Exhibit 10.39
XXXX X. XXXXXXXX
February 28, 1997
Xxxxxx Medical Corporation
0000 Xxxxxxx Xxxxxxx Xxxxx, XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Re: Loan to Xxxxxx Medical Corporation (the "Company")
The undersigned hereby irrevocably agrees to loan to the
Company up to $500,000, at an interest rate of 10% per annum, which amount,
together with all accrued interest due thereon, shall be repayable by the
Company on May 31, 1998 (the "Loan"). The undersigned agrees that (a) the first
tranche of the Loan in the amount of $150,000 (the "First Tranche") shall be
funded on the date hereof and (b) the second tranche of the Loan in the amount
of $350,000 (the "Second Tranche") shall be funded upon the request of the
President of the Company, but not later than April 30, 1997. Notwithstanding the
foregoing, in the event that the Second Tranche is not funded, the maturity date
for the First Tranche shall be July 15, 1997. The Second Tranche shall be
evidenced by a Promissory Note in substantially the same form as the Promissory
Note delivered to the undersigned contemporaneously herewith in respect of the
First Tranche. In consideration for the Loan, the Company hereby agrees to issue
to the undersigned (i) upon the funding of the First Tranche, a warrant to
purchase 15,000 shares of the Company's Common Stock, par value $.01 per share
(the "Common Stock"), at an exercise price of $8.25 per share and (ii) upon the
funding of the Second Tranche, a warrant to purchase 35,000 shares of Common
Stock at an exercise price $8.25 per share in substantially the same form as the
Warrant delivered to the undersigned contemporaneously herewith in respect of
the First Tranche (collectively, the "Warrants").
The undersigned hereby represents and warrants as follows:
(a) The undersigned understands that neither the Warrants nor
the Common Stock issuable upon the exercise thereof have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or the securities
laws of certain states, in reliance upon specific exemptions from registration
thereunder, and the undersigned agrees that neither the undersigned's Warrants
nor the Common Stock issuable upon the exercise thereof may be sold, offered for
sale, transferred, pledged, hypothecated or otherwise disposed of except in
compliance with the Securities Act and applicable state securities laws. The
undersigned has been advised that the Company has no obligation to cause the
Warrants or the Common Stock issuable upon the exercise thereof to be registered
under the Securities
Act or to comply with any exemption under the Securities Act, including but not
limited to that set forth in Rule 144 promulgated under the Act, which otherwise
might permit the Warrants or the Common Stock issuable upon the exercise thereof
to be sold by the undersigned. The undersigned understands that the Warrants and
all certificates representing the Common Stock issuable upon the exercise
thereof may bear legends restricting the transfer thereof.
(b) The undersigned is acquiring the Warrants and the Common
Stock issuable upon the exercise thereof in good faith solely for the
undersigned's own account, and the undersigned is acquiring such Warrants and
the Common Stock issuable upon the exercise thereof for investment purposes and
not with a view to, or for, subdivision, distribution, fractionalization or
resale, or for the account, in whole or in part, of others.
Very truly yours,
/s/ Xxxx X. Xxxxxxxx
Xxxx X. Xxxxxxxx
AGREED:
XXXXXX MEDICAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------
Xxxxxx X. Xxxxxxxxx, President
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NON-TRANSFERABLE SUBORDINATED PROMISSORY NOTE
$150,000 February 28, 1997
FOR VALUE RECEIVED, Xxxxxx Medical Corporation, a Delaware
corporation (the "Maker"), with offices at 0000 Xxxxxxx Xxxxxxx Xxxxx, XX,
Xxxxxxxxxxx, Xxx Xxxxxx 00000, promises to pay to Xxxx X. Xxxxxxxx ("Payee"), at
such place in the United States as shall be designated in writing by Xxxxx, a
principal sum of $150,000 (the "Principal Sum") on May 31, 1998 (the "Maturity
Date"). From and after the date hereof, the balance of the Principal Sum
outstanding from time to time shall bear interest at the rate of ten percent
(10%) per annum, all then accrued but unpaid interest being due and payable
concurrently with the Principal Sum as herein provided. This Note may be
prepaid, at the option of Maker, in whole or in part at any time and from time
to time, without penalty or premium, provided that the amount so prepaid shall
be accompanied by the payment of all interest accrued to the prepayment date of
the amount so prepaid.
