NOTE PURCHASE AGREEMENT
BY AND AMONG
GUIDED THERAPEUTICS, INC.,
THE AGENT
AND
THE NOTEHOLDERS NAMED HEREIN
DECEMBER 1, 2008
SECTION
1
DEFINITIONS
SECTION
2
LOANS
2.1 Loans and Issuance of
Convertible Notes
2.2 Security Agreement
2.3 Conversion of
Convertible Notes
2.4 Warrants
2.5 Private Offering
2.6 Prepayment
SECTION
3
CLOSING; DELIVERY
3.1 Closing
3.2 Delivery
SECTION
4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization and
Standing
4.2 Corporate Power
4.3 Subsidiaries
4.4
Authorization
4.5 Reports and Financial
Statements
4.6 Securities
Laws
4.7 Public
Offering
4.8 No
Conflicts
4.9 Consents and
Approvals
4.10 Litigation; Proceedings
4.11 No Default or Violation
4.12 Intellectual Property
Rights
4.13 Title
4.14 Permits
4.15 Environmental
4.16 Insurance
4.17 Tax Status
4.18 Accounting Controls
4.19 Sarbanes-Oxley
Act
4.20 Investment Company
Status
4.21 Usury
4.22 Reservation of
Shares
SECTION
5
COVENANTS OF THE COMPANY
5.1
Integration
5.2
Liens
5.3 Redemption
5.4 Asset Sales
5.5 Participation
Rights
5.6 Information
5.7 Notice of Event of
Default
5.8 Securities Law
Compliance
5.9 Reservation of Common
Stock
5.10 Use of Proceeds
5.11 Board Matters
SECTION
6
REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE
NOTEHOLDERS
6.1 Experience
6.2 Investment Intent
6.3 Accredited Investor
6.4 Rule 144
6.5 Access to
Information
6.6 Organization;
Authorization
6.7
Enforcement
6.8 Legend
6.9 Governmental Review
6.10 No Intent to Effect a Change of
Control
6.11 Residency
6.12 No Reliance
SECTION
7
CONDITIONS TO CLOSING OF NOTEHOLDERS
7.1 Representations and
Warranties
Correct
7.2 Covenants
7.3 No Injunction
7.4 Adverse Changes
7.5 Change of Control
7.6 Compliance
Certificate
7.7 Secretary' s
Certificate
SECTION
8
CONDITIONS TO CLOSING OF COMPANY
8.1 Representations and
Warranties Correct
8.2 Legal Matters
8.3 Covenants
8.4 Change of Control
8.5 No Injunction
SECTION
9
DEFAULTS; REMEDIES
9.1 Events of Default;
Acceleration
9.2 Remedies on Default,
etc
9.3 Remedies Not
Exclusive
SECTION
10
Subordination of the Convertible Notes
10.1 Convertible Notes Subordinate to
Senior Debt
10.2 Payment Over of Proceeds upon
Dissolution, etc
10.3 No Payment When Senior Debt in
Default
10.4 Subrogation to Rights of Holders of
Senior Debt
10.5 Provisions Solely to Define
Relative Rights
10.6 No Waiver of Subordination
Provisions
SECTION
11
DESIGNEES AND AGENTS
11.1 Appointment, Powers and
Immunities
11.2 Reliance by Agent
11.3 Events of Default
11.4 Rights as a Noteholder
11.5 Indemnification
11.6 Non-Reliance on Agent and Other
Noteholders
11.7 Failure to Act
11.8 Resignation or Removal of
Agent
11.9 Cooperation of
Noteholders
SECTION
12
MISCELLANEOUS
12.1 Governing Law
12.2 Courts
12.3
Survival
12.4 Successors and Assigns
12.5 Entire Agreement; Amendment
12.6 Notices, etc
12.7 Delays or Omissions
12.8 Expenses
12.9 U.S. Withholding Income Tax
12.10
Counterparts
12.11
Severability
12.12
Titles and Subtitles
12.13
No Third Party Beneficiaries
12.14
Independent Nature of Noteholders' Obligations and Rights
12.15
Further Assurances
List of Schedules
Schedule 1, Noteholders
Schedule 2.3(d), Certain Outstanding Derivative Securities
Schedule of Exceptions
List of Exhibits
Exhibit A
Form of Convertible Notes
Exhibit B
Weighted Average Conversion Price Adjustment Terms
Exhibit C
Form of Warrant
NOTE PURCHASE
AGREEMENT
This Note Purchase Agreement is made as of
December 1, 2008 by and among GUIDED THERAPEUTICS, INC., a Delaware
corporation located at 4955 Avalon Ridge Parkway, Suite 300,
Norcross, Georgia 30071 (the " Company "), facsimile: (770)
242-8639, the various lenders identified and listed on Schedule
1 attached hereto (the " Noteholders ") and Fred C.
Minnich, as agent for the Noteholders (in such capacity, together
with successors and assigns, the " Agent ").
WITNESSETH:
WHEREAS, in March, April, June and July of
2008, the Company issued and sold certain promissory notes (the "
Existing Notes ") to certain investors (the " Existing
Noteholders ");
WHEREAS, the Company and all parties hereto
have determined to enter into this Agreement in order to permit the
following:
(i) to issue to
those Existing Noteholders who are parties hereto (the "
Participating Existing Noteholders ") newly issued
Convertible Notes (as defined below) in exchange for their Original
Notes;
(ii) to issue and sell to
certain new investors (the " New Noteholders ") newly issued
Convertible Notes;
(iii) to issue to each of the
Participating Existing Noteholders and New Noteholders (who
collectively comprise the Noteholders hereunder) the Warrants (as
defined below); and
(iv) to enter into the other
agreements contained herein relative to the Convertible Notes and
Warrants;
NOW, THEREFORE, the parties agree as follows:
SECTION 1
DEFINITIONS
For purposes of this Agreement, except as otherwise expressly
provided or unless the context clearly requires otherwise:
" Affiliate " has the meaning set forth in Rule 12b-2 of
the regulations promulgated under the Exchange Act.
" Agent " has the meaning set forth in the first
paragraph of this Agreement.
" Agreement " means this Note Purchase Agreement, as it
may be amended from time to time.
