EXHIBIT 10.2
RADIOMED CORPORATION
NOTE PURCHASE AGREEMENT
dated October 7, 1997
NOTE PURCHASE AGREEMENT
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This Agreement dated as of October __, 1997 is entered into by and among
RadioMed Corporation, a Delaware corporation (the "Company"), H. Xxxxxx Xxxxx,
M.D., Xxxxxxx Xxxxxxxx, Xxxxxx Xxxxxxx, Jr., Ph.D. and Piran Xxxxxxxxx, Ph.D.
(individually, an "Initial Founder" and, collectively, the "Initial Founders"),
and the entity identified on EXHIBIT A hereto (the "Purchaser").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. AUTHORIZATION AND SALE OF SECURED CONVERTIBLE NOTE.
1.1 AUTHORIZATION. The Company has, or before the Closing (as
defined in Section 2) will have, duly authorized the sale and issuance, pursuant
to the terms of this Agreement, of a Secured Convertible Note in principal
amount of $500,000 (the "Note"). The Note shall be in substantially the form
set forth in EXHIBIT B attached hereto. The Note shall be dated the date of its
issue, shall mature on October __, 2007 (the "Maturity Date"), and shall bear
interest at the rate of 10% per annum. Accrued interest shall be payable on the
Maturity Date, unless earlier converted pursuant to Section 9. Prior to
maturity, the entire principal amount of, and all accrued interest with respect
to the Note shall be convertible into shares of Series A Convertible Preferred
Stock of the Company, $.01 par value per share (the "Series A Preferred") (as
further described in Section 9 below), having the rights, restrictions,
privileges and preferences set forth in the Certificate of Amendment attached
hereto as EXHIBIT B-1 (the "Certificate of Amendment"). The Company has, or
before the Closing will have, adopted and filed the Certificate of Amendment
with the Secretary of State of the State of Delaware.
1.2 SALE OF SECURED CONVERTIBLE NOTE. Subject to the terms and
conditions of this Agreement, at the Closing the Company will sell and issue to
the Purchaser, and the Purchaser will purchase, the Note. The purchase price
for the Note purchased and sold hereunder shall be 100% of the principal amount
thereof for a purchase price of $500,000.
1.3 USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Note for research and development expenses, legal and patent expenses,
salaries and administrative costs and other working capital purposes, as further
described on EXHIBIT D. Except as otherwise provided herein, proceeds from the
sale of the Note offered hereby shall not be used for the repayment of
non-business related debts or for the payment of accrued compensation owed to
employees of, or consultants to, the Company prior to the Closing (as defined
below).
2. THE CLOSING. The closing ("Closing") of the sale and purchase of the
Note under this Agreement shall take place at the offices of Xxxx and Xxxx LLP,
00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx at 11:00 a.m. on October __, 1997, or at
such other time, date and place as are mutually agreeable to the Company and
counsel to the Purchaser. At the Closing, the Company
shall deliver to the Purchaser the Note, registered in the name of such
Purchaser, against payment to the Company of the purchase price therefor, by
wire transfer, check, or other method acceptable to the Company. The date of
the Closing is hereinafter referred to as the "Closing Date." If at the Closing
any of the conditions specified in Section 6 shall not have been fulfilled, the
Purchaser shall, at its election, be relieved of all of its obligations under
this Agreement without thereby waiving any other rights it may have by reason of
such failure or such non-fulfillment.
3. REPRESENTATIONS OF THE COMPANY. Subject to and except as disclosed by
the Company in EXHIBIT C hereto, the Company hereby represents and warrants to
the Purchaser as follows:
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
presently conducted and to enter into and perform this Agreement and to carry
out the transactions contemplated by this Agreement. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on the operations or financial condition of the Company. The
Company has furnished to counsel to the Purchaser true and complete copies of
its Certificate of Incorporation and By-Laws, each as amended to date and
presently in effect.
3.2 CAPITALIZATION. The authorized capital stock of the Company
(immediately prior to the Closing) consists of 5,000 shares of common stock,
$0.01 par value per share (the "Common Stock"), of which 1,300 shares are
issued and outstanding, and 3,200 shares of Preferred Stock, $0.01 par value per
share, all of which shares have been designated as Series A Preferred, none of
which shares are issued or outstanding. All of the issued and outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. Except as set forth in EXHIBIT C hereto or
provided in this Agreement, (i) no subscription, warrant, option, convertible
security or other right (contingent or otherwise) to purchase or acquire any
shares of capital stock of the Company is authorized or outstanding, (ii) the
Company has no obligation (contingent or otherwise) to issue any subscription,
warrant, option, convertible security or other such right or to issue or
distribute to holders of any shares of its capital stock any evidences of
indebtedness or assets of the Company, and (iii) the Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any shares of
its capital stock or any interest therein or to pay any dividend or make any
other distribution in respect thereof. All of the issued and outstanding shares
of capital stock of the Company have been offered, issued and sold by the
Company in compliance with applicable Federal and state securities laws.
3.3 SUBSIDIARIES, ETC. The Company has no subsidiaries and does not
own or control, directly or indirectly, any shares of capital stock of any other
corporation or any interest in any partnership, joint venture or other
non-corporate business enterprise.
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3.4 STOCKHOLDER LIST AND AGREEMENTS. Attached as EXHIBIT E is a true
and complete list of the stockholders of the Company, showing the number of
shares of Common Stock or other securities of the Company held by each
stockholder as of the date of this Agreement and the consideration paid to the
Company, therefor. Except as contemplated by or disclosed in this Agreement,
there are no agreements, written or oral, between the Company and any holder of
its capital stock, or, to the best of the Company's knowledge, among any holders
of its capital stock, relating to the acquisition (including without limitation
rights of first refusal or pre-emptive rights), disposition, registration under
the Securities Act of 1933, as amended (the "Securities Act"), or voting of the
capital stock of the Company.
3.5 ISSUANCE OF NOTE. The issuance, sale and delivery of the Note in
accordance with this Agreement, and the issuance and delivery of the shares of
Series A Preferred and Common Stock issuable upon conversion of the Note and
Series A Preferred, respectively, have been, or will be on or prior to the
Closing, duly authorized by all necessary corporate action on the part of the
Company, and all such shares have been duly reserved for issuance. The Note
when so issued, sold and delivered against payment therefor in accordance with
the provisions of this Agreement, and the shares of Series A Preferred and
Common Stock issuable upon conversion of the Note and Series A Preferred,
respectively, when issued upon such conversion, will be duly and validly issued,
fully paid and non-assessable and will represent a valid and binding obligation
of the Company enforceable in accordance with its terms.
