POSITRON CORPORATION
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (the "Agreement") is made as of May 21, 2004,
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by and between Positron Corporation, a Texas corporation (the "Company"), and
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IMAGIN Diagnostic Centres, Inc., an Ontario, Canada corporation ("Investor").
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All numbers expressed herein as "$" or "dollars" are in United States dollars.
R E C I T A L S:
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WHEREAS, the Company desires to issue Secured Convertible Promissory Notes
in the aggregate principal amount of $700,000, subject to the terms and
conditions set forth in this Agreement.
WHEREAS, the Investor desires to purchase the Secured Convertible
Promissory Notes, subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the respective undertakings, covenants
and agreements of the parties set forth herein, the parties hereby agree as
follows:
SECTION 1 PURCHASE AND SALE OF THE NOTE.
1.1 Issuance of the Notes. The Company has authorized the issuance and
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sale to the Investor of, and, subject to and in reliance upon the
representations, warranties, terms and conditions of this Agreement, the
Investor the have agreed to purchase, the Company's Secured Convertible
Promissory Notes (individually, a "Note" and collectively, the "Notes"), in the
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original aggregate principal amount of $700,000. Each Note shall be
substantially in the form set forth in Exhibit A hereto.
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1.2 Closing. The Company agrees to issue and sell to the Investor, and,
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subject to and in reliance upon the representations, warranties, terms and
conditions of this Agreement, the Investor agrees to purchase, the Notes for the
aggregate purchase price of $700,000. Such purchase and sale shall take place
(a) at the initial closing (the "First Closing") to be held at the offices of
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the Company, 0000 Xxxxxxx Xxxxx Xxxxx, #000, Xxxxxxx, Xxxxx 00000 on May 21,
2004, at 10:00 A.M. (the "First Closing Date"), or on such other dates and at
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such times as may be mutually agreed upon and (b) at a second closing (the
"Second Closing") to be held at the offices of the Company, 0000 Xxxxxxx Xxxxx
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Xxxxx, #000, Xxxxxxx, Xxxxx 00000 on May 28, 2004, at 10:00 A.M. (the "Second
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Closing Date"), or on such other dates and at such times as may be mutually
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agreed upon. At the First Closing, the Company will issue a Note, dated the
First Closing Date, payable to the order of Investor, in the principal amount of
$400,000 in exchange for cash. At the Second Closing, the Company will issue a
Note, dated the Second Closing Date, payable to the order of Investor, in the
principal amount of $300,000 in exchange for cash. The First Closing and the
Second Closing shall be referred to individually and collectively hereinafter as
the "Closing".
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1.3 Payments and Endorsements. Payments of principal, interest and
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premium, if any, on the Notes, shall be made directly by wire transfer or by
checks duly mailed or delivered to the Investor at addresses specified in the
Note without any presentment or notation of payment, except that prior to any
transfer of any Note, the holder of record shall endorse on such Note a record
of the date to which interest has been paid and all payments made on account of
principal of such Note.
1.4 Payment on Non-Business Days. Whenever any payment to be made shall
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be due on a day which is not a Business Day, such payment may be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest due.
1.5 Registration, etc. The Company shall maintain at its principal office
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a register of the Notes and shall record therein the name and address of the
registered holder of the Notes, the address to which notices are to be sent and
the address to which payments are to be made as designated by the registered
holder if other than the address of the holder, and the particulars of all
transfers, exchanges and replacements of Notes. No transfer of a Note shall be
valid unless made on such register for the registered holder or his executors or
administrators or his or their duly appointed attorney, upon surrender therefor
for exchange as hereinafter provided, accompanied by an instrument in writing,
in form and execution reasonably satisfactory to the Company. Each Note issued
hereunder, whether originally or upon transfer, exchange or replacement of a
Note or Notes, shall be registered on the date of execution thereof by the
Company and shall be dated the date to which interest has been paid on such Note
or Notes. The registered holder of a Note shall be that Person in whose name
the Note has been so registered by the Company. A registered holder shall be
deemed the owner of a Note for all purposes of this Agreement and, subject to
the provisions hereof, shall be entitled to the principal, premium, if any, and
interest evidenced by such Note free from all equities or rights of set-off or
counterclaim among the Company and the transferor of such registered holder or
any previous registered holder of such Note.
1.6 Limitations on Transferability. The Investor covenants that in no
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event will it dispose of any Note or any shares of capital stock into which such
Note is convertible unless and until Investor shall have complied with Sections
4.7 and 4.8 hereof and (a) the Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and (b) if requested by
the Company, the Investor shall have furnished the Company with an opinion of
counsel satisfactory in form and substance to the Company and the Company's
counsel to the effect that (x) such disposition will not require registration
under the Securities Act and (y) appropriate action necessary for compliance
with the Securities Act and any applicable state, local, or foreign law has been
taken.
1.7 Replacement of Notes. Upon receipt of evidence satisfactory to the
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Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated
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Note; provided, however, if any Note of which an Investor, its nominee, or any
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of its partners or affiliates is the registered holder is lost, stolen or
destroyed, the affidavit of the registered holder setting forth the
circumstances with respect to such loss, theft or destruction shall be accepted
as satisfactory evidence thereof, and no indemnification bond or other security
shall be required as a condition to the execution and delivery by the Company of
a new Note in replacement of such lost, stolen or destroyed Note other than the
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registered holder's written agreement to indemnify the Company.
1.8 Conversion of Notes. All or any portion of the principal amounts of
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the Notes, may be converted at the option of the Investor, into shares of Series
C Preferred Stock (as defined herein) at a conversion price and on such terms as
are provided in the Notes.
SECTION 2 DEFINITIONS.
For purposes of this Agreement the following terms shall have the following
meanings:
2.1 "ARTICLES" shall mean the Company's Articles of Incorporation, as
amended, as of the First Closing, and including the Series A Statement, Series C
Statement and Series D Statement thereto.
2.2 "BUSINESS DAY" shall mean a day other than Saturday, Sunday or a
public holiday under the laws of the State of Texas.
2.3 "COMMISSION" shall mean the Securities and Exchange Commission.
2.4 "COMMON STOCK" shall mean the Common Stock of the Company, par value
$0.01 per share.
2.5 "EQUIPMENT PURCHASE AGREEMENT" shall mean the Equipment Purchase
Agreement dated as of the First Closing by and between the Company and Investor.
2.6 "FINANCIAL STATEMENTS" shall mean the Company's (a) audited balance
sheet as of March 31, 2004 and (b) audited statement of operations,
shareholders' equity and cash flows for the twelve months and year ended March
31, 2004.
2.7 "GAAP" shall mean United States generally accepted accounting
principles.
2.8 "INDEBTEDNESS" shall mean all obligations, contingent and otherwise,
which should, in accordance with GAAP consistently applied, be classified upon
the obligor's balance sheet as liabilities, but in any event including, without
limitation, liabilities secured by any mortgage on property owned or acquired
subject to such mortgage, whether or not the liability secured thereby shall
have been assumed, and also including, without limitation, (i) all guaranties,
endorsements and other contingent obligations, in respect of Indebtedness of
others, whether or not the same are or should be so reflected in said balance
sheet, except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business and (ii)
the present value of any lease payments due under leases required to be
capitalized in accordance with applicable Statements of Financial Accounting
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Standards, determined in accordance with applicable Statements of Financial
Accounting Standards.
2.9 "INTELLECTUAL PROPERTY" shall mean patents, patent applications,
trademarks, service marks, mask works, trade names, copyrights, trade secrets,
information, proprietary rights and processes.
2.10 "LOAN AGREEMENT" shall mean the Loan Agreement dated as of the First
Closing by and between the Company and Investor providing for borrowing by the
Company of up to $1,300,000.
2.11 "MATERIAL ADVERSE EVENT" shall mean any change, event or effect that
is materially adverse to the general affairs, business, operations, assets,
condition (financial or otherwise) or results of operations of the Company and
its subsidiaries taken as a whole; provided, however, that the following shall
not be taken into account in determining a "Material Adverse Event": (a) any
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adverse change, event or effect that is directly attributable to conditions
affecting the United States economy generally unless such conditions adversely
affect the Company in a materially disproportionate manner, and (b) any adverse
change, event or effect that is directly attributable to conditions affecting
the Company's industry generally, unless such conditions adversely affect the
Company in a materially disproportionate manner.
2.12 "PERSON" shall mean an individual, corporation, partnership, joint
venture, limited liability company, trust, or unincorporated organization, or a
government or any agency or political subdivision thereof, or any other entity
or business form.
2.13 "PREFERRED STOCK" shall mean the Company's Series A Preferred Stock,
Series C Preferred and Series D Preferred Stock.
2.14 "PREPAYMENT" shall mean any payment of any Indebtedness prior to the
scheduled date of payment therefor.
2.15 "REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated as of the First Closing by and between the Company and the
Investor in the form attached hereto as Exhibit B.
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2.16 "SCHEDULE OF EXCEPTIONS" shall mean the schedule of exceptions to the
representations and warranties of the Company in Section 3. The Schedule of
Exceptions is attached as Schedule 1 hereto.
