THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER SECURITIES LAWS, AND IT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SO REGISTERED OR UNLESS SOLD PURSUANT TO AN EXEMPTION THEREFROM. THIS...
Exhibit
99.1
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
ANY OTHER SECURITIES LAWS, AND IT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS SO REGISTERED OR UNLESS SOLD PURSUANT TO AN EXEMPTION
THEREFROM. THIS NOTE MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THIS NOTE.
|
$1,000,000
|
September
1, 2006
|
FOR
VALUE
RECEIVED, the undersigned, HEALTH DISCOVERY CORPORATION (the “Company”),
a
Texas corporation, hereby promises to pay to the order of Xxxxxxx X. Xxxxx
or
his, her or its permitted, registered assigns (the “Holder”),
the
principal sum of One Million Dollars ($1,000,000.00) on
(i) September 1, 2008, or (ii) when declared due and payable by the
Holder upon the occurrence of an Event of Default (as defined below) (in the
case of either (i) or (ii), the “Maturity
Date”).
This
Note
shall bear a simple rate of interest equal to five percent (5%) per annum,
payable in arrears on the Maturity Date. Principal and interest, if any, shall
be payable in lawful money of the United States of America at such place as
the
Holder may designate from time to time in writing to the Company. Any payment
of
principal which is not paid when due shall bear interest until paid at a simple
rate of interest equal to eight percent (8%) per annum; provided, however,
that delinquent installments of interest shall not bear interest if and to
the
extent prohibited by applicable law. Any interest required to be paid due to
a
delinquent payment shall be computed on the basis of a three hundred sixty
five
day year and for the actual number of days elapsed. The entire principal hereof,
together with all accrued and unpaid interest hereon shall be due and payable
on
the Maturity Date. All payments received from the Company by Holder shall be
first applied to interest to the extent then accrued then to
principal.
The
following is a statement of the rights of the Holder of this Note and the
conditions to which this Note is subject, and to which the Holder hereof, by
the
acceptance of this Note, agrees:
1. Definitions.
As used
in this Note, the following terms have the following meanings:
1.1 “Change
of Control”
means
the
consummation of (i) a merger, consolidation, share exchange, combination,
reorganization, or like transaction involving the Company in which the
shareholders of the Company immediately prior to such transaction do not own
at
least fifty percent (50%) of the value or voting power of the issued and
outstanding capital stock of the Company or its successor immediately after
such
transaction, or (ii) the sale or transfer (other than as security for the
Company's obligations) of all or substantially all of the assets of the Company
in any transaction or a series of related transactions, in which the Company,
any corporation controlled by the Company, or the shareholders of the Company
immediately prior to the transaction do not own at least fifty percent (50%)
of
the value or voting power of the issued and outstanding equity securities of
the
acquirer immediately after the transaction.
1.2 “Company”
shall
include any corporation which shall succeed to or assume the obligations of
the
Company under this Note.
1.3 “Holder,”
when
the context refers to a holder of this Note, shall mean any person who shall
at
the time be the registered holder of this Note.
2. Events
of Default.
If any
of the events specified in this Section 2 shall occur (herein individually
referred to as an “Event
of Default”),
the
Holder of the Note may, so long as such condition exists, declare the entire
principal and unpaid accrued interest hereon immediately due and payable in
cash, by notice in writing to the Company:
1
2.1. Default
in the payment of the principal or unpaid accrued interest of this Note when
due
and payable if such default is not cured by the Company within thirty (30)
days
after the Holder has given the Company written notice of such default;
or
2.2. Upon
a
Change of Control; provided; however, that no Event of Default shall be deemed
to have occurred if the Holder approves such Change of Control; or
2.3. The
institution by the Company of proceedings to be adjudicated as bankrupt or
insolvent, or the consent by it to institution of bankruptcy or insolvency
proceedings against it or the filing by it of a petition or answer or consent
seeking reorganization or release under the federal Bankruptcy Act, or any
other
applicable federal or state law, or the consent by it to the filing of any
such
petition or the appointment of a receiver, liquidator, assignee, trustee or
other similar official of the Company, or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors,
or
the taking of corporate action by the Company in furtherance of any such action;
or
2.4. If,
within ninety (90) days after the commencement of an action against the Company
(and service of process in connection therewith on the Company) seeking any
bankruptcy, insolvency, reorganization, liquidation or dissolution or similar
relief under any present or future statute, law or regulation, such action
shall
not have been resolved in favor of the Company or all orders or proceedings
thereunder affecting the operations or the business of the Company stayed,
or if
the stay of any such order or proceeding shall thereafter be set aside, or
if,
within ninety (90) days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company,
such
appointment shall not have been vacated.
