Exhibit 10.1 LOAN AGREEMENT BETWEEN IVIVI
TECHNOLOGIES, INC. AND EMIGRANT CAPITAL CORP. DATED AS OF APRIL 7,
2009
|
TABLE OF CONTENTS PAGE 1.
DEFINITIONS.............................................................................................1
2. BORROWINGS; ISSUANCE OF NOTE AND
WARRANT................................................................6
2.1 The
Loans......................................................................................6
2.2 Use of
Proceeds................................................................................6
2.3
Borrowings.....................................................................................6
2.4 No Voluntary
Prepayment........................................................................7
2.5 Mandatory
Prepayment...........................................................................7
2.6 Repayment at
Maturity..........................................................................7
2.7 Issuance of the Note and
Warrant...............................................................8
2.8 Optional Loan Advance in Connection with
Conversion............................................8 3. THE
CLOSING.............................................................................................8
4. CONDITION TO THE OBLIGATIONS OF THE COMPANY TO ISSUE THE NOTE
AND THE WARRANT...........................8 4.1 This
Agreement.................................................................................8
5. REPRESENTATIONS OF THE
COMPANY..........................................................................8
5.1 Organization and Corporate
Power...............................................................9
5.2
Capitalization.................................................................................9
5.3 Subsidiaries,
Etc..............................................................................9
5.4 Issuance and Delivery of the Note and Warrant; Issuance, Sale
and Delivery of the Conversion Shares and Warrant
Shares...........................................................9
5.5 Authority for Agreement; Effect of
Transactions...............................................10 5.6
Litigation....................................................................................11
5.7 Title to
Assets...............................................................................12
5.8 Company Reports; Financial
Statements.........................................................12
5.9 Material
Changes..............................................................................13
5.10 Tax
Matters...................................................................................14
5.11 Loans and
Advances............................................................................14
5.12 Assumptions, Guaranties, etc. of Indebtedness of Other
Persons................................14 5.13 Transactions with
Affiliates..................................................................14
5.14 Proprietary Rights; Employee
Restrictions.....................................................15
5.15 Proprietary Information of Third
Parties......................................................15 -i-
TABLE OF CONTENTS (continued) 5.16 Business; Compliance with
Laws................................................................15
5.17 Environmental
Compliance......................................................................16
5.18
Contracts.....................................................................................16
5.19
Brokerage.....................................................................................16
5.20 Employee Benefit
Plans........................................................................16
5.21
Employees.....................................................................................17
5.22 Nasdaq Capital
Market.........................................................................17
5.23 No Solicitation or
Advertisement..............................................................17
5.24 No Manipulation of
Stock......................................................................17
5.25 Securities Act
Registration...................................................................18
5.26
Solvency......................................................................................18
5.27 Security
Agreement............................................................................18
5.28 No Default or Event of
Default................................................................19
5.29 Investment Company
Act........................................................................19
5.30 Acknowledgment Regarding Lender's
Status......................................................19 5.31
U.S. Real Property Holding
Corporation........................................................19
5.32
Disclosure....................................................................................19
6. REPRESENTATIONS OF THE
LENDER..........................................................................19
6.1
Authority.....................................................................................19
6.2 Validity; No
Conflicts........................................................................19
6.3 Purchase Entirely for Own
Account.............................................................20
6.4 Reliance Upon Lender's
Representations........................................................20
6.5 Restricted
Securities.........................................................................20
6.6 Economic Risk; Sophistication; No General
Solicitation........................................21 6.7
Accredited
Investor...........................................................................21
6.8
Brokerage.....................................................................................21
6.9 Access to
Information.........................................................................21
6.10 Certain Trading
Activities....................................................................22
6.11 Independent Investment
Decision...............................................................22
6.12 No Governmental
Review........................................................................22
-ii- TABLE OF CONTENTS ( continued) 6.13 Regulation
M..................................................................................22
6.14
Residency.....................................................................................22
7. CONDITIONS TO THE OBLIGATIONS OF THE LENDER TO MAKE
LOANS..............................................22 7.1
Conditions to the Obligations of the Lender to Make a Loan on the
Initial Advance Date........23 7.2 Conditions to the Obligations of
the Lender to Make a Loan on any Subsequent Advance
Date..........................................................................................25
8. COVENANTS OF THE
COMPANY...............................................................................25
8.1 Covenants With Respect to the
Loans...........................................................25
8.2 Covenants With Respect to the
Warrant.........................................................30
8.3 General
Covenants.............................................................................30
8.4 Indemnification of the
Lender.................................................................31
9. EVENTS OF DEFAULT AND
REMEDIES.........................................................................32
9.1 Events of
Default.............................................................................32
9.2
Remedies......................................................................................34
10.