3.6 AUTHORITY FOR AGREEMENT. The execution, delivery and performance
by the Company of this Agreement, the Note, and all other agreements required to
be executed by the Company on or prior to the Closing pursuant to Section 6.4
(the "Ancillary Agreements"), and the consummation by the Company of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action. This Agreement, the Note and the Ancillary
Agreements have been duly executed and delivered by the Company and constitute
valid and binding obligations of the Company enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws relating to or
affecting the rights of creditors, generally. The execution of and performance
of the transactions contemplated by this Agreement, the Note and the Ancillary
Agreements and compliance with their provisions by the Company will not violate
any provision of law and will not conflict with or result in any breach of any
of the terms, conditions or provisions of, or constitute a default under, or
require a consent or waiver under, its Certificate of Incorporation or By-Laws
(each as amended to date) or any indenture, lease, agreement or other instrument
to which the Company is a party or by which it or any of its properties is
bound, or any decree, judgment, order, statute, rule or regulation applicable to
the Company.
3.7 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Company
in connection with the execution and delivery of this Agreement, the offer,
issuance, sale and delivery of the Note, or the other transactions to be
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consummated at the Closing, as contemplated by this Agreement, except such
filings as shall have been made prior to and shall be effective on and as of the
Closing. Based on the representations made by the Purchaser in Section 5 of
this Agreement, the offer and sale of the Note to the Purchaser will be in
compliance with applicable Federal and state securities laws.
3.8 LITIGATION. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to the best of the Company's
knowledge, any basis therefor or threat thereof, against the Company. There is
no action, suit or proceeding, or governmental inquiry or investigation,
pending, or, to the best of the Company's knowledge, any basis therefor or
threat thereof against any of the Initial Founders which questions the validity
of this Agreement or the right of any of the Initial Founders to enter into it.
3.9 FINANCIAL STATEMENTS. The Company has furnished to the Purchaser
a complete and correct copy of the unaudited balance sheet of the Company (the
"Balance Sheet") as at June 30, 1997 (the "Balance Sheet Date"), compiled by the
Company.
3.10 ABSENCE OF LIABILITIES. Except as disclosed in EXHIBIT C, the
Company did not have, at the Balance Sheet Date, any liabilities of any type
which in the aggregate exceeded $20,000, whether absolute or contingent, which
were not fully reflected on the Balance Sheet, and, since the Balance Sheet
Date, the Company has not incurred or otherwise become subject to any such
liabilities or obligations except in the ordinary course of business and as
disclosed in EXHIBIT C.
3.11 TAXES. The Company has filed an election pursuant to
Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"), that
the Company be taxed as an S Corporation.
3.12 PROPERTY AND ASSETS. The Company has good title to all of its
material properties and assets, and, except as set forth on EXHIBIT C, none of
such properties or assets is subject to any mortgage, pledge, lien, security
interest, lease, charge or encumbrance.
3.13 INTELLECTUAL PROPERTY. Set forth on EXHIBIT C is a true and
complete list of all patents, patent applications, trademarks, service marks,
trademark and service xxxx applications, trade names, copyright registrations
and licenses presently used by the Company or necessary for the conduct of the
Company's business as conducted and as proposed to be conducted, as well as any
agreement under which the Company has access to any confidential information
used by the Company in its business (the "Intellectual Property Rights"). The
Company owns, or has the right to use under the agreements or upon the terms
described in EXHIBIT C, all of the Intellectual Property Rights, and has taken
all actions reasonably necessary to protect the Intellectual Property Rights.
To the knowledge of the Company, after reasonable investigation, the business
conducted or proposed by the Company does not and will not cause the Company to
infringe or violate any of the patents, trademarks, service marks, trade names,
copyrights, licenses, trade secrets or other intellectual property rights of any
other person or entity. The Company is not
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aware that any Initial Founder or other employee is obligated under any contract
(including any license, covenant or commitment of any nature), or subject to any
judgment, decree or order of any court or administrative agency, that would
conflict or interfere with (i) the performance of such Initial Founder's or
employee's duties as an officer, employee or director of the Company, (ii) the
use of such Initial Founder's or employee's best efforts to promote the
interests of the Company or (iii) the Company's business as conducted or
proposed to be conducted.
3.14 MATERIAL CONTRACTS AND OBLIGATIONS. EXHIBIT C sets forth a list
of all material agreements or commitments of any nature to which the Company is
a party or by which it is bound. All of such agreements and contracts are
valid, binding and in full force and effect.
3.15 COMPLIANCE. The Company has, in all material respects, complied
with all laws, regulations and orders applicable to its present and proposed
business and has all material permits and licenses required thereby. To the
best of the Company's knowledge, none of the Initial Founders nor any other
employee of the Company is in violation of any term of any contract or covenant
(either with the Company or with another entity) relating to employment,
patents, proprietary information disclosure, non-competition or
non-solicitation.
3.16 ABSENCE OF CHANGES. Since the Balance Sheet Date, there has been
no material adverse change, individually or in the aggregate, in the business,
assets, condition, financial or otherwise, net worth or results of operations of
the Company.
3.17 INITIAL FOUNDERS. The Initial Founders have executed and
delivered nondisclosure and assignment of invention agreements in the form of
EXHIBIT E, and all of such agreements are in full force and effect.
3.18 ERISA. The Company does not have or otherwise contribute to or
participate in any employee benefit plan subject to the Employee Retirement
Income Security Act of 1974.
3.19 BOOKS AND RECORDS. The minute books of the Company contain
complete and accurate records of all meetings and other corporate actions of its
stockholders and its Board of Directors and committees thereof. The stock
ledger of the Company is complete and reflects all issuances, transfers,
repurchases and cancellations of shares of capital stock of the Company.
3.20 DISCLOSURES. Neither this Agreement nor any Exhibit hereto,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading. Each projection furnished by the Company to the
Purchaser in the Business Plan of the Company dated December, 1996, as amended
on EXHIBIT D to include such projections (as so amended, the "Plan"), was
prepared in good faith based on reasonable assumptions and represents the
Company's best estimate of future
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results based on information available as of the date of the Plan and as of the
date of this Agreement.