3. Collateral. Until
all
amounts due under this Note are paid, the Holder of this Note shall retain
a
security position in the assets of the Company, subordinate and subject to
prior
liens granted by the Company in favor of Xxxxxx Xxxxxxxx, Xxx XxXxxxxx, Memorial
Health Trust, Inc., Xxxxx Xxxxxxxxxx, Xxxxx Xxxxxxx and Xxxxxx Xxxxx, including
any patents resulting from discoveries or applications related to or arising
from the assets. Xxxxxx agrees to execute such documents as are reasonably
requested by the Company to release such security interest when Holder no longer
has a right to receive payments under this Note.
4. Prepayment.
4.1. At
any
time prior to the Maturity Date, the Company has the right, at the Company’s
option, to prepay the remaining balance of the Note and any accrued but unpaid
interest, without penalty, prepayment premium or payment of unearned interest
(the “Prepayment”).
4.2. Prepayment
Procedure.
Before
the Company shall be entitled to prepay the Note in accordance with Section
4.1
above, it shall give written notice to the Holder, notifying the Holder of
its
desire to exercise its right of Prepayment and specifying the remaining balance
of the Note and the date on which such Prepayment will occur (the “Prepayment
Closing Date”).
On
the Prepayment Closing Date, the Company will pay to the Holder in cash or
other
immediately available funds an amount equal to the remaining balance of the
Note
plus any accrued but unpaid interest and the Holder shall deliver to the Company
the Note.
2
4.3. Surrender
of Warrants.
Upon
Prepayment, Xxxxxx shall surrender any unvested warrants pursuant to the Warrant
Agreement between the Company and Holder, dated as of September 1,
2006.
5. Restrictions
on Transfer of the Note.
This
Note may only be transferred in compliance with the terms and conditions of
this
Note, and the rights and obligations of the Company and the Holder of this
Note
shall be binding upon and benefit any permitted and registered successors,
assigns, heirs, administrators and transferees of the parties. Subject to the
limitations contained in the following sentence, the Holder may transfer its
interest to any other Lender, to one of the Holder’s affiliates or to the
Company. In addition to these transfer restrictions, each Holder must comply
with all relevant federal and state securities laws, and, if the Company
requires, provide an opinion of counsel reasonably satisfactory to the Company
that any requested transfer does not violate federal or state securities laws.
6. Lost
or Destroyed Note.
Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note and, if requested in the case of any such loss,
theft
or destruction, upon delivery of an indemnity bond or other agreement or
security reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Note, the Company will
issue
a new Note, in the amount of the unpaid principal balance of the lost, stolen,
destroyed or mutilated Note, in lieu of such lost, stolen, destroyed or
mutilated Note.
7. Expenses;
Waivers; Amendment.
If
action is instituted to collect this Note, the Company promises to pay all
reasonable costs and expenses, including without limitation reasonable
attorneys’ fees and costs, incurred in respect with such action. The Company
hereby waives notice of default, presentation or demand for payment, protest
or
notice of nonpayment or dishonor and all other notices or demands relative
to
this Note. Any provision of this Note may be amended, waived or modified upon
the written consent of the Company and Holder.
8. Notices.
Any
notice, request or other communication required or permitted hereunder shall
be
in writing and shall be deemed to have been duly given if personally delivered
or if faxed or mailed by registered or certified mail, postage prepaid, at
the
respective addresses of the parties as set forth below. Any party hereto may
by
notice so given change its address for future notice hereunder. Notice shall
conclusively be deemed to have been given when personally delivered or when
deposited in the mail in the manner set forth above and shall be deemed to
have
been received when delivered.
| If to Company: |
Health
Discovery Corporation
0000
x Xxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn: Xxx
Xxxxx
Xxxxxxxxx:
__________________________
|
| If to Holder: |
3
9. No
Shareholder Rights.
Nothing
contained in this Note shall be construed as conferring upon the Holder or
any
other person the right to vote or to consent, except as provided herein, or
to
receive notice as a shareholder in respect of meetings of shareholders for
the
election of directors of the Company or any other matters or any rights
whatsoever as a shareholder of the Company; and no dividends shall be payable
or
accrued in respect of this Note or the interest represented hereby.
10. Governing
Law.
This
Note and all actions arising out of or in connection with this Note shall be
governed by and construed in accordance with the laws of the State of Georgia,
excluding that body of law relating to conflict of laws.
[Signature
Page Follows]
4
IN
WITNESS WHEREOF,
the
Company has caused this Note to be issued this 1st
day of
September, 2006.
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HEALTH
DISCOVERY CORPORATION
By:
/s/ Xxxxxx
Xxxxx
Xxxxxx
Xxxxx
Executive
Vice President
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5