MISCELLANEOUS..........................................................................................34
10.1
Expenses......................................................................................34
10.2 Survival of Representations and
Warranties....................................................34
10.3
Notices.......................................................................................35
10.4 Successor and
Assigns.........................................................................35
10.5 Entire
Agreement..............................................................................36
10.6 Amendments and
Waivers........................................................................36
10.7 Counterparts; Facsimile
Signatures............................................................36
10.8 Section
Headings..............................................................................36
10.9
Severability..................................................................................36
10.10 Governing
Law.................................................................................36
-iii-
|
|
LOAN AGREEMENT This Loan Agreement (the
"AGREEMENT"), dated as of April 7, 2009, is entered into by and
between Ivivi Technologies, Inc., a New Jersey corporation (the
"COMPANY"), and Emigrant Capital Corp., a Delaware corporation (the
"LENDER"). The Company and the Lender are each referred to herein
as a "PARTY" or collectively as the "PARTIES". In consideration of
the mutual promises and covenants contained in this Agreement, the
parties hereto agree as follows: 1. DEFINITIONS. For purposes of
this Agreement, the following terms shall have the meanings set
forth below: 1.1 "ACCELERATION NOTICE" shall have the meaning
ascribed to such term in SECTION 9.2(B). 1.2 "ACTION" shall mean
any action, suit, proceeding (including any partial proceeding such
as a deposition) or investigation pending or threatened in writing
against or affecting the Company or any of its properties before or
by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign).
1.3 "ADVANCE DATE" shall mean the Initial Advance Date and each
Subsequent Advance Date. 1.4 "AFFILIATE" shall mean, when used with
respect to a specified Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified;
PROVIDED, however, that, the term "Affiliate" shall also include
any Person that directly or indirectly owns 10% or more of any
class of equity interests of the Person specified or that is an
officer or director of the Person specified. 1.5 "AGREEMENT" shall
have the meaning ascribed to such term in the preamble to this
Agreement. 1.6 "APPLICABLE EMPLOYMENT AGREEMENT" shall mean, with
respect to each Subject Employee, such Subject Employee's
employment agreement with the Company. 1.7 "APPLICABLE SUBSEQUENT
ADVANCE AMOUNT" shall mean, with respect to any Subsequent Advance
Date, the sum of $500,000 plus an amount equal to the excess (if
any) of: (a) the sum of (x) $1,000,000, plus (y) the product of (i)
$500,000 and (ii) the number of Subsequent Advance Dates preceding
such Subsequent Advance Date, over (b) the aggregate principal
amount of Loans made pursuant to this Agreement prior to such
Subsequent Advance Date. 1.8 "BUSINESS DAY" shall mean any day
other than a Saturday, Sunday or day on which banks in New York
City are authorized or required by law to close. 1.9 "CLOSING"
shall have the meaning ascribed to such term in SECTION 3. 1 1.10
"CLOSING DATE" shall have the meaning ascribed to such term in
SECTION 3. 1.11 "COLLATERAL" shall mean all of the property,
assets, rights and interests of the Company that are or are
intended to be subject to the Liens created by the Security
Documents. 1.12 "COMMISSION" shall mean the Securities and Exchange
Commission. 1.13 "COMMON STOCK" shall mean the Company's common
stock, no par value per share. 1.14 "COMPANY" shall have the
meaning ascribed to such term in the preamble to this Agreement.
1.15 "COMPANY ACCOUNT" shall mean the account specified on ANNEX 1.
1.16 "COMPANY REPORTS" shall have the meaning ascribed to such term
in SECTION 5.8(A). 1.17 "CONVERSION DATE" shall mean the date on
which the entire aggregate outstanding principal balance of the
Loans and all accrued and unpaid interest thereon is converted into
shares of Conversion Shares in accordance with the terms of the
Note. 1.18 "CONVERSION SHARES" shall have the meaning ascribed to
such term in SECTION 5.5(A). 1.19 "DEFAULT" shall mean any event
which is, or after notice or passage of time or both would be, an
Event of Default. 1.20 "DISCLOSURE SCHEDULES" shall have the
meaning ascribed to such term in SECTION 5. 1.21 "DRAWDOWN NOTICE"
shall have the meaning ascribed to such term in SECTION 2.3(B).