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2.17 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended and
the rules and regulations of the Commission promulgated thereunder.
2.18 "SECURITY AGREEMENT" shall mean the Security Agreement dated as of the
First Closing by and between the Company and the Investor in the Form attached
hereto as Exhibit C.
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2.19 "SERIES A PREFERRED STOCK" shall mean the Series A Preferred Stock of
the Company, par value $1.00 per share.
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2.20 "SERIES A STATEMENT" shall mean the Statement of Designation
Establishing Series A 8% Cumulative Convertible Redeemable Preferred Stock of
Position Corporation, filed with the Texas Secretary of State on February 29,
1996.
2.21 "SERIES C PREFERRED STOCK" shall mean the Series C Preferred Stock of
the Company, par value $1.00 per share.
2.22 "SERIES C STATEMENT" shall mean the Statement of Designation
Establishing Series C Preferred Stock of Positron Corporation, filed with the
Texas Secretary of State on May 21, 2004.
2.23 "SERIES D PREFERRED STOCK" shall mean the Series D Preferred Stock of
the Company, par value $1.00 per share.
2.24 "SERIES D STATEMENT" shall mean the Statement of Designation
Establishing Series D Preferred Stock of Positron Corporation, filed with the
Texas Secretary of State on May 21, 2004.
2.25 "SUBSIDIARY" shall mean any corporation, partnership or other entity,
more than 50% of whose equity interests (measured by virtue of voting rights) in
the aggregate is owned by the Company.
2.26 "TAX" or "TAXES" shall mean any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall, profits, environmental, customs,
capital stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative or add-on minimum or
other similar tax, governmental fee, governmental assessment or governmental
charge of any kind whatsoever, including any interest, penalties or additions or
additional amounts with respect to the foregoing.
2.27 "TRANSACTIONAL AGREEMENTS" shall mean this Agreement, the Notes, the
Security Agreement, and the Registration Rights Agreement.
2.28 "VOTING AGREEMENT" shall mean the Voting Agreement dated as of the
First Closing by and between the Company and Investor in the form attached
hereto as Exhibit D.
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2.29 "WARRANTS" shall mean the outstanding warrants of the Company
immediately prior to the date of this Agreement, exercisable for an aggregate of
25,120,000 shares of the Company's Common Stock.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedule of Exceptions (as noted herein), the
Company hereby represents and warrants to the Investor that:
3.1 Corporate Organization and Authority. The Company:
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3.1.1 is a corporation duly organized, validly existing,
authorized to exercise all its corporate powers, rights and privileges, and in
good standing in the State of Texas;
3.1.2 has the corporate power and corporate authority to own and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted;
3.1.3 has made available to the Investor or their counsel a copy
of the minute books of the Company, and said copies are true, correct, and
complete and contain all amendments and all minutes of meetings and actions
taken by the shareholders and directors of the Company through the date of this
Agreement.
3.2 Capitalization. The authorized capital of the Company consists of:
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3.2.1 Preferred Stock. 10,000,000 shares of Preferred Stock,
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$1.00 par value, of which: (i) 5,450,000 shares are designated as Series A
Preferred Stock, 510,219 shares of which are issued and outstanding prior to the
First Closing; (ii) 840,000 shares are designated as Series C Preferred Stock,
no shares of which are issued or outstanding prior to the First Closing; and
(iii) 1,560,000 shares are designated as Series D Preferred Stock, no shares of
which are issued or outstanding prior to the First Closing;
3.2.2 Common Stock. 100,000,000 shares of Common Stock, of which
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53,245,959 shares are issued and outstanding prior to the First Closing
(including treasury shares);
3.2.3 Other Securities. Except as set forth on Schedule 3.8 of
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the Schedule of Exceptions, the Company has reserved: (a) 840,000 shares of
Series C Preferred Stock for issuance upon conversion of the Notes; (b)
1,560,000 shares of Series D Preferred Stock for issuance upon conversion of the
notes issued by the Company to Investor pursuant to the Loan Agreement; (c)
510,219 shares of Common Stock for issuance upon conversion of the Series A
Preferred Stock; (d) subject to stockholder approval, 42,000,000 shares of
Common Stock for issuance upon conversion of the Series C Preferred Stock; (e)
subject to stockholder approval, 62,400,000 shares of Common Stock for issuance
upon conversion of the Series D Preferred Stock; (f) 6,100,000 shares of Common
Stock for issuance upon exercise of the Warrants; and (g) an aggregate of
1,746,654 shares of Common Stock for issuance under the Company's 1999 Employee
Stock Option Plan, 1999 Non-Employee Directors' Stock Option Plan, 1999 Stock
Bonus Incentive Plan and 1999 Employee Stock Purchase Plan (collectively the
"Plans"), prior to the First Closing. Except as set forth above, in Schedule
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3.8 of the Schedule of Exceptions, and in the Articles and the Registration
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Rights Agreement, there are no outstanding (and no commitments to issue) rights
of first refusal, preemptive rights or other rights, warrants, options, stock
appreciation rights, phantom stock rights, conversion privileges, subscriptions,
or other rights or agreements, either directly or indirectly, to purchase or
otherwise acquire, sell or issue any equity securities of the Company.
3.2.4 The outstanding shares of Preferred Stock and Common Stock
(i) are all duly and validly authorized and issued, fully paid and
non-assessable and (ii) were issued in compliance with all applicable state and
federal securities laws.
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3.3 Subsidiaries. The Company does not presently own, have any equity
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interest or investment in, or control, directly or indirectly, any other
corporation, partnership or entity. The Company is not a participant in any
joint venture or partnership.
3.4 Financial Statements; Liabilities.
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3.4.1 Financial Statements. The Financial Statements are accurate
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and complete in all material respects, consistent with the books and records of
the Company (which are accurate and complete in all material respects) and have
been prepared in accordance with GAAP consistently applied. The Financial
Statements fairly present the financial condition and operating results of the
Company as of the dates and for the periods indicated therein.
3.4.2 Liabilities. As of the date hereof, the Company has no
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material liabilities, debts or obligations, whether accrued, absolute,
contingent or otherwise, whether known or unknown, and whether due or to become
due, regardless of when asserted, including, but not limited to, liabilities on
account of taxes, other governmental charges or lawsuits, other than liabilities
incurred since the incorporation of the Company in the ordinary course of
business and properly reflected in the Financial Statements. The Company is not
a guarantor or indemnitor of any indebtedness of any other person or entity.
3.5 Corporate Power. Except as set forth on Schedule 3.5 of the Schedule
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of Exceptions, the Company will have at the Closing Date all requisite legal and
corporate power and authority to execute and deliver the Transactional
Agreements, to sell and issue the Notes hereunder, to issue the Series C
Preferred Stock upon conversion of the Notes, subject to stockholder approval
(as set forth in Section 7.1 hereof), to issue the Common Stock issuable upon
conversion of the Series C Preferred Stock, and to carry out and perform its
obligations under the terms of the Transactional Agreements.
3.6 Authorization. Except as set forth on Schedule 3.6 of the Schedule of
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Exceptions, all corporate action on the part of the Company, its officers,
directors, and stockholders necessary for the authorization, execution,
delivery, and performance of all obligations under the Transactional Agreements,
and for the authorization, issuance, and delivery of the Notes, of the Series C
Preferred Stock issuable upon conversion of the Notes, and of the Common Stock
issuable upon conversion of the Series C Preferred Stock has been taken. The
Transactional Agreements constitute legally binding and valid obligations of the
Company enforceable in accordance with their respective terms, except to the
extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors' rights and laws concerning
equitable remedies.
3.7 Validity of Shares. The Series C Preferred Stock issuable upon
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conversion of the Notes has been duly and validly reserved and, assuming such
Series C Preferred Stock is issued in accordance with the Articles and the terms
of this Agreement, will be duly and validly issued (including, without
limitation, issued in compliance with applicable federal and state securities
laws) and non-assessable and will be free of any liens or encumbrances other
than any liens or encumbrances created by or imposed thereon under this
Agreement, the Notes, or the Registration Rights Agreement. Subject to
stockholder approval, as set forth in Section 7.1
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hereof, the Common Stock issuable upon conversion of the Series C Preferred
Stock has been duly and validly reserved and, assuming such Common Stock is
issued in accordance with the Articles, will be duly and validly issued
(including, without limitation, issued in compliance with applicable federal and
state securities laws) and non-assessable and will be free of any liens or
encumbrances other than any liens or encumbrances created by or imposed thereon
by the holders; provided, however, that the Series C Preferred Stock (and the
Common Stock issuable upon conversion thereof) shall be subject to restrictions
on transfer under state and/or federal securities laws. Except as set forth on
Schedule 3.7 of the Schedule of Exceptions, the Notes, the Series C Preferred
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Stock issuable upon conversion of the Notes and the Common Stock issuable upon
conversion of the Series C Preferred Stock are not subject to any preemptive or
other similar statutory or contractual rights and will not conflict with any
provisions of any agreement or instrument to which the Company is a party or by
which it is bound.
