TERMINATION, SETTLEMENT, AND FORBEARANCE AGREEMENT
THIS TERMINATION, SETTLEMENT AND FORBEARNANCE AGREEMENT (the "Agreement")
is made and entered into effective as of October 16, 2006, between IN VERITAS
MEDICAL DIAGNOSTICS, INC., a Colorado corporation (the "Company"), XXXXXXXXXX
EQUITY PARTNERS, LTD. (the "Xxxxxxxxxx") and CORNELL CAPITAL PARTNERS, L.P.
("Cornell"). Xxxxxxxxxx and Cornell are collectively referred to herein as the
"Buyers". All terms not otherwise defined herein shall have the meaning ascribed
to the in the Securities Purchase Agreement (as defined below).
WHEREAS, on September 7, 2005, the Company and Xxxxxxxxxx entered into a
Securities Purchase Agreement ("Securities Purchase Agreement"). In connection
with the Securities Purchase Agreement and contemporaneously therewith, the
Company and Xxxxxxxxxx also entered in an Investor Registration Rights Agreement
(the "Registration Rights Agreement"), Irrevocable Transfer Agent Instructions
along with Corporate Stock Transfer (the "Transfer Agent Instructions"), an
Escrow Agreement along with Xxxxx Xxxxxxxx, Esq. (the "Escrow Agreement"), a
Pledge and Escrow Agreement along with Xxxxx Xxxxxxxx, Esq. (the "Pledge
Agreement"), and a Security Agreement (the "Security Agreement"). The Securities
Purchase Agreement, Registration Rights Agreement, Transfer Agent Instructions,
Escrow Agreement, Pledge Agreement, Security Agreement, Debenture (as defined
below) and all other agreements entered into between the Company and Xxxxxxxxxx
in connection therewith are collectively referred to herein as the "Transaction
Documents".
WHEREAS, on September 7, 2005, the Company and Cornell entered into a
Standby Equity Distribution Agreement ("SEDA"). In connection with the SEDA and
contemporaneously therewith, the Company and Cornell entered into a Registration
Rights Agreement (the "SEDA Registration Rights Agreement"), a Placement Agent
Agreement along with Monitor Capital, Inc. (the "Placement Agent Agreement") and
an Escrow Agreement along with Xxxxx Xxxxxxxx, Esq. (the "SEDA Escrow
Agreement"). The XXXX, XXXX Registration Rights Agreement, SEDA Escrow
Agreement, and Placement Agent Agreement are collectively referred to herein as
the "SEDA Transaction Documents".
WHEREAS, the Company wishes to repay all principal and accrued and unpaid
interest due to Xxxxxxxxxx as of the date hereof under that certain Secured
Convertible Debenture (the "Debenture") which the Company issued to the
Xxxxxxxxxx on September 7, 2005 under the terms and conditions as set forth
herein.
WHEREAS, the Company acknowledges that an event of default has occurred
under the Debenture as a result of (i) the Registration Statement not being
declared effective within 120 days after filing thereof, and (ii) the Company's
breach of its obligations to make payments of principal and interest under the
Debenture (collectively, the "Existing Defaults").
NOW, THEREFORE, in consideration of the mutual promises, conditions and
covenants contained herein and other good and valuable consideration, receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. In consideration for the accommodations made by Xxxxxxxxxx to the Company
set forth herein,
a. Repayment of the Debenture. The Company shall pay Xxxxxxxxxx an
aggregate of $348,000.00 (the "Funds") which represents all amounts
owed by the Company to Xxxxxxxxxx under the Debenture as of the date
hereof including outstanding principal and interest. The Company shall
pay the Funds to Xxxxxxxxxx monthly at the rate of $29,000.00
("Monthly Payment") per calendar month, with the first payment being
due and payable on November 15, 2006 and each subsequent payment being
due and payable on the first business day of each subsequent month
until the Funds are repaid in full. The parties agree that the
Redemption Premium shall not be applied to the payment of the Funds by
the Company.
b. All amounts owed, together with interest accrued and accruing thereon,
and fees, costs, expenses and other charges (including, without
limitation, the Funds) (collectively, the "Obligations") now or
hereafter payable by the Company to Xxxxxxxxxx under the Debenture and
the Transaction Documents are unconditionally owing by the Company to
Xxxxxxxxxx, without offset, setoff, defense or counterclaim of any
kind, nature or description whatsoever. All terms of the Transaction
Documents not modified by this Agreement shall remain in full force
and effect. An event of default on any Transaction Document shall
constitute an Event of Default on all other Transaction Documents.