" Bylaws " means the Bylaws of the Company as in effect
on the date hereof.
" CERCLA " has the meaning set forth in
Section 4.15 .
" Certificate of Incorporation " means the Certificate of
Incorporation of the Company as in effect on the date hereof.
" Change of Control " means the occurrence of any of (a)
an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 13d-5(b)(1) promulgated
under the Exchange Act), other than the Noteholders or any of their
Affiliates, of in excess of 50% of the voting securities of the
Company, (b) a replacement of more than one half of the members of
the Company' s Board of Directors that is not approved by a
majority of those individuals who are members of the Board of
Directors on the date hereof, or their duly elected successors who
are directors immediately prior to such transaction, in one or a
series of related transactions, (c) the merger of the Company with
or into another Person, unless the holders of the Company' s
securities immediately prior to the merger continue to hold at
least 51% of such securities following such transaction, (d) the
consolidation or sale of all or substantially all of the assets of
the Company in one or a series of related transactions or (e) the
execution by the Company of an agreement to which the Company is a
party or by which it is bound, providing for any of the events set
forth above in clauses (a), (b), (c) or (d).
" Closing " has the meaning set forth in
Section 3.1 .
" Common Stock " means the Company' s common stock,
$0.001 par value per share.
" Company " has the meaning set forth in the first
paragraph of this Agreement.
" Conversion Price " has the meaning set forth in
Section 2.3(a) .
" Convertible Notes " has the meaning set forth in
Section 2.1 .
" Environmental Laws " has the meaning set forth in
Section 4.15 .
" Equity Financing " has the meaning set forth in
Section 5.5 .
" Event of Default " has the meaning set forth in
Section 9.1 .
" Exchange Act " means the Securities Exchange Act of
1934, as amended.
" Existing Note " has the meaning set forth in the
recitals to this Agreement.
" Existing Noteholders " has the meaning set forth in the
recitals to this Agreement.
" FDA " means the U.S. Federal Drug Administration.
" Full-Ratchet Condition " has the meaning set forth in
Section 2.3(d) .
" GAAP " means generally accepted accounting
principles.
" Hazardous Material " has the meaning set forth in
Section 4.15 .
" Indebtedness " means liabilities, obligations,
guarantees and indebtedness of the Company, of any kind or nature,
whether now or hereafter owing, arising, due or payable, howsoever
evidenced, created, incurred, acquired or owing, and whether
primary, secondary, direct, contingent, fixed or otherwise.
" Insolvency Proceeding " has the meaning set forth in
Section 9.1(e) .
" Intellectual Property Rights " has the meaning set
forth in Section 4.12 .
" Lien " means any deed to secure debt, deed of trust,
mortgage or similar instrument, and any lien, security interest,
preferential arrangement which has the practical effect of
constituting a security interest, security title, pledge, charge,
encumbrance or servitude of any kind, whether by consensual
agreement or by operation of statute or other law, and whether
voluntary or involuntary, including, without limitation, any
conditional sale or other title retention agreement or lease in the
nature thereof.
" Loans " has the meaning set forth in
Section 2.1 .
" Majority Noteholders " means the holders of the
Convertible Notes representing more than fifty percent of the then
outstanding aggregate principal amount of the Convertible
Notes.
" Material Adverse Effect " means a material adverse
effect on the business, results of operation, assets, prospects or
financial condition of the Company, or on the issuance of the
Convertible Notes or the consummation of the transactions
contemplated by the Transaction Documents.
" New Noteholders " has the meaning set forth in the
recitals to this Agreement.
" Noteholder " has the meaning set forth in the first
paragraph of this Agreement and includes the Noteholder' s
successors and assigns.
" Permitted Encumbrances " has the meaning set forth in
Section 5.2 .
" Permitted Indebtedness " means (a) Senior Debt; (b) any
Indebtedness of the Company or any of its subsidiaries, by written
agreement in form and substance reasonably satisfactory to the
Agent, subordinated in right of payment and claim, to the rights of
payment and claims under the Convertible Notes; (c) any trade
payables and contractual obligations to suppliers and customers
incurred in the ordinary course of business; (d) any deferred
taxes; (e) any salary deferral or reduction; and (f) any other
Indebtedness up to $50,000 in the aggregate.
" Person " means a court or other federal, state, local
or other governmental authority, regulatory or self regulatory
agency, individual, partnership, corporation, limited liability
company, joint stock company, association, trust, or unincorporated
organization.
" SEC Reports " has the meaning set forth in
Section 4.5 .
" SEC " means the Securities and Exchange Commission.
" Securities Act " means the Securities Act of 1933, as
amended.
" Security Agreement " means the Security Agreement
substantially in the form attached hereto as Exhibit D .
" Senior Debt " means the Company' s outstanding 13%
Senior Secured Convertible Notes, as governed by the Amended and
Restated Loan Agreement, dated March 1, 2007, by and among the
Company, the various lenders party thereto, and the agent to such
lenders, as secured by the Security Agreement, dated as of June 28,
2006, by and among the Company in favor of the lenders identified
therein and the agent thereof, as further secured by the Security
Agreement, dated as of June 28, 2006, by and among Sterling
Medivations, Inc. in favor of the lenders identified therein and
the agent thereof, as guaranteed by the Guaranty, dated June 28,
2006, made by Sterling Medivations, Inc. in favor of the lenders
party thereto, and as further secured by the Pledge Agreement,
dated June 28, 2006, between the Company and the lenders identified
therein and the agent thereof.
" Series A Preferred Stock " means the Company' s Series
A Preferred Stock, $0.001 par value per share.
" Term " means the period commencing on the date of this
Agreement and ending on the earlier of the third anniversary of the
date of this Agreement and the date on which all outstanding
Convertible Notes have either been converted into Common Stock in
accordance with the terms hereof or all outstanding obligations
under the Convertible Notes have been repaid.
" Transaction Documents " means this Agreement, the
Convertible Notes, the Warrants, the Security Agreement, and any
other agreements and instruments required to be executed and
delivered in connection herewith and therewith by the Company.
" Underlying Stock " means the Common Stock into which a
Noteholders' Convertible Note(s) are convertible and Warrants are
exercisable.