3.8 Litigation. Except as set forth on Schedule 3.8 of the Schedule of
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Exceptions, there is no action, proceeding, or investigation pending or, to the
Company's knowledge, threatened by or against the Company, or any of its
employees, officers, directors and/or stockholders, or affecting any of its
properties or assets, and there is no basis therefor known to the Company.
There is no judgment, decree, or order of any court in effect against the
Company and the Company is not in default with respect to any order of any
governmental authority to which the Company is a party or by which it is bound.
There is no action, suit, proceeding, or investigation by the Company currently
pending or which the Company presently intends to initiate.
3.9 Title to Properties; Liens and Encumbrances. Except as set forth on
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Schedule 3.9 of the Schedule of Exceptions, the Company has good and marketable
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title to all of its properties and assets, both real and personal, and has good
title to all its leasehold interests, in each case subject to no mortgage,
pledge, lien, security interest, conditional sale agreement, encumbrance, or
charge, other than (a) the lien of current taxes not yet due and payable, and
(b) liens and encumbrances which do not materially detract from the value of the
property subject thereto or materially impair the operations of the Company.
3.10 Patents and Other Proprietary Rights.
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3.10.1 (i) To the knowledge of the Company, the Company has
sufficient title and ownership of all Intellectual Property necessary for its
business as now conducted, and believes it can obtain, on commercially
reasonable terms, any additional rights necessary for its business as
contemplated at the Closing, and (ii) the Company's Intellectual Property does
not, and would not, conflict with or constitute an infringement of the rights of
others;
3.10.2 The Company has not received any communications alleging
that the Company or its employees has violated or infringed or, by conducting
its business as proposed, would violate or infringe any Intellectual Property
rights of any other person or entity;
3.10.3 To the knowledge of the Company, no employee is obligated
under any contract (including licenses, covenants, or commitments of any nature)
or other agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would
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interfere with the use of such employee's best efforts to promote the interests
of the Company or that would conflict with the Company's business as
contemplated at the Closing; and
3.10.4 Neither the execution nor delivery of any Transactional
Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as contemplated at the
Closing, will, to the Company's knowledge, conflict with the terms, conditions,
or provisions of, or constitute a default under, any contract, covenant, or
instrument under which any of such employees is now obligated. The Company does
not believe it is, or will be, necessary to utilize any inventions of any of its
employees (or people it currently intends to hire) made prior to their
employment by the Company.
3.11 Compliance With Other Agreements. Except as set forth on Schedule
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3.11 of the Schedule of Exceptions, the Company is not in violation of any term
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or provision of its Articles or Bylaws, each as in effect as of the Closing, or
any term or provision of any indebtedness, mortgage, indenture, contract,
agreement, judgment or, to the Company's knowledge, any decree, order, statute,
rule or regulation applicable to the Company, in each case, or in the aggregate,
the violation of which would constitute a Material Adverse Event. The
execution, delivery and performance of the Transactional Agreements by the
Company will not result in any violation of, be in conflict with, or constitute
a default under, with or without the passage of time or the giving of notice, in
each case, or in the aggregate, the violation, conflict or default would
constitute a Material Adverse Event:
3.11.1 any provision of the Company's Articles or Bylaws;
3.11.2 any provision of any judgment, decree or order to which the
Company is a party or by which it is bound;
3.11.3 any material contract, obligation or commitment to which the
Company is a party or by which it is bound; or
3.11.4 any statute, rule or governmental regulation applicable to
the Company.
3.12 Employee Relations and Compensation Plans. The Company believes its
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relations with its employees are satisfactory. The Company's employees are not
represented by any labor unions nor, to the Company's knowledge, is any union
organization campaign in progress. The Company is not aware that any of its
officers or employees intends to terminate employment nor does the Company have
any present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company. Except as set forth on Schedule 3.12 of the Schedule of
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Exceptions, the Company is not party to or bound by any currently effective
employment contracts, severance agreements, deferred compensation agreements,
bonus plans, incentive plans, profit sharing plans, retirement agreements, or
other employee compensation agreements, arrangements or understandings.
3.13 Employee Confidential Information and Inventions Agreement. Each
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officer, employee, and consultant of the Company has executed and delivered to
the Company an employee confidential information and inventions agreement, the
form of which has been
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delivered to Investors. The Company, after reasonable investigation, is not
aware that any of its employees, officers, or consultants is in violation
thereof.
3.14 Governmental and Third Party Consents. Subject to the accuracy of the
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Investor' representations in Section 4 of this Agreement, no consent, approval,
order, or authorization of, or registration, qualification, designation,
declaration, or filing with, any federal, state, local, or provincial
governmental authority on the part of the Company is required in connection with
the consummation of the transactions contemplated by this Agreement, except for
the timely filing of such filings as are required by the securities laws of
those jurisdiction of which the Investor is resident.
3.15 Brokers and Finders. The Company has not retained any investment
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banker, broker, or finder in connection with the transactions contemplated by
this Agreement.
3.16 No Adverse Changes. Since March 31, 2004, there has not been:
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3.16.1 any adverse change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not resulted, individually or in the aggregate, in a Material Adverse
Event;
3.16.2 any waiver by the Company of a valuable right or of a debt
owed to it;
3.16.3 any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that did not result in a Material Adverse Event;
3.16.4 any termination, change or amendment to a material contract
or arrangement by which the Company or any of its assets or properties is bound
or subject;
3.16.5 any change in any compensation arrangement or agreement with
any employee;
3.16.6 any sale, assignment or transfer of any Intellectual
Property or other intangible assets, or disclosure of any proprietary
confidential information to any person;
3.16.7 any resignation or termination of employment (or notice of
intent thereof) of any key officer of the Company;
3.16.8 any declaration, payment, setting aside or other
distribution of cash or other property to its stockholders with respect to its
capital stock or other equity securities (including, without limitation, any
warrants, options or other rights to acquire its capital stock or other equity
securities);
3.16.9 made any capital expenditures or commitments therefor that
aggregate in excess of $100,000;
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3.16.10 made any loans or advances to, guarantees for the benefit
of, or any investments in, any person (including but not limited to any of the
Company's employees, officers or directors, or any members of their immediate
families), corporation, partnership, joint venture or other entity;
3.16.11 the knowledge of the Company, any other event or condition
of any character that might result in a Material Adverse Event; or
3.16.12 any agreement or commitment by the Company to do any of the
things described in this Section 3.16.
3.17 Taxes. Except as set forth on Schedule 3.17 of the Schedule of
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Exceptions, the Company has timely filed all tax returns (federal, state and
local) required to be filed by it, and all Taxes, assessments and other
government charges imposed upon the Company, or upon any of the assets, income
or franchises of the Company, have been timely paid or, if not yet payable, are
adequately accrued on the Company's books and records. Except as set forth on
Schedule 3.17 of the Schedule of Exceptions, there are no actual or proposed Tax
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deficiencies, assessments or adjustments with respect to the Company or any
assets or operations of the Company. No consent has been given with respect to
the Company to extend the time in which any Tax may be assessed or collected by
any taxing authority. There are no ongoing or pending Tax audits by any taxing
authority against the Company.
3.18 Insurance. The Company has in full force and effect fire, casualty,
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business interruption and other insurance policies, with extended coverage,
sufficient in amount to allow it to replace any of its properties that might be
damaged or destroyed or to cover liabilities to which the Company may reasonably
become subject, and such types and amounts of other insurance with respect to
its business and properties, on both a per occurrence and an aggregate basis, as
the Company's management considers reasonable. The Company is not in default
with respect to its obligations under any insurance policy maintained by it, and
the Company is not aware of any event which could give rise to a default under
any such policy. The Company has not been denied insurance coverage.
3.19 Disclosure. The Company has fully provided the Investor with all the
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information that the Investor have requested for deciding whether to purchase
the Notes and all information that the Company believes is reasonably necessary
to enable such Investor to make such decision.
3.20 Environmental and Safety Laws. To the knowledge of the Company, the
-------------------------------
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor represents and warrants to the Company as follows:
4.1 Authorization. When executed and delivered by the Investor, and
-------------
assuming execution and delivery by the Company, the Transactional Agreements
will each constitute a
-11-
valid obligation of the Investor, enforceable in accordance with its terms,
except to the extent that such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting enforcement of creditors' rights and laws
concerning equitable remedies.
4.2 Brokers and Finders. The Investor has not retained any investment
---------------------
banker, broker, or finder in connection with the transactions contemplated by
this Agreement.
4.3 Investment. This Agreement is made with the Investor in reliance upon
----------
the Investor's representation to the Company, which by the Investor's execution
of this Agreement the Investor hereby confirms, that the Notes (including
capital stock issuable upon conversion thereunder) to be received by the
Investor will be acquired for investment for the Investor's own account, not as
a nominee or agent, and not with a view to the sale or distribution of any part
thereof, and that the Investor has no present intention of selling, granting any
participation in, or otherwise distributing any of the Notes (including capital
stock issuable upon conversion thereunder). By executing this Agreement, the
Investor further represents that it has no contract, undertaking, agreement, or
arrangement with any person to sell, transfer, or grant participation to such
person or to any third person, with respect to any of the Notes (including
capital stock issuable upon conversion thereunder).