3.21 SMALL BUSINESS CONCERN. The Company is a "small business
concern" as defined in Part 121 of Title 13 of the Code of Federal Regulations.
3.22 U.S. REAL PROPERTY HOLDING CORPORATION. The Company is not now
and has never been a "United States Real Property Holding Corporation" as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service.
4. REPRESENTATIONS OF INITIAL FOUNDERS. Each of the Initial Founders
severally represents and warrants to the Purchaser as follows:
4.1 CONFLICTING AGREEMENTS. Such Initial Founder is not, as a result
of the nature of the business conducted or proposed to be conducted by the
Company or for any other reason, in violation of (i) any fiduciary or
confidential relationship, (ii) any term of any contract or covenant (either
with the Company or with another entity) relating to employment, patents,
proprietary information disclosure, non-competition or non-solicitation, or
(iii) any other contract or agreement, or any judgment, decree or order of any
court or administrative agency relating to or affecting the right of such
Initial Founder to be employed by the Company. No such relationship, term,
judgment, decree, or order conflicts with such Initial Founder's obligations to
use his best efforts to promote the interests of the Company nor does the
execution and delivery of this Agreement, nor the carrying on of the Company's
business as an officer or key employee of the Company, conflict with any such
relationship, term, judgment, decree or order.
4.2 LITIGATION. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending or, to the best of such Initial
Founder's knowledge, threatened against such Initial Founder, and, to the best
of such Initial Founder's knowledge, there is no basis for any such action,
suit, proceeding, or governmental inquiry or investigation.
4.3 STOCKHOLDER AGREEMENTS. Except as contemplated by or disclosed
in this Agreement, such Initial Founder is not a party to and has no knowledge
of any agreements, written or oral, relating to the acquisition, disposition,
registration under the Securities Act, or voting of the capital stock of the
Company.
5. REPRESENTATIONS OF THE PURCHASER. The Purchaser represents and
warrants to the Company as follows:
5.1 INVESTMENT. Such Purchaser is acquiring the Note, and the shares
of Series A Preferred and Common Stock into which the Note and Series A
Preferred, respectively, may be converted, for its own account for investment
and not with a view to, or for sale in connection with, any distribution
thereof, nor with any present intention of distributing or selling the same;
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and, except as contemplated by this Agreement and the Exhibits hereto, such
Purchaser has no present or contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the disposition thereof.
5.2 AUTHORITY. Such Purchaser has full power and authority to enter
into and to perform this Agreement in accordance with its terms. Such Purchaser
has not been organized, reorganized or recapitalized specifically for the
purpose of investing in the Company.
5.3 EXPERIENCE. Such Purchaser has carefully reviewed the
representations concerning the Company contained in this Agreement, has read the
Plan and has made reasonable inquiry concerning the Company, its business and
its personnel; the officers of the Company have made available to such Purchaser
any and all written information which it has requested and have answered to such
Purchaser's satisfaction all inquiries made by such Purchaser; and such
Purchaser has sufficient knowledge and experience in investing so as to be able
to evaluate the risks and merits of its investment in the Company and is able
financially to bear the risks thereof.
6. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligation of the
Purchaser to purchase the Note at the Closing is subject to the fulfillment, or
the waiver by such Purchaser, of each of the following conditions on or before
the Closing:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each representation
and warranty contained in Sections 3 and 4 shall be true on and as of the
Closing Date with the same effect as though such representation and warranty had
been made on and as of that date.
6.2 PERFORMANCE. The Company and each of the Initial Founders shall
have performed and complied with all agreements and conditions contained in this
Agreement required to be performed or complied with by the Company or such
Initial Founder prior to or at the Closing.
6.3 OPINION OF COUNSEL. The Purchaser shall have received an opinion
from Xxxx and Xxxx LLP, counsel for the Company, dated the Closing Date,
addressed to the Purchaser, and reasonably satisfactory in form and substance to
the Purchaser, substantially in the form of EXHIBIT G hereto.
6.4 OTHER AGREEMENTS.
(a) The Stockholders' Voting Agreement attached hereto as
EXHIBIT H (the "Stockholders' Voting Agreement") shall have been executed and
delivered by the Company, by the Purchaser and by each of the Stockholders (as
defined therein). All such action shall have been taken as may be necessary to
elect a Board of Directors of the Company, effective upon the Closing, in
accordance with the Stockholders' Voting Agreement.
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(b) The Registration Rights Agreement attached hereto as
EXHIBIT I (the "Registration Rights Agreement") shall have been executed and
delivered by the Company and the Purchaser.
(c) The Right of First Refusal and Co-Sale Agreement attached
hereto as EXHIBIT J shall have been executed and delivered by the Purchaser and
the other parties named therein.
(d) The Security Agreement attached hereto as EXHIBIT K (the
"Security Agreement") shall have been executed and delivered by the Company.
(e) The Company shall have entered into an employment agreement
with Piran Xxxxxxxxx, Ph.D. and Xxxxxxx Xxxxxxxx, substantially in the form
attached hereto as EXHIBIT L which Employment Agreements shall commence upon
termination of each of Xx. Xxxxxxxxx'x and Xx. Xxxxxxxx'x employment with Spire
Corporation.
6.5 CERTIFICATES AND DOCUMENTS. The Company shall have delivered to
counsel to the Purchaser:
(a) The Certificate of Incorporation of the Company, as amended
and in effect as of the Closing Date (including the Certificate of Amendment),
certified by the Secretary of State of the State of Delaware;
(b) Certificates, as of the most recent practicable dates, as to
the corporate good standing of the Company issued by the Secretary of State of
the State of Delaware and the Secretary of the State of the Commonwealth of
Massachusetts.
(c) By-laws of the Company, certified by its Secretary or
Assistant Secretary as of the Closing Date; and
(d) Resolutions of the Board of Directors of the Company,
authorizing and approving all matters in connection with this Agreement and the
transactions contemplated hereby, certified by the Secretary or Assistant
Secretary of the Company as of the Closing Date.
(e) Copies of letters of resignation tendered by Piran Xxxxxxxxx
and Xxxxxxx Xxxxxxxx to the Chief Executive Officer of Spire Corporation on the
date hereof.
6.6 MINIMUM INVESTMENT. The Purchaser shall have tendered at the
Closing aggregate consideration of not less than $500,000 for the purchase of
the Note.