1.22 "ENVIRONMENTAL LAWS" shall have the meaning ascribed to such
term in SECTION 5.17. 1.23 "EVENT OF DEFAULT" shall have the
meaning ascribed to such term in SECTION 9.1. 1.24 "EXCHANGE ACT"
shall mean the Securities Exchange Act of 1934, as amended. 1.25
"FORGONE INTEREST AMOUNT" shall mean, in respect of any mandatory
prepayment of the Loans pursuant to SECTION 2.5, an amount equal to
the aggregate amount of interest that would have accrued at a rate
of 12% per annum on the entire aggregate outstanding principal
balance of the Loans pursuant to the Note during the period from
and including the date of such mandatory prepayment though the
Maturity Date had such outstanding principal balance remained
outstanding through the Maturity Date. 1.26 "GAAP" shall mean
United States generally accepted accounting principles as in effect
from time to time. 2 1.27 "HAZARDOUS MATERIALS" shall have the
meaning ascribed to such term in SECTION 5.17. 1.28 "INDEBTEDNESS"
of any Person shall mean, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person under conditional
sale or other title retention agreements relating to property or
assets purchased by such Person, (d) all obligations of such Person
issued or assumed as the deferred purchase price of property or
services (excluding (x) trade accounts payable and accrued
obligations incurred in the ordinary course of business and (y)
amounts representing delayed or deferred compensation in respect of
employment services), which purchase price is due more than 90 days
after the purchase of such property or service, (e) all
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed
(with the amount of any such Indebtedness that is not assumed by
such person being deemed to be equal to the lesser of the fair
market value of such property and the principal amount of such
Indebtedness), (f) all guarantees by such Person of Indebtedness of
others (provided, that, (i) the term "guarantee" shall not include
endorsements of negotiable instruments for collection or deposit in
the ordinary course of business and (ii) the amount of any
guarantee of a Person shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect
of which such guarantee is given or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith), (g) all capitalized lease
obligations and synthetic lease obligations of such Person, (h) all
obligations of such Person as an account party in respect of
letters of credit, (i) all obligations of such Person in respect of
bankers' acceptances, and (j) all obligations of such Person under
or in respect of any interest rate or commodity hedging agreements.
1.29 "INITIAL ADVANCE DATE" shall mean means the date on which the
initial Loan is made by the Lender to the Company hereunder upon
satisfaction of the conditions specified in SECTION 7.1 (or waiver
of such conditions in accordance with SECTION 10.6). 1.30
"INSOLVENCY EVENT" shall have the meaning ascribed to such term in
SECTION 9.1(A) 1.31 "INTELLECTUAL PROPERTY RIGHTS" shall mean all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with
the Company's business as described in the SEC Reports. 1.32
"KNOWLEDGE OF THE COMPANY" means the actual knowledge of any of
Steven Gluckstern, Andre' DiMino, David Saloff, Alan Gallantar,
Edward Hammel or Sean Hagberg; PROVIDED, that, any such individual
will be deemed to have "actual knowledge" of a particular fact or
other matter if a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the
conduct of the employment duties of the applicable individual in
the ordinary course of business. 1.33 "LENDER" shall have the
meaning ascribed to such term in the preamble to this Agreement. 3
1.34 "LENDER PARTY" shall mean the Lender and its Affiliates and
their respective directors, officers, members, shareholders,
partners, employees, representatives, attorneys and agents. 1.35
"LIEN" shall mean, with respect to any asset, (i) any mortgage,
deed of trust, lien, pledge, encumbrance, charge or security
interest in or on such asset, (ii) the interest of a vendor or a
lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially
the same economic effect as any of the foregoing) relating to such
asset and (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such
securities. 1.36 "LOAN DOCUMENTS" shall mean this Agreement, the
Note, the Warrant and the Security Documents, as each of the
foregoing may be amended from time to time. 1.37 "LOANS" shall have
the meaning ascribed to such term in SECTION 2.1. 1.38 "LOSS" shall
mean any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of preparation and investigation. 1.39
"MATERIAL ADVERSE EFFECT" shall mean (i) a material adverse effect
on the results of operations, business, prospects, assets,
liabilities or condition (financial or otherwise) of the Company,
or (ii) any material limitation on the ability of the Company to
perform its obligations under, or the legality, validity or
enforceability of, this Agreement or any of the other Loan
Documents; PROVIDED, that, solely for the purposes of the usage of
the term "Material Adverse Effect" in SECTION 8.1(E) or 9.1(G), the
term "Material Adverse Effect" shall mean (i) a material adverse
effect on the results of operations, business, assets, liabilities
or condition (financial or otherwise) of the Company, or (ii) any
material limitation on the ability of the Company to perform its
obligations under, or the legality, validity or enforceability of,