This Note evidences the first tranche of an aggregate loan by
Xxxxx to the Maker of $500,000 (the "Loan"). Notwithstanding anything to the
contrary contained herein, in the event that the second tranche of the Loan in
the amount of $350,000 is not funded in accordance with the terms of the Letter
Agreement, dated of even date herewith, between Maker and Payee, the Maturity
Date hereunder shall be July 15, 1997. This Note is non-negotiable.
Notwithstanding any provision of this Note to the contrary,
the indebtedness evidenced by this Note (including all interest thereon), and
all renewals, extensions and modifications thereof and hereof, is and shall
remain subordinate and junior in right of payment, to the extent set forth in
this Note, to the prior payment in full of all indebtedness (including
principal, interest, fees and other charges), and any other obligations, whether
direct or contingent, presently existing or hereafter incurred, of the Maker,
for money borrowed from, and/or arising out of any credit facilities and/or any
loan agreement(s) with, Sunwest Bank of Albuquerque, N.A. ("Bank") and/or to any
successor to Bank and/or to any one or more banks or other lending institutions
which shall repay a portion or all of the indebtedness or obligations of the
Maker to Bank or any such successor in the future, or which otherwise shall
become the primary institutional lenders to the Maker, and/or under guaranties
from time to time by the Maker of any of such indebtedness or obligations, all
as the same may be refinanced, restated, modified or amended from time to time
(collectively, "Senior Indebtedness"). No payments of, nor any cancellation,
set-off or discharge of, nor any transfer of collateral in respect of, any
principal or interest shall be made, given or received hereunder or in respect
of the indebtedness evidenced by this Note, nor shall any holder of this Note be
entitled to demand or accept payment of any amount due or payable under this
Note, whether by acceleration or upon demand by reason of the occurrence of an
Event of Default (as hereinafter defined), at maturity, or otherwise, nor shall
the holder hereof be entitled to declare an acceleration or demand immediate
payment of the indebtedness evidenced by this Note, until the Senior
Indebtedness shall have been paid in full, if there shall have occurred and be
continuing a default in the payment of principal and/or interest under Senior
Indebtedness, or a default under any financial covenant of the Maker under
Senior Indebtedness which shall have occurred and be continuing or would occur
or exist by reason of such payment under this Note which has not been waived by
Bank or the then holder(s) of such Senior Indebtedness. All payments and
distributions
which would otherwise be payable or deliverable in respect of this Note (but for
the terms hereof) shall be paid or delivered directly to the holders of Senior
Indebtedness at the time outstanding, ratably, until all such Senior
Indebtedness shall have been paid in full. If any payment, distribution or
collateral shall be received by any holder of this Note in contravention of any
of the terms hereof and before all Senior Indebtedness shall have been paid in
full, such payment, distribution or collateral shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of the Senior
Indebtedness at the time outstanding for application to the payment of all
Senior Indebtedness remaining unpaid, ratably, to the extent necessary to pay
all such Senior Indebtedness in full. Nothing in this paragraph shall impair or
qualify, as among the Maker and the holder hereof, the obligation of the Maker
to pay the holder hereof the principal of and interest on this Note when and as
due as set forth elsewhere herein, subject, however, to the rights of the
holders of Senior Indebtedness, and to the provisions as to subordination, as
provided herein.
In the event of any liquidation, dissolution or any other
winding up of the Maker or in the event of any receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization or
arrangement with creditors, whether or not pursuant to bankruptcy laws, or any
other marshalling of the assets or liabilities of the Maker, or any proceeding
as to any of the foregoing, (i) Senior Indebtedness shall first be paid in full
before the holder of this Note shall be entitled to receive any moneys,
dividends or assets in any such proceeding, and (ii) the holder of this Note
will at the request of the holders of the Senior Indebtedness file any claim,
proof of claim or other instrument of similar character necessary to enforce the
obligations of the Maker in respect of this Note and will hold in trust for the
holders of the Senior Indebtedness and pay over to them, in the form received,
to be applied to Senior Indebtedness, pro rata, any and all moneys, dividends or
other assets, received in any such proceeding on account of this Note, until the
Senior Indebtedness shall be paid in full. In the event that the holder of this
Note shall fail to take such action requested by the holders of Senior
Indebtedness, such holders may, as attorneys-in-fact for the holder of this
Note, and are hereby irrevocably authorized by the holder hereof to, take such
action on behalf of the holder of this Note as shall be necessary to effect or
in furtherance of the provisions of this paragraph, and without limiting the
generality of the foregoing:
(i) to enforce claims under this Note either in
their own name or the name of the holder hereof by proof of debt, proof of
claim, suit or otherwise;
(ii) to vote in their sole discretion in connection
with any resolution, arrangement, plan of reorganization, compromise, settlement
or extension and to take all such other action, including, without limitation,
the right to participate in any composition of creditors and the right to vote
this Note at creditors' meetings; and
(iii) to take generally any action in connection with
any such proceeding or meeting which the holder hereof might otherwise take.