6.7 SUPPLY AGREEMENT. The Purchaser and the Company shall have
entered into a Supply Agreement in the form of EXHIBIT M hereto.
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6.8 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate, executed by the President of the Company, dated the
Closing Date, certifying to the fulfillment of the conditions specified in
Sections 6.1, 6.2, 6.4, 6.5, 6.6 and 6.7 of this Agreement.
6.9 OTHER MATTERS. All corporate and other proceedings in connection
with the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchaser and its counsel, and the Purchaser and its
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
7. CONDITION TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company under Section 1.2 of this Agreement are subject to fulfillment, or the
waiver, of the following conditions on or before the Closing:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Purchaser contained in Section 5 shall be true on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of that date.
7.2 MINIMUM INVESTMENT. The Purchaser shall have tendered
consideration of not less than $500,000 for the purchase of the Note.
7.3 SUPPLY AGREEMENT. The Purchaser and the Company shall have
entered into a Supply Agreement in the form of EXHIBIT M hereto.
8. COVENANTS OF THE COMPANY.
8.1 INSPECTION. The Company shall permit the Purchaser, or any
authorized representative thereof, to visit and inspect the properties of the
Company, including its corporate and financial records, and to discuss its
business and finances with officers of the Company, during normal business hours
following reasonable notice and as often as may be reasonably requested.
8.2 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall
deliver to the Purchaser:
(a) within 120 days after the end of each fiscal year of the
Company, an audited balance sheet of the Company as at the end of such year and
audited statements of income and of cash flows of the Company for such year,
certified by certified public accountants of established national reputation
selected by the Company, and prepared in accordance with generally accepted
accounting principles;
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(b) within 45 days after the end of each fiscal quarter of the
Company, an unaudited balance sheet of the Company as at the end of such
quarter, and unaudited statements of income and of cash flows of the Company for
such fiscal quarter and for the current fiscal year to the end of such fiscal
quarter; and
(c) within 15 days after the end of each month, a monthly
operating statement.
8.3 NONDISCLOSURE AGREEMENTS. The Company shall require all persons
now or hereafter employed by the Company who have access to confidential and
proprietary information of the Company to enter into nondisclosure and
assignment of inventions agreements substantially in the form of EXHIBIT F, or
such other form as may be approved by the Board of Directors of the Company.
8.4 RESERVATION OF SHARES.
(a) The Company shall reserve and maintain a sufficient number
of shares of Series A Preferred for issuance upon conversion of the Note.
(b) The Company shall reserve and maintain a sufficient number
of shares of Common Stock for issuance upon conversion of all of the outstanding
shares of Series A Preferred.
8.5 TERMINATION OF COVENANTS. The covenants of the Company contained
in Section 8 shall terminate, and be of no further force or effect, upon the
effective date of a registration statement filed by the Company under the
Securities Act covering the Company's first public offering of Common Stock,
resulting in gross proceeds to the Company of at least $10,000,000, at a price
per share of at least $2,500 (as adjusted for stock splits, stock dividends,
recapitalizations and similar events).
9. CONVERSION OF NOTE.
9.1 OPTIONAL CONVERSION. Subject to and upon compliance with the
provisions hereof, the Purchaser shall have the right, at any time prior to the
close of business on the Maturity Date, to convert all or any part of the
principal amount of the Note, plus accrued interest thereon, into Series A
Preferred at a price of $500 per share (such price, as it may be adjusted
pursuant to Section 9.5 below, the "Conversion Price"). In order to exercise
such conversion right the holder shall surrender (in person or by mail) such
Note to the Company at its principal office at 00 Xxxxxxxxx Xxxxx, Xxxxxxxxxx,
Xxxxxxxxxxxxx (or such other office or agency as the Company may reasonably
designate by notice in writing to the holder of such Note), together with a
written notice that the holder elects to convert such Note, or a specified
amount of principal and interest thereunder, in accordance with this Section 9.
Such notice shall also state the name or
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names (together with addresses) in which the certificate or certificates to
Series A Preferred shall be issued.
9.2 MANDATORY CONVERSION. The entire outstanding principal amount of
the Note, plus accrued interest thereon, shall automatically be converted into
fully-paid and non-assessable shares of Series A Preferred at the then effective
Conversion Price upon the consummation of an underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale by the Company of Common Stock to
the public at a price not less than $2,500 per share (as appropriately adjusted
for stock splits, stock dividends and similar events affecting the Common Stock
after the date hereof) and which results in aggregate gross proceeds to the
Company of not less than $10,000,000. The Company shall cause notice of
mandatory conversion to be mailed to the registered holder of the Note, at such
holder's address appearing in the records of the Company at least ten (10) days
prior to the date fixed for mandatory conversion of the Note. On or before the
date fixed for mandatory conversion, the holder shall surrender the Note at the
place designated in such notice, together with a statement of the name or names
(with address) in which the certificate or certificates for shares of Series A
Preferred which shall be issuable on such conversion shall be issued.
9.3 ISSUANCE OF CERTIFICATES; WHEN CONVERSION AND EXERCISE EFFECTED.
When surrendered for optional or mandatory conversion, the Company shall issue
and deliver to the holder registered in such name or names as the holder may
direct, a certificate or certificates for the number of full shares of Series A
Preferred issuable upon the conversion of such Note (or specified portion
thereof), bearing any appropriate restrictive legend. To the extent permitted
by law, such conversion or such exercise, as the case may be, shall be deemed to
have been effected and the Conversion Price shall be determined as of the close
of business on the date by which both (i) such written statement shall have been
received by the Company and (ii) such Note shall have been surrendered as
aforesaid, and at such time the rights of the holder of such Note (or specified
portion thereof) as the holder shall cease, and the person or persons in whose
name or names any certificate or certificate for shares of Series A Preferred
shall then be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Series A Preferred represented
thereby.
9.4 FRACTIONAL SHARES; ACCRUED INTEREST; PARTIAL CONVERSION.
(a) No fractional shares shall be issued upon conversion of the
Note and no payment or adjustment shall be made upon any conversion on account
of any cash dividends on the Common Stock or Series A Preferred issued upon such
conversion. If the Note is converted in part only, the Company shall, upon such
conversion, execute and deliver to the holder thereof, at the expense of the
Company, a new Note or Notes of authorized denominations in principal amount
equal to the unconverted portion of such Note and bearing interest from the date
to which interest has been paid on the Note so surrendered (other than pursuant
to the next preceding sentence hereof). If any fractional interest in a share
of Series A Preferred would,
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except for the provisions of the first sentence of this subparagraph 9.4(a), be
deliverable upon the conversion of any Note, the Company shall, in lieu of
delivering the fractional share therefor, pay to the holder surrendering such
Note an amount in cash equal to the fair market value of such fractional
interest as determined by the Board of Directors.