this Agreement or any of the other Loan Documents. 1.40 "MATERIAL
CONTRACTS" shall have the meaning ascribed to such term in SECTION
5.18. 1.41 "MATURITY DATE" shall have the meaning ascribed to such
term in the Note. 1.42 "MAXIMUM PRINCIPAL BALANCE" shall mean
$2,500,000. 1.43 "NOMINEE AND SHARING AGREEMENT" shall mean that
certain Nominee and Sharing Agreement, dated as of the date hereof,
between the Lender and the participants named therein. 1.44 "NOTE"
shall have the meaning ascribed to such term in SECTION 2.1. 1.45
"PARTY" shall have the meaning ascribed to such term in the
preamble to this Agreement. 1.46 "PERMITTED LIENS" shall mean (a)
Liens for taxes not yet due and payable or which are being
contested in good faith in accordance with SECTION 8.1(B), (b)
Liens existing on the date hereof to the extent that the 4
existence of such Liens does not constitute a breach of the
representations and warranties set forth in SECTION 5.7; PROVIDED
that such Liens shall secure only those obligations which they
secure on the date hereof and any extensions, renewals and
replacements thereof permitted hereunder, (c) Liens created under
the Loan Documents, (d) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in the
ordinary course of business and securing obligations that are not
due and payable, (e) pledges and deposits made in the ordinary
course of business in compliance with workers' compensation,
unemployment insurance and other social security laws or
regulations, (f) zoning restrictions, easements, rights-of-way,
restrictions on use of real property and other similar encumbrances
incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and do not materially
detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Company, (g)
licenses, leases or subleases granted by the Company to third
Persons in the ordinary course of business not interfering in any
material respect with the business of the Company, (h) Liens
arising solely by virtue of any statutory or common law provision
relating to bankers' liens, rights of setoff or similar rights and
remedies as to deposit accounts or other funds maintained with a
creditor depository institution, (i) statutory and common law
landlord's Liens under leases to the Company is a party and (j)
judgment Liens in respect of judgments that do not constitute an
Event of Default under SECTION 9.1(F). 1.47 "PERSON" shall mean an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind. 1.48 "QUALIFIED
FINANCING" shall have the meaning ascribed to such term in the
Note. 1.49 "QUALIFIED FINANCING CONVERSION STOCK" shall have the
meaning ascribed to such term in the Note. 1.50 "SEC REPORTS" shall
mean, collectively, (i) the Company's Annual Report on Form 10-KSB
for the fiscal year ended March 31, 2008, as filed by the Company
with the Commission on June 30, 2008, (ii) the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2008, as
filed by the Company with the Commission on August 14, 2008, (iii)
the Company's Amendment No. 1 to Quarterly Report on Form 10-Q/A
for the fiscal quarter ended September 30, 2008, as filed by the
Company with the Commission on November 20, 2008, (iv) the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 2008, as filed by the Company with the
Commission on February 23, 2009, and (v) any Current Report on Form
8-K filed or furnished by the Company with the Commission since
April 1, 2008 and publicly available prior to the date of this
Agreement. 1.51 "SECURITIES ACT" shall mean the Securities Act of
1933, as amended. 1.52 "SECURITY AGREEMENT" shall mean that certain
Security Agreement, dated the date hereof, between the Company and
the Lender, in the form attached hereto as EXHIBIT C, as the same
may be amended from time to time. 5 1.53 "SECURITY DOCUMENTS" shall
mean the Security Agreement and each of the security agreements,
mortgages and other instruments and documents that provides for the
granting of a Lien by the Company on any of its assets in
connection with the Loan Documents and that is executed and
delivered pursuant to any of the foregoing, as each may be amended
from time to time. 1.54 "SEVERANCE AMENDMENTS" shall have the
meaning ascribed to such term in SECTION 7.1(J). 1.55 "SUBJECT
EMPLOYEE" shall mean each of Steven Gluckstern, Andre' DiMino,
David Saloff, Edward Hammel, Alan Gallantar and Sean Hagberg. 1.56
"SUBSEQUENT ADVANCE DATE" shall mean each of May 1, 2009, June 1,
2009 and July 1, 2009; PROVIDED, that, in the event that any such
date is not a Business Day, the applicable Subsequent Advance Date
shall be the first Business Day occurring after such date. 1.57
"WARRANT" shall have the meaning ascribed to such term in SECTION
2.7(B). 1.58 "WARRANT SHARES" shall have the meaning ascribed to
such term in SECTION 2.7(B). 2. BORROWINGS; ISSUANCE OF NOTE AND
WARRANT. 2.1 THE LOANS. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth,
the Lender hereby agrees to make loans to the Company on each
Advance Date, as set forth herein, in an aggregate principal amount
of up to the Maximum Principal Balance (each such loan made by the
Lender hereunder is herein referred to individually as a "LOAN" and
collectively as the "LOANS"). The Loans will be evidenced by a
convertible promissory note in the form attached hereto as EXHIBIT
A (as amended from time to time, the "NOTE"). The Loans shall bear
interest and shall be repaid by the Company in the manner and at
