shares of Common Stock pursuant to Section 2.2, the Conversion Price
shall be equal to one share per $0.20 converted. The Conversion Price shall be
subject to adjustment from time to time as provided in Section 6.5.
6.5 ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
(a) SPECIAL DEFINITIONS. For purposes of this Section 6.5, the
following definitions shall apply:
(1) "OPTION" shall mean rights, options, or warrants
to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
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(2) "ORIGINAL ISSUE DATE" shall mean the date on
which the first Convertible Note was issued pursuant to the Private Placement
Memorandum.
(3) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares (other than Convertible Notes), or other securities
directly or indirectly convertible into or exchangeable for Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued (or, pursuant to Section 6.5(c), deemed to be
issued) by the Company after the Original Issue Date, other than shares of
Common Stock issued or issuable (or so deemed to be issued):
[A] upon the issue of any Common Stock or the
Convertible Notes (including Common Stock issued upon conversion of any
Convertible Note or in payment of any interest under any Convertible Note)
pursuant to the Offering described in the Private Placement Memorandum;
[B] upon issue of any Common Stock or upon issue or
exercise of any options to officers, directors or employees of, or consultants
to, the Company pursuant to any stock Option, incentive, employment or
consulting, bonus or compensation program or agreement so long as any such
shares do not exceed at any time up to an aggregate of 20% of the issued and
outstanding shares of Common Stock (excluding any shares issued before the
Original Issue Date) and so long as with respect to any Options issued after the
Original Issue Date, the exercise price is not below $.50 per share;
[C] upon exercise of any Options issued prior to the
Original Issue Date or upon issue or exercise of any Options issued upon the
exercise of any warrants issued prior to the Original Issue Date;
[D] by way of dividend or other distribution on
shares Common Stock excluded from the definition of Additional Shares of Common
Stock by the foregoing clauses [A], [B], [C], or this clause [D] or on shares of
Common Stock so excluded; or
[E] for which adjustment is made in the Conversion
Price pursuant to Section 6.5(f).
(b) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional Shares
of Common Stock or otherwise, unless the consideration per share for such
Additional Shares of Common Stock issued or deemed to be issued by the Company
is less than the Conversion Price in effect on the date of, and immediately
prior to, the issue of such Additional Shares.
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(c) ISSUE OF OPTIONS AND CONVERTIBLE SECURITIES DEEMED ISSUE
OF ADDITIONAL SHARES OF COMMON STOCK. In the event the Company at any time or
from time to time after the Original Issue Date shall issue any Options or
Convertible Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained therein
for a subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall
(except as provided in Section 6.5(a)(4)) be deemed to be Additional Shares of
Common Stock issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that Additional Shares of Common Stock shall not be deemed to have been issued
unless the consideration per share (determined pursuant to Section 6.5(e)) of
such Additional Shares of Common Stock would be less than the Conversion Price
in effect on the date of and immediately prior to such issue, or such record
date, as the case may be, and provided further that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(2) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(3) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not have
been exercised, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto) and any
subsequent adjustments based thereon shall, upon such expiration, be recomputed
as if:
[A] in the case of Convertible Securities or Options for
Common Stock, the only Additional Shares of Common Stock issued were the shares
of Common Stock, if any, actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Company for the
issue of all such Options, whether or not exercised, plus the consideration
actually received by the Company upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Company upon such
conversion or exchange, and
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[B] in the case of Options for Convertible Securities, only
the Convertible Securities, if any, actually issued upon the exercise thereof
were issued at the time of issue of such Options, and the consideration received
by the Company for the Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received by the Company for the issue
of all such Options, whether or not exercised, plus the consideration deemed to
have been received by the Company (determined pursuant to Section 6.5(e)) upon
the issue of the Convertible Securities with respect to which such Options were
actually exercised;
(4) no readjustment pursuant to clause (1) or (2) above shall
have the effect of increasing the Conversion Price to an amount which exceeds
the lower of [A] the Conversion Price on the original adjustment date, or [B]
the Conversion Price that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date and such
readjustment date;
(5) in the case of any Options which expire by their terms not
more than thirty (30) days after the date of issue thereof, no adjustment of the
Conversion Price shall be made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in the same manner provided in
clause (3) above; and
(6) if such record date shall have been fixed and such Options
or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Conversion Price which became effective on
such record date shall be cancelled as of the close of business on such record
date, and thereafter the Conversion Price shall be adjusted pursuant to this
Section 6.5(c) as of the actual date of their issuance.