4.4 No Public Market. The Investor understands that no public market now
-----------------
exists for the Series C Preferred Stock and that the Company has given no
assurances that a public market will ever exist for the Series C Preferred
Stock. The investor understands that the Company's Common Stock is currently
quoted by the Nasdaq OTC Bulletin Board and that although the Company will use
its best efforts to obtain listing on the Nasdaq SmallCap Market and Toronto
Street Exchange, no assurance can be given that the Company's securities will be
approved for listing on such exchanges.
4.5 Experience. The Investor represents that: (a) it has such knowledge
----------
and experience in financial and business matters as to be capable of evaluating
the merits and risks of its prospective investment in the Notes; (b) it believes
it has received all the information it has requested from the Company and
considers necessary or appropriate for deciding whether to obtain the Notes; (c)
it has had the opportunity to discuss the Company's business, management, and
financial affairs with the Company's management; (d) it understands the economic
implications of the transactions contemplated by this Agreement and confronting
the Company; (e) it has had the full opportunity to seek advice of counsel and
any other appropriate advice with respect to the transactions contemplated by
this Agreement; (f) it has the ability to bear the economic risks of its
prospective investment; and (g) it is able, without materially impairing its
financial condition, to hold the Notes for an indefinite period of time and to
suffer a complete loss on its investment.
4.6 Accredited Investor. The Investor presently qualifies and will as of
--------------------
the Closing qualify as an "accredited investor" within the meaning of Regulation
D of the rules and regulations promulgated under the Securities Act.
4.7 Investment by Non-U.S. Person. The Investor hereby represents and
--------------------------------
warrants to the Company as follows:
-12-
4.7.1 This Agreement is made by the Company with such Investor who
is a Non-U.S. person in reliance upon such Investor's representations,
warranties and covenants made in this Section 4.7.
------------
4.7.2 Investor has been advised and acknowledges that:
(a) the Notes and shares of Series C Preferred Stock and
Common Stock issuable upon conversion thereof have not been, and when issued,
will not be registered under the Securities Act, the securities laws of any
state of the United States or the securities laws of any other country;
(b) in issuing and selling the Notes, and Series C
Preferred Stock and Common Stock issuable upon conversion thereof to the
Investor pursuant hereto, the Company is relying upon the "safe harbor" provided
by Regulation S and/or on Section 4(2) under the Securities Act;
(c) it is a condition to the availability of the Regulation
S "safe harbor" that the Notes, and Series C Preferred Stock and Common Stock
issuable upon conversion thereof not be offered or sold in the United States or
to a U.S. person until the expiration of a period of one year following the date
of the Closing Date; and
(d) notwithstanding the foregoing, prior to the expiration
of one year after Closing Date (the "Restricted Period"), the Notes, and Series
-----------------
C Preferred Stock and Common Stock issuable upon conversion thereof, subject to
Section 4.8 below, may be offered and sold by the holder thereof only if such
offer and sale is made in compliance with the terms of this Agreement and
either: (a) if the offer or sale is within the United States or to or for the
account of a U.S. person, the securities are offered and sold pursuant to an
effective registration statement or pursuant to Rule 144 under the Securities
Act or pursuant to an exemption from the registration requirements of the
Securities Act; or (b) the offer and sale is outside the United States and to
other than a U.S. person.
4.7.3 As used herein, the term "United States" means and includes
the United States of America, its territories and possessions, any State of the
United States, and the District of Columbia, and the term "U.S. person" (as
defined in Regulation S) means:
(a) a natural person resident in the United States;
(b) any partnership or corporation organized or
incorporated under the laws of the United States;
(c) any estate of which any executor or administrator is a
U.S. person;
(d) any trust of which any trustee is a U.S. person;
(e) any agency or branch of a foreign entity located in the
United States;
-13-
(f) any nondiscretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary for the benefit or
account of a U.S. person;
(g) any discretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary organized,
incorporated and (if an individual) resident in the United States; and
(h) a corporation or partnership organized under the laws
of any foreign jurisdiction and formed by a U.S. person principally for the
purpose of investing in securities not registered under the Securities Act,
unless it is organized or incorporated, and owned, by accredited investors (as
defined in Rule 501(a) under the Securities Act) who are not natural persons,
estates or trusts.
As used herein, the term "Non-U.S. person" means any person who is not a
U.S. person or is deemed not to be a U.S. person under Rule 902(k)(2) of the
Securities Act.
4.7.4 Investor agrees that with respect to the Notes, and Series C
Preferred Stock and Common Stock issuable upon conversion thereof, subject to
Section 4.8 below and until the expiration of the Restricted Period:
(a) Investor, its agents or its representatives have not
and will not solicit offers to buy, offer for sale or sell any of the Notes, and
Series C Preferred Stock and Common Stock issuable upon conversion thereof, or
any beneficial interest therein in the United States or to or for the account of
a U.S. person during the Restricted Period;
(b) notwithstanding the foregoing, prior to the expiration
of the Restricted Period, the Notes, and Series C Preferred Stock and Common
Stock issuable upon conversion thereof, may be offered and sold by the holder
thereof only if such offer and sale is made in compliance with the terms of this
Agreement and either: (a) if the offer or sale is within the United States or
to or for the account of a U.S. person (as such terms are defined in Regulation
S), the securities are offered and sold pursuant to an effective registration
statement or pursuant to Rule 144 under the Securities Act or pursuant to an
exemption from the registration requirements of the Securities Act; or (b) the
offer and sale is outside the United States and to other than a U.S. person; and
(c) Investor shall not engage in hedging transactions with
regard to the Notes, and Series C Preferred Stock and Common Stock issuable upon
conversion thereof unless in compliance with the Securities Act.
The foregoing restrictions are binding upon subsequent transferees of the Notes,
and Series C Preferred Stock and Common Stock issuable upon conversion thereof,
except for transferees pursuant to an effective registration statement. Subject
to Section 4.8 below, Investor agrees that after the Restricted Period, the
Notes, and Series C Preferred Stock and Common Stock issuable upon conversion
thereof may be offered or sold within the United States or to or for the account
of a U.S. person only pursuant to applicable securities laws.
4.7.5 Investor has not engaged, nor is it aware that any party has
engaged, and Investor will not engage or cause any third party to engage, in any
directed selling efforts (as
-14-
such term is defined in Regulation S) in the United States with respect to the
Notes, and Series C Preferred Stock and Common Stock issuable upon conversion
thereof.
4.7.6 Investor: (i) is domiciled and has its principal place of
business outside the United States; (ii) certifies it is not an Investor and is
not acquiring the Notes, and Series C Preferred Stock and Common Stock issuable
upon conversion thereof for the account or benefit of any U.S. person; and (iii)
at the time of the Closing, the Investor or persons acting on Investor's behalf
in connection therewith will be located outside the United States.
4.7.7 At the time of offering to the Investor and communication of
Investor's order to purchase the Notes, and Series C Preferred Stock and Common
Stock issuable upon conversion thereof and at the time of the Investor's
execution of this Agreement, the Investor or persons acting on Investor's behalf
in connection therewith were located outside the United States.
4.7.8 Investor is not a "distributor" (as defined in Regulation S)
or a "dealer" (as defined in the Securities Act).
4.7.9 Investor acknowledges that that the Company shall refuse to
instruct its transfer agent to register any transfer of any Note, and Series C
Preferred Stock and Common Stock issuable upon conversion thereof not made in
accordance with (i) Section 4.8 below and (ii) the provisions of Regulation S,
pursuant to registration under the Securities Act or pursuant to an available
exemption from registration.
4.7.10 Investor is satisfied as to the full observance of the laws
of its jurisdiction in connection with any invitation to purchase the Notes, and
Series C Preferred Stock and Common Stock issuable upon conversion thereof or
any use of the Agreements, including (i) the legal requirements within its
jurisdiction for the purchase of such Notes, and Series C Preferred Stock and
Common Stock issuable upon conversion thereof, (ii) any foreign exchange
restrictions applicable to such purchase, (iii) any governmental or other
consents that may need to be obtained and (iv) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale or transfer of such Notes, and Series C Preferred Stock and Common Stock
issuable upon conversion thereof. The Investor's payment for, and the
Investor's continued beneficial ownership of, the Notes, and Series C Preferred
Stock and Common Stock issuable upon conversion thereof will not violate any
applicable laws of such Investor's jurisdiction.
4.7.11 Investor has satisfied in full all applicable securities
laws of Canada and the United States in connection with the issuance by Investor
of securities the proceeds from the sale and issuance of which are or will be
used in whole or in part to purchase the Notes or make loans pursuant to the
Loan Agreement, and has or will provide to the Company such information and
documents as the Company shall reasonably request concerning such transactions,
including an opinion of counsel regarding the legality of such transactions.
4.7.12 The Investor understands and agrees that each certificate
held by the Investor representing a Note, and Series C Preferred Stock and
Common Stock issuable upon conversion thereof, or any other securities issued in
respect of a Note, and Series C Preferred
-15-
Stock and Common Stock issuable upon conversion thereof upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event, shall
bear the following legend (in addition to any legend required by the other
Agreements or under applicable state securities laws):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
--------------
BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE
SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION."