the times set forth in the Note. 2.2 USE OF PROCEEDS. The proceeds
of each Loan made by the Lender to the Company hereunder shall be
used by the Company solely for working capital purposes. 2.3
BORROWINGS. (a) INITIAL ADVANCE DATE. Subject to the satisfaction
of the conditions set forth in SECTION 7.1, on the Initial Advance
Date, the Lender shall make a Loan to the Company in a principal
amount up to $1,000,000 by wire transfer of immediately available
funds in such amount to the Company Account. (b) SUBSEQUENT ADVANCE
DATES. (i) In the event that the Company desires to obtain a Loan
hereunder on any Subsequent Advance Date, the Company shall hand
deliver or fax (or give telephonic notice promptly confirmed by
hand delivery or fax) to the Lender a duly completed drawdown
notice in the form attached hereto as EXHIBIT D (a "DRAWDOWN
NOTICE") at least five Business Days prior to such Subsequent
Advance Date. Each Drawdown Notice 6 shall (x) state the principal
amount of Loans that the Company desires to obtain hereunder on the
applicable Subsequent Advance Date, which amount shall not exceed
the Applicable Subsequent Advance Amount, (y) certify that each of
the conditions to the making of such Loan on such Subsequent
Advance Date set forth in SECTION 7.2 hereof has been satisfied,
and (z) be executed by a duly authorized officer of the Company.
(ii) Following the receipt of a duly and timely delivered Drawdown
Notice in respect of a Subsequent Advance Date pursuant to CLAUSE
(I) above and subject to the satisfaction of the conditions set
forth in SECTION 7.2, the Lender shall make a Loan to the Company
on such Subsequent Advance Date in a principal amount equal to the
amount requested pursuant to SECTION 2.3(B)(I) by wire transfer of
immediately available funds in such amount to the Company Account.
(c) EXPIRATION OF COMMITMENTS. Subject to SECTION 2.8, the
obligation of the Lender to make any further Loans to the Company
hereunder shall expire immediately following the earlier of (x) the
final Advance Date (after the making of any Loan to be made on such
date) and (y) the Conversion Date. (d) NOT REVOLVING LOANS. Amounts
paid or prepaid by the Company in respect of Loans may not be
reborrowed. 2.4 NO VOLUNTARY PREPAYMENT. The Company may not
optionally prepay all or any portion of the outstanding principal
amount of the Loans or any accrued and unpaid interest thereon. 2.5
MANDATORY PREPAYMENT. In the event that (x) the Company consummates
a Qualified Financing prior to the occurrence of the Maturity Date
and (y) the Lender shall not elect to convert the entire aggregate
outstanding principal balance of the Loans and all accrued and
unpaid interest thereon into shares of Qualified Financing
Conversion Stock in accordance with Section 4.2 of the Note, then
the Company shall be required, on the date of the closing of such
Qualified Financing, to (i) prepay, in cash, the entire outstanding
principal amount of the Loans, together with all accrued and unpaid
interest thereon, and (ii) make an additional payment, in cash, to
the Lender in an amount equal to the Forgone Interest Amount. 2.6
REPAYMENT AT MATURITY. Unless the Lender shall elect to convert the
entire aggregate outstanding principal balance of the Loans and all
accrued and unpaid interest thereon into Conversion Shares on the
Maturity Date in accordance with Section 4.3(a) of the Note, on the
Maturity Date, the Company shall repay, in cash, the entire
outstanding principal amount of the Loans, together with all
accrued and unpaid interest thereon. 2.7 ISSUANCE OF THE NOTE AND
WARRANT. (a) ISSUANCE OF THE NOTE. At the Closing, the Company will
execute, issue and deliver the Note to the Lender. 7 (b) ISSUANCE
OF THE WARRANT. At the Closing, the Company will execute, issue and
deliver to the Lender, as part of its inducement to make the Loans
hereunder, warrants to purchase certain shares of the Company's
capital stock (the "WARRANT SHARES"), in the form attached hereto
as EXHIBIT B (the "WARRANT"). 2.8 OPTIONAL LOAN ADVANCE IN
CONNECTION WITH CONVERSION. Notwithstanding anything to the
contrary set forth herein, in the event that (x) the Company
consummates a Qualified Financing, (y) the Lender elects to convert
the entire aggregate outstanding principal balance of the Loans and
all accrued and unpaid interest thereon into shares of Qualified
Financing Conversion Stock in accordance with Section 4.2 of the
Note, and (z) as of the date of the closing of the Qualified
Financing, the aggregate principal amount of Loans made pursuant to
this Agreement is less than the Maximum Principal Balance, then the
Lender shall have the option, but not the obligation, to elect to
make, immediately prior to the conversion of the entire aggregate
outstanding principal balance of the Loans and all accrued and
unpaid interest thereon into shares of Qualified Financing
Conversion Stock in accordance with Section 4.2 of the Note, an
additional Loan to the Company hereunder in an amount which will
result in the aggregate outstanding principal balance of the Note
being equal to the Maximum Principal Balance immediately prior to
the conversion of the Note into shares of Qualified Financing
Conversion Stock under Section 4.2 of the Note). The Lender shall
notify the Company of such election and shall fund such additional
Loan not later than the Business Day preceding the Conversion Date.