(d) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF COMMON STOCK. In the event the Company shall issue Additional Shares
of Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 6.5(c)) 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, concurrently with such issue, to an amount (calculated to the nearest
cent) determined by multiplying such Conversion Price in effect immediately
prior to such issuance by a fraction, (x) the numerator of which shall be (A)
the number of shares of Common Stock outstanding immediately prior to such issue
(including shares of Common Stock issuable upon conversion of any outstanding
Convertible Notes and Convertible Securities and the exercise of any Options,
except for Options excluded from the definition of "Additional Shares of Common
Stock" under Section 6.5(a)(4)), plus (B) the number of shares of Common Stock
which the net aggregate consideration, if any, received by the Company for the
total number of such additional shares of Common Stock so issued would purchase
at such Conversion Price in effect immediately prior to such issuance, and (y)
the denominator of which shall be (A) the number of shares of Common Stock
outstanding immediately prior to such issue (including shares of Common Stock
issuable upon conversion of any outstanding Preferred Stock and Convertible
Securities and the exercise of any Options (except for Options excluded from the
definition of "Additional Shares of Common Stock" under Section 6.5(a)(4)), plus
(B) the total number of such Additional Shares of Common Stock so issued.
(e) DETERMINATION OF CONSIDERATION. For purposes of this
Section 6.5, the consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as follows:
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(1) CASH AND PROPERTY. Such consideration shall:
[A] insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company excluding amounts paid or
payable for accrued interest or accrued dividends;
[B] insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, as determined in
good faith by the Board of Directors; and
[C] in the event Additional Shares of Common Stock are issued
together with other shares or 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 [A] and [B] above, as determined in
good faith by the Board of Directors.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by
the Company for Additional Shares of Common Stock deemed to have been issued
pursuant to Section 6.5(c), relating to Options and Convertible Securities,
shall be determined by dividing (x) the total amount, if any, received or
receivable by the Company as consideration for the issue of such Options or
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 until such subsequent adjustment occurs) payable to the Company
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities or in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities, by (y) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such number
until such subsequent adjustment occurs) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
(f) ADJUSTMENT FOR DIVIDENDS, ETC.
(1) STOCK DIVIDENDS, DISTRIBUTIONS, OR SUBDIVISIONS.
In the event the Company at any time or from time to time after the Original
Issue Date shall declare or pay any dividend or make any other distribution on
the Common Stock payable in Common Stock, or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock), then and in any such event, the
Conversion Price shall be proportionately decreased to reflect such dividend,
distribution or subdivision as of: [A] in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or distribution, or [B] in the case of any such subdivision, at the
close of business on the date immediately prior to the date upon which such
corporate action becomes effective. If such record date or other effective date
shall have been fixed and such dividend, distribution or subdivision shall not
have been fully paid or effected on the date fixed therefor, the adjustment
previously made in the Conversion Price which became effective on such record
date or other date shall be cancelled as of the close of business on such record
date or other date, and thereafter the Conversion Price shall be adjusted
pursuant to this Section 6.5(c) as of the time of actual payment of such
dividend, distribution or effectiveness of such subdivision.
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(2) COMBINATIONS OR CONSOLIDATIONS. In the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(g) ADJUSTMENT FOR MERGER OR REORGANIZATION. In case of any
capital reorganization or reclassification of the capital stock of the Company
(other than a reclassification covered by Section 6.5(f)(2)), the Principal,
Interest, and Default Interest shall thereafter be convertible into and Interest
shall be payable by the number of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock would be
entitled upon such reorganization or reclassification. In any such case,
appropriate adjustment (as determined by the Board of Directors) shall be made
in the application of these provisions set forth with respect to the rights and
interest thereafter of the Lender, to the end that these provisions (including
provisions with respect to changes in and other adjustments of the Conversion
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the conversion of Principal, Interest, and Default Interest or the payment of
Interest.
6.6 MINIMAL ADJUSTMENTS. No adjustment in the Conversion Price need be
made if such adjustment would result in a change in the Conversion Price of less
than $0.0001. Any adjustment of less than $0.0001 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.0001 or more in the Conversion Price.
6.7 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to Section 6.5, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to the Lender a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon written request at any time of the Lender, furnish or cause to be
furnished to the Lender a like certificate setting forth (a) such adjustments
and readjustments, (b) the Conversion Price at the time in effect, and (c) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of Principal, Interest, or
Default Interest or the payment of Interest.