9.5 ADJUSTMENT OF CONVERSION PRICE.
(a) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES:
(i) SPECIAL DEFINITIONS. For purposes of this
Subsection 9.5(a), the following definitions shall apply:
(A) "OPTION" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, excluding options described in subsection 9.5(a)(i)(D)(IV) below.
(B) "ORIGINAL ISSUE DATE" shall mean October __, 1997.
(C) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(D) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to Subsection 9.5(a)(iii) below,
deemed to be issued) by the Company after the Original Issue Date, other than
shares of Common Stock issued or issuable:
(I) upon conversion of any Convertible Securities
outstanding on the Original Issue Date, or upon
exercise of any Options outstanding on the
Original Issue Date;
(II) as a dividend or distribution on Series A
Preferred Stock;
(III) by reason of a dividend, stock split, split-up or
other distribution on shares of Common Stock that
is covered by Section 9.5(b) below; or
(IV) to employees or directors of, or consultants to,
the Company pursuant to a plan adopted by the
Board
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of Directors of the Company; not to exceed 300 shares
of Common Stock; PROVIDED THAT, such number of shares
may be increased by a vote of a majority of the Board
of Directors without further amendment to this Section
9.5(a)(i)(D)(IV).
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
number of shares of Series A Preferred into which the Note is convertible shall
be made, by adjustment in the applicable Conversion Price thereof: (a) unless
the consideration per share (determined pursuant to Subsection 9.5(a)(v)) for an
Additional Share of Common Stock issued or deemed to be issued by the Company is
less than the applicable Conversion Price in effect on the date of, and
immediately prior to, the issue of such Additional Shares, or (b) if prior to
such issuance, the Company receives written notice from the holder of the Note
agreeing that no such adjustment shall be made as the result of the issuance of
Additional Shares of Common Stock.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES OF
COMMON STOCK.
If the Company at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Subsection 9.5(a)(v) hereof)
of such Additional Shares of Common Stock would be less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original issue thereof (or upon
the occurrence of a record date with respect thereto), and
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any subsequent adjustments based thereon, shall, upon any such increase becoming
effective, be recomputed to reflect such increase insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities;
(C) Upon the expiration or termination of any unexercised
Option, the Conversion Price shall not be readjusted, but the Additional Shares
of Common Stock deemed issued as the result of the original issue of such Option
shall not be deemed issued for the purposes of any subsequent adjustment of the
Conversion Price;
(D) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Conversion Price then in effect shall
forthwith be readjusted to such Conversion Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security not exercised or converted prior to such change been made upon the
basis of such change; and
(E) No readjustment pursuant to clause (B) or (D) above shall
have the effect of increasing the Conversion Price to an amount which exceeds
the lower of (i) the Conversion Price on the original adjustment date, or
(ii) the Conversion Price that would have resulted from any issuances of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date.
In the event the Company, after the Original Issue Date, amends the terms
of any Options or Convertible Securities (whether such Options or Convertible
Securities were outstanding on the Original Issue Date or were issued after the
Original Issue Date), then such Options or Convertible Securities, as so
amended, shall be deemed to have been issued after the Original Issue Date and
the provisions of this Subsection 9.5(a)(iii) shall apply.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK.
In the event the Company shall at any time after the Original Issue Date
issue Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Subsection 9.5(a)(iii), but excluding
shares issued as a stock split, split dividend or combination as provided in
Subsection 9(b), without consideration or for a consideration per share less
than the applicable Conversion Price in effect on the date of and immediately
prior to such issue, then and in such event, such Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying such Conversion Price by a fraction, (A) the
numerator of which shall be (1) the number of shares of Common Stock outstanding
immediately prior to such issue plus (2) the number of shares of Common Stock
which the aggregate consideration received or to be received by the Company for
the total number of Additional Shares of Common Stock so issued would purchase
at such Conversion
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Price; and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; PROVIDED THAT, (i) for the purpose
of this Subsection 9.5(a)(iv), all shares of Common Stock issuable upon exercise
or conversion of Options or Convertible Securities outstanding immediately prior
to such issue shall be deemed to be outstanding, and (ii) the number of shares
of Common Stock deemed issuable upon exercise or conversion of such outstanding
Options and Convertible Securities shall not give effect to any adjustments to
the conversion price or conversion rate of such Options or Convertible
Securities resulting from the issuance of Additional Shares of Common Stock that
is the subject of this calculation.
(v) DETERMINATION OF CONSIDERATION. For purposes of
this Subsection 9.5(a), the consideration received by the Company for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(A) CASH AND PROPERTY: Such consideration shall:
(I) insofar as it consists of cash, be computed at the
aggregate of cash received by the Company, excluding amounts paid or payable for
accrued interest and dividends;
(II) insofar as it consists of property other than
cash, be computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the Company
for consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (I) and (II) above, as determined in
good faith by the Board of Directors.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to Subsection 9.5(a)(iii), relating to
Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable
by the Company as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
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(y) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) MULTIPLE CLOSING DATES. In the event the Company shall
issue on more than one date Additional Shares of Common Stock which are
comprised of shares of the same series or class of Preferred Stock, and such
issuance dates occur within a period of no more than 60 days, then the
Conversion Price shall be adjusted only once on account of such issuances, with
such adjustment to occur upon the final such issuance and to give effect to all
such issuances as if they occurred on the date of the final such issuance.
(b) ADJUSTMENTS FOR STOCK SPLITS, STOCK DIVIDENDS AND
COMBINATIONS.