c. The Company hereby acknowledges, confirms and agrees that Xxxxxxxxxx
has and shall continue to have valid, enforceable and perfected
first-priority liens upon and security interests in the Pledged
Property and the Pledged Shares (each as defined in the Transaction
Documents) heretofore granted pursuant to any and all security
agreements, pledge agreements, or otherwise granted to or held by
Xxxxxxxxxx.
d. In reliance upon the representations, warranties and covenants of the
Company contained in this Agreement, and subject to the terms and
conditions set forth herein, Xxxxxxxxxx hereby waives on a one-time
basis only the Existing Defaults and further agree to forbear from
exercising its rights and remedies under the Transaction Documents or
applicable law in respect of or arising out of the Existing Defaults,
subject to the conditions, amendments and modifications contained
herein for the period (the "Forbearance Period") commencing on the
date hereof and continuing for so long as the -------------------
following conditions are met: (i) the Company strictly complies with
the terms of this Agreement (including the covenants of the Company
set forth in Section 1.a. hereof), and (ii) there is no occurrence or
existence of any event of default, other than the Existing Default
under the Transaction Documents.
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e. Upon the termination or expiration of the Forbearance Period, the
agreement of Xxxxxxxxxx to forbear shall automatically and without
further action terminate and be of no force and effect, it being
expressly agreed that the effect of such termination will be to permit
Xxxxxxxxxx to exercise such rights and remedies immediately,
including, but not limited to, the acceleration of all of the
Obligations without any further notice, passage of time or forbearance
of any kind as well as the continuation of the accrual of interest as
set forth above. This Agreement shall be deemed to satisfy any and all
requirements by Xxxxxxxxxx to notify the Company of the occurrence of
the Existing Default and satisfies any obligation by Xxxxxxxxxx to
give the Company an opportunity to cure each Existing Default.
f. The Company hereto acknowledges, confirms and agrees that: (a) each of
the Transaction Documents to which it is a party has been duly
executed and delivered to Xxxxxxxxxx by the Company, and each is in
full force and effect as of the date hereof, (b) the agreements and
obligations of the Company contained in such documents and in this
Agreement constitute the legal, valid and binding obligations of the
Company, enforceable against it in accordance with their respective
terms, and the Company has no valid defense to the enforcement of such
obligations, (c) Xxxxxxxxxx is and shall be entitled to the rights,
remedies and benefits provided for in the Transaction Documents and
applicable law, without offset, setoff, defense or counterclaim of any
kind, nature or descriptions whatsoever, and (d) it has no claims,
actions, cause of action, suits, judgments, and demands whatsoever, in
law, admiralty or equity, against Montgomery, Cornell, or their
affiliates.
2. Conversion of the Debenture. During the Forbearance Period, Xxxxxxxxxx
shall not convert in excess of $60,000 in principal amount of the Debenture
per calendar month. If Xxxxxxxxxx converts the Debenture in a particular
calendar month in a principal amount equal to or greater than the Monthly
Payment amount, the Company shall be relieved of its obligation to pay the
Monthly Payment amount due in the subsequent calendar month, and, to the
extent that the amount of the conversion in that month exceeds the Monthly
Payment amount, the amount of such excess (the "Excess Amount") shall be
deducted from the following months Monthly Payment amount; or, if a
conversion occurs in the subsequent month which is equal to or greater than
the Monthly Payment amount, the Excess Amount shall be carried forward and
offset against future Monthly Payments amounts until such time as the
Company has satisfied all accumulated Monthly Payments amounts due by
cumulative payments made plus cumulative conversions. Similarly, if, in any
month, a conversion occurs for an amount which is less that the Monthly
Payment Amount the amount that the Company shall pay in that month shall be
reduced by the amount of the conversion.
3. Interest and Liquidated Damages. The Company and Xxxxxxxxxx agree that
during the Forbearance Period (as defined below) the Debenture shall not
bear any interest and no Liquidated Damages shall accrue under any of the
Transaction Documents. Immediately upon the termination or expiration of
the Forbearance Period, if the Funds have not been repaid to Xxxxxxxxxx in
full, Liquidated Damages and interest shall automatically and without any
further action start accruing.