4.8 Ownership Change Under Section 382 of the Internal Revenue Code;
----------------------------------------------------------------------
Special Restrictions Upon Transfer.
-------------------------------------
4.8.1 Special Restrictions Upon Transfer. The following
-------------------------------------
restrictions shall apply to the transfer of shares of Common Stock, issuable
directly or indirectly upon the conversion of any Note.
4.8.2 Definitions. For purposes of this Section 4.8 the following
-----------
terms shall have the following meanings:
"BOARD" means the Company's Board of Directors.
"COMMON STOCK" shall mean the Common Stock of the Company,
par value $0.01 per share.
"SECTION 382" means Section 382 of the Internal Revenue Code
of 1986, as amended, and the regulations thereunder.
"SPECIAL BOARD APPROVAL" shall mean the approval by the
Board of Directors of the Company acting in accordance with applicable law.
4.8.3 Purported Transfers Not Effective. Unless such transfer
------------------------------------
shall have been preceded by Special Board Approval, any purported transfer of
Common Stock into which any Note is directly or indirectly convertible in excess
of the number of shares that can be transferred without increasing the
transferee's ownership interest percentage above 4.5% is not effective to
transfer ownership of such excess shares (the "Prohibited Shares") from the
-----------------
transferor (the "Initial Transferor") to the purported acquiror (the "Purported
------------------ ---------
Acquiror"). For this purpose a transferee's ownership interest percentage shall
--------
be calculated pursuant to Section 382. By way of explanation, a transferees
ownership interest is generally the sum of the transferee's direct ownership
interest percentage as calculated pursuant to Section 382 and the transferee's
indirect ownership interest as calculated pursuant to Section 382, with
adjustments made to include ownership interests that, under ordinary
circumstances, are not included in measuring ownership interests. In the event
a Initial Transferor seeks a Special Board Approval, to the extent that the
transaction reflected in the proposed request for a Special Board Approval does
not result in an
-16-
"ownership shift" in excess of 40% and does not result in an "ownership change"
as those terms are used in Section 382, the approval of the Board will not be
unreasonably withheld. Moreover, to the extent that the proceeds of any
"ownership shift" of up to 40% results directly or indirectly in the receipt of
cash by the Company, the transaction will be presumed to be in the interest of
the Company unless it results in an "ownership change".
4.8.4 Transfer to Agent of Prohibited Shares; Sale by Agent;
------------------------------------------------------------
Payment of Proceeds. On demand by the Company (which demand must be made within
-------------------
30 days of the time Company learns of the transfer of Prohibited Shares), a
Purported Acquiror must transfer any certificate or other evidence of ownership
of the Prohibited Shares within the Purported Acquiror's possession or control,
together with any dividends or other distributions that were received by the
Purported Acquiror from Company with respect to the Prohibited Shares
("Prohibited Distributions"), to an agent designated by Company (the "Agent").
------------------------- -----
The Agent will sell the Prohibited Shares in an arms-length transaction (over a
public exchange, if reasonable possible), and the Purported Acquiror will
receive an amount of sales proceeds not in excess of the price paid or
consideration surrendered by the Purported Acquiror for the Prohibited Shares
(or the fair market value of the Prohibited Shares at the time of an attempted
transfer to the Purported Acquiror by gift, inheritance, or a similar transfer).
If the Purported Acquiror has resold the Prohibited Shares prior to receiving
the Company's demand to surrender the Prohibited Shares to the Agent, the
Purported Acquiror shall be deemed to have sold the Prohibited Shares as agent
for the Initial Transferor and shall be required to transfer to the Agent any
Prohibited Distributions and the proceeds of such sale, except to the extent
that the Agent grants written permission to the Purported Acquiror to retain a
portion of such sales proceeds not exceeding the amount that the Purported
Acquiror would have received from the Agent if the Agent rather than the
Purported Acquiror had resold the Prohibited Shares. If the Initial Transferor
can be identified, the Agent will pay to the Initial Transferor any sales
proceeds in excess of those due to the Purported Acquiror, together with any
amounts received by the Agent from the Purported Acquiror that are attributable
to Prohibited Distributions. If the Initial Transferor cannot be identified
within 90 days, the Agent may pay any amounts due to the Initial Transferor into
a court or governmental agency, if applicable law permits, and otherwise must
transfer such amounts to a charity designated by Company. In no event shall
amounts due to the Initial Transferor pursuant to Article inure to the benefit
of Company or the Agent, but such amounts may be used to cover expenses incurred
by Agent in attempting to identify the initial Transferor. If the Purported
Acquiror fails to surrender the Prohibited Shares within the next 30 business
days from demand by Company, then the Company will institute legal proceedings
to compel the surrender.
4.8.5 Legend. The Investor understands and agrees that each
------
certificate held by the Investor representing a Note, and Series C Preferred
Stock and Common Stock issuable upon conversion thereof, or any other securities
issued in respect of a Note, and Series C Preferred Stock and Common Stock
issuable upon conversion thereof upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall bear the
following legend ((in addition to any legend required by this Agreement, the
other Agreements or under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE
TERMS OF, AND ARE SUBJECT TO RESTRICTIONS ON
-17-
TRANSFER AND RIGHTS OF SALE AS PROVIDED IN A NOTE PURCHASE AGREEMENT
BETWEEN THE COMPANY AND THE HOLDER HEREOF, OR ITS SUCCESSOR, A COPY OF
WHICH IS AVAILABLE FROM THE COMPANY."
SECTION 5 CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING.
The obligations of the Investor under Section 1 of this Agreement are
subject to the fulfillment at or before each of the Closings of the following
conditions, any of which may be waived in writing by such Investor:
5.1 Representations and Warranties. The representations and warranties of
------------------------------
the Company contained in Section 3 shall be true in all respects on and as of
the Closing with the same effect as if made on and as of the Closing.
5.2 Performance. The Company shall have performed or fulfilled in all
-----------
material respects all agreements, obligations, and conditions contained herein
required to be performed or fulfilled by the Company before the Closing.
5.3 Qualifications. All authorizations, approvals, or permits, if any, of
--------------
any governmental authority or regulatory body of the United States or any state
that are required in connection with the lawful issuance and sale of the Notes
pursuant to this Agreement shall be duly obtained effective as of the Closing.
5.4 Compliance Certificate. The Company shall have delivered to the
-----------------------
Investor a certificate dated as of the Closing, signed by the Company's
Secretary, certifying as to (a) the Company's Articles, (b) the Company's
Bylaws, (c) the resolutions adopted by, and other consents and approvals of, the
Company's Board of Directors and stockholders in connection with the
Transactional Agreements and the transactions contemplated hereby and thereby,
and (d) the names of the officers of the Company authorized to sign the
Transactional Agreements and the other documents or certificates to be delivered
pursuant to this Agreement by the Company, or any of its officers, together with
the true signatures of such officers. The Company shall have delivered to the
Investor a certificate dated as of the Closing, signed by the Company's
President, certifying that the conditions set forth in Sections 5.1, 5.2 and 5.3
have been satisfied.
5.5 Articles. The Company shall have filed the Series C Statement and
--------
Series D Statement with the Secretary of State of the State of Texas, which
shall be in full force and effect on the Closing, and delivered to the Investor
a certified copy of the Series C Statement and Series D Statement.
5.6 Equity Compensation Plans. As of the First Closing, the Company shall
--------------------------
have reserved and authorized for issuance under the Plans an amount of shares of
its Common Stock equal to 10% of the fully diluted, as converted shares of
capital stock of the Company (assuming the conversion of all option shares
reserved for issuance under the Plans and conversion of all preferred stock
issuable under the Notes and notes issuable under the Loan Agreement).
5.7 Note. The Company shall have executed and delivered to Investor the
----
original Note.
-18-
5.8 Security Agreement. The Company shall have executed and delivered to
-------------------
Investor the Security Agreement.
5.9 Registration Rights Agreement. The Company shall have executed and
-------------------------------
delivered to Investor the Registration Rights Agreement.
5.10 Loan Agreement. The Company shall have executed and delivered to
---------------
Investor the Loan Agreement.
5.11 Equipment Purchase Agreement. The Company shall have executed and
------------------------------
delivered to Investor the Equipment Purchase Agreement.
5.12 Voting Agreement. The Company shall have executed and delivered to
-----------------
Investor the Voting Agreement.
SECTION 6 CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company under Section 1 of this Agreement are
subject to the fulfillment at or before the Closing of the following conditions,
any of which may be waived in writing by the Company:
6.1 Representations and Warranties. The representations and warranties of
------------------------------
the Investor contained in Section 4 shall be true in all respects on and as of
the Closing with the same effect as though said representations and warranties
had been made on and as of the Closing.
6.2 Blue Sky Compliance. The Company shall have complied with the
---------------------
securities laws of the State of Texas and any other applicable states as
necessary to offer and sell the Notes to the Investor.
6.3 Articles. The Series C Statement and Series D Statement shall have
--------
been filed with the Secretary of State of the State of Texas and shall be in
full force and effect on the Closing.