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No payment or distribution to the holder of any Senior
Indebtedness as contemplated by the provisions of this Note shall entitle the
holder hereof to exercise any rights of subrogation in respect thereof until all
Senior Indebtedness shall have been paid in full; and, for the purposes of such
subrogation, payments or distributions to the holder of any Senior Indebtedness
of any cash, property or securities to which the holder hereof would be entitled
except for the provisions of this Note shall, as between the Maker and its
creditors other than the holders of Senior Indebtedness and the holder hereof,
be deemed to be a payment by the Maker to or on account of the Senior
Indebtedness, it being understood that the provisions of this Note are for the
purpose of defining the relative rights of the holder hereof, on the one hand,
and the holders of Senior Indebtedness on the other hand.
The holders of the Senior Indebtedness may, at any time and
from time to time, without consent of or notice to the holder of this Note and
without impairing or releasing any of the rights of the holders of Senior
Indebtedness under this Note, effect, consent to and/or permit, and the rights
and interests of the holders of the Senior Indebtedness under this Note shall
remain in full force and effect irrespective of, any of the following:
(i) any change in the terms of the Senior
Indebtedness, including the amount, time, place, manner or terms of payment, or
any amendment or waiver of any agreement relating to Senior Indebtedness;
(ii) any sale, exchange or release of or any other
dealing with any property by whomsoever at any time pledged or mortgaged to
secure the Senior Indebtedness, other than a provision expressly prohibiting the
payment of this Note as a device to avoid the obligation hereunder to make such
payment;
(iii) any release of anyone liable in any manner for
the payment and collection of Senior Indebtedness;
(iv) any exercise or refraining from the exercise of
any rights against the Maker or others, including the holder of this Note;
(v) any application of any funds received by holders
of Senior Indebtedness by whomsoever paid or however realized to the Senior
Indebtedness; or
(vi) any other circumstance which might otherwise
constitute a defense available to any holder hereof as against any holder of
Senior Indebtedness.
The provisions of this Note as to the rights of the holders of
Senior Indebtedness and the obligations of the holder hereof with respect to the
Senior Indebtedness shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Senior Indebtedness is
rescinded or must otherwise be returned by the holder
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thereof upon the insolvency, bankruptcy or reorganization of any party hereto or
otherwise, all as though such payment had not been made.
The holder of this Note, by acceptance of same, absolutely
agrees to be bound by all of the provisions hereof relating to the subordination
of the indebtedness evidenced by this Note to the Senior Indebtedness and/or the
rights of the holders of Senior Indebtedness and the obligations of the holder
hereof with respect thereto, in each case for the benefit of the holders of such
Senior Indebtedness. Such provisions of this Note shall inure to the benefit of
the holders of the Senior Indebtedness and their respective successors and
assigns and shall be binding upon the holder hereof and its successors and
assigns.
An "Event of Default" shall be deemed to have occurred
hereunder if and only if the Maker shall fail to make any payment under this
Note when due and such failure shall not be cured within 30 days following
written notice thereof from the Payee to the Maker; or (a) the Maker shall
approve of, consent to or acquiesce in the appointment of a trustee, receiver,
liquidator, custodian, sequestrator or similar official (collectively,
"Custodians") for itself or substantially all of its assets; or (b) a Custodian
shall be appointed for the Maker without its consent, or for substantially all
of its assets, and such appointment shall not be terminated or stayed within 90
days; or (c) any voluntary bankruptcy proceeding shall be commenced by the
Maker, as debtor; or (d) any involuntary bankruptcy proceeding commenced against
the Maker shall not be dismissed or stayed within 90 days or an order for relief
is granted against the Maker in such proceeding.
If an Event of Default shall occur and be continuing, then the
Principal Sum under this Note and all accrued interest thereon, if any, shall,
at the election of the Payee, but subject always to the subordination provisions
hereof and/or the rights of the holders of Senior Indebtedness and the
obligations of the holder hereof with respect thereto, become due and payable
immediately, without presentment, notice of dishonor, protest and notice of
protest and nonpayment, entitlement to which is hereby waived by the Maker.