7. RESTRICTIONS ON TRANSFER.
7.1 OWNERSHIP OF NOTE. The Company may deem and treat the Lender as the
holder and owner hereof (notwithstanding any notations of ownership or writing
hereon made by any person other than the Company) for all purposes and shall not
be affected by any notice to the contrary, until presentation of this Note for
registration of transfer as provided in this Section 7.
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7.2 TRANSFER OF NOTE. The Company agrees to maintain books for the
registration of transfers of this Note and all rights hereunder shall be
registered, in whole or in part, on such books, upon surrender of this Note to
the Company, together with a written assignment of this Note duly executed by
Lender or its duly authorized agent or attorney. Subject to applicable law and
regulation and Section 7 of this Note, upon surrender of this Note as provided
for herein, the Company shall execute and deliver a new Note in the name of the
assignee or assignees, and this Note shall promptly be canceled.
7.3 RESTRICTIONS ON TRANSFER. Lender, by its acceptance hereof,
represents that this Note is being acquired for Lender's own account, as an
investment and not with a view towards the further resale or the distribution
thereof in violation of the Securities Act, and agrees that this Note may not be
transferred, sold, assigned, hypothecated or otherwise disposed of, in whole or
in part, except as provided in the legend on the first page hereof and provided
that Lender shall have furnished to the Company an opinion of Lender's Counsel,
in form and substance reasonably satisfactory to the Company, to the effect that
such transfer is exempt from the registration requirements of the Securities Act
and any applicable state securities laws.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. The following shall constitute events of default
hereunder (an "EVENT OF DEFAULT"): (i) a default in the payment of any amounts
due hereunder occurring on or prior to the Maturity Date and such default is not
cured within 10 days of the date such payment is due; (ii) a default by the
Company in the performance of its obligations under Section 3.1; (iii) a default
by the Company in the performance of any covenant (other than those provided in
(i) and (ii)) under this Note and such default is not cured within 30 days of
the date it occurs; (iv) any representation or warranty made by the Company
contained in the Subscription Agreement and Questionnaire of Lender pursuant to
which this Note was issued shall prove to have been incorrect in any material
respect when made; (v) any assignment for the benefit of creditors by the
Company; (vi) the appointment of a receiver for the Company or for a substantial
portion of the property of the Company unless such appointment shall be
dismissed within 90 days of the filing thereof; (vii) the filing of a petition
in bankruptcy by or against the Company unless such filing shall be dismissed
within 90 days thereof; or (viii) the termination of existence or dissolution of
the Company.
8.2. ACCELERATION. Notwithstanding anything to the contrary contained
herein, upon the occurrence of an Event of Default, then upon the determination
of Lender (in Lender's discretion), and without further demand or notice of any
kind, the following shall become immediately due and payable: (i) the Principal;
(ii) unpaid Interest; (iii) any unpaid Default Interest; and (iv) all other
indebtedness evidenced by this Note.
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8.3 GENERAL. Upon the occurrence of an Event of Default, Lender shall
have all of the rights and remedies provided to Lender: (i) under this Note, and
(ii) otherwise at law or in equity. The remedies of Lender, as provided in this
Note, shall be cumulative and concurrent, and may be pursued singularly,
successively, or together, at the sole discretion of Lender, and may be
exercised as often as occasion therefor shall arise. No act or omission of
Lender, including specifically any failure to exercise any right, remedy or
recourse, shall be deemed to be a waiver or release of the same, such waiver or
release to be effected only through a written document executed by Lender and
then only to the extent specifically recited therein. A waiver or release with
reference to any one event shall not be construed as continuing, as a bar to, or
as a waiver or release of, any subsequent right, remedy, or recourse as to a
subsequent event.
8.4 COSTS AND FEES. If this Note is placed in the hands of an attorney
for collection or is collected through any legal proceeding, the Company
promises to pay, to the extent permitted by law, court costs and reasonable
attorneys' fees incurred by Lender, and all such amounts shall thereafter
constitute other indebtedness evidenced by this Note.
8.5 WAIVERS. Every person and/or entity now or at any time liable,
whether primarily or secondarily, for the payment of the indebtedness evidenced
hereby, for such person and/or entity and for the heirs, legal representatives,
successors, and assigns of such person and/or entity, expressly waives
presentment for payment, notice of dishonor, protest, notice of protest, and
diligence in collection, and further waives for the benefit of itself and such
other parties, to the extent permitted by law, the benefit of all appraisement,
valuation, marshaling, forbearance, stay, extension, redemption, homestead,
exemption, and moratorium laws now or hereafter in force, and agrees that the
time of payment of Principal, Interest, or Default Interest may be extended,
without in any way modifying, altering, releasing, affecting, or limiting his,
her, or its liability hereunder.