In case the Company shall:
(A) declare a dividend on its Common Stock in shares
of Common Stock, on its Series A Preferred in shares of
Series A Preferred or on any other class or series of
capital stock of the Company ranking on liquidation prior
or in preference to the Series A Preferred ("Senior
Stock") in shares of Senior Stock,
(B) subdivide outstanding Common Stock or Series A
Preferred or Senior Stock into a larger number of shares
of Common Stock, Series A Preferred or Senior Stock, as
the case may be, by reclassification, stock split or
otherwise, or
(C) combine outstanding Common Stock, Series A
Preferred or Senior Stock into a smaller number of shares
of Common Stock, Series A Preferred or Senior Stock, as
the case may be, by reclassification or otherwise,
the number of shares of Series A Preferred issuable upon conversion of the Note
(and, if applicable, the number of shares of Common Stock issuable upon
conversion of the shares of Series A Preferred issuable upon conversion of the
Note) immediately prior to any such event shall be adjusted proportionately so
that thereafter the holder of the Note shall be entitled to receive upon
conversion of the Note the number of shares of Series A Preferred (and, upon
conversion of such Series A Preferred, the number of shares of Common Stock),
which such holder would have owned after the happening of any of the events
described above had the Note been converted into shares of Series A Preferred
immediately prior to the happening of such event, provided that the Conversion
Price shall in no event be reduced to less than the par value of the shares
issuable upon conversion. An adjustment made pursuant to this Section 9.5(b)
shall
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become effective immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in the case of a
subdivision or combination.
(c) If, prior to maturity of the Note, the Company shall at any
time consolidate or merge with another corporation (other than a merger or
consolidation in which the Company is the surviving corporation), the registered
holder hereof will thereafter be entitled to receive, upon the conversion
hereof, the securities or property to which a holder of the number of shares of
Series A Preferred then deliverable upon the conversion hereof would have been
entitled upon such consolidation or merger, and the Company shall take such
steps in connection with such consolidation or merger as may be necessary to
ensure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or property thereafter
deliverable upon the conversion of the Note.
(d) NOTICE. In case the Company proposes to take any action
referred to in this Section 9.5, or to effect the liquidation, dissolution or
winding up of the Company, then the Company shall cause notice thereof to be
mailed to the registered holder of the Note, at such holder's address appearing
in the records of the Company, at least thirty (30) days prior to the date on
which the transfer books of the Company shall close or a record be taken for
such stock dividend or the date when such reclassification, liquidation,
dissolution or winding up shall be effective, as the case may be.
(e) STATEMENT OF ADJUSTMENT. Whenever the Conversion Price
shall be adjusted as provided in this Section 9.5 above, the Company shall
forthwith file at each office designated for the conversion of Note, a
statement, signed by the Chairman of the Board, the President, any Vice
President, the Treasurer or Secretary of the Company, showing in reasonable
detail the facts requiring such adjustment and the Conversion Price that will be
effective after such adjustment. The Company shall also cause a notice setting
forth any such adjustment to be sent by mail, first class, postage prepaid, to
the record holder of the Note at his or its address appearing in the records of
the Company. Where appropriate, such notice may be given in advance and may be
included as part of a notice required to be mailed under the provisions of
Section 9.5(d) hereof.
(f) ADJUSTMENTS TO SERIES A PREFERRED ISSUED UPON CONVERSION OF
THE NOTE. The provisions of this Section 9.5 relate solely to any adjustments
to the Conversion Price and to the number of shares of Series A Preferred
issuable upon conversion of the Note (and, if applicable, the shares of Common
Stock issuable upon conversion of such Series A Preferred) which occur as a
result of actions taken by the Company while the Note is outstanding. Upon
conversion of the Note into shares of Series A Preferred, the provisions of this
Section 9.5 will no longer be applicable and the shares of Series A Preferred
issued upon conversion of the Note will be subject to adjustment solely in
accordance with the terms of Section 4 of the Company's Certificate of
Incorporation, as amended from time to time.
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(g) ACCRUED INTEREST. Upon the conversion of the Note, all
accrued but unpaid interest on the amount so converted up to the Conversion Date
shall be converted into additional shares of Series A Preferred on the terms set
forth herein.
(h) SECURITIES ACT OF 1933. Upon conversion of the Note, the
registered holder may be required to execute and deliver to the Company an
instrument, in form satisfactory to the Company, representing that the shares
issuable upon conversion hereof are being acquired for investment and not with a
view to distribution within the meaning of the Securities Act of 1933, as
amended.
9.6 NO PREPAYMENT OF PRINCIPAL. Except as otherwise provided herein,
the principal indebtedness represented by the Note may not be prepaid in whole
or in part, without the prior written consent of the holder of the Note.
10 TRANSFER OF NOTE; TRANSFER OF SHARES ACQUIRED UPON CONVERSION OF NOTE.
10.1 RESTRICTED SECURITIES. "Restricted Securities" means (i) the
Note, (ii) the shares of Series A Preferred issued or issuable upon conversion
of the Note; (iii) the shares of Common Stock issued or issuable upon conversion
of the Series A Preferred, (iv) any shares of capital stock of the Company
acquired by the Purchaser pursuant to the Right of First Refusal Agreement, and
(iv) any other shares of capital stock of the Company issued in respect of such
shares (as a result of stock splits, stock dividends, reclassifications,
recapitalizations, or similar events); PROVIDED, HOWEVER, that shares of Common
Stock which are Restricted Shares shall cease to be Restricted Securities
(i) upon any sale pursuant to the Registration Rights Agreement, Section 4(1) of
the Securities Act or Rule 144 under the Securities Act or (ii) at such time as
they become eligible for sale under Rule 144(k) under the Securities Act or an
alternative available exemption from registration under the Securities Act.
10.2 REQUIREMENTS FOR TRANSFER.
(a) Restricted Securities shall not be sold or transferred
unless either (i) they first shall have been registered under the Securities
Act, or (ii) the Company first shall have been furnished with an opinion of
legal counsel, reasonably satisfactory to the Company, to the effect that such
sale or transfer is exempt from the registration requirements of the Securities
Act.
(b) Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for (i) a transfer by the Purchaser which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the transferee agrees in writing to be subject to
the terms of this Section 10 to the same extent as if he were an original
Purchaser hereunder, or (ii) a transfer made in accordance with Rule 144 under
the Securities Act.
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10.3 LEGEND. Each certificate representing Restricted Securities
shall bear a legend substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not
be offered, sold or otherwise transferred, pledged or hypothecated
unless and until such shares are registered under such Act or an
opinion of counsel in form reasonably satisfactory to the Company is
obtained to the effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing
any Restricted Securities, at the request of the holder thereof, at such time as
they become eligible for resale pursuant to Rule 144(k) under the Securities
Act.