Payee shall be entitled to recover reasonable attorneys' fees incurred in the
collection of the indebtedness evidenced by this Note after the occurrence of an
Event of Default.
This Note may not be changed or terminated orally. This Note
shall be governed by the internal laws of the State of New York without regard
to principles of conflict of laws.
XXXXXX MEDICAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxxxx, President
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NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF SUCH WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND NONE OF THEM MAY BE TRANSFERRED, NOR WILL ANY ASSIGNEE OR ENDORSEE
OF SUCH WARRANT OR SHARES OF COMMON STOCK BE RECOGNIZED AS AN OWNER THEREOF
BY THE ISSUER FOR ANY PURPOSE, UNLESS A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, WITH RESPECT TO SUCH WARRANT OR SHARES
SHALL THEN BE IN EFFECT OR UNLESS THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION WITH RESPECT TO ANY PROPOSED TRANSFER OR DISPOSITION OF SUCH
WARRANT OR SHARES SHALL BE ESTABLISHED TO THE SATISFACTION OF THE ISSUER.
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF SUCH WARRANT MAY BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR SIMILAR QUALIFICATION UNDER APPLICABLE
STATE SECURITIES LAWS, OR UNLESS IT IS ESTABLISHED TO THE SATISFACTION OF
THE ISSUER THAT SUCH SALE OR TRANSFER IS IN A TRANSACTION WHICH IS EXEMPT
UNDER, OR OTHERWISE IN COMPLIANCE WITH, SUCH LAWS.
XXXXXX MEDICAL CORPORATION
0000 Xxxxxxx Xxxxxxx Xxxxx XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
To: Xxxx X. Xxxxxxxx (the "Warrantholder")
For value received, subject to the terms and conditions set
forth below, Xxxxxx Medical Corporation (the "Company") hereby promises to issue
to the Warrantholder Fifteen Thousand (15,000) shares of Common Stock, $.01 par
value per share, of the Company (the "Common Stock"), upon payment by the
Warrantholder to the Company of the purchase price of Eight Dollars and
Twenty-Five Cents ($8.25) per share, subject to adjustment as hereinafter
provided (the "Warrant Price"), and to deliver to the Warrantholder a
certificate or certificates representing the shares purchased (with such shares
of Common Stock subject to issuance hereunder being referred to herein as the
"Shares).
1. Warrant Exercise. This Warrant may be exercised by the
Warrantholder from time to time, in part or in full (but subject to the terms
and conditions set forth herein), at any time on or prior to March 1, 2002 (the
"Expiration Date").
(a) This Warrant can be exercised only with respect
to full Shares and only with respect to a minimum of 2,000 Shares at the time of
any exercise.
(b) Any exercise of this Warrant must be in writing
addressed to the Board of Directors of the Company at the principal place of
business of the Company and delivered at least ten (10) business days prior to
the proposed date of exercise, which writing shall indicate the number of Shares
as to which this Warrant is being exercised and shall be accompanied by a check
payable to the order of the Company in the full amount of the aggregate Warrant
Price of the Shares covered by such exercise.
2. Certain Conditions to Exercise. This Warrant may be
exercised by the Warrantholder only if on the date of exercise the Warrantholder
satisfies the Company, in such manner as the Company shall reasonably specify,
that the Shares issuable upon such exercise
may be issued to the Warrantholder pursuant to an exemption from the
registration requirements of, and otherwise in compliance with, applicable
federal and state securities laws.
3. Reservation of Shares. The Company will at all times
through the close of business on the Expiration Date reserve and keep available,
out of the aggregate of its authorized but unissued or treasury shares of Common
Stock, for the purpose of enabling it to satisfy any obligation to issue shares
of Common Stock upon exercise of this Warrant, the number of Shares deliverable
upon the exercise of this Warrant. The Company covenants that all Shares issued
upon exercise of this Warrant shall, upon issuance in accordance with the terms
of this Warrant, be fully paid and nonassessable.
4. Certain Other Adjustments; Mergers, Consolidations, Etc.
Notwithstanding any other provisions contained in this Warrant, in the event of
the merger or consolidation of the Company, or reorganization or
recapitalization of, stock dividend on, stock split, split-up, split-off,
spin-off or combination of, shares of Common Stock, this Warrant shall entitle
the Warrantholder to receive, upon the exercise of this Warrant, the number of
shares of Common Stock which the Warrantholder would have owned immediately
following such action had this Warrant been exercised immediately prior thereto,
and appropriate adjustments shall be made by the Board of Directors of the
Company as to the number of Shares and/or the Warrant Price as shall be
equitable to prevent reduction or enlargement of rights under this Warrant; the
determination of the Board of Directors as to such matters shall be conclusive
and binding. References in this Warrant to Common Stock shall include any such
securities or other property (including cash) into which shares of Common Stock
may be changed pursuant to or in accordance with the preceding sentence through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, split-up, split-off, spin-off, or combination of shares.