8.6 APPLICATION OF PAYMENTS. After the Maturity Date or following the
occurrence of an Event of Default, all payments received on account of the
indebtedness evidenced hereby shall be applied, in whatever order, combination
and amounts as Lender, in its sole discretion, decide, to all costs, expenses,
and other indebtedness, if any, owing to Lender by reason of this Note, Default
Interest, Interest, and Principal.
9. MISCELLANEOUS.
9.1 SEVERABILITY. If any provision of this Note is unenforceable,
invalid or contrary to law, or its inclusion herein would affect the validity,
legality, or enforcement of this Note, such provision shall be limited to the
extent necessary to render the same valid or shall be excised from this Note, as
the circumstances require, and this Note shall be construed as if said provision
had been incorporated herein as so limited or as if said provision had not been
included herein, as the case may be.
9.2 BINDING EFFECT. This Note, and the terms and provisions hereof,
shall be binding upon the Company and its successors, administrators, and
assigns, and shall inure to the benefit of' Lender.
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9.3 GOVERNING LAW. This Note shall be governed by and construed in
accordance with the internal laws of the State of New York without reference to
(i) its judicially or statutorily pronounced rules regarding conflict of laws or
choice of law; (ii) where any instrument is executed or delivered; (iii) where
any payment or other performance required by any such instrument is made or
required to be made; (iv) where any breach of any provision of any such
instrument occurs, or any cause of action otherwise accrues; (v) where any
action or other proceeding is instituted or pending; (vi) the nationality,
citizenship, domicile, principal place of business, or jurisdiction or
organization or domestication of any party; (vii) whether the laws of the form
jurisdiction otherwise would apply the laws of a jurisdiction other than the
State of New York; or (viii) any combination of the foregoing.
9.4 NOTICE. Any notice or other communication to be given hereunder
shall be in writing and, unless otherwise provided in this Note, shall be shall
be conclusively deemed given if deposited in the United States mail, postage
prepaid, and addressed to the recipient at the address set forth below (or at
such other address as Lender or the Company shall by notice specify to the
other).
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first above written.
Performance Health Technologies, Inc.
By:
------------------------------------------
Name:
Title:
Notice Address:
[Insert Lender's Address] 000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
----------------------------------
----------------------------------
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CONVERSION ELECTION
(To be executed upon conversion of Note)
To: Performance Health Technologies, Inc. (the "Company")
Lender hereby irrevocably elects to convert Lender's rights represented
by this Note to purchase _______ shares of Common Stock issuable upon the
conversion of this Note and requests that certificates for such securities shall
be issued in the name of Lender and be delivered to
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
(please print or type name and address)
and if such number of shares of Common Stock shall not be all the shares that
may be acquired pursuant to the conversion of this Note that a new Note for the
balance not converted be registered in the name of and delivered to Lender at
the address stated above.
In connection with the conversion of the Note, Lender hereby represents and
warrants that: (i) Lender recognizes that the Common Stock issuable pursuant to
the attached Note have not been registered under the Securities Act and may not
be sold, pledged or otherwise transferred except pursuant to the exceptions set
forth on the legend on the Common Stock which is also set forth in Section 7 of
the attached Note; (ii) Lender has received all material information with
respect to the Company which Lender deems necessary with its decision to convert
the attached Note and Lender has been given an opportunity to ask questions and
receive answers from representatives of the Company; (iii) Lender is purchasing
the Common Stock for Lender's own account, for the purpose of investment only,
and not with a view towards the further resale or distribution thereof; and (iv)
Lender is an "Accredited Investor" within the meaning of Rule 501 of Regulation
D under the Securities Act of 1933, as amended.
Dated: ________________
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NOTE: The above signatory should correspond
exactly with the name on the face of the
attached Note.
----------------------------------------------
Taxpayer Identification Number
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Signature Guaranteed
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ASSIGNMENT
(To be executed upon assignment of Note)
For value received and in accordance with Section 7 of the attached Note,
____________________ hereby sells, assigns and transfers unto ____________ the
attached Note, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint __________________ attorney to
transfer said Note on the books of Performance Health Technologies, Inc. with
full power of substitution in the premises.
Dated: ____________________
----------------------------------------------
NOTE: The above signatory should correspond
exactly with the name on the face of the
attached Note.
----------------------------------------------
Signature Guaranteed
Consented to and approved in accordance with
Section 7 of the attached Note
PERFORMANCE HEALTH TECHNOLOGIES, INC.
By:
----------------------------------------
Name:
----------------------------------------
Its:
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