11. SUBORDINATION.
11.1 SUBORDINATION TO SENIOR INDEBTEDNESS. The indebtedness evidenced
by the Note, and the payment of the principal thereof, and any interest thereon,
is wholly subordinated, junior and subject in right of payment, to the extent
and in the manner hereinafter provided, to the prior payment of all Senior
Indebtedness of the Company now outstanding or hereinafter incurred. "Senior
Indebtedness" means the principal of, and premium, if any, and interest on
(a) all indebtedness of the Company for monies borrowed from banks, trust
companies, insurance companies and other financial institutions, including
commercial paper and accounts receivable sold or assigned by the Company to such
institutions, (b) all indebtedness of the Company for monies borrowed by the
Company from other persons or entities, (c) obligations of the Company as lessee
under leases of real or personal property, (d) principal of, and premium, if
any, and interest on any indebtedness or obligations of others of the kinds
described in (a), (b) and (c) above assumed or guaranteed in any manner by the
Company, (d) deferrals, renewals, extensions and refundings of any such
indebtedness or obligations described in (a), (b), (c) and (d) above, and
(f) any other indebtedness of the Company which the Company and the holder of
the Note may hereafter from time to time expressly and specifically agree in
writing shall constitute Senior Indebtedness.
11.2 NO PAYMENT IF DEFAULT IN SENIOR INDEBTEDNESS. No payment on
account of principal of or interest on the Note shall be made, and the Note
shall not be redeemed or purchased directly or indirectly by the Company (or any
of its subsidiaries), if at the time of such payment or purchase or immediately
after giving effect thereto, (a) there shall exist a default in any payment with
respect to any Senior Indebtedness or (b) there shall have occurred an event of
default (other than a default in the payment of amounts due thereon) with
respect to any Senior Indebtedness, as defined in the instrument under which the
same is outstanding, permitting the
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holders thereof to accelerate the maturity thereof, and such event of default
shall not have been cured or waived or shall not have ceased to exist.
11.3 PAYMENT UPON DISSOLUTION, ETC.
(a) In the event of any bankruptcy, insolvency, reorganization,
receivership, composition, assignment for the benefit of creditors or other
similar proceeding initiated by or against the Company or any dissolution or
winding up or total or partial liquidation or reorganization of the Company
(being hereinafter referred to as a "Proceeding"), all claims of the holder of
the Note in such Proceeding shall be deemed assigned, pro rata, to the then
holders of the Senior Indebtedness on the basis of the respective amounts of
such Senior Indebtedness held by such holder, and the holder of the Note hereby
agrees to execute all documents that such holders request in order to evidence
such assignment, PROVIDED, HOWEVER, that such assignment shall terminate upon
receipt by such holders of payment in full of all of the Senior Indebtedness.
While such assignment is in effect, the then holders of the Senior Indebtedness
shall have the exclusive right to exercise all rights of the holder of the Note
arising from their claims in the Proceeding, including but not limited to the
right to vote for a trustee and to accept or reject a proposed plan of
reorganization or composition, and the holder of the Note hereby agrees to
execute all documents requested by the then holders of the Senior Indebtedness
in order to exercise any such rights whether (at the sole discretion of such
holders) in the holder's own name or in the name of the holder of the Note.
While such assignment is in effect, the holder of the Note also agree that it
shall, upon request, and at their own expense take all reasonable actions
(including but not limited to the execution and filing of documents and the
giving of testimony in any Proceeding, whether or not such testimony could have
been compelled by process) necessary to prove the full amount of all its claims
in any Proceeding, and the holder of the Note shall not expressly, by
implication or by inaction waive any claim in any Proceeding without the written
consent of such holder.
(b) Upon payment or distribution to creditors in a Proceeding of
assets of the Company of any kind or character, whether in cash, property or
securities, all principal and interest due upon any Senior Indebtedness shall
first be paid in full, or payment thereof in full duly provided for, before the
holder of the Note shall be entitled to receive or, if received, to retain any
payment or distribution on account of the Note; and upon any such Proceeding,
any payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holder of the Note would
be entitled except for the provisions of this Section 11 shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other person making such payment or distribution, or by the holder of the Note
who shall have received such payment or distribution, directly to the holders of
the Senior Indebtedness (pro rata to each such holder on the basis of the
respective amounts of such Senior Indebtedness held by such holder) or their
representatives to the extent necessary to pay all such Senior Indebtedness in
full after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to the holder of the Note. In the event of any Proceeding, the holder of Note
shall be entitled to be paid one
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hundred percent (100%) of the principal amount thereof and accrued interest
thereon before any distribution of assets shall be made among the holders of any
class of shares of the capital stock of the Company in their capacities as
holders of such shares.
(c) For purposes of this Section 1(c), the words "assets" and
"cash, property or securities" shall not be deemed to include shares of Common
Stock of the Company as reorganized or readjusted, or securities of the Company
or any other person provided for by a plan of reorganization or readjustment,
the payment of which is subordinated at least to the extent provided in this
Section 11 with respect to the Note to the payment of all Senior Indebtedness
which may at the time be outstanding, if (x) the Senior Indebtedness is assumed
by the new person, if any, resulting from any such reorganization or
readjustment, and (y) the rights of the holders of Senior Indebtedness are not,
without the consent of such holders, altered by such reorganization or
readjustment.
11.4 SUBROGATION. Subject to payment in full of all Senior
Indebtedness, the holder of the Note shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of the
assets of the Company made on such Senior Indebtedness until all principal and
interest on the Note shall be paid in full; and for purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
of any cash, property or securities to which the holder of the Note would be
entitled except for the subordination provisions of this Section 11 shall, as
between the holder of the Note and the Company and/or its creditors other than
the holders of the Senior Indebtedness, be deemed to be a payment on account of
the Senior Indebtedness.
11.5 RIGHTS OF HOLDER UNIMPAIRED. The provisions of this Section 11
are and are intended solely for the purposes of defining the relative rights of
the holder of the Note and the holders of Senior Indebtedness and nothing in
this Section 11 shall impair, as between the Company and the holders of the
Note, the obligation of the Company, which is unconditional and absolute, to pay
to the holder of the Note the principal thereof and interest thereon, in
accordance with the terms of the Note, nor shall anything herein prevent the
holder of the Note from exercising all remedies otherwise permitted by
applicable law or hereunder upon default, subject to the rights set forth above
of holders of Senior Indebtedness to receive cash, property or securities
otherwise payable or deliverable to the holder of the Note.