" Warrant " has the meaning set forth in
Section 2.4 .
" Warrant Value " has the meaning set forth in
Section 2.4 .
SECTION 2
LOANS
The Company and the Noteholders covenant and agree as
follows:
2.1 Loans and Issuance of
Convertible Notes . Each of the Participating Existing
Noteholders held an Existing Note or Existing Notes having made
loans to the Company in the aggregate principal amounts and on the
dates set forth next to that Participating Existing Noteholder' s
name on Schedule 1 , and on the date hereof have agreed that
their Existing Notes have been amended and restated and reissued
as, or exchanged for, as applicable, Convertible Notes. To the
extent applicable, each such Participating Existing Noteholder
hereby waives the right of such Noteholder to any advance notice
provision attached to such Existing Note relating to the issuance
hereunder of the Convertible Notes and Warrants. Each of the New
Noteholders has, on the date hereof, made loans to the Company, or
on a Subsequent Closing will make loans, in the aggregate principal
amount set forth next to that New Noteholders' name on Schedule
1 . Each of the loans described above is referred to herein as
a " Loan " and collectively the " Loans ". Each Loan
will be evidenced by a 15% Subordinated Secured Convertible Note
payable to the order of the Noteholder in the aggregate principal
amount of the Loan in the form attached hereto as
Exhibit A , which note is referred to herein as a "
Convertible Note ." The Company has issued, and will issue,
to each Participating Existing Noteholder, upon surrender of such
Noteholder' s Existing Note, a Convertible Note with that new
principal amount set forth next to that Original Noteholder' s name
on Schedule 1 and bearing interest from the date of issuance
of such Convertible Note. The Company has issued, and will issue,
to each New Noteholder a Convertible Note in the same principal
amount as the amount of the Loan made in cash by such New
Noteholder and bearing interest from the date of issuance of such
Convertible Note.
2.2 Security
Agreement . The Convertible Notes will be secured by a lien on
all assets of the Company pursuant to the Security Agreement,
subordinated as provided in Section 10 .
2.3 Conversion of
Convertible Notes .
(a) The outstanding
principal of, and the accrued and unpaid interest on, each
Convertible Note shall be subject to automatic conversion pursuant
to Section 2.3(b) or conversion at the election of the
Noteholder pursuant to Section 2.3(c) into that number
of shares of Common Stock as equals the amount being converted
divided by $0.65, subject to adjustment pursuant to
Section 2.3(d) (as adjusted, the " Conversion
Price ").
(b) If following sale
of the Convertible Notes and during the Term the Company raises
additional capital in one or more securities issuances (whether
private or public) with gross proceeds to the Company of at least
$5,000,000 in the aggregate for all such issuances, whether such
securities issuances take the form of stock offerings, and whether
preferred or common stock, or debt (whether or not convertible into
stock), or a combination of any of the foregoing, then the
Convertible Notes shall automatically be converted into Common
Stock at the Conversion Price applicable on the date of notice by
the Company to the Noteholders that such automatic conversion event
has occurred. In the event of such an automatic conversion, the
Company shall provide to each Noteholder instructions for the
surrender of the Convertible Note for conversion into Common Stock
and for designation of Persons to receive Common Stock. The
Person(s) to receive the Common Stock shall be a record holder(s)
thereof on the date designated by the Company for the automatic
conversion if the Convertible Note has been appropriately
surrendered for conversion or such later date as it is so
surrendered.
(c) Any Noteholder
may, at any time, convert a portion or the entirety of such
Noteholders' outstanding Convertible Notes into Common Stock at the
Conversion Price then-applicable. Before any Noteholder shall be
entitled to convert a Convertible Note into Common Stock the
Noteholder shall surrender the Convertible Note endorsed for
transfer to the Company or its designated transfer agent and shall
give written notice of the election to convert, including the name
or names in which the Common Stock certificates are to be issued.
The Company shall as soon as practicable thereafter issue and
deliver to such Noteholder or the designated Persons a certificate
or certificates for the number of shares of Common Stock into which
the Convertible Note or percentage thereof is being converted and,
if applicable, a new Convertible Note for the unconverted principal
and unpaid interest; however, the conversion shall be deemed to
have occurred and the Person(s) designated to receive the Common
Stock shall be a record holder(s) thereof on the date of surrender
by the Noteholder with appropriate instructions.
(d) The Conversion
Price shall be adjusted on a full ratchet basis (for so long as
either the Company' s then issued and outstanding shares of Series
A Preferred Stock comprises at least 10% of the fully diluted
equity of the Company and continues to have a conversion price that
adjusts (as it currently does) on a full-ratchet basis or
$5,851,799 in principal amount of Senior Debt remains outstanding
and continues to have a conversion price that adjusts (as it
currently does) on a full-ratchet basis (the " Full-Ratchet
Condition ")), that is, if the Company issues any Common Stock
or securities or debt convertible into or exchangeable for Common
Stock or right to acquire such securities or debt at a price per
share of Common Stock below the Conversion Price then in effect,
then the Conversion Price shall be reduced to the price of that new
issuance. If the Full-Ratchet Condition ceases to be applicable,
then the Conversion Price shall be adjusted on a standard weighted
average basis pursuant to the terms which shall govern same
provided in Exhibit B attached hereto. The Conversion Price
shall also be adjusted proportionately for any stock dividends,
stock splits, reverse stock splits, consolidations and the like in
respect of the Company' s Common Stock. Notwithstanding the
foregoing, there shall be no adjustment of the Conversion Price as
a result of any of the following: (i) the grant of options,
warrants or other rights to purchase shares of Common Stock issued
pursuant to a stock option plan approved by the Company' s Board of
Directors and the issuance of Common Stock upon exercise thereof,
(ii) the issuance of Common Stock upon the conversion or exercise
of Convertible Notes and Warrants, (iii) the issuance of Common
Stock upon any conversion of Series A Preferred Stock or Senior
Debt, (iv) the issuance of Common Stock upon any exercise of those
outstanding derivative securities set forth on Schedule
2.3(d), to include Series A warrants, Senior Debt warrants, and
any other outstanding warrant whose exercise price adjusts along
with the Series A preferred or March 2007 notes, (v) the issuance
of securities in connection with a business acquisition of or by
the Company, whether by merger, consolidation, sale of assets, sale
or exchange of stock or otherwise, or in connection with any other
strategic transaction, or any financing or leasing transaction or a
consulting relationship, and (vi) securities offered pursuant to
any employee benefit plan or employment contract approved by the
Board of Directors.