6.4 Legal Matters. All material matters of a legal nature which pertain
--------------
to the Transactional Agreements and the transactions contemplated hereby and
thereby shall have been reasonably approved by counsel to the Company.
6.5 Registration Rights Agreement. Investor shall have executed and
-------------------------------
delivered to the Company the Registration Rights Agreement.
6.6 Security Agreement. Investor shall have executed and delivered to the
------------------
Company the Security Agreement.
6.7 Loan Agreement. Investor shall executed and delivered to the Company
---------------
the Loan Agreement.
-19-
6.8 Equipment Purchase Agreement. Investor shall have executed and
------------------------------
delivered to the Company the Equipment Purchase Agreement.
6.9 Voting Agreement. Investor shall have executed and delivered to the
-----------------
Company the Voting Agreement.
SECTION 7 POST-CLOSING COVENANTS OF THE COMPANY.
7.1 Stockholder Approval. The Company shall use reasonable efforts to
---------------------
obtain all required stockholder approval of the transactions contemplated by the
Transactional Agreements, including amending the Articles to increase the number
of shares of authorized Common Stock to account for conversion of the Series C
Preferred Stock and Series D Preferred Stock.
7.2 Securities Laws Compliance. Within 15 days after the Closing the
----------------------------
Company shall make any filings necessary under the securities or blue sky laws
of any applicable jurisdiction.
7.3 Private Offering. The Company agrees that neither the Company nor
-----------------
anyone acting on its behalf will offer any of the Notes or any similar
securities for issuance or sale to, or solicit any offer to acquire any of the
same from, anyone or take any other action so as to make the issuance and sale
of the Notes subject to the registration requirements of Section 5 of the
Securities Act.
7.4 Properties, Business, Insurance. The Company shall maintain, and
---------------------------------
cause each of its subsidiaries to maintain, as to their respective properties
and business, insurance against such casualties and contingencies and of such
types and in such amounts as is customary for companies similarly situated, of
similar size, scope and financial condition, which insurance shall be deemed by
the Company to be sufficient.
7.5 Restrictive Agreements Prohibited. Neither the Company nor any of its
---------------------------------
subsidiaries shall become a party to any agreement which by its terms restricts
the Company's performance of the Transactional Agreements or the Articles.
7.6 Use of Proceeds. The Company agrees to use the proceeds from the sale
----------------
of the Notes for (i) payment of expenses related to the transactions
contemplated by the Transactional Agreements, (ii) payment of outstanding
accounts payable, and (iii) current operating expenses.
7.7 Material Changes and Litigation. The Company shall promptly notify
----------------------------------
the Investor of any Material Adverse Event and of any litigation or governmental
proceeding or investigation brought or, to the Company's knowledge, threatened
in writing against the Company, officer, director, key employee or principal
stockholder of the Company which, if adversely determined, would result in a
Material Adverse Event.
7.8 Punctual Payment. The Company shall pay the principal of, premium, if
----------------
any, and interest on the Notes at the times and place and in the manner provided
in the Notes and herein.
7.9 Preservation of Corporate Existence. The Company shall preserve and
-------------------------------------
maintain its corporate existence and all rights, franchises and privileges in
the jurisdiction of its organization, and qualify and remain qualified as a
foreign corporation in each jurisdiction in
-20-
which such qualification is necessary or desirable in view of its business and
operations or the ownership of its properties, except where the failure to
qualify would not constitute a Material Adverse Event. The Company shall
preserve and maintain all licenses and other rights to use patents, processes,
licenses, trademarks, trade names, inventions, intellectual property rights or
copyrights owned or possessed by it, and material to the conduct of its
business.
7.10 Compliance with Laws. The Company shall comply, and cause each
----------------------
Subsidiary to comply, with all applicable laws, rules, regulations and orders of
any governmental authority, noncompliance with which could materially adversely
affect its business or condition, financial or other.
7.11 Keeping of Records and Books of Account. The Company shall keep
--------------------------------------------
adequate records and books of account, in which complete entries will be made in
accordance with GAAP consistently applied, reflecting all material financial
transactions of the Company and in which, for each fiscal year, are proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
7.12 Compliance with ERISA. The Company shall comply with all minimum
-----------------------
funding requirements applicable to any pension or other employee benefit or
employee contribution plans which are subject to ERISA or to the Code, and
comply in all material respects with the provisions of ERISA and the Code, and
the rules and regulations thereunder, which are applicable to any such plan.
The Company will not permit any event or condition to exist which could permit
any such plan to be terminated under circumstances which would cause the lien
provided for in Section 4068 of ERISA to attach to the assets of the Company.
7.13 Foreign Corrupt Practices Act. The Company shall comply and cause
--------------------------------
each officer, director, partner, employee and agent of the Company, each
Subsidiary to comply, at all times with the prohibitions on certain acts and
practices set forth in the Foreign Corrupt Practices Act of 1977, and any rules
or regulations promulgated thereunder.
7.14 Issuance of Warrants to Investor. The Company shall issue after the
---------------------------------
First Closing Date to Investor a number of warrants exercisable for Common Stock
equal to the number of outstanding warrants surrendered to the Company within 3
months of the date hereof by holders of warrants of the Company outstanding as
of the date hereof. The warrants issued to Investor shall be exercisable for
$0.02 per share and shall expire five years from the date hereof.
7.15 Repricing of Options. The Company shall exchange all outstanding
----------------------
options held by the employees listed on Exhibit F, attached hereto, for new
---------
options exercisable for Common Stock at a price per share of $0.02. The new
options shall be subject to four year vesting in equal monthly installments.
7.16 Exchange Relisting. The Company shall use its best efforts to obtain
------------------
listing of its Common Stock on the Nasdaq SmallCap Market and the Toronto Stock
Exchange.
7.17 Board of Directors. Within 10 days following the First Closing, the
-------------------
Board of Directors shall be composed of the persons listed on Exhibit E
---------
-21-
7.18 Bylaw Amendment. Within 10 days following the First Closing, the
----------------
Company shall adopt an amendment to its Bylaws which restricts the transfer of
the Common Stock issuable upon conversion of the Notes, in accordance with
Section 4.8 hereof.
7.19 Negative Covenants. Without limiting any other covenants and
-------------------
provisions hereof, the Company covenants and agrees that, as long as any of the
Notes remain outstanding, it will comply with and observe the following
covenants and provisions, and will cause each Subsidiary to comply with and
observe such of the following covenants and provisions as are applicable to such
Subsidiary, and will not, without the prior written consent of the holder or
holders of at least one-half in principal amount of all Notes then outstanding:
7.19.1 Distributions. Except as required by the Notes and the
-------------
Articles, declare or pay any dividends, purchase, redeem, retire, or otherwise
acquire for value any of its capital stock (or rights, options or warrants to
purchase such shares) now or hereafter outstanding, return any capital to its
stockholders as such, or make any distribution of assets to its stockholders as
such, or permit any Subsidiary to do any of the foregoing (such transactions
being hereinafter referred to as "Distributions"), except that the Subsidiaries
-------------
may declare and make payment of cash and stock dividends, return capital and
make distributions of assets to the Company; and, except that nothing herein
--- ------
contained shall prevent the Company from effecting a stock split or declaring or
paying any dividend consisting of shares of any class of capital stock pro rata
to the holders of shares of such class of capital stock.
7.19.2 Extraordinary Corporate Transactions. Take any corporate
--------------------------------------
action, enter into any agreement to take such action, or obligate itself to take
any such action, if such action would: (i) provide for the voluntary
liquidation, dissolution or winding up of the Company; (ii) enter into any
transaction that expressly prohibits or limits the Company's right to perform
its obligations under this Agreement or the Notes; or (iii) transfer, sell or
license any material amount of its assets other than in the ordinary course of
business or other than obsolete equipment or unsaleable inventory.
7.19.3 Dealings with Affiliates. Except for transactions involving
------------------------
the Company and Investor, enter or permit any Subsidiary to enter into any
transaction with any holder of five percent (5%) or more of any class of capital
stock of the Company, or any member of their families or any corporation or
other entity in which anyone or more of such stockholders or members of their
immediate families, directly or indirectly holds five percent (5%) or more of
any class of capital stock or other ownership interest, except in the ordinary
course of business and on terms not less favorable to the Company or any
Subsidiary than it would obtain in a transaction between unrelated parties.
7.19.4 Change in Nature of Business. Make any material change in
------------------------------
the nature of the Company's business as carried on at the date hereof, without
the prior approval of its Board of Directors.
-22-
SECTION 8 MISCELLANEOUS.
8.1 Governing Law. This Agreement shall be governed by, and construed in
--------------
accordance with, the laws of the State of Texas, excluding those laws that
direct the application of the laws of another jurisdiction.
8.2 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.3 Headings. The headings of the sections of this Agreement are for
--------
convenience and shall not by themselves determine the interpretation of this
Agreement.