11.6 HOLDERS OF SENIOR INDEBTEDNESS. These provisions regarding
subordination will constitute a continuing offer to all persons who, in reliance
upon such provisions, become holders of, or continue to hold, Senior
Indebtedness; such provisions are made for the benefit of the holders of Senior
Indebtedness, and such holders are hereby made obligees under such provisions to
the same extent as if they were named therein, and they or any of them may
proceed to enforce such subordination. The holder of the Note shall execute and
deliver to any holder of Senior Indebtedness (a) any such instrument as such
holder of Senior Indebtedness may request in order to confirm the subordination
of the Note to such Senior Indebtedness upon the terms set forth in the Note,
and (b) any powers of attorney specifically confirming the rights of holders of
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Senior Indebtedness to enforce such subordination and all such proofs of claim,
assignments of claim and other instruments as may be requested by the holders of
Senior Indebtedness or their representatives to enforce all claims upon or in
respect of the Note.
11.7 PAYMENTS ON NOTE. Subject to Section 11.3, the Company may make
payments of the principal of, and any interest or premium on, the Note, if at
the time of payment, and immediately after giving effect thereto, (a) there
exists no default in any payment with respect to any Senior Indebtedness and
(b) there shall not have occurred an event of default (other than a default in
the payment of amounts due thereon) with respect to any Senior Indebtedness, as
defined in the instrument under which the same is outstanding, permitting the
holders thereof to accelerate the maturity thereof, other than an event of
default which shall have been cured or waived or shall have ceased to exist.
12. MISCELLANEOUS.
12.1 SUCCESSORS AND ASSIGNS. This Agreement, and the rights and
obligations of Purchaser hereunder, may be assigned by such Purchaser to any
person or entity to which the Note is transferred by such Purchaser, and such
transferee shall be deemed a "Purchaser" for purposes of this Agreement;
provided that the transferee provides written notice of such assignment to the
Company.
12.2 CONFIDENTIALITY. Each Party agrees that it will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information which such Party may obtain from the other Party pursuant to
financial statements, reports and other materials submitted by the other Party
to such Party pursuant to this Agreement, or pursuant to visitation or
inspection rights granted hereunder, unless such information is known, or until
such information becomes known, to the public; PROVIDED, HOWEVER, that either
Party may disclose such information to its attorneys, accountants, consultants,
and other professionals to the extent necessary to obtain their services in
connection with the transaction contemplated by this Agreement; and PROVIDED
FURTHER, that the Purchaser may disclose such information (i) to any prospective
purchaser of the Note from the Purchaser as long as such prospective purchaser
agrees in writing to be bound by the provisions of this Section or (ii) to any
affiliate of the Purchaser or to a partner, shareholder or subsidiary of such
Purchaser.
12.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All agreements,
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby.
12.4 NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand or mailed by first class certified or registered mail, return receipt
requested, postage prepaid:
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If to the Company, at 00 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxxxxxx 00000,
Attention: President, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchaser, with a copy to Xxxxx X.
Xxxxxx, Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, XX 00000.
If to the Purchaser, at its address set forth on EXHIBIT A, or at such
other address or addresses as may have been furnished to the Company in writing
by such Purchaser, with a copy to Xxxxx X. Xxxxx, X'Xxxxxx & Xxxxxx, Suite 2900,
00 Xxxxx Xx Xxxxx Xxxxxx, Xxxxxxx, XX 00000; or
If to a Founder, at his address set forth below his signature to this
Agreement.
Notices provided in accordance with this Section 12.4 shall be deemed
delivered upon personal delivery or two business days after deposit in the mail.
12.5 BROKERS. The Company, each Initial Founder and the Purchaser
(i) represents and warrants to the other parties hereto that he or it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement, and (ii) will indemnify and save the other parties harmless from
and against any and all claims, liabilities or obligations with respect to
brokerage or finders' fees or commissions, or consulting fees in connection with
the transactions contemplated by this Agreement asserted by any person on the
basis of any statement or representation alleged to have been made by such
indemnifying party.
12.6 ENTIRE AGREEMENT. This Agreement and the Ancillary Agreements
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter.
12.7 AMENDMENTS AND WAIVERS. Except as otherwise expressly set forth
in this Agreement, any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the holder of the Note. Any amendment or waiver effected in
accordance with this Section 12.7 shall be binding upon the holder of the Note
(including shares of Series A Preferred and Common Stock into which such Note
and Series A Preferred, respectively, have been converted) each future holder of
all such securities and the Company. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.
12.8 RECOURSE. Recourse under the Note shall be to the general assets
of the Company.
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12.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
12.10 SECTION HEADINGS. The section headings are for the convenience
of the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
12.11 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
12.12 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
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12.13 BINDING ON SUCCESSORS AND ASSIGNS. Subject to the provisions of
Section 12.1 herein, this Agreement shall be binding on successors and assigns.
COMPANY:
RADIOMED CORPORATION
By: /s/ X.X. Xxxxxxx, Xx.
--------------------------------------------
Xxxxxx Xxxxxxx, Jr., Ph.D.
Chairman and Chief Executive Officer
PURCHASER:
NORTH AMERICAN SCIENTIFIC, INC.
By: /s/ L. Xxxxxxx Xxxxxx
--------------------------------------------
INITIAL FOUNDERS:
/s/ H. Xxxxxx Xxxxx
------------------------------------------------
H. Xxxxxx Xxxxx, M.D.
Address:
------------------------
------------------------
/s/ Xxxxxxx Xxxxxxxx
-----------------------------------------------
Xxxxxxx Xxxxxxxx
Address:
------------------------
------------------------
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/s/ X.X. Xxxxxxx, Xx.
-------------------------------------------------
Xxxxxx Xxxxxxx, Jr., Ph.D.
Address:
------------------------
------------------------
/s/ Piran Xxxxxxxxx
---------------------------------------------------
Piran Xxxxxxxxx, Ph.D.
Address:
------------------------
------------------------
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EXHIBIT A
---------
Principal Amount
Name and Address of Purchaser of Note Purchase Price
------------------------------- ------- --------------
North American Scientific, Inc. $500,000 $500,000
0000 Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxxxxx, XX 00000
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