2.4 Warrants . Upon
the issuance of any Convertible Note, the Company shall issue and
deliver to the Noteholder in respect thereof a warrant to purchase
Company Common Stock in the form attached to this Agreement as
Exhibit C (a " Warrant "). Each Noteholder will
receive a warrant to purchase a number of shares of Common Stock
equal to five multiplied by the aggregate principal amount of such
Noteholder' s Convertible Note(s), divided by $1.00. The exercise
price for a share of Common Stock issuable upon exercise of the
Warrant shall be $0.65 per share. The Warrants will be exercisable
for five years from the date of issuance, at which time they will
expire. For purposes of Regulation 1.1273-2 promulgated under
Section 1273 of the Code, the fair market value of a Warrant shall
be the number of shares into which it is exercisable on the day of
issuance multiplied by the Warrant Value. For purposes of this
Agreement, the " Warrant Value " shall be $0.65. The Company
and the Noteholders agree to use the Warrant Value for U.S. federal
tax purposes with respect to the transactions contemplated by this
Agreement (unless otherwise requested by a final determination of
the Internal Revenue Service or a court of competent
jurisdiction).
2.5 Private Offering
. The Convertible Notes and the Warrants have been, and will be,
offered and sold to the Noteholders without registration under the
Securities Act, in reliance upon the exemption from registration
provided by Rule 506 of Regulation D or under Section 4(2) of
the Securities Act.
2.6 Prepayment . The
Company may at any time elect to prepay, without penalty, the
outstanding amount of the Convertible Notes including any unpaid
accrued interest, in whole or in part, by giving five business
days' written notice to the holders of the Convertible Notes. Any
prepayments must be applied pro-rata to all outstanding Convertible
Notes. Such prepayments must be in a minimum amount of $250,000, or
an integral multiple thereof (except for a prepayment in full of
all remaining Convertible Notes).
SECTION 3
CLOSING; DELIVERY
3.1 Closing . The
issuance of Convertible Notes and Warrants under this Agreement
will take place on December 1, 2008 or such other later date as
agreed by the Company and the Agent together (the " Closing
").
3.2 Delivery . At the
Closing, the Company will deliver to each Noteholder a Convertible
Note in the aggregate principal amount as provided for in
Schedule 1 against payment of the purchase price therefor in
the case of New Noteholders, or in exchange for cancellation or
restatement of an Existing Note, in the case of a Participating
Original Noteholder, as the case may be. At the Closing, the
Company will issue and deliver to each Noteholder a Warrant to
purchase that number of shares of Common Stock as determined
pursuant to Section 2.4 .
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached
hereto, as of the date of the Closing, the Company represents and
warrants to each Noteholder as follows:
4.1 Organization and
Standing . The Company is a corporation duly organized and
validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has
requisite power and authority to own and operate its properties and
assets and to carry on its business as presently conducted and as
proposed to be conducted. The Company is not presently qualified to
do business as a foreign corporation in any jurisdiction other than
Georgia.
4.2 Corporate Power .
The Company has all requisite legal and corporate power and
authority to execute and deliver the Transaction Documents, to sell
and issue the Convertible Notes and the Warrants, and to carry out
and perform its obligations under the terms of the Transaction
Documents.
4.3 Subsidiaries .
The Company has no subsidiaries or affiliated companies except
InterScan, Inc., a Delaware corporation (" InterScan ") and
does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
InterScan is a corporation duly organized and existing under the
laws of Delaware and is not qualified to do business as a foreign
corporation in any other jurisdiction. All issued and outstanding
shares of capital stock of InterScan are owned of record and
beneficially by the Company.
4.4 Authorization .
All corporate action on the part of each of the Company and its
officers, directors and stockholders necessary for the
authorization, execution, delivery and performance of this
Agreement, the issuance of the Convertible Notes, the issuance of
the Warrants and the performance of all of the Company' s
obligations under the Transaction Documents, have been taken or
will be taken prior to the Closing. Each of the Transaction
Documents, when executed and delivered by the Company, shall
constitute valid and binding obligations of the Company,
enforceable in accordance with their terms, subject to the laws of
general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies.
4.5 Reports and Financial
Statements . Each of (a) the Company' s quarterly report[s] on
Form 10-Q for the quarter ended March 31, 2008, (b) the Company' s
annual report on Form 10-K/A1 for the year ended December 31, 2007,
and (c) any current reports on Form 8-K filed with the SEC by the
Company since January 1, 2008 (as such documents have since the
time of their filing been amended or supplemented, the " SEC
Reports ") did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, in
each case, at the time of filing (or the time of subsequent
amendment or supplement, in the case of any SEC Reports that have
been subsequently amended or supplemented). The audited
consolidated financial statements and unaudited interim
consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the SEC Reports complied in all
material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated
therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q) and fairly present
(subject, in the case of the unaudited interim financial
statements, to year end audit adjustments and the absence of notes
thereto) the consolidated financial position of the Company as at
the respective dates thereof and the consolidated results of its
operations and cash flow for the respective periods then ended.
4.6 Securities Laws .
Assuming the accuracy of the representations and warranties made by
the Noteholders in this Agreement, the offer, sale and issuance of
the Convertible Notes, and the offer, sale and issuance of the
Warrants are exempt from registration under the Securities Act and
from registration and qualification under applicable state
securities laws. Neither the Company nor anyone acting on its
behalf has, directly or through any agent during the six-month
period ending on the date of this Agreement, sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect
of, any security (as defined in the Securities Act) in a manner
that would cause the offer and sale of the Convertible Notes not to
be entitled to the exemption afforded by Rule 506 of Regulation D,
or under Section 4(2) of the Securities Act.