3. THE CLOSING. The closing (the "CLOSING") of the issuance and
delivery of the Note and the Warrant under this Agreement shall
take place at the offices of Mayer Brown LLP, 1675 Broadway, New
York, New York 10010, or at such other place as is mutually
agreeable to the Company and the Lender. At the Closing, the
Company shall deliver to the Lender (a) the Note and (b) the
Warrant. The Closing shall occur on such date as is mutually
agreeable to the Company and the Lender (the "CLOSING DATE"). 4.
CONDITION TO THE OBLIGATIONS OF THE COMPANY TO ISSUE THE NOTE AND
THE WARRANT. The obligations of the Company to issue and deliver
the Note and Warrant to the Lender at the Closing are subject to
fulfillment, or the waiver, of the following condition on or before
the Closing Date: 4.1 THIS AGREEMENT. The Company shall have
received a copy of this Agreement executed by the Lender. 5.
REPRESENTATIONS OF THE COMPANY. Except as disclosed by the Company
in the Disclosure Schedule attached as EXHIBIT E hereto (the
"DISCLOSURE SCHEDULE"), which Disclosure Schedule makes explicit
reference to the particular representation or warranty as to which
exception is taken, which in each case shall constitute the sole
representation and warranty as to which such exception shall apply,
the Company hereby represents and warrants, as of the date hereof
and as of the Closing Date, to the Lender as follows: 5.1
ORGANIZATION AND CORPORATE POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of New Jersey and has full power and authority to own its
properties and to conduct its business as presently conducted and
as proposed to be conducted by it. The Company is duly qualified to
do business as a foreign corporation in 8 every jurisdiction in
which the failure so to qualify would reasonably be expected to
have a Material Adverse Effect. The Company has made available to
the Lender true, correct and complete copies of the Company's
Certificate of Incorporation and Bylaws as in effect on the date of
this Agreement. 5.2 CAPITALIZATION. (a) The authorized capital
stock of the Company (immediately prior to the Closing) consists of
(i) 70,000,000 shares of Common Stock, of which (x) 10,116,930
shares are issued and outstanding as of February 24, 2009 and (y)
650,000 shares are held by the Company in treasury as of February
24, 2009, and (ii) 5,000,000 shares of preferred stock, no par
value per share, none of which are issued and outstanding. (b) All
of the issued and outstanding shares of the Company's capital stock
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as provided in this Agreement (including
Schedule 5.2 hereto) or in the Loan Documents, as of the date
hereof, (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. 5.3
SUBSIDIARIES, ETC. The Company has no subsidiaries and does not own
or control, directly or indirectly, any shares of capital stock or
other equity interest of any other corporation or limited liability
company or any interest in any partnership, joint venture or other
non-corporate business enterprise. 5.4 ISSUANCE AND DELIVERY OF THE
NOTE AND WARRANT; ISSUANCE, SALE AND DELIVERY OF THE CONVERSION
SHARES AND WARRANT SHARES. (a) The Note, when issued and delivered
in accordance with the provisions of this Agreement, will be duly
and validly issued and free and clear of all Liens (other than
Liens created by the Lender), will not be subject to any
contractual preemptive rights of any other stockholder of the
Company and will constitute a valid and binding obligation of the
Company enforceable in accordance with its terms, subject as to
enforcement of remedies to applicable bankruptcy, insolvency,
reorganization or similar laws affecting generally the enforcement
of creditors' rights and subject to a court's discretionary
authority with respect to the granting of a decree ordering
specific performance or other equitable remedies. 9 (b) The
Warrant, when issued and delivered in accordance with the
provisions of this Agreement, will be duly and validly issued,
fully paid and nonassessable, and free and clear of all Liens
(other than Liens created by the Lender), will not be subject to
preemptive rights of any other stockholder of the Company and will
constitute a valid and binding obligation of the Company
enforceable in accordance with its terms, subject as to enforcement
of remedies to applicable bankruptcy, insolvency, reorganization or
similar laws affecting generally the enforcement of creditors'
rights and subject to a court's discretionary authority with
respect to the granting of a decree ordering specific performance
or other equitable remedies. (c) Upon the issuance of any
Conversion Shares upon the conversion of the Note in accordance
with its terms, the issuance, sale and delivery of such Conversion
Shares will have been duly authorized by all necessary corporate
action and, when so issued and delivered in accordance with the
terms of the Note, such Conversion Shares will be validly issued,
fully paid and nonassessable, and free and clear of all Liens
(other than Liens created by the Lender) and will not be subject to
