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Exhibit 10.7
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY (this “ Subsidiary
Guaranty ”), effective as of June 2, 2008, among
Pediatric Prosthetics, Inc., an Idaho corporation (the “
Company
”), Pediatric Prosthetics, Inc., a Texas corporation
(individually a “ Subsidiary
Guarantor ”), for the benefit of the secured parties
signatory hereto and their respective endorsees, transferees and
assigns (individually a “ Secured Party
” and collectively, (the “ Secured
Parties ”).
W I T N E S S E T H :
WHEREAS, pursuant to a Securities Purchase Agreement, dated the
date hereof, between Company and the Secured Parties (the “
Purchase Agreement ”), the Company has agreed to issue
to the Secured Parties and the Secured Parties have agreed to
purchase from Company certain of the Company’s 6% Callable
Secured Convertible Notes, due three years from the date of issue
(the “
Notes ”), which are convertible into shares of
Company’s Common Stock, par value $.001 per share (the
“
Common Stock ”). In connection therewith,
Company shall issue the Secured Parties certain Common Stock
purchase warrants (the “
Warrants ”); and
WHEREAS, the Company and the Subsidiary Guarantors have been, and
are now, engaged as a national provider of specialized pediatric
prosthetics for both upper and lower limbs; and
WHEREAS, in the past, as now, the Company has provided financing
for the Subsidiary Guarantor, and the Subsidiary Guarantor has
relied upon the Company to provide such financing. In
addition, it is anticipated that, if the Subsidiary Guarantor
executes and delivers this Subsidiary Guaranty, the Company will
continue to provide such financing to the Subsidiary Guarantor, and
that the proceeds of the Purchase Agreement and Notes
will be used, in part, for the general working
capital purposes of the Subsidiary Guarantor; and
WHEREAS, the Subsidiary Guarantor constitutes all of the
subsidiaries of the Company and it is in the best interest of the
Subsidiary Guarantor as subsidiary of the Company and the indirect
beneficiaries of the Purchase Agreement and Notes, that the Secured
Parties enter into the Purchase Agreement and purchase the Notes
from the Company; and
WHEREAS, as a material inducement to the Secured Parties to enter
into the Purchase Agreement and Notes, the Secured Parties have
required and the Subsidiary Guarantor has agreed to unconditionally
guarantee the timely and full satisfaction of all obligations of
the Company, whether matured or unmatured, now or hereafter
existing or created and becoming due and payable (the “
Obligations ”) to the Secured Parties, their
successors, endorsees, transferees or assigns under the Transaction
Documents (as defined in the Purchase Agreement); and
WHEREAS, in light of the foregoing, the Subsidiary Guarantor
expects to derive substantial benefit from the Purchase Agreement
and sale of the Notes and the transactions
contemplated thereby and, in furtherance thereof, has agreed to
execute and deliver this Subsidiary Guaranty.
NOW,
THEREFORE, in consideration of the foregoing recitals, and the
mutual covenants contained herein, the parties hereby agree as
follows:
1.
Guaranty
. The Subsidiary Guarantor, jointly and severally,
hereby absolutely, unconditionally and irrevocably guarantee
to the Secured Parties, their successors, endorsees,
transferees and assigns the due and punctual performance and
payment of the Obligations owing to the Secured Parties, their
successors, endorsees, transferees or assigns when due, all at
the time and place and in the amount and manner prescribed in,
and otherwise in accordance with, the Transaction Documents,
regardless of any defense or set-off counterclaim which the
Company or any other person may have or assert, and regardless
of whether or not the Secured Parties or anyone on behalf of
the Secured Parties shall have instituted any suit, action or
proceeding or exhausted its remedies or taken any steps to
enforce any rights against the Company or any other person to
compel any such performance or observance or to collect all or
part of any such amount, either pursuant to the provisions of
the Transaction Documents or at law or in equity, and
regardless of any other condition or contingency.
2.
Waiver of
Demand . The Subsidiary Guarantor hereby
unconditionally: (i) waive any requirement that the
Secured Parties, in the event of a breach in any material
respect by the Company of any of its representations or
warranties in the Transaction Documents, first make demand
upon, or seek to enforce remedies against, the Company or any
other person before demanding payment of enforcement
hereunder; (ii) covenant that this Subsidiary Guaranty will
not be discharged except by complete performance of all the
Obligations; (iii) agree that this Subsidiary Guaranty shall
remain in full force and effect without regard to, and shall
not be affected or impaired, without limitation, by, any
invalidity, irregularity or unenforceability in whole or in
part of the Transaction Documents or any limitation on the
liability of the Company thereunder, or any limitation on the
method or terms of payment thereunder which may now or
hereafter be caused or imposed in any manner whatsoever; and
(iv) waive diligence, presentment and protest with respect to,
and notice of default in the performance or payment of any
Obligation by the Company under or in connection with the
Transaction Documents.
3.
Absolute
Obligation . The Subsidiary Guarantor
acknowledges and agrees that (i) no Secured Party has made any
representation or warranty to such Subsidiary Guarantor with
respect to the Company, any of its subsidiaries, any
Transaction Documents or any agreement, instrument or document
executed or delivered in connection therewith, or any other
matter whatsoever, and (ii) such Subsidiary Guarantor shall be
liable hereunder, and such liability shall not be affected or
impaired, irrespective of (A) the validity or enforceability
of any Transaction Documents, or any agreement, instrument or
document executed or delivered in connection therewith, or the
collectability of any of the Obligations, (B) the preference
or priority ranking with respect to any of the Obligations,
(C) the existence, validity, enforceability or perfection of
any security interest or collateral security under any
Transaction Documents, or the release, exchange, substitution
or loss or impairment of any such security interest or
collateral security, (D) any failure, delay, neglect or
omission by any Secured Party to realize upon or protect any
direct or indirect collateral security, indebtedness,
liability or obligation, any Transaction
Documents, or any agreement, instrument or
document
executed or delivered in connection therewith, or any of the
Obligations, (E) the existence or exercise of any right of
set-off by any Secured Party, (F) the existence, validity or
enforceability of any other guaranty with respect to any of
the Obligations, the liability of any other person in respect
of any of the Obligations, or the release of any such person
or any other guarantor of any of the Obligations, (G) any act
or omission of any Secured Party in connection with the
administration of any Transaction Documents or any of the
Obligations, (H) the bankruptcy, insolvency, reorganization or
receivership of, or any other proceeding for the relief of
debtors commenced by or against, any person, (I) the
disaffirmance or rejection, or the purported disaffirmance or
purported rejection, of any of the Obligations, any
Transaction Documents, or any agreement, instrument or
document executed or delivered in connection therewith, in any
bankruptcy, insolvency, reorganization or receivership, or any
other proceeding for the relief of debtor, relating to any
person, (J) any law, regulation or decree now or hereafter in
effect which might in any manner affect any of the terms or
provisions of any Transaction Documents, or any agreement,
instrument or document executed or delivered in connection
therewith or any of the Obligations, or which might cause or
permit to be invoked any alteration in the time, amount,
manner or payment or performance of any of the Company's
obligati
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