4.7 Public Offering .
Neither the Company nor anyone acting on its behalf has engaged, in
connection with the sale of the Convertible Notes (a) in any form
of general solicitation or general advertising within the meaning
of Rule 502(c) under the Securities Act or (b) in any manner
involving a public offering within the meaning of Section 4(2)
of the Securities Act.
4.8 No Conflicts .
The execution, delivery and performance of the Transaction
Documents by the Company, and the consummation by the Company of
the transactions contemplated in the Transaction Documents, do not
and will not (a) conflict with or violate any provision of its
Certificate of Incorporation or Bylaws, (b) conflict with, or
constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to other
Persons any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, license, note or
instrument (evidencing a debt of the Company or otherwise) to which
the Company is a party or by which any property or asset of the
Company is bound or affected or (c) result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company is subject or by which any material property or asset of
the Company is bound or affected.
4.9 Consents and
Approvals . The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any
filing or registration with, any Person in connection with the
execution, delivery and performance by the Company of the
Transaction Documents, other than any filings, notices or
registrations under Regulation D of the Securities Act and
applicable state securities laws.
4.10 Litigation; Proceedings .
Except as otherwise disclosed in the Company' s filings with the
SEC, there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its assets or
properties before or by any court, governmental or administrative
agency or regulatory authority (Federal, state, county, local or
foreign) or any arbitrator, that adversely affects the legality,
validity or enforceability of any Transaction Document.
4.11 No Default or Violation .
Except as otherwise disclosed in the Company' s filings with the
SEC the Company is not in (a) violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court, arbitrator or governmental authority
applicable to it, or (b) violation of any law, statute, ordinance,
rule or regulation of any governmental authority to which it is
subject. The Company is not in default under or in violation of its
Certificate of Incorporation or Bylaws. The business of the Company
is not being conducted in violation of any law, statute, ordinance,
rule or regulation of any governmental authority, except where such
violations have not resulted or are not reasonably likely to
result, individually or in the aggregate, in a Material Adverse
Effect.
4.12 Intellectual Property Rights
. The Company owns or possesses adequate rights or licenses to use
all Intellectual Property Rights (as defined below) that are
material to its business, as now conducted or as proposed to be
conducted and as described in the SEC Reports. To the knowledge of
the Company, the Company has not infringed or is not infringing on
any of the Intellectual Property Rights (excluding the right to
license or sue for infringement) of any Person and, except as
disclosed in the Company' s SEC Reports, there is no claim, action
or proceeding which has been made or brought, or to the Company' s
knowledge, is being made, brought or threatened, which involves any
Intellectual Property Rights of the Company or infringement or
alleged infringement by the Company of any Intellectual Property
Rights of any Person. The Company has taken reasonable security
measures to protect the secrecy, confidentiality and value of all
of its Intellectual Property Rights. The Intellectual Property
Rights of the Company are valid and enforceable.
For purposes of this Agreement, " Intellectual Property
Rights " means trademarks, trademark applications, trade names
and service marks, whether or not registered, and all patents,
patent applications, copyrights, copyright applications and related
filings, computer software and programs, inventions, licenses,
approvals, governmental authorizations, trade secrets and any other
intellectual property and proprietary rights, including all rights
to license and to sue for any past, present and future infringement
relating to the above.
4.13 Title . The Company has good
and marketable title in fee simple to all real property and
personal property owned by it which is material to its business, in
each case free and clear of all liens and encumbrances, except for
liens that do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such
property by the Company. Any real property and facilities held
under lease by the Company are held by it under valid, subsisting
and enforceable leases, with such exceptions as are not material
and do not interfere with the use made and proposed to be made of
such property and facilities by the Company.
4.14 Permits . The Company
possesses all certificates, authorizations, licenses, easements,
consents, approvals, orders and permits necessary to own, lease and
operate its properties and to conduct its business as currently
conducted, except where the failure to possess such permits could
not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect (collectively, " Material
Permits "), and there is no claim, action or proceeding
pending, or, to the knowledge of the Company, threatened relating
to the revocation, modification, suspension or cancellation of any
Material Permit. The Company is not in conflict with, in default
under, or in violation of, any Material Permit.
4.15 Environmental . Except as
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect (a) the Company is in compliance
with and not subject to any known liability under applicable
Environmental Laws (as defined below), (b) the Company has made all
filings and provided all notices required under any applicable
Environmental Law, and has, and is in compliance with, all permits
required under any applicable Environmental Laws and each of them
is in full force and effect, (c) (i) there is no pending civil,
criminal or administrative action, or pending hearing or suit, (ii)
the Company has not received any demand, claim, or notice of
violation and (iii) to the knowledge of the Company , there is no
investigation, proceeding, notice or demand letter or request for
information threatened against the Company in the case of (i), (ii)
and (iii), under any Environmental Law, (d) no lien, charge,
encumbrance or restriction has been recorded under any
Environmental Law with respect to any assets, facility or property
owned, operated, leased or controlled by the Company, (e) the
Company has not received notice that it has been identified as a
potentially responsible party under CERCLA (as defined below), or
any comparable state law, (f) no property or facility currently or
formerly owned or leased by the Company is (i) listed or, to the
knowledge of the Company, proposed for listing on the National
Priorities List under CERCLA or is (ii) listed in the Comprehensive
Environmental Response, Compensation, Liability Information System
List promulgated pursuant to CERCLA, or on any comparable list
maintained by any state or local governmental authority.
For purposes of this Agreement, " Environmental Laws "
means all applicable federal, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder, relating to pollution
or protection of public or employee health and safety or the
environment, including, without limitation, laws relating to (a)
emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or
subsurface strata), (b) the manufacture, processing, distribution,
use, generation, treatment, storage, disposal, transport or
handling of Hazardous Materials, and (c) underground and above
ground storage tanks and related piping, and emissions, discharges,
releases or threatened releases therefrom; " Hazardous
Material " means (a) any "hazardous substance," as defined in
CERCLA, (b) any "hazardous waste," as defined by the Resource
Conservation and Recovery Act, as amended, (c) any petroleum or
petroleum product, (d) any polychlorinated biphenyl and (e) any
pollutant or contaminant or hazardous, dangerous or toxic chemical,
material, waste or substance; and " CERCLA " means the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended.