preemptive rights of any other stockholder of the Company. (d) Upon
the issuance of any Warrant Shares upon the exercise of the Warrant
in accordance with its terms, the issuance, sale and delivery of
such Warrant Shares will have been duly authorized by all necessary
corporate action and, when so issued and delivered in accordance
with the terms of the Warrant, such Warrant Shares will be validly
issued, fully paid and nonassessable, and free and clear of all
Liens (other than Liens created by the Lender) and will not be
subject to preemptive rights of any other stockholder of the
Company. 5.5 AUTHORITY FOR AGREEMENT; EFFECT OF TRANSACTIONS. (a)
The Company has the corporate power and authority to enter into
this Agreement and each of the other Loan Documents and to carry
out its obligations hereunder and thereunder. The execution,
delivery and performance by the Company of this Agreement and each
of the other Loan Documents, the performance by the Company of each
of its obligations hereunder and thereunder and the consummation by
the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and delivery of the
Note and the Warrant at the Closing), have been duly authorized by
all necessary corporate action. No other corporate proceedings or
stockholder actions are necessary for the execution and delivery by
the Company of this Agreement and each of the other Loan Documents,
the performance by the Company of each of its obligations hereunder
and thereunder, and the consummation by the Company of each of the
transactions contemplated hereby and thereby, including, without
limitation, (x) the issuance and delivery by the Company to the
Lender of the Note and the Warrant on the Closing Date, (y) the
issuance, sale and delivery of the Warrant Shares that may be
issuable upon exercise of the Warrant and (z) the issuance, sale
and delivery of the shares of the Company's capital stock that may
be issuable upon conversion of the Note (the "CONVERSION SHARES").
10 (b) This Agreement and each of the other Loan Documents 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 as to enforcement
of remedies to applicable bankruptcy, insolvency, reorganization or
similar laws affecting generally the enforcement of creditors'
rights and subject to a court's discretionary authority with
respect to the granting of a decree ordering specific performance
or other equitable remedies. (c) The execution of and performance
of the transactions contemplated by this Agreement and the Loan
Documents and compliance with their provisions by the Company will
not (i) violate any provision of any law, regulation, decree,
judgment, license, permit, order, statute or rule applicable to the
Company, (ii) except with respect to the Liens imposed by the
Security Agreement, result in the creation of any Lien upon any of
the property of the Company, (iii) 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 Bylaws (each as amended to
date), or (iv) 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, any material note, indenture,
bond, lease, agreement or other instrument to which the Company is
a party or by which it or any of its properties is bound, except,
in the case of CLAUSE (I) or (IV), for any such violations,
conflicts, breaches or defaults which would not reasonably be
expected to have a Material Adverse Effect. (d) The Company is not
required to obtain any third-party consent, waiver, authorization
or order of, give any notice to, or make any filing or registration
with, any court or other federal, state, local or other
governmental authority or other Person in connection with the
execution, delivery and performance by the Company of this
Agreement and the other Loan Documents, other than (i) filings
required by state securities laws, and the filing of a Notice of
Sale of Securities on Form D with the Commission as required under
Regulation D of the Securities Act, (ii) the filing of financing
statements in appropriate form, properly describing the collateral
and identifying the Company as debtor and the Lender as the secured
party in the Department of the Treasury of the State of New Jersey
or such other office specified by the Uniform Commercial Code as
necessary for perfection, (iii) the recording of appropriate
documents with respect to Intellectual Property Rights in the
United States Patent and Trademark Office and (iv) those that have
been made or obtained prior to the date of this Agreement. 5.6
LITIGATION. There is no Action to which the Company is a party
which (i) adversely affects or challenges the legality, validity or
enforceability of this Agreement or the other Loan Documents, the
Conversion Shares or the Warrant Shares or (ii) except as disclosed
in the SEC Reports, would, if any such Action were decided
adversely to the Company, reasonably be expected to have a Material
Adverse Effect, individually or considered in the aggregate with
all such Actions. Neither the Company nor, to the Knowledge of 11
the Company, any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of
breach of fiduciary duty, except as disclosed in the SEC Reports.