8.4 Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be conclusively deemed effectively given upon personal
delivery or delivery by courier, or on the first business day after transmission
if sent by confirmed facsimile transmission or electronic mail transmission, or
five days after deposit in the United States mail, by registered or certified
mail, postage prepaid, addressed (i) if to the Company, as set forth below the
Company's name on the signature page of this Agreement, and (ii) if to an
Investor, at such Investor's address as set forth on the Signature page of this
Agreement, or at such other address as the Company or such Investor may
designate by 10 days' advance written notice to the other parties hereto.
8.5 Survival of Warranties. The warranties and representations of the
------------------------
parties contained in or made pursuant to this Agreement shall survive for two
years after the execution and delivery of this Agreement and the First Closing;
provided, however, that such representations and warranties need only be
accurate as of the date of such execution and delivery and as of the Closing.
8.6 Amendments, Waivers and Consent. Any provision in this Agreement or
---------------------------------
the Notes to the contrary notwithstanding, changes in or additions to this
Agreement may be made, and compliance with any covenant or provision herein or
therein set forth may be omitted or waived, if the Company shall obtain consent
thereto in writing from the holder or holders of at least two-thirds (2/3) in
principal amount of all Notes then outstanding; provided that no such consent
--------
shall be effective (a) to reduce or to postpone the date fixed for the payment
of the principal (including any required redemption) or interest payable on any
Note, without the consent of the holder thereof; or (b) to reduce the percentage
of the Notes the consent of the holders of which is required under this section.
Any waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. Written notice of any
waiver or consent effected under this subsection shall promptly be delivered by
the Company to any holders who did not execute the same. No failure or delay on
the part of the Investor, or any other holder of the Notes in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
-23-
8.7 Finders' Fees. The Company and the Investor will indemnify the other
--------------
against all liabilities incurred by the indemnifying party with respect to
claims related to investment banking or finders' fees in connection with the
transactions contemplated by this Agreement, arising out of arrangements between
the party asserting such claims and the indemnifying party, and all costs and
expenses (including reasonable fees of counsel) of investigating and defending
such claims.
8.8 Expenses. The Company and the Investor will bear their respective
--------
legal and other fees and expenses with respect to this Agreement and the
transactions contemplated hereby.
8.9 Confidentiality. Each party hereto agrees that, except with the prior
---------------
written permission of the Company, it shall at all times keep confidential and
not divulge or furnish or make accessible to anyone any confidential information
concerning or relating to the business or financial affairs of the Company to
which such party has become privy by reason of this Agreement, discussions or
negotiations relating to this Agreement or the exhibits to this Agreement,
provided that an Investor may disclose confidential information if (i) the
information is publicly known through publication or otherwise through no
wrongful act of the Investor; (ii) the information is received from a third
party who rightfully discloses it to the Investor without restriction on its
subsequent disclosure; (iii) the information is disclosed pursuant to the lawful
requirement of a governmental agency or by order of court of competent
jurisdiction, provided that in such event, Investor will provide prior written
notice of such proposed disclosure to the Company; or (iv) the information is
reasonably required to be disclosed in order for the Investor or their
transferee to market an interest in the capital stock of the Company, provided
that in such instance the person to whom the information is provided shall be
required to hold such information in confidence.
8.10 Further Assurances. From and after the date of this Agreement, upon
-------------------
the request of the Investor, the Company and each Subsidiary shall execute and
deliver such instruments, documents and other writings as may be necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and the Notes.
8.11 Jury Waiver. THE COMPANY AND THE INVESTOR AGREE THAT NEITHER OF THEM
-----------
NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM, OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF,
THIS AGREEMENT OR ANY OF THE OTHER FINANCING DOCUMENTS, ANY RELATED INSTRUMENTS,
ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM,
OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED; PROVIDED, HOWEVER, THAT THE FOREGOING
SHALL NOT PRECLUDE ANY PARTY OR ITS SUCCESSORS FROM ASSERTING ANY COUNTERCLAIM
WHICH WOULD OTHERWISE BE BARRED OR FORFEITED. EXCEPT AS STATED IN THE PRECEDING
SENTENCE, THE PROVISIONS OF THIS SECTION SHALL BE SUBJECT TO NO EXCEPTIONS.
NEITHER THE COMPANY NOR ANY OF THE INVESTOR HAS AGREED WITH OR REPRESENTED TO
THE OTHER THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
-24-
8.12 Entire Agreement; Successors and Assigns. This Agreement (and the
-------------------------------------------
exhibits hereto) constitutes the entire contract between the Company and the
Investor relative to the subject matter hereof. Any prior and contemporaneous
agreement, discussion, understanding or correspondence between the Company and
the Investor regarding the purchase of the Notes is superseded by this
Agreement. Subject to the exceptions specifically set forth in this Agreement,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective executors, administrators, heirs, successors, and
assigns of the parties. All subsequent transferees or assigns of the Notes
shall be deemed a party to this Agreement and bound by the obligations imposed
upon Investor herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-25-
IN WITNESS WHEREOF, the parties hereto have executed this Note Purchase
Agreement as of the date first above written.
COMPANY: POSITRON CORPORATION
By: /s/ Xxxx X. Xxxxxx
-----------------------------------------------
Xxxx X. Xxxxxx, President
Address: 0000 Xxxxxxx Xxxxx Xxxxx, #000,
Xxxxxxx, Xxxxx 00000
INVESTOR: IMAGIN Diagnostic Centres, Inc.,
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Its: Chief Executive Officer
Address: 0000 Xxxxx Xx., Xxxxx 000
Xxxxxxx, Xxxxxxx, Xxxxxx M4S 1XB
-26-
SCHEDULES AND EXHIBITS
----------------------
Schedule 1 Schedule of Exceptions
Exhibit A Secured Convertible Promissory Notes
Exhibit B Registration Rights Agreement
Exhibit C Security Agreement
Exhibit D Voting Agreement
Exhibit E Board of Directors
Exhibit F Repricing of Options
-27-
SCHEDULE 1
----------
SCHEDULE OF EXCEPTIONS
BOARD OF DIRECTORS
SCHEDULE OF EXCEPTIONS
TO
NOTE PURCHASE AGREEMENT
BY AND BETWEEN
POSITRON CORPORATION
AND
IMAGIN DIAGNOSTIC CENTRES, INC.
DATED AS OF MAY 21, 2004
CAPITALIZED TERMS USED HEREIN AND NOT OTHERWISE DEFINED SHALL HAVE THE SAME
MEANING AS IN THE AGREEMENT TO WHICH THESE SCHEDULES ARE ATTACHED AND
INCORPORATED BY REFERENCE.
SCHEDULE 3.5
Corporate Power.
---------------
As of the date of this Agreement, there are insufficient shares of Common Stock
to allow for the exercise of all outstanding options and warrants, and
conversion of all outstanding convertible securities, including the Company's
Series C Preferred Stock and Series D Preferred Stock, to Common Stock. The
Company will use its reasonable efforts to obtain stockholder approval to amend
the Articles to increase the number of shares of authorized Common Stock to
account for conversion of the Series C Preferred Stock and Series D Preferred
Stock.
1
SCHEDULE 3.6
Authorization.
-------------
As of the date of this Agreement, there are insufficient shares of Common Stock
to allow for the exercise of all outstanding options and warrants, and
conversion of all outstanding convertible securities, including the Company's
Series C Preferred Stock and Series D Preferred Stock, to Common Stock. The
Company will use its reasonable efforts to obtain stockholder approval to amend
the Articles to increase the number of shares of authorized Common Stock to
account for conversion of the Series C Preferred Stock and Series D Preferred
Stock.
2
SCHEDULE 3.7
Validity of Shares.
------------------
The Series C Preferred Stock issuable upon conversion of the Note and the Common
Stock issuable upon conversion of the Series C Preferred Stock are subject to
the contractual rights and restrictions set forth in the Articles, Series A
Statement, Series C Statement and Series D Statement.
3
SCHEDULE 3.8
Litigation.
----------
The Company received a warning letter ("Warning Letter") dated April 26, 2004
from the Department of Health and Human Services regarding various alleged
deficiencies under the Current Good Manufacturing Practice requirements of the
Quality System regulations for medical devices, a copy of which has been
provided to Investor.
The Company is subject to the following legal proceedings:
PROFUTURES CAPITAL BRIDGE FUND, L.P.
On September 26, 2000, ProFutures Bridge Capital Fund, L.P. ("ProFutures") filed
a complaint against the Company in Colorado state court for declaratory relief
and breach of contract (the "Complaint"). The Complaint alleged that the
Company breached four stock purchase warrants issued to ProFutures on the basis
that the Company failed to notify ProFutures of dilutive events and failed to
register the full number of shares ProFutures was allegedly entitled to purchase
under the warrants when, on February 14, 2000, the Company registered 1,500,000
shares of stock underlying ProFutures' warrants instead of 4,867,571. The
Complaint further alleged that the Company's issuance of shares of common stock
to Imatron, Inc. on or about January 22, 1999, (the "Imatron Transaction") was a
dilutive event pursuant to the anti-dilution provisions contained in the four
stock purchase warrants. The Complaint sought declarations that the
consideration received by the Company in the Imatron Transaction increased the
number of shares issuable under the warrants, the Company breached the warrants
by failing to notify ProFutures of the Imatron Transaction and its effect on
ProFutures' warrants at the time of the Imatron Transaction and that the Company
further breached the warrants by failing to register the number of shares
ProFutures alleged were purchasable under its warrants. The Complaint sought an
unspecified amount of monetary damages.