4.16 Insurance . The Company is
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as management of the
Company believes to be prudent and customary in the business in
which the Company is engaged. The Company has no reason to believe
that it will not be able to renew its existing insurance coverages
as and when such coverages expire or to obtain similar coverage
from similar insurers as may be necessary to continue its business,
at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or
operations of the Company, taken as a whole.
4.17 Tax Status . The Company has
made or filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to
which it is subject and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations,
except those being contested in good faith. There are no unpaid
taxes in any material amount claimed to be due from the Company by
the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
4.18 Accounting Controls . Except
as otherwise set forth in the SEC Reports, the Company maintains
systems of internal accounting controls sufficient to provide
reasonable assurance that (a) transactions are executed in
accordance with management' s general or specific authorizations;
(b) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (c)
access to assets is permitted only in accordance with management' s
general or specific authorization; and (d) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect
to any differences.
4.19 Sarbanes-Oxley Act . Except
as otherwise set forth in the SEC Reports, the Company is in
compliance in all material respects with all applicable effective
provisions of the Sarbanes-Oxley Act and the rules and regulations
promulgated in connection therewith, including Section 402
related to loans.
4.20 Investment Company Status .
The Company is not an "investment company," a company controlled by
an "investment company" or an "affiliated person" of, or "promoter"
or "principal underwriter" for, an "investment company" as such
terms are defined in the Investment Company Act of 1940, as
amended.
4.21 Usury . The Transaction
Documents when enforced in accordance with their terms, without the
need to apply Section 8 of the Convertible Notes, do not
violate any law or regulation of the State of Georgia with respect
to usury.
4.22 Reservation of Shares . The
Company has reserved from its authorized but unissued shares of
Common Stock sufficient shares of Common Stock to permit the
conversion of all Convertible Notes and the exercise of all
Warrants that will be outstanding upon the Closing.
SECTION 5
COVENANTS OF THE COMPANY
So long as the Convertible Notes are outstanding, the Company
hereby covenants to the Noteholders as follows; provided, however,
that any action in contravention of this Section 5 will
be permitted if consented to by the Agent or the Majority
Noteholders.
5.1 Integration .
Neither the Company nor anyone acting on its behalf will offer,
sell or solicit offers to buy or otherwise negotiate in respect of
any security (as defined in the Securities Act) in a manner that
would cause the offer and sale of the Convertible Notes and the
offer and sale of the Warrants to fail to be entitled to the
exemption afforded by Rule 506 of Regulation D, or under
Section 4(2) of the Securities Act.
5.2 Liens . The
Company will not create, assume, or suffer to exist any Lien on any
of its property, except for Permitted Encumbrances (as defined
below), existing Liens in favor of the holders of Senior Debt, and
the Liens in favor of the Noteholders pursuant to the Security
Agreement. For purposes of this Agreement, " Permitted
Encumbrances " means (a) Liens for taxes not yet due and
payable or being actively contested; (b) carriers' , warehousemen'
s mechanics, materialmen' s, repairmen' s or other like Liens
arising in the ordinary course of business, payment for which is
not yet due or which are being actively contested in good faith and
by appropriate, lawful proceedings; (c) pledges or deposits in
connection with worker' s compensation, unemployment insurance and
other social security legislation; and (d) any Liens that rank
junior to the security interest created in favor of the Noteholders
pursuant to Section 2.2 .
5.3 Redemption . The
Company will not purchase, redeem, or otherwise acquire for value
any of its shares of any class of capital stock.
5.4 Asset Sales . The
Company will not sell, license or otherwise dispose of or transfer
any of its properties to or in favor of any Person, except for (a)
sales of products in the ordinary course of the Company' s
business, (b) sales or dispositions in one or a series of related
transaction with an aggregate sale price of less than $100,000, or
(c) the disposition of any assets of the Company that are obsolete,
worn-out or unsuitable for continued use. In the event of any sales
permitted under this Section 5.4 , the Noteholders
shall, upon the request and at the expense of the Company,
forthwith release all of its Liens and security interests in the
assets to be sold and shall execute, if necessary, and deliver all
UCC termination statements and/or other documents reasonably
requested.
5.5 Participation
Rights . So long as at least ten percent of the aggregate
principal amount of the Convertible Notes outstanding at the
Closing remain outstanding, the Company hereby grants to each
Noteholder the right to invest in any Equity Financing an amount
equal to that required to maintain its pro rata equity ownership
based on the number of shares into which such Noteholder' s
Convertible Notes are then convertible into on the same terms and
conditions as the other investors in the Equity Financing, except
the Noteholder may pay for the securities by exchanging that
portion of the Noteholder' s Convertible Note(s). The rights set
forth in this Section 5.5 are subject to pro ration
among the Noteholders based on the principal amounts of their
Convertible Notes outstanding if the Equity Financing is too small
to accommodate all investments that the Noteholders have elected to
make pursuant to this Section 5.5 and subject to any
preemptive rights or rights of first refusal held by the holders of
the Series A Preferred Stock and Senior Debt. The Company shall
provide each Noteholder with not less than ten business days'
advance notice of any Equity Financing, which notice shall include
the terms of the Equity Financing in sufficient detail to permit
each Noteholder to make an informed investment decision whether or
not to participate.
For purposes of this Agreement, " Equity Financing "
means a financing of the Company in which capital stock, securities
convertible or exercisable into the Company' s capital stock, debt
convertible into such capital stock, or debt with options or
warrants exercisable into such capital stock are offered; however,
an Equity Financing shall exclude (i) the grant of options,
warrants or other rights to purchase shares of Common Stock issued
pursuant to a stock option or equity incentive plan approved by the
Company' s Board of Directors and the issuance of Common Stock upon
exercise thereof, (ii) the issuance of Common Stock upon the
conversion or exercise of Convertible Notes and Warrants, (iii) the
issuance of Common Stock upon any conversions of Series A Preferred
Stock, (iv) the issuance of securities in connection with a
business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or
otherwise, or in connection with any other strategic transaction,
or any financing or leasing transaction or a consulting
relationship, (v) securities offered pursuant to any employee
benefit plan approved by the Board of Directors, and (vi) the
issuance of securities in one or more related transactions for
gross proceeds to the Company of less than $5,000,000 in the
aggregate.