There has not been, and to the Knowledge of the Company, there is
not pending or contemplated, any Action by the Commission involving
the Company or any current director or officer of the Company. To
the Knowledge of the Company, there has not been, and there is not
pending or contemplated, any Action by the Commission involving any
former director or officer of the Company. The Company has not
received any stop order or other order suspending the effectiveness
of any registration statement filed by the Company under the
Exchange Act or the Securities Act. 5.7 TITLE TO ASSETS. The
Company has good title in fee simple to all real property owned by
it that is material to its business and good title in all personal
property owned by it that is material to its business, in each case
free and clear of all Liens, except for (i) Liens disclosed in the
SEC Reports, (ii) Liens as do not materially affect the value of
such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and (iii)
Permitted Liens. Any real property and facilities or personal
property held under lease by the Company are held by it under
valid, subsisting and enforceable leases with which the Company is
in compliance, except to the extent of non-compliance which would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. 5.8 COMPANY REPORTS; FINANCIAL
STATEMENTS. (a) Since October 18, 2006, the Company has filed all
reports, registrations, documents, filings, statements and
submissions, together with any amendments thereto, that it was
required to file with the Commission under applicable law and the
rules and regulations of the Commission (the "COMPANY REPORTS") on
a timely basis or has timely filed a valid extension of such time
of filing and has filed any such Company Reports prior to the
expiration of any such extension. As of their respective dates, the
Company Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder, and
none of the Company Reports, at the time it was filed, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein not misleading. The financial
statements of the Company included in the Company Reports comply in
all material respects with applicable accounting requirements and
the rules and regulations of the Commission with respect thereto as
in effect at the time of filing. Such financial statements have
been prepared in accordance with GAAP to the extent required by
applicable law and the rules and regulations of the Commission,
except as may be otherwise specified in such financial statements
or the notes thereto, and fairly present in all material respects
the financial position of the Company as of and for the dates
thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements,
to normal, immaterial, year-end audit adjustments. All material
agreements to which the Company is a party or to which the property
or assets of the Company are subject are included as part of or
specifically identified in the Company Reports to the extent
required by applicable law and the rules and regulations of the
Commission. No executive officer of the Company has failed in any
respect to make the certifications required of him or her under
Section 302 or 906 of the Sarbanes-Oxley Act of 2002. 12 (b) The
records, systems, controls, data and information of the Company are
recorded, stored, maintained and operated under means (including
any electronic, mechanical or photographic process, whether
computerized or not) that are under the exclusive ownership and
direct control of the Company or its accountants (including all
means of access thereto and therefrom), except for any
non-exclusive ownership and non-direct control that would not
reasonably be expected to adversely affect in any material respect
the system of internal accounting controls described below in this
Section 5.8(b). The Company (A) has implemented and maintains
disclosure controls and procedures (as defined in Rule 13a-15(e) of
the Exchange Act) to ensure that material information relating to
the Company is made known to the chief executive officer and the
chief financial officer of the Company by others within the Company
or the Company's accounting firm, and (B) has disclosed, based on
its most recent evaluation prior to the date hereof, to the
Company's outside auditors and the audit committee of the board of
directors of the Company (x) any significant deficiencies and
material weaknesses in the design or operation of internal controls
over financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act) that are reasonably likely to adversely affect the
Company's ability to record, process, summarize and report
financial information and (y) any fraud, whether or not material,
that involves management or other employees who have a significant
role in the Company's internal controls over financial reporting.
Since October 18, 2006 and until the date of this Agreement, (A)
neither the Company nor, to the Knowledge of the Company, any
director, officer, employee, auditor, accountant or representative
of the Company has received or otherwise had or obtained knowledge
of any material complaint, allegation, assertion or claim, whether
written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of the Company or its internal
accounting controls, including any material complaint, allegation,
assertion or claim that the Company has engaged in questionable
accounting or auditing practices, and (B) no attorney representing
the Company, whether or not employed by the Company, has reported
evidence of a material violation of securities laws, breach of
fiduciary duty or similar violation by the Company or any of its
officers, directors, employees or agents to the board of directors
of the Company or any committee thereof or to any director or
officer of the Company. 5.9 MATERIAL CHANGES. Since the date of the
latest audited financial statements included in the Company's most
recent Annual Report on Form 10-KSB, except as disclosed in the SEC
Reports, (i) the Company has operated its busin