The Colorado State level case of ProFutures v. Positron, District Court, City
and County of Denver, Colorado, Case No. 00CV7146, was tried before the Court in
June 2002. The Court issued its Findings of Fact, Conclusions of Law and
Judgment on November 13, 2002. The Court agreed with the Company's
determination of the value of the consideration paid for the shares issued to
Imatron and that there was no evidence of fraud by Company. The Court agreed
with ProFutures that the Company breached the 1996 stock purchase warrant with
ProFutures by failing to give ProFutures written notice stating the adjusted
exercise price and the new number of shares deliverable as a result of the
Imatron Transaction and by failing to register the shares to which ProFutures
was entitled under the warrant as a result of the Imatron Transaction.
Nevertheless, the Court also found that ProFutures' alleged damages were
uncertain and speculative and that ProFutures was not entitled to recover actual
damages. Therefore ProFutures was awarded $1 in nominal damages. ProFutures
has appealed the trial Court's findings and The Company has cross-appealed.
Those appeals are presently pending before the Court of Appeals, State of
Colorado.
In the federal case of ProFutures v. Positron, et al., United States District
Court for the District of Colorado, Case No. 02-N-0154, the Complaint alleged
two causes of action against the Company: fraudulent transfer and injunctive
relief. The allegations arose out of a June 2001 loan agreement between The
Company and Imatron. The action was dismissed in 2002 without prejudice.
4
SCHEDULE 3.8 CONTINUED
10P10, L.P.
In December 2001, 10P10, L.P., the Company's previous landlord for its premises
located at 00000 Xxxx Xxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx, filed a complaint
(Cause No. 2001-65534 in the 000xx Xxxxxxxx Xxxxxxxx Xxxxx xx Xxxxxx Xxxxxx,
Xxxxx) against the Company alleging breach of lease agreement. The Company
disputes the amount of lease commissions and construction costs charged by
10P10, L.P. in conjunction with the subleasing of the premises. Although 10P10,
L.P. asserted a claim in excess of $150,000, a subsequent analysis of the
transactions under the lease has resulted in the reduction of the lease
obligation alleged by 10P10, L.P. to approximately $97,000. Although the
Company disputes the amount of the claim, due to the pending lawsuit,
approximately $97,000 is recorded as an accrued liability as of December 31,
2003. The case is set for trial on a two week docket beginning in September
2004.
Radiology Corporation of America, Inc.
A judgment in the amount of $75,000 has been entered against the Company in
Texas state court in favor of Radiology Corporation of America, Inc., a vendor
to the Company. In satisfaction of the judgment the Company and the creditor
have agreed that the judgment may be satisfied by five monthly payments of
$15,000 each commencing March 10, 2004.
5
SCHEDULE 3.9
Title to Properties; Liens and Encumbrances.
-------------------------------------------
The following taxes are due and payable:
Sales Tax:
New York $94,881.78
Florida $7,875.00
Alabama $31,250.00
Texas $2,894.81
Property Tax: $321,884.17
6
SCHEDULE 3.11
Compliance With Other Agreements.
--------------------------------
See Schedule 3.8.
7
SCHEDULE 3.12
Employee Relations and Compensation Plans.
-----------------------------------------
The Company has the following equity and incentive compensation plans which are
more fully described in its filings with the Securities and Exchange Commission:
1999 Non-employee Directors' Stock Option Plan
1999 Employee Stock Option Plan
1999 Stock Bonus Incentive Plan
1999 Employee Stock Purchase Plan
401(K) Retirement Plan and Trust
Key Employee Incentive Compensation Plan
Employment Contracts/Severance Arrangements:
The Company has entered into an employment agreement with Xxxx X. Xxxxxx.
Pursuant to the agreement, Xx. Xxxxxx was appointed initially as President of
the Company with an initial employment term ending June 15, 2000, with a rolling
six month basis thereafter. From January 22, 1999 until June 15, 1999, and then
from June 15, 1999 through August 31, 1999, his base salary was $1,000 and
$3,417 per month respectively, reflecting his less than full-time commitments to
the office during these periods. Effective September 1, 1999 and with his
full-time assignment with the Company, his salary increased to $185,000 on an
annualized basis. In addition to participation in the Company's group benefit
plans and a monthly automobile allowance, Xx. Xxxxxx was given the opportunity
to purchase for $20,000 a warrant to purchase 3,000,000 shares of the Company's
common stock exercisable at $0.30 per share. The warrant, and the underlying
common stock, are subject to the Company's repurchase right, which lapses 25%
immediately and the remainder annual over the next three years. The base salary
for Xx. Xxxxxx was increased to $205,000 effective June 15, 2000 and was
increased again to $217,000 effective January 1, 2002. The Board can terminate
Xx. Xxxxxx' employment without cause on thirty days' written notice and the
payment of base salary for the remainder of the employment term or six months,
whichever is greater.
8
SCHEDULE 3.16
No Adverse Changes.
------------------
See Warning Letter on Schedule 3.8.
9
SCHEDULE 3.17
Taxes.
-----
The following taxes are due and payable:
Sales Tax:
New York $94,881.78
Florida $7,875.00
Alabama $31,250.00
Texas $2,894.81
Property Tax: $321,884.17
10
SCHEDULE 3.20
Environmental and Safety Laws.
-----------------------------
See Warning Letter on Schedule 3.8.
11
EXHIBIT A
---------
SECURED CONVERTIBLE PROMISSORY NOTES
EXHIBIT A
-1-
EXHIBIT B
---------
REGISTRATION RIGHTS AGREEMENT
EXHIBIT B
-1-
EXHIBIT C
---------
SECURITY AGREEMENT
EXHIBIT C
-1-
EXHIBIT D
---------
VOTING AGREEMENT
EXHIBIT D
-1-
EXHIBIT E
---------
BOARD OF DIRECTORS
The Board of Directors shall consist of:
Xxxx X. Xxxxxx
Xxxxxx Xxxxxxx
Xxxxx Xxxxx
Xxxxxxx Xxxxxx
Xxxx X. XxXxxxxxxxx, Xx.
EXHIBIT E
-1-
EXHIBIT F
---------
REPRICING OF OPTIONS
The option grants listed below shall be exchanged for new options in accordance
with Section 7.15 of the Agreement:
GRANTS VESTED
GRANT OPTION OUTSTANDING AT
DATE PRICE 12/31/2003 12/31/2003
-------- ------ ----------- ----------
Xxxxx, R. 02/23/95 2.625 11,189 11,189
Xxxxx, R. 02/23/95 2.625 7,500 7,500
Xxxxx, R. 02/23/95 2.625 11,311 11,311
----------- ----------
30,000 30,000
Liu, I. 09/22/95 3.750 628 628
Xxxxxxx, K. 09/22/95 3.750 188 188
816 816
1999 PLAN
Xxxxx, R. 06/15/99 0.280 300,000 300,000
Liu, I. 06/15/99 0.280 10,000 10,000
Xxxxxxx, K. 06/15/99 0.280 60,000 60,000
Xxxxxx, G. 10/11/99 0.630 40,000 40,000
410,000 410,000
Xxxxxxxx, W. 02/14/00 0.940 26,250 26,250
Xxxx, C.T. 01/10/00 0.560 10,000 9,375
Zeb, A. 01/18/00 0.630 10,000 9,375
46,250 45,000
Director - X. Xxxxxxx 04/01/01 0.111 25,000 25,000
25,000 25,000
Director - X. Xxxxxxx 01/02/02 0.077 25,000 25,000
Director - X. Xxxxx 05/10/02 0.068 25,000 25,000
----------- ----------
50,000 50,000
Director - X. Xxxxxxx 01/01/03 0.010 25,000 25,000
Director - X. Xxxxx 01/01/03 0.010 25,000 25,000
Xxxxxx, G. 04/30/03 0.050 500,000 250,000
Xxxxxxxx, W. 04/30/03 0.050 20,834 20,834
Xxxxxxx, Xxxx 04/30/03 0.050 100,000 50,002
Xxxxx, R. 04/30/03 0.050 300,000 150,000
Liu, I. 04/30/03 0.050 10,000 5,002
Xxxxxxx, K. 04/30/03 0.050 25,000 12,502
Xxxxxx, G. 04/30/03 0.050 50,000 25,001
Ngo, C. 04/30/03 0.050 4,168 4,168
Xxxxxxx, Xxxxxx 04/30/03 0.050 20,000 10,001
Xxxx, C.T. 04/30/03 0.050 10,000 5,002
Zeb, A. 04/30/03 0.050 20,000 10,001
----------- ----------
1,110,002 592,513
1,672,068 1,153,329
EXHIBIT F
-1-
________________________________________________________________________
________________________________________________________________________
POSITRON CORPORATION
NOTE PURCHASE AGREEMENT
________________________________________________________________________
________________________________________________________________________
May 21, 2004