5.6 Information .
(a) As long as the
Company is a reporting company under the Exchange Act, the Company
will deliver to the Noteholders the same documentation or
information provided to its holders of Common Stock and Series A
Preferred Stock.
(b) If the Company is
not a reporting company under the Exchange Act, the Company
will:
(i) as soon as
practicable after the end of each fiscal year, furnish to the
holders of Convertible Notes audited consolidated balance sheets of
the Company as of the end of such fiscal year and audited
consolidated statements of income and cash flow of the Company, if
any, for such fiscal year, prepared in accordance with GAAP
consistently applied; and
(ii) as soon as
practicable after the end of each fiscal quarter, furnish to the
holders of Convertible Notes unaudited consolidated balance sheets
of the Company as of the end of such quarter, and unaudited
consolidated statements of income and cash flow of the Company for
such quarter and for the current fiscal year to date, prepared in
accordance with GAAP consistently applied, other than the absence
of footnotes and normal year-end adjustments, with such statements
certified by the chief financial officer of the Company as having
been prepared in accordance with GAAP consistently applied.
5.7 Notice of Event of
Default . The Company will immediately notify in writing each
of the Noteholders and the Agent of the occurrence of each Event of
Default or each occurrence or situation which with but for the
applicable grace period or passage of time would be an Event of
Default, as soon as the Company gains knowledge thereof. The
notification shall describe the nature of the occurrence or
situation and the action that the Company proposes to take with
respect thereto.
5.8 Securities Law
Compliance . The Company will make such filings, notices or
registrations as are required under Regulation D of the Securities
Act and applicable state securities laws after the Closing, within
the time periods set forth in the Securities Act and those
laws.
5.9 Reservation of Common
Stock . The Company will continue to reserve from its
authorized but unissued shares of Common Stock a sufficient number
of shares of Common Stock to permit conversion of the Convertible
Notes and exercise of the Warrants.
5.10 Use of Proceeds . The
proceeds of the Convertible Notes, to the extent available, will be
used to pay general corporate debts and obligations and, to the
extent available, for the following other purposes:
(a) complete the FDA
Pivotal trial for the Cervical Cancer detection device;
(b) seek FDA approval
of the Cervical Cancer detection device;
(c) payment of legal
and other fees and expenses through the Closing Date relating to
the issuance and sale of the Convertible Notes and Warrants, and
prior financings of the Company;
(d) prepare for
manufacturing, launch and commercialization of the Cervical Cancer
Detection Device, especially with regard to development work toward
the "CE Mark;"
(e) continue
activities in Glucose Monitoring with an appropriate corporate
partner;
(f) seek
additional R&D grants;
(g) enhance the
intellectual property portfolio; and
(h) other corporate
purposes as authorized by the Board of Directors.
5.11 Board Matters . The Company
agrees to take all actions within its control to cause the
appointment and election thereafter of a member to its Board of
Directors nominated by the Majority Noteholders.
SECTION 6
REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE
NOTEHOLDERS
Each Noteholder, severally and not jointly, hereby represents
and warrants to the Company with respect to such Noteholder' s Loan
and the issuance of the Noteholder' s Convertible Note and as of
the date of the Closing, as follows:
6.1 Experience . Such
Noteholder has substantial experience in evaluating and making
loans and investing in private placement transactions of securities
in companies similar to the Company so that such Noteholder is
capable of evaluating the merits and risks of its Loan to the
Company and purchase of the Convertible Notes and Warrants, and has
the capacity to protect its own interests.
6.2 Investment Intent
. Such Noteholder is making its Loan, acquiring its Convertible
Note and its Warrants for investment for its own account, not as a
nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. Such Noteholder
understands that its Convertible Note, its Warrants and the
Underlying Stock have not been registered under the Securities Act
by reason of the exemption from the registration provisions of the
Securities Act contained in Rule 506 of Regulation D and/or
Section 4(2) of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the
investment intent and the accuracy of such Noteholder' s
representations as expressed herein. The Company will rely upon the
accuracy and truthfulness of, the representations made by each
Noteholder set forth in this Section 6 and each
Noteholder hereby consents to such reliance on the representations
made by it hereunder.
6.3 Accredited
Investor . Such Noteholder is an "accredited investor" as that
term is defined in Rule 501 of Regulation D promulgated pursuant to
the Securities Act.
6.4 Rule 144 . Such
Noteholder acknowledges that its Convertible Note, its Warrants and
the Underlying Stock must be held indefinitely unless subsequently
registered under the Securities Act or unless an exemption from
such registration is available. Such Noteholder is aware of the
provisions of Rule 144 promulgated under the Securities Act, which
permit limited resale of securities acquired in a private placement
subject to the satisfaction of certain conditions, which may
include under certain circumstances, among other things, the
existence of a public market for the securities, the availability
of certain current public information about the Company, minimum
holding periods, manner-of-sale limitation and volume
limitations.
6.5 Access to
Information . Such Noteholder has had an opportunity to discuss
the Company' s business, management and financial affairs with its
management. It has also had an opportunity to ask questions of
officers of the Company, which questions were answered to its
satisfaction. Such Noteholder understands that such discussions, as
well as any written information issued by the Company, were
intended to describe certain aspects of the Company' s business and
prospects. Such Noteholder acknowledges and understands that, in
the course of such discussions, it may have been provided access to
material, non-public information concerning the Company. Further,
such Noteholder acknowledges and understands the fact that the
Company is seeking to effect the private placement of the
Convertible Notes and the Warrants is material non-public
information and disclosure of such information or use of such
information by the Noteholder or anyone receiving such information
from the Noteholder in connection with the purchase, sale or trade
of the Company' s securities (other than use by the Noteholder in
acquiring Convertible Notes and Warrants), or any hedging,
derivative or similar transactions or activities involving the
Company' s securities, is unlawful and constitutes a violation of
securities laws. Nothing contained in this Section 6.5
modifies, amends or affects each Noteholder' s right to rely on the
Company' s representations and warranties contained in
Section 4 .