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4. Conversion Price of the Debentures. The Conversion Price (as set forth in
the Debenture) in effect on any Conversion Date (as set forth in the
Debenture) from and after the date hereof shall be adjusted to equal $0.05,
which may be subsequently adjusted pursuant to the other terms of the
Debenture.
5. Warrant Shares. Xxxxxxxxxx shall retain the Warrant issued in accordance
with the Securities Purchase Agreement.
6. Termination of SEDA Transaction Documents, Investor's Shares. The Company
and Cornell hereby terminate the SEDA Transaction Documents. Cornell shall
retain the Investor's Shares (as defined in the SEDA).
7. Termination of Transaction Documents, Security Interest, and Mutual
Release.
x. Xxxxxxxxxx hereby (i) acknowledges and agrees that the payment in full
of the Funds (whether through Monthly Payments, conversion, any
combination thereof, or otherwise) in accordance with this Agreement,
will constitute payment in full and complete satisfaction of all of
the Obligations, and (ii) agrees that effective upon receipt by
Xxxxxxxxxx of the Funds all security interests, mortgages and other
liens, if any, which the Company may have granted to Xxxxxxxxxx in
connection with the Transaction Documents shall automatically be
released and terminated.
x. Xxxxxxxxxx agrees to, within five (5) calendar days after the payment
in full of the Funds in accordance with this Agreement, (ii) file the
necessary financing statement amendments, terminations, releases, or
other agreements with the pertinent governmental authorities in the
United Kingdom evidencing the release and termination of the
Xxxxxxxxxx'x liens in any of the Pledged Property, (ii) execute and
deliver to the Company following payment in full of the Funds, such
financing statement amendments, terminations, releases, or other
agreements and documents, as the Company may request to evidence the
release and termination of the Xxxxxxxxxx'x liens in any assets or
properties of the Company arising under the Transaction Documents, and
(iii) instruct the Escrow Agent to cause the Pledged Shares to be
returned to the Company, together with the power of attorney duly
executed by the Company in favor of Xxxxxxxxxx, each for cancellation
by the Company.
c. Upon payment in full of the Funds in accordance with this Agreement,
Xxxxxxxxxx and the Company shall release and discharge each other, and
each of their respective officers, directors, principals, control
persons, past and present employees, insurers, successors, agents and
assigns from all actions, cause of action, suits, debts, dues, sums of
money, accounts, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages,
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judgments, extents, executions, claims, and demands whatsoever, in
law, admiralty or equity, which against the other party it ever had,
now have or hereafter can, shall or may, have for, upon, or by reason
of any matter, cause or thing whatsoever, whether or not known or
unknown, to the date of this Agreement arising under any of the
Transaction Documents.
8. Confidentiality. Except as required under the statutes, rules or
regulations of any federal or state government, government agency or court
of competent jurisdiction, each of the Company and the Buyer, and their
respective counsel, shall not disclose or divulge any of the matters
underlying this Agreement, or any of the terms or substance of this
Agreement to any third party. The Company shall issue an 8-K disclosing the
material terms of this Agreement within 2 business days of the date hereof.
9. Miscellaneous.
(a) Further Assurances. The parties hereto each agree to execute and
deliver such other documents or agreements and to take such other action as
may be reasonably necessary or desirable for the implementation of this
Agreement and the consummation of the transactions contemplated hereby.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
(d) Headings. Section headings of this Agreement are for reference
purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
(e) Binding Effect. This Agreement is irrevocable and shall be binding
upon and inure to the benefit of the parties and their respective
successors and permitted assigns.
(f) Counterparts. This Agreement may be executed in counterparts, each
of which when executed by any party will be deemed to be an original and
all of which counterparts will together constitute one and the same
Agreement. Delivery of executed copies of this Agreement by telecopier will
constitute proper delivery, provided that originally executed counterparts
are delivered to the parties within a reasonable time thereafter.
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IN WITNESS WHEREOF, the parties have signed and delivered this Termination,
Settlement, and Forbearance Agreement on the date first set forth above.
IN VERITAS MEDICAL DIAGNOSTICS, INC. XXXXXXXXXX EQUITY PARTNERS, LTD
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxx X. Xxxxxx
------------------ -------------------
Name: Xxxxxx Xxxxxx Name: Xxxx X. Xxxxxx
Title: President and CEO Title: Director
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
------------------------
Its: General Partner
By: /s/ Xxxx X. Xxxxxx
--------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
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