5. Restrictions on Transfers. (a) This Warrant is not
transferable by the Warrantholder, and is exercisable only by the Warrantholder,
and may not be sold, assigned, transferred, pledged or hypothecated in any way
(whether by operation of law or otherwise), and shall not be subject to
execution, attachment or similar proceeding. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of this Warrant or any interest
herein, and the levy of any attachment or similar proceeding upon this Warrant
or any interest herein, shall be null and void and without effect except as
provided in the preceding sentence.
(b) The Company may postpone the time of delivery of
certificates for the shares issuable upon the exercise of this Warrant for such
additional time as the Company shall deem necessary or desirable to enable it to
comply with the listing or quotation requirements of any securities exchange
upon which shares of the Company may or are then contemplated to be listed or
the National Association of Securities Dealers, Inc., or the requirements of the
Securities Act of 1933, as amended the Securities Exchange Act of 1934, as
amended, any applicable rules or regulations of the Securities and Exchange
Commission or the requirements of applicable state securities laws.
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6. Miscellaneous. (a) The Warrantholder shall not have any
rights to dividends or any other rights of a stockholder with respect to any
shares subject to this Warrant, except to the extent that the Warrantholder
shall have paid for such Shares and a certificate for such shares shall have
been actually issued in the Warrantholder's name upon the due, proper and timely
exercise of this Warrant as provided for herein.
(b) Each notice relating to this Warrant shall be in
writing and delivered in person or by certified mail, return receipt requested,
to the proper address. All notices to the Warrantholder shall be addressed to
the Warrantholder at the Warrantholder's address below specified. All notices to
the Company shall be addressed to the Company at the address set forth on the
first page of this Warrant. Anyone to whom a notice may be given under this
Warrant may designate a new address by notice to that effect given to the other
party in accordance with this subparagraph (b).
(c) If this Warrant shall be mutilated, lost, stolen
or destroyed, the Company shall issue in exchange and substitution for and upon
cancellation of the mutilated Warrant, or in lieu of and in substitution for the
Warrant lost, stolen or destroyed, a new Warrant of like tenor and denomination,
but only upon receipt of evidence satisfactory to the Company of such loss,
theft or destruction of such Warrant and such indemnity and, if requested by the
Company, such bond, as shall in each case be satisfactory to the Company. The
Warrantholder must also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe in connection with
such issuance.
(d) This Warrant shall be governed and construed in
accordance with the substantive laws of the State of Delaware applicable to
contracts executed, delivered and to be fully performed in the State of
Delaware, without giving effect to contrary provisions regarding conflict of
laws.
(e) This Warrant shall inure to the benefit of and
shall be binding upon the Warrantholder's heirs, executors, administrators,
successors, legal representatives and permitted assigns, and shall inure to the
benefit of and be binding upon the Company and its successors and assigns. The
Warrantholder may not assign, transfer, pledge, encumber, hypothecate or
otherwise dispose of this Warrant, or any of the Warrantholder's rights
hereunder, and any such attempted prohibited delegation or disposition shall be
null and void and without effect.
(f) This Warrant constitutes the complete
understanding between the parties with respect to the subject matter hereof, and
no statement, representation, warranty or covenant has been made by either party
with respect thereto except as expressly set forth herein. This Warrant shall
not be altered, modified, amended or terminated except by written instrument
signed by each of the parties hereto.
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(g) This Warrant may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(h) The paragraph headings contained herein are for
the purposes of convenience only, are not intended to define or limit the
contents of said paragraphs and are not part of this Warrant.
(i) By signing below, the Warrantholder hereby
accepts this Warrant subject to all of the terms and provisions hereof and
acknowledge all of the representations, warranties and agreements set forth
above. This Warrant shall not be effective until the Warrantholder has signed
this Warrant and delivered it to the Company.
IN WITNESS WHEREOF, Xxxxxx Medical Corporation has caused this
Warrant to be executed as of the 28th day of February, 1997.
XXXXXX MEDICAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxxxx, President
ACCEPTED AND AGREED TO:
/s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx
[Address]
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