6.6 Organization;
Authorization . If such Noteholder is a corporation or a
limited duration company or a limited liability company or limited
partnership or a business trust or other entity, it is duly formed,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, organization or formation, as
the case may be, with the requisite power and authority, corporate
or otherwise, to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations under this Agreement, and the acquisition by
such Noteholder of its Convertible Note(s) and Warrants hereunder
has been duly authorized by all necessary action on the part of
such Noteholder.
6.7 Enforcement .
This Agreement when executed and delivered by such Noteholder will
constitute a valid and legally binding obligation of the
Noteholder, enforceable in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
6.8 Legend . Such
Noteholder understands that its Convertible Note, the Warrants and
the Underlying Stock will bear the following legend until such time
as such securities are registered under the Securities Act and sold
pursuant to such registration statement or sold in a transaction
that, in the opinion of counsel satisfactory to the Company (as to
both such counsel and such opinion): "THESE SECURITIES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER
APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACTS
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF
THE SECURITIES ACT OF 1933."
Such Noteholder acknowledges that its Convertible Notes,
Warrants and Underlying Stock shall bear any additional legend
required by any other applicable state securities or "blue sky"
laws.
6.9 Governmental
Review . Such Noteholder understands that no U.S. federal or
state agency or any other government or governmental agency or
authority has passed upon or made any recommendation or endorsement
of the Convertible Notes.
6.10 No Intent to Effect a Change of
Control . Such Noteholder has no present intent to change or
influence the control of the Company within the meaning of Rule
13d-1 of the Exchange Act.
6.11 Residency . Such Noteholder
is a resident of the jurisdiction set forth in the address below
such Noteholder' s name on Schedule 1 hereto.
6.12 No Reliance . The
consummation of the transactions contemplated by the Transaction
Documents are not done in reliance upon any warranty or
representation by, or information from, the Company of any sort,
oral or written, except the warranties and representations
specifically set forth in this Agreement (including the exhibits
and schedules hereto), in the other Transaction Documents
(including the exhibits and schedules thereto) and in any
certificates required to be delivered by the Company hereunder and
thereunder.
SECTION 7
CONDITIONS TO CLOSING OF NOTEHOLDERS
The obligations of the Noteholders to purchase the Convertible
Notes and the Warrants at the Closing is subject to the fulfillment
of the following conditions:
7.1 Representations and
Warranties Correct . The representations and warranties made by
the Company herein shall be true and correct in all material
respects as of the date when made and as of the Closing.
7.2 Covenants . All
covenants, agreements and conditions contained in this Agreement
and the other Transaction Documents to be performed by the Company
on or prior to the Closing shall have been performed or complied
with in all material respects.
7.3 No Injunction .
No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated, endorsed
or threatened or is pending by or before any court or governmental
authority of competent jurisdiction which prohibits or threatens to
prohibit the consummation of any of the transactions contemplated
by the Transaction Documents.
7.4 Adverse Changes .
Since the date of the financial statements included in the most
recently filed SEC Report prior to the date of this Agreement, no
event which has had or could reasonably be expected to have a
material impact on the commercialization of the Company' s Cervical
Neoplasia Detection Device System shall have occurred.
7.5 Change of Control
. No Change of Control shall have occurred between the date hereof
and the Closing.
7.6 Compliance
Certificate . Should the Closing occur as of a date other than
the date of this Agreement, the Company shall have delivered to the
Noteholder a certificate of the Company executed by the Chief
Executive Officer of the Company, dated as of the Closing
certifying to the fulfillment of the conditions specified in this
Section 7 .
7.7 Secretary' s
Certificate . The Company shall have delivered to the
Noteholder a certificate of the Company executed by the Secretary
of the Company, dated as of the Closing, certifying (a) resolutions
adopted by the Company' s Board of Directors authorizing the
execution of this Agreement, the Convertible Notes, the Warrants
and the transactions contemplated hereby; and (b) that the
Certificate of Incorporation and Bylaws of the Company, as
currently on file with the SEC, are in effect and full force.
SECTION 8
CONDITIONS TO CLOSING OF COMPANY
The Company' s obligation to sell and issue the Convertible
Notes at the Closing is subject to the fulfillment as of the
Closing of the following conditions:
8.1 Representations and
Warranties Correct . The representations and warranties made by
the Noteholders participating in that Closing shall be true and
correct when made, and shall be true and correct on the date made
and on the Closing.
8.2 Legal Matters .
All material matters of a legal nature which pertain to this
Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
8.3 Covenants . Each
Noteholder participating in that Closing shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Noteholder at or
before the Closing.
8.4 Change of Control
. No Change of Control of the Company shall have occurred between
the date hereof and the Closing.
8.5 No Injunction .
No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated, endorsed,
threatened or pending by or before any court or governmental
authority of competent jurisdiction which prohibits or threatens to
prohibit the consummation of any of the transactions contemplated
by the Transaction Documents.
SECTION 9
DEFAULTS; REMEDIES
9.1 Events of Default;
Acceleration . The occurrence of one or more of the following
events without a cure within 30 days after occurrence of the
default or within such other time period provided herein (each an "
Event of Default ") shall constitute an Event of
Default:
(a) The Company
defaults in the payment of principal of or interest on the
Convertible Notes or any other fee or expense due under the
Transaction Documents when the same becomes due and payable,
whether on demand, at maturity or at a date fixed for the payment
of any installment or prepayment thereof or otherwise, and such
default is not waived or cured within 30 days after such default
occurs.
(b) The Company
defaults in the performance of or compliance with any covenant or
provision of this Agreement, the Convertible Notes, or in any
Transaction Document, and any such default is not cured or waived
within 60 days after the Company has notice of the occurrence of
such default.
(c) The
representations or warranties made by the Company in this Agreement
and in any Transaction Document shall prove to have been false or
incorrect in any material respect when made.
(d) The Company
discontinues its business or makes an assignment for the benefit of
creditors.
(e) If, within 60 days
after the commencement against the Company of a case under the
federal bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other
similar law (an " Insolvency Proceeding "), such case shall
have been consented to or shall